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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1998 (June 23, 1998)
-----------------------------
SYNAGRO TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-21054 76-0511324
- ----------------------------------- -------------------------------------
(Commission File Number) (IRS Employer Identification No.)
5850 SAN FELIPE, SUITE 500 HOUSTON, TEXAS 77057
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 706-6180
------------------------
16000 STUEBNER AIRLINE, SUITE 420 SPRING, TEXAS 77379
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 23, 1998, Synagro Technologies, Inc. (the "Company"), completed
the mergers of three of its wholly-owned subsidiaries formed for the
acquisitions with and into A&J Cartage, Inc., a Wisconsin corporation ("A&J"),
Michigan Organic Resources, Inc., a Michigan corporation ("MORI"), and A&J
Cartage, Inc., Southeast, a Florida corporation ("A&J Southeast," and
collectively with A&J and MORI, the "Sellers"), resulting in the Sellers
becoming wholly-owned subsidiaries of the Company. The Sellers are full service
biosolids management companies with operations in Florida, Illinois, Michigan,
Oklahoma and Wisconsin. The consideration paid in the mergers was 1,812,533
shares of the Company's common stock, par value $.002 per share ("Common
Stock"), and approximately $5,731,400 million in cash and notes, subject to
certain adjustments based on the Sellers' balance sheet as of the date of the
closing. The amount of such consideration, the cash portion of which was
financed by the Company's available cash balances, was determined by
negotiations between the Company, the Sellers and the principal stockholders of
each of the Sellers. No material relationship exists between the Sellers or
their principal stockholders and the Company or any of its affiliates, any
director or officer of the Company or any associate of any such officer or
director. However, in connection with the mergers, the Company entered into an
employment agreement with James A. Jalovec, the sole stockholder of A&J and a
stockholder of MORI and A&J Southeast, pursuant to which Mr. Jalovec was named
Chief Operating Officer of the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired.
To be filed by amendment on or before September 7, 1998.
(b) Pro Forma Financial Information.
To be filed by amendment on or before September 7, 1998.
(c) Exhibits.
The following exhibits, from which schedules have been omitted and will
be furnished to the Commission upon its request, are filed with this report on
Form 8-K.
2.1 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Corp. Wisconsin, Inc.; A&J Cartage, Inc.;
and James A. Jalovec dated as of June 23, 1998
2.2 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Florida, Inc.; A&J Cartage, Inc.; A&J
Cartage, Inc. Southeast; James A. Jalovec; and Karl R.
Sattler dated June 23, 1998
2
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2.3 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Corp. Michigan, Inc.; Michigan Organic
Resources, Inc.; James A. Jalovec; and Donald R. Hoekstra
dated June 23, 1998
4.1 -- Registration Rights Agreement among Synagro
Technologies, Inc.; James A. Jalovec; Karl R. Sattler; and
Donald R. Hoekstra dated June 23, 1998
10.1 -- Employment Agreement among Synagro Technologies, Inc.
and James A. Jalovec dated June 23, 1998
SIGNATURES
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.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Daniel L. Shook
------------------------------------
Daniel L. Shook,
Vice President and
Chief Financial Officer
June 30, 1998
3
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EXHIBITS
EXHIBIT
NO.
2.1 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Corp. Wisconsin, Inc.; A&J Cartage, Inc.;
and James A. Jalovec dated as of June 23, 1998
2.2 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Florida, Inc.; A&J Cartage, Inc.; A&J
Cartage, Inc. Southeast; James A. Jalovec; and Karl R.
Sattler dated June 23, 1998
2.3 -- Plan and Agreement of Merger among Synagro Technologies,
Inc.; Synagro Sub Corp. Michigan, Inc.; Michigan Organic
Resources, Inc.; James A. Jalovec; and Donald R. Hoekstra
dated June 23, 1998
4.1 -- Registration Rights Agreement among Synagro Technologies,
Inc.; James A. Jalovec; Karl R. Sattler; and Donald R.
Hoekstra dated June 23, 1998
10.1 -- Employment Agreement among Synagro Technologies, Inc.
and James A. Jalovec dated June 23, 1998
<PAGE> 1
================================================================================
PLAN AND AGREEMENT OF MERGER
AMONG
SYNAGRO TECHNOLOGIES, INC.,
SYNAGRO SUB CORP. WISCONSIN, INC.,
A&J CARTAGE, INC.
AND
JAMES A. JALOVEC
DATED AS OF JUNE 23, 1998
================================================================================
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TABLE OF CONTENTS
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ARTICLE 1 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Name and Continued Corporate Existence of Surviving Corporation . . . 3
1.4.1 Name and Existence . . . . . . . . . . . . . . . . . . . . . . 3
1.4.2 Federal Income Tax Treatment of Merger . . . . . . . . . . . . 3
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Bylaws of Surviving Corporation . . . . . . . . . . . . . . . . . . . 3
1.7 Directors and Officers of Surviving Corporation . . . . . . . . . . . 3
1.7.1 Directors of Surviving Corporation. . . . . . . . . . . . . . 3
1.7.2 Officers of Surviving Corporation. . . . . . . . . . . . . . . 3
1.7.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Capital Stock of Surviving Corporation . . . . . . . . . . . . . . . 4
1.9 Conversion of Securities upon Merger . . . . . . . . . . . . . . . . 4
1.9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9.2 Conversion of A&J Common Stock. . . . . . . . . . . . . . . 4
1.9.2.1 Post-Closing Adjustment to Exchange Value . . . 4
1.9.3 Exchange of A&J Stock Certificates . . . . . . . . . . . . . . 6
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp
Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . 6
1.9.5 Sub Corp Transfer Books Closed . . . . . . . . . . . . . . . . 6
1.10 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . 6
1.10.1 Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . 6
1.10.2 Conveyances to Surviving Corporation. . . . . . . . . . . . . 7
1.10.3 Accounting Treatment. . . . . . . . . . . . . . . . . . . . . 7
1.11 Other Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . 7
1.11.1 Opinion of Synagro Counsel . . . . . . . . . . . . . . . . . . 8
1.11.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND A&J . . 9
2.1 Representations and Warranties of the Shareholder and A&J . . . . . . 9
2.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . 9
2.1.2 Agreement Authorized and its Effect on Other Obligations . . . 9
2.1.3 Capitalization of A&J . . . . . . . . . . . . . . . . . . . . 9
2.1.4 Ownership of A&J Shares . . . . . . . . . . . . . . . . . . . 10
2.1.5 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . 10
2.1.7 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 10
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2.1.8 Additional Information . . . . . . . . . . . . . . . . . . . . 11
2.1.8.1 Real Estate . . . . . . . . . . . . . . . . . . 11
2.1.8.2 Machinery and Equipment . . . . . . . . . . . . 11
2.1.8.3 Receivables . . . . . . . . . . . . . . . . . . 11
2.1.8.4 Payables . . . . . . . . . . . . . . . . . . . . 11
2.1.8.5 Insurance . . . . . . . . . . . . . . . . . . . 11
2.1.8.6 Contracts . . . . . . . . . . . . . . . . . . . 11
2.1.8.7 Employee Compensation Plans . . . . . . . . . . 11
2.1.8.8 Certain Salaries . . . . . . . . . . . . . . . . 12
2.1.8.9 Bank Accounts . . . . . . . . . . . . . . . . . 12
2.1.8.10 Employee Agreements . . . . . . . . . . . . . . 12
2.1.8.11 Intellectual Property . . . . . . . . . . . . . 12
2.1.8.12 Trade Names . . . . . . . . . . . . . . . . . . 12
2.1.8.13 Promissory Notes . . . . . . . . . . . . . . . . 12
2.1.8.14 Guaranties . . . . . . . . . . . . . . . . . . . 12
2.1.8.15 Leases . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.16 Permits . . . . . . . . . . . . . . . . . . . . 12
2.1.9 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10 Absence of Certain Changes and Events . . . . . . . . . . . . 13
2.1.10.1 Financial Change . . . . . . . . . . . . . . . . 13
2.1.10.2 Property Damage . . . . . . . . . . . . . . . . 13
2.1.10.3 Dividends . . . . . . . . . . . . . . . . . . . 13
2.1.10.4 Capitalization Change . . . . . . . . . . . . . 13
2.1.10.5 Labor Disputes . . . . . . . . . . . . . . . . . 13
2.1.10.6 Other Material Changes . . . . . . . . . . . . . 13
2.1.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.11.1 General . . . . . . . . . . . . . . . . . . . . 13
2.1.11.2 Subchapter S Matters . . . . . . . . . . . . . . 14
2.1.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . 14
2.1.13 Title to and Condition of Assets . . . . . . . . . . . . . . . 14
2.1.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . 15
2.1.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.17 Environmental Compliance . . . . . . . . . . . . . . . . . . . 16
2.1.17.1 Environmental Conditions . . . . . . . . . . . . 16
2.1.17.2 Permits, etc. . . . . . . . . . . . . . . . . . 16
2.1.17.3 Compliance . . . . . . . . . . . . . . . . . . . 16
2.1.17.4 Past Compliance . . . . . . . . . . . . . . . . 17
2.1.17.5 Environmental Claims . . . . . . . . . . . . . . 17
2.1.17.6 Renewals . . . . . . . . . . . . . . . . . . . . 17
2.1.17.7 Asbestos and PCBs . . . . . . . . . . . . . . . 17
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2.1.18 Compliance with Other Laws . . . . . . . . . . . . . . . . . . 17
2.1.19 ERISA Plans or Labor Issues . . . . . . . . . . . . . . . . . 18
2.1.20 Investigations; Litigation . . . . . . . . . . . . . . . . . . 19
2.1.21 Absence of Certain Business Practices . . . . . . . . . . . . 19
2.1.22 Consents and Approvals . . . . . . . . . . . . . . . . . . . . 19
2.1.23 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Investment Representations . . . . . . . . . . . . . . . . . . . . . 20
2.2.1 Shareholder Investment Suitability and Related Matters . . . . 20
2.2.2 Synagro Shares Not Registered . . . . . . . . . . . . . . . . 20
2.2.3 Reliance on Representations . . . . . . . . . . . . . . . . . 20
2.2.4 Investment Intent . . . . . . . . . . . . . . . . . . . . . . 20
2.2.5 Permitted Resale . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.6 Investor Sophistication . . . . . . . . . . . . . . . . . . . . 20
2.2.7 Availability of Information . . . . . . . . . . . . . . . . . 20
2.2.8 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SYNAGRO . . . . . . . . . . 21
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . 21
3.2 Agreement Authorized and its Effect on Other Obligations . . . . . . 21
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.4 Reports and Financial Statements . . . . . . . . . . . . . . . . . . 22
3.5 Absence of Certain Changes and Events in Synagro . . . . . . . . . . 23
3.5.1 Financial Change . . . . . . . . . . . . . . . . . . . . . . . 23
3.5.2 Other Material Changes . . . . . . . . . . . . . . . . . . . . 23
3.6 Synagro's Compliance with Other Laws . . . . . . . . . . . . . . . . 23
3.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . 23
3.8 Investigations; Litigation . . . . . . . . . . . . . . . . . . . . . 23
3.9 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.10 Nasdaq Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 4 OBLIGATIONS PENDING CLOSING DATE . . . . . . . . . . . . . . . 24
4.1 Agreements of Synagro and A&J . . . . . . . . . . . . . . . . . . . . 24
4.1.1 Maintenance of Present Business. . . . . . . . . . . . . . . . 24
4.1.2 Maintenance of Properties . . . . . . . . . . . . . . . . . . 24
4.1.3 Maintenance of Books and Records . . . . . . . . . . . . . . . 24
4.1.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . 24
4.1.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1.6 Notice of Material Developments . . . . . . . . . . . . . . . 24
4.2 Additional Agreements of A&J and the Shareholder . . . . . . . . . . 25
4.2.1 Prohibition of Certain Employment Contracts . . . . . . . . . 25
4.2.2 Prohibition of Certain Loans . . . . . . . . . . . . . . . . . 25
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4.2.3 Prohibition of Certain Commitments . . . . . . . . . . . . . . 25
4.2.4 Disposal of Assets . . . . . . . . . . . . . . . . . . . . . . 25
4.2.5 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . 25
4.2.6 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . 25
4.2.7 No Amendment to Articles of Incorporation . . . . . . . . . . 26
4.2.8 No Issuance, Sale, or Purchase of Securities . . . . . . . . . 26
4.2.9 Prohibition on Dividends . . . . . . . . . . . . . . . . . . . 26
4.3 Agreements of Synagro . . . . . . . . . . . . . . . . . . . . . . . . 26
4.3.1 No Amendment to Articles of Incorporation . . . . . . . . . . 26
4.3.2 Notice of Material Developments . . . . . . . . . . . . . . . 26
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . . . . . . 26
5.1 Conditions Precedent to Obligations of A&J and the Shareholder . . . 26
5.1.1 Representations and Warranties of Synagro True at
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . 27
5.1.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . 27
5.1.4 Consent of Certain Parties in Privity With Synagro . . . . . . 27
5.2 Conditions Precedent to Obligations of Synagro . . . . . . . . . . . 27
5.2.1 Representations and Warranties of A&J and the Shareholder
True at Effective Date . . . . . . . . . . . . . . . . . . . . 27
5.2.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . 28
5.2.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . 28
5.2.4 Consent of Certain Parties in Privity with A&J or
the Shareholder . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . 28
6.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Registration Matters . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3.1 Agreement to Register Resales . . . . . . . . . . . . . . . . 29
6.3.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3.3 Registration Expenses . . . . . . . . . . . . . . . . . . . . 29
6.3.4 Preparation; Reasonable Investigation . . . . . . . . . . . . 29
6.3.5 Rights Non-Transferable . . . . . . . . . . . . . . . . . . . 30
6.3.6 Indemnification by Synagro . . . . . . . . . . . . . . . . . . 30
6.3.7 Notices of Claims, etc . . . . . . . . . . . . . . . . . . . . 30
6.3.8 Undertaking to File Reports and Cooperate in Rule 144 and Rule
145 Transactions . . . . . . . . . . . . . . . . . . . . . . . 31
6.3.9 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . 31
6.4 Nomination of Director . . . . . . . . . . . . . . . . . . . . . . . 31
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ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Indemnification by the Shareholder . . . . . . . . . . . . . . . . . 31
7.2 Indemnification by Synagro . . . . . . . . . . . . . . . . . . . . . 32
7.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . 32
7.4 Termination of Indemnity, Representations and Warranties . . . . . . 33
ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Entirety; Conflict . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.3 Counterparts and Facsimile Signature . . . . . . . . . . . . . . . . 33
8.4 Notices and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.5 Table of Contents and Captions . . . . . . . . . . . . . . . . . . . 34
8.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 34
8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of June
23, 1998, is by and among Synagro Technologies, Inc., a Delaware corporation
("Synagro"), Synagro Sub Corp. Wisconsin, Inc., a Wisconsin corporation and a
wholly owned subsidiary of Synagro formed for the purpose of carrying out the
transactions contemplated hereby ("Sub Corp"), A&J Cartage, Inc., a Wisconsin
corporation ("A&J" or the "Surviving Corporation"), and James A. Jalovec, an
individual residing in Franklin, Milwaukee County, Wisconsin and the
shareholder of A&J ("Shareholder"). Sub Corp and A&J are hereinafter
collectively referred to as the "Merging Corporations."
W I T N E S S E T H:
WHEREAS, Synagro is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its registered office at 1209
Orange Street, Wilmington, Delaware 19801 and its principal executive office at
5850 San Felipe, Suite 500, Houston, Texas 77057;
WHEREAS, the authorized capital stock of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock-Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock,
though no such shares are issued or outstanding; and (ii) 100,000,000 shares of
common stock, par value $.002 per share ("Synagro Common Stock"), of which, at
June 6, 1998, 9,082,638 shares were issued and outstanding, and an additional
2,261,031 shares were reserved for issuance pursuant to stock options and
600,000 shares were reserved for issuance pursuant to outstanding warrants; at
the same date, no shares of Common Stock were held in Synagro's treasury;
WHEREAS, Sub Corp is a corporation duly organized and validly existing
under the laws of the State of Wisconsin, with its registered office at 44 East
Mifflin Street, Madison, Wisconsin 53703;
WHEREAS, the authorized capital stock of Sub Corp consists of 1,000
shares of common stock, $.01 par value per share, of which at the date hereof
1,000 shares were issued and outstanding and held beneficially and of record by
Synagro ("Sub Corp Common Stock");
WHEREAS, A&J is a corporation duly organized and validly existing under
the laws of the State of Wisconsin, with its registered office at and its
principal executive office at 2841 South 5th Court, Milwaukee, Wisconsin 53207;
WHEREAS, the authorized capital stock of A&J consists of 100 shares (the
"A&J Shares") of common stock, $10.00 par value per share ("A&J Stock"), all of
which are issued and outstanding;
<PAGE> 8
WHEREAS, the Shareholder owns all of the issued and outstanding A&J
Shares and, as such, the Shareholder expects to receive, directly or
indirectly, substantial benefit from the transactions contemplated hereby;
WHEREAS, the respective boards of directors of Sub Corp and A&J deem it
desirable and in the best interests of their respective corporations and their
respective stockholders, and the Shareholder deems it desirable and in his best
interests, that Sub Corp be merged with and into A&J, pursuant to the
applicable provisions of Section 180.1101 of the Wisconsin Business Corporation
Law (the "Corporations Act") in exchange for the consideration herein provided
for, and have proposed, declared advisable, and approved such merger pursuant
to this Agreement which has been duly approved by resolutions of the respective
boards of directors of Sub Corp and A&J;
WHEREAS, Synagro, A&J and others have executed a letter agreement dated
April 21, 1998 (the "Letter Agreement") relating to the acquisition by Synagro
of substantially all of the assets of A&J, such acquisition being subject to
change to accommodate the needs of the parties thereto; and
WHEREAS, the parties desire to evidence their agreement with respect to
the form of and the other terms and provisions not set forth in the Letter
Agreement with respect to the transaction contemplated by the Letter Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the merger, the mode of carrying the same into effect, the
manner and basis of converting (i) the outstanding shares of Sub Corp Common
Stock into shares of A&J Stock, and (ii) the outstanding shares of A&J Stock
into shares of Synagro Common Stock, and such other details and provisions as
are deemed necessary or proper, the parties hereto agree as follows:
ARTICLE 1
MERGER
1.1 Surviving Corporation. Subject to the adoption and approval of
this Agreement by the requisite vote of the stockholders of Sub Corp and to the
other conditions hereinafter set forth, Sub Corp and A&J shall be, upon the
Effective Date (as defined in Section 1.3 hereof), merged into a single
surviving corporation, which shall be A&J, one of the Merging Corporations,
which shall continue its corporate existence and remain a Wisconsin corporation
governed by and subject to the laws of that state.
1.2 Stockholder Approval. This Agreement shall be submitted for
adoption and approval by the stockholders of Sub Corp in accordance with its
articles of incorporation and the applicable laws of the State of Wisconsin.
1.3 Effective Date. The merger shall become effective upon the
filing by A&J of Articles of Merger with the Department of Financial
Institution of the State of Wisconsin in accordance with the Corporations Act.
The date upon which the merger shall become effective is referred to in this
Agreement as the "Effective Date."
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1.4 Name and Continued Corporate Existence of Surviving Corporation
1.4.1 Name and Existence. Effective as of the Effective Date,
the Articles of Incorporation of A&J (the "A&J Articles"), the
corporation whose corporate existence is to survive the merger and
continue thereafter as the surviving corporation, shall be the Articles
of Incorporation of the Surviving Corporation and the identity,
existence, purposes, powers, objects, franchises, rights, and immunities
of A&J, the surviving corporation of the merger, shall continue
unaffected and unimpaired by the merger, and the corporate identity,
existence, purposes, powers, objects, franchises, rights, and immunities
of Sub Corp shall be wholly merged into A&J, and A&J shall be fully
vested therewith. Accordingly, on the Effective Date, the separate
existence of Sub Corp, except insofar as continued by statute, shall
cease.
1.4.2 Federal Income Tax Treatment of Merger. The merger is
intended to qualify as and, subject to the requirements of Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be characterized as a tax-free reverse subsidiary merger
transaction described in Section 368(a)(2)(E) of the Code.
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Wisconsin shall continue to govern the Surviving
Corporation. On the Effective Date, the A&J Articles shall be the articles of
incorporation of A&J until further amended in the manner provided by law.
1.6 Bylaws of Surviving Corporation. Effective as of the Effective
Date, the bylaws of A&J (the "A&J Bylaws") shall be the bylaws of the Surviving
Corporation until altered, amended, or repealed, or until new bylaws shall be
adopted in accordance with the provisions of law, the A&J Articles and the A&J
Bylaws.
1.7 Directors and Officers of Surviving Corporation
1.7.1 Directors of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the board of directors of the Surviving Corporation, and who shall hold
office until the first annual meeting of stockholders of the Surviving
Corporation next following the Effective Date, are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
James A. Jalovec 3841 South 5th Court, Milwaukee, Wisconsin 53207
Ross M. Patten 5850 San Felipe, Suite 500, Houston, Texas 77057
Mark A. Rome 5850 San Felipe, Suite 500, Houston, Texas 77057
</TABLE>
1.7.2 Officers of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the officers of the Surviving Corporation, and who shall hold their
respective offices of the Surviving Corporation, subject to the A&J
Bylaws, from and after the Effective Date, are as follows:
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<PAGE> 10
<TABLE>
<S> <C>
Ross M. Patten President
James A. Jalovec Vice President
Mark A. Rome Secretary and Treasurer
</TABLE>
1.7.3 Vacancies. On or after the Effective Date, if a vacancy
shall exist for any reason in the board of directors or in any of the
offices of the Surviving Corporation, such vacancy shall be filled in
the manner provided in the A&J Articles and/or A&J Bylaws.
1.8 Capital Stock of Surviving Corporation. The authorized number of
shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, and limitations thereof, and the express
terms thereof, shall be as set forth in the A&J Articles.
1.9 Conversion of Securities upon Merger
1.9.1 General. The manner and basis of converting the issued
and outstanding shares of the capital stock of (A) Sub Corp into shares
of the capital stock of A&J and (B) A&J into shares of the capital stock
of Synagro and/or other consideration herein provided for shall be as
hereinafter set forth in this Section 1.9.
1.9.2 Conversion of A&J Common Stock. On the Effective Date,
the A&J Shares, without any action on the part of the holder thereof,
shall automatically become and be converted into the right to receive
(i) certificates evidencing 1,346,929 fully paid and nonassessable
shares of issued and outstanding Synagro Common Stock (which, together
with associated Preferred Stock Purchase Rights, are hereinafter
referred to as the "Synagro Shares"), (ii) cash in the amount of
$1,175,170 (the "Cash Amount"), and (iii) a promissory note,
substantially in the form of Exhibit A hereto, in the principal amount
of $1,128,079 (plus all principal amounts payable to Shareholder under
Section 1.9.2(iii) of each of the Other Merger Agreements (as defined
herein), (the "Promissory Note"), upon surrender, in accordance with
Section 1.9.3 hereof, of certificates theretofore evidencing the A&J
Shares (the Synagro Shares together with the Cash Amount and the
Promissory Note collectively, the "Exchange Value").
1.9.2.1 Post-Closing Adjustment to Exchange Value
(a) Preparation of Closing Balance Sheet. Not
later than 60 days following the Effective Date (as
hereinafter defined), Shareholder shall prepare and
deliver to Synagro for its review in accordance with this
section a balance sheet (the "Closing Balance Sheet") of
A&J prepared as of the Effective Date and prepared in
accordance with generally accepted accounting principles
("GAAP") in a manner consistent with the financial
statements described in Section 2.1.6 hereof. All of the
parties hereto shall cooperate fully with each other in
the preparation of the Closing Balance Sheet, and Synagro
shall have access at all reasonable times to review
workpapers, books and records relating to the preparation
of the Closing Balance Sheet.
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<PAGE> 11
(b) Right to Dispute Closing Balance Sheet.
Synagro shall have the right to dispute the Closing
Balance Sheet by giving notice of dispute to Shareholder
within 30 days after the Closing Balance Sheet has been
given to Synagro. Such notice shall set forth in detail
the reasons for the dispute and Synagro's proposed
adjustments to the Closing Balance Sheet. If Synagro does
not give notice of dispute to Shareholder within such 30
day period in accordance with the foregoing, the Closing
Balance Sheet as prepared by Shareholder shall become
final and binding upon Synagro. If Synagro does give
notice of dispute to Shareholder within such 30 day
period, Shareholder and Synagro shall endeavor in good
faith to reach agreement on all of the disputed items. If
the parties are unable to reach an agreement on the
disputed items during such 30 day period, then the
disputed items which have not been resolved shall be
submitted to the accounting firm of Arthur Andersen,
Houston, Texas for determination and resolution on the
basis of such procedures as such accounting firm, in its
sole judgement, deems applicable and appropriate, taking
into account GAAP and the terms of this Agreement. Such
accounting firm shall review the disputed matters and as
promptly as practicable deliver to Shareholder and to
Synagro a statement setting forth its determination as to
the proper treatment of the matters in dispute, and such
determination shall be final and binding upon the parties
without any further right of appeal; provided, however,
neither such determination nor any other provisions of
this Section 1.9.2.1 shall affect Synagro's right to seek
indemnification for any breaches of representations and
warranties by Shareholder pursuant to Article 7 hereof.
All charges of such accounting firm and other expenses
directly incurred in making such determination shall be
borne equally by the parties hereto.
(c) Adjustment of Consideration. In the event
that A&J's tangible assets net of liabilities ("Net
Assets") as shown on the Closing Balance Sheet, as finally
prepared and binding upon the parties in accordance with
Sections 1.9.2.1(a) and (b) is less than the Net Assets on
April 30, 1998 then Synagro shall have the right to give
notice thereof to the Shareholder, whereupon the
Shareholder shall have 10 days to refund to Synagro a cash
amount equal to the amount by which the Net Assets on
April 30, 1998 exceeds the amount of the Net Assets as
shown on the Closing Balance Sheet, or cancel the
Promissory Note and promptly surrender it to Synagro
whereupon Synagro shall execute and deliver to Shareholder
a new promissory note, which note shall be in the same
form and contain the same terms and provisions as the
Promissory Note, in the aggregate principal amount of
$1,128,079 (plus all amounts payable under Section
1.9.2(iii) of each of the Other Merger Agreements) less
the difference between the Net Assets on April 30, 1998
and the Effective Date (and any other adjustments made
pursuant to Section 1.9.2.1 of each of the Other Merger
Agreements).
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<PAGE> 12
1.9.3 Exchange of A&J Stock Certificates. On the Effective
Date, the Shareholder shall surrender the certificates representing the
A&J Shares to Synagro, and Shareholder shall be entitled upon such
surrender to receive in exchange therefor a certificate or certificates
representing the Synagro Shares together with the Cash Amount, and the
Promissory Note (the "Exchange").
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp
Common Stock. On the Effective Date, each share of Sub Corp Common
Stock then issued and outstanding, without any action on the part of the
holder thereof (and after giving effect to the conversion in the merger
of all then outstanding shares of capital stock of A&J into capital
stock of Synagro and/or other consideration herein provided for) shall
automatically become and be converted into one-tenth of one fully paid
and nonassessable share of issued and outstanding A&J Stock. On the
Effective Date, Synagro shall surrender the outstanding certificate
theretofore representing shares of Sub Corp Common Stock to A&J, A&J
will cancel the certificates representing the Sub Corp Common Stock, and
shall receive in exchange therefor a certificate or certificates
representing the number of whole shares of A&J Stock into which the
shares of Sub Corp Common Stock theretofore represented by the
certificate so surrendered shall have been converted as aforesaid.
1.9.5 Sub Corp Transfer Books Closed. Upon the Effective Date,
the stock transfer books of Sub Corp shall be deemed closed, and no
transfer of any certificates theretofore representing shares of Sub Corp
Common Stock shall thereafter be made or consummated.
1.10 Assets and Liabilities
1.10.1 Assets and Liabilities of Merging Corporations Become
Those of Surviving Corporation. On the Effective Date, all rights,
privileges, powers, immunities, and franchises of each of the Merging
Corporations, both of a public and private nature, and all property,
real, personal, and mixed, and all debts due on whatever account, as
well as stock subscriptions and all other choices or things in action,
and all and every other interest of or belonging to or due to either of
the Merging Corporations, shall be taken by and deemed to be transferred
to and shall be vested in the Surviving Corporation without further act
or deed, and all such rights, privileges, powers, immunities, and
franchises, property, debts, choices or things in action, and all and
every other interest of each of the Merging Corporations shall be
thereafter as effectually the property of the Surviving Corporation as
they were of the respective Merging Corporations, and the title to any
real or other property, or any interest therein, whether vested by deed
or otherwise, in either of the Merging Corporations, shall not revert or
be in any way impaired by reason of the merger, provided, however, that
all rights of creditors and all liens upon any properties of each of the
Merging Corporations shall be preserved unimpaired, and all debts,
liabilities, restrictions, obligations, and duties of the respective
Merging Corporations, including without limitation all obligations,
liabilities and duties as lessee under any existing lease, shall
thenceforth attach to the Surviving Corporation and may be enforced
against and by it to the same extent as if such debts, liabilities,
duties, restrictions and obligations had been incurred or contracted by
it. Any
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<PAGE> 13
action or proceeding pending by or against either of the Merging
Corporations may be prosecuted to judgment as if the merger had not
taken place, or the Surviving Corporation may be substituted in place of
either of the Merging Corporations.
1.10.2 Conveyances to Surviving Corporation. The Merging
Corporations hereby agree, respectively, that from time to time, as and
when requested by the Surviving Corporation, or by its successors and
assigns, they will execute and deliver or cause to be executed and
delivered, all such deeds, conveyances, assignments, permits, licenses
and other instruments, and will take or cause to be taken such further
or other action as the Surviving Corporation, its successors or assigns,
may deem necessary or desirable to vest or perfect in or confirm to the
Surviving Corporation, its successors and assigns, title to and
possession of all the property, rights, privileges, powers, immunities,
franchises, and interests referred to in Section 1.10.1 and otherwise
carry out the intent and purposes of this Agreement.
1.10.3 Accounting Treatment. The assets and liabilities of the
Merging Corporations shall be taken up on the books of the Surviving
Corporation in accordance with generally accepted accounting principles,
and the capital surplus and retained earnings accounts of the Surviving
Corporation shall be determined, in accordance with generally accepted
accounting principles, by the board of directors of the Surviving
Corporation. Nothing herein shall prevent the board of directors of the
Surviving Corporation from making any future changes in its accounts in
accordance with law.
1.11 Other Closing Deliveries. Contemporaneously with the Exchange,
(i) the Shareholder shall execute and deliver to Synagro a confidentiality and
noncompetition agreement in substantially the form of Exhibit B hereto (the
"Noncompete Agreement"); (ii) the Shareholder, Donald R. Hoekstra ("Hoekstra"),
Karl R. Sattler ("Sattler"), Ross M. Patten, Donald L. Thone and Daniel L.
Shook shall execute and deliver a voting agreement and irrevocable proxy
substantially in the form of Exhibit C hereto (the "Voting Agreement"); (iii)
Synagro shall execute and deliver to Shareholder the Promissory Note; (iv)
Synagro shall deliver to the Shareholder the certificate required by Section
5.1.1 hereof, and the Shareholder shall deliver to Synagro the certificate
required by Section 5.2.1 hereof; (v) Synagro, the Shareholder, Hoekstra and
Sattler shall execute and deliver a registration rights agreement substantially
in the form of Exhibit D hereto (the "Registration Rights Agreement"; (vi)
Synagro and the Shareholder shall execute and deliver a non-qualified stock
option agreement substantially in the form of Exhibit E hereto (the "Stock
Option Agreement"); (vii) the Shareholder and Synagro shall execute and deliver
an employment agreement substantially in the form of Exhibit F hereto (the
"Employment Agreement"); (viii) the Shareholder and the Surviving Corporation
shall execute and deliver a lease substantially in the form of Exhibit G hereto
(the "Lease") and a memorandum of lease substantially in the form of Exhibit H
hereto (the "Lease Memorandum"); (ix) the Shareholder shall cause Oak Creek
Storage & Handling, Inc., a Wisconsin corporation wholly owned by Shareholder
("Oak Creek") to execute and deliver a lease agreement substantially in the
form of Exhibit I hereto, covering the lease by Oak Creek to the Surviving
Corporation of the office building located at 2841 South 5th Court, Milwaukee,
Wisconsin 53207 currently occupied by A&J (the "Office Building Lease"); and
(x) Synagro and the Shareholder will deliver to one another the opinions of
counsel described below:
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<PAGE> 14
1.11.1 Opinion of Synagro Counsel. Porter & Hedges, L.L.P.,
counsel for Synagro, shall issue an opinion to the Shareholder, in form
and substance satisfactory to the Shareholder, to the effect that (i)
Synagro has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware;
(ii) all corporate proceedings required to be taken by or on the part of
Synagro to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) the shares of Synagro Common Stock which are to be delivered in
accordance with this Agreement will, when issued, be validly issued,
fully paid and nonassessable outstanding securities of Synagro; (iv)
this Agreement and the Ancillary Documents (as hereinafter defined) to
which Synagro is a party have been duly executed and delivered by, are
the legal, valid and binding obligation of, and are enforceable against
Synagro in accordance with their respective terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally;
provided that said opinion shall be limited to federal law, the laws of
the State of Texas and the general corporate law of the State of
Delaware; and (v) except as specified by such counsel (such exceptions
to be acceptable to A&J) such counsel does not know of any material
litigation, proceedings, or governmental investigation pending or
threatened against or relating to Synagro, any of its subsidiaries, or
their respective properties or businesses in which it is sought to
restrain, prohibit or otherwise affect the consummation of the
transactions contemplated by this Agreement. Such opinion also shall
cover such other matters incident to the transactions herein
contemplated as A&J and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of Synagro as to matters of fact and
(ii) the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to A&J, as to matters other than federal or
Texas law. As used herein, "Ancillary Documents" means the the
Promissory Note and the Option Agreement.
1.11.2 Opinion of Counsel. Domnitz, Mawicke, Goisman & Rosenberg,
S.C., counsel to A&J and the Shareholder, shall issue an opinion to
Synagro in form and substance satisfactory to Synagro, to the effect that
(i) A&J has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Wisconsin;
(ii) all corporate proceedings required to be taken by or on the part of
the Shareholder to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) all outstanding shares of the A&J Stock have been validly issued
and are fully paid and nonassessable; (iv) this Agreement and the
Ancillary Documents to which Shareholder is a party have been duly
executed and delivered by, and are the legal, valid and binding
obligation of the Shareholder, and are enforceable against the
Shareholder in accordance with their respective terms, except as the
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally;
and (v) except as specified by such counsel (such exceptions to be
acceptable to Synagro) such counsel does not know of any material
litigation, proceedings or governmental investigation, pending or
threatened against or relating to A&J, its properties or businesses, or
the Shareholder in which it is sought to restrain, prohibit or otherwise
affect
8
<PAGE> 15
consummation of the transactions contemplated by this Agreement. Such
opinion shall also cover such other matters incident to the transactions
herein contemplated as Synagro and its counsel may reasonably request.
In rendering such opinion, such counsel may rely upon (i) certificates
of public officials and of officers of A&J as to matters of fact and
(ii) on the opinion or opinions of other counsel, which opinions shall
be reasonably satisfactory to Synagro, as to matters other than federal
or Wisconsin law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDER AND A&J
2.1 Representations and Warranties of the Shareholder and A&J. The
Shareholder and A&J jointly and severally represent and warrant to Synagro as
follows:
2.1.1 Organization and Standing. A&J is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin, has full requisite corporate power and authority to
carry on its business as it is currently conducted and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed would
not have a material adverse effect on its financial condition,
properties or business.
2.1.2 Agreement Authorized and its Effect on Other Obligations.
The execution, delivery and performance of this Agreement have been duly
and validly authorized by all necessary corporate action on the part of
A&J. This Agreement is a valid and binding obligation of A&J and the
Shareholder enforceable against A&J and the Shareholder in accordance
with its terms, except as such enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally. The execution, delivery
and performance of this Agreement by A&J and the Shareholder will not
conflict with or result in a violation or breach of any term or
provision of, nor constitute a default under (i) the Articles of
Incorporation or Bylaws of A&J or (ii) to the extent such conflict,
violation, breach or default could have a material adverse effect on the
business, operations, assets or financial condition of A&J or the
Shareholder, any obligation, indenture, mortgage, deed of trust, lease,
contract or other agreement to which A&J or the Shareholder is a party
or by which A&J or the Shareholder or their respective properties are
bound.
2.1.3 Capitalization of A&J. The authorized capitalization of
A&J consists of 100 shares of A&J Stock, all of which are issued and
outstanding and all of which are held beneficially and of record by the
Shareholder. A&J does not have any outstanding options, warrants, calls
or commitments of any character relating to its capital stock. All
issued and outstanding shares of A&J Stock are validly issued, fully
paid and non-assessable. None of the outstanding shares of A&J Stock is
subject to any voting trust, voting agreement or other
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<PAGE> 16
agreement or understanding with respect to the voting thereof, nor is
any proxy in existence with respect thereto.
2.1.4 Ownership of A&J Shares. The Shareholder holds good and
valid title to all of the A&J Shares free and clear of all Encumbrances.
The Shareholder possesses full authority and legal right to sell,
transfer and assign to Synagro the A&J Shares, free and clear of all
Encumbrances. Upon transfer to Synagro by the Shareholder of the A&J
Shares, Synagro will own the A&J Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of A&J,
and the Shareholder, threatened, against A&J or the Shareholder that
concern or affect title to the A&J Shares, or that seek to compel the
issuance of capital stock or other securities of A&J.
2.1.5 No Subsidiaries. As of the date hereof, A&J has no
subsidiaries, whether wholly or partially owned, and does not own,
beneficially or of record, or have any obligation to acquire, any
material amount of, or have any material investment in, any stock,
partnership or membership interest or other equity or debt securities of
any other business, enterprise or entity.
2.1.6 Financial Statements. The Shareholder has delivered to
Synagro A&J's audited balance sheet and related statements of income,
retained earnings and cash flows, with appended notes which are an
integral part of such statements, as of and for the twelve months ended
December 31, 1997 (the "Audited A&J Financial Statements"), and also has
delivered to Synagro copies of A&J's unaudited balance sheet and related
statements of income, retained earnings and cash flows as of and for the
four-month period ending April 30, 1998 (the "Unaudited A&J Financial
Statements", and, together with the Audited A&J Financial Statements"
the "A&J Financial Statements"). Copies of the A&J Financial Statements
are attached hereto as Schedule 2.1.6. All of the A&J Financial
Statements are complete in all material respects (except, with respect
to the Unaudited A&J Financial Statements, for the omission of notes and
schedules), present fairly the financial condition of A&J as of the
dates indicated, and the results of operations for the respective
periods indicated, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, except as
noted therein and subject, in the case of the Unaudited A&J Financial
Statements, to normal year-end adjustments and other adjustments
described therein; in addition, the Unaudited A&J Financial Statements,
though unaudited, include all adjustments which A&J, the Shareholder and
consider necessary for a fair presentation of A&J's results for that
period. December 31, 1997 may sometimes be hereinafter referred to as
the "Balance Sheet Date".
2.1.7 Liabilities. Except as disclosed on Schedule 2.1.7
hereto, A&J has no pending or, to A&J's and the Shareholder's knowledge,
threatened liabilities or obligations, either accrued, absolute or
contingent, nor does A&J or Shareholder have any knowledge of any
potential liabilities or obligations, which would materially adversely
affect the value and conduct of the business of A&J, other than those
(i) reflected or reserved against in the Unaudited A&J Financial
Statements or (ii) incurred in the ordinary course of business since the
Balance Sheet Date.
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<PAGE> 17
2.1.8 Additional Information. Attached as Schedule 2.1.8 hereto
are true, complete and correct lists of the following items:
2.1.8.1 Real Estate. All real property and
structures thereon (i) owned, or subject to a contract of
purchase and sale, by A&J, with a description of the nature and
amount of any Encumbrances thereon created by A&J or Shareholder,
or (ii) leased, or subject to a lease commitment, by A&J, with a
description of the terms of each lease and lease commitment. The
term "Encumbrances" means all liens, security interests, pledges,
mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or
assignment, liabilities, obligations, privileges, equities,
easements, rights-of-way, limitations, reservations, restrictions
and other encumbrances of any kind or nature;
2.1.8.2 Machinery and Equipment. All machinery,
vehicles, trailers, transportation equipment, tools, equipment,
furnishings, and fixtures (i) owned or subject to a contract of
purchase and sale, by A&J with a description of the nature and
amount of any Encumbrances thereon or (ii) leased, or subject to
a lease commitment, by A&J, with a description of each lease and
lease commitment;
2.1.8.3 Receivables. All accounts and notes
receivable of A&J, together with (i) aging schedules by invoice
date and due date, (ii) the amounts provided for as an allowance
for bad debts, (iii) the identity and location of any asset in
which A&J holds a security interest to secure payment of the
underlying indebtedness, and (iv) a description of the nature and
amount of any Encumbrance on such accounts and notes receivable;
2.1.8.4 Payables. All accounts and notes payable of
A&J, together with an appropriate aging schedule;
2.1.8.5 Insurance. All insurance policies or bonds
currently maintained by A&J, including title insurance policies,
and those covering A&J's properties, machinery, equipment,
fixtures, employees and operations, as well as a listing of any
deductibles, premiums, audit adjustments or retroactive
adjustments due or pending on such policies or any predecessor
policies;
2.1.8.6 Contracts. All sludge contracts, bulking
agent contracts and all other material contracts to which A&J is
a party which are to be performed in whole or in part after the
date hereof;
2.1.8.7 Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation, profit-sharing,
retirement, pension, welfare, group insurance, death benefit, or
other fringe benefit plans, arrangements or trust agreements of
A&J, whether or not subject to ERISA (as hereinafter defined),
together with copies of the most recent reports with respect to
such plans, arrangements, or trust agreements filed with any
governmental agency, and all
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<PAGE> 18
Internal Revenue Service determination letters that have been
received with respect to such plans;
2.1.8.8 Certain Salaries. The names and salary
rates of all present employees of A&J who have salaries in excess
of $25,000, and all arrangements with respect to any bonuses to
be paid to them from and after the date of this Agreement;
2.1.8.9 Bank Accounts. The name of each bank in
which A&J has an account, the account numbers of each account and
the names of all persons authorized to draw thereon;
2.1.8.10 Employee Agreements. Any collective
bargaining agreements of A&J with any labor union or other
representative of employees, including amendments, supplements,
and written or oral understandings, and all employment and
consulting and severance agreements of A&J;
2.1.8.11 Intellectual Property. All patents,
trademarks, copyrights and other intellectual property rights
owned, licensed, or used by A&J;
2.1.8.12 Trade Names. All trade names, assumed names
and fictitious names used or held by A&J, whether and where such
names are registered, and where used;
2.1.8.13 Promissory Notes. All long-term and short-
term promissory notes, installment contracts, loan agreements,
credit agreements, and any other agreements of A&J relating
thereto or with respect to collateral securing the same;
2.1.8.14 Guaranties. All indebtedness, liabilities
and commitments of others and as to which A&J is a , endorser,
co-maker, surety, or accommodation maker, or contingently liable
therefor and all letters of credit, whether stand-by or
documentary, issued by any third party;
2.1.8.15 Leases. All material leases to which A&J is
a party whether as lessor or lessee not previously described on
Schedule 2.1.8.1 or Schedule 2.1.8.2; and
2.1.8.16 Permits. All permits, authorizations,
variances, waivers, exemptions, rights-of-way, franchises,
ordinances, approvals, certifications, licenses, registrations,
orders, decrees and other similar rights applicable to current
operations conducted by A&J (collectively, "Permits") and all
environmental audits, assessments, investigations and reviews
conducted by or on behalf of A&J within the last five years on
any property owned or used by it.
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2.1.9 No Defaults. Except as set forth on Schedule 2.1.9, A&J
is not in default in any material obligation or covenant on its part to
be performed under any obligation, lease, contract, order, plan or other
agreement or arrangement.
2.1.10 Absence of Certain Changes and Events. Other than as a
result of the transactions contemplated by this Agreement, since the
Balance Sheet Date, there has not been:
2.1.10.1 Financial Change. Any material adverse
change in the financial condition, backlog, operations, assets,
liabilities or business of A&J;
2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of A&J
(whether or not covered by insurance);
2.1.10.3 Dividends. Except as set forth on Schedule
2.1.10.3, any declaration, setting aside, or payment of any
dividend or other distribution in respect of the A&J Stock, or
any direct or indirect redemption, purchase or any other
acquisition by A&J of any such stock;
2.1.10.4 Capitalization Change. Any change in the
capital stock or in the number of shares or classes of the
authorized or outstanding capital stock of A&J as described in
Section 2.1.3 hereof;
2.1.10.5 Labor Disputes. Except as disclosed on
Schedule 2.1.16, any labor disputes involving A&J; or
2.1.10.6 Other Material Changes. Except as set forth
on Schedule 2.1.10.6, any other event or condition known to A&J
or the Shareholder pertaining to and adversely affecting the
operations, assets or business of A&J which could constitute a
material adverse change in the business, assets or financial
condition of A&J, other than events or conditions which are of a
general or industry wide nature and of general public knowledge,
or which have been disclosed to Synagro in writing.
2.1.11 Taxes.
2.1.11.1 General. All federal, state and local
income, value added, sales, use, franchise, gross revenue,
turnover, excise, payroll, property, employment, customs duties
(collectively, "Taxes") and any and all other tax returns,
reports, and estimates have been filed with appropriate
governmental agencies, domestic and foreign, by A&J for each
period for which any such returns, reports, or estimates were
due; all taxes shown by such returns to be payable and, except as
set forth in Schedule 2.1.11, any and all other taxes due and
payable have been paid other than those being contested in good
faith by A&J; and the tax provisions reflected in the Unaudited
A&J Balance Sheet are adequate, in accordance with generally
accepted
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accounting principles, to cover liabilities of A&J at the date
thereof for all taxes, including any assessed interest, assessed
penalties and additions to taxes of any character whatsoever
applicable to A&J or its assets or business. No waiver of any
statute of limitations executed by A&J with respect to any income
or other tax is in effect for any period. Except as set forth on
Schedule 2.1.11 hereto, the income tax returns of A&J have never
been examined by the Internal Revenue Service or the taxing
authorities of any other jurisdiction. There are no tax liens on
any assets of A&J except for taxes not yet currently due.
2.1.11.2 Subchapter S Matters. A&J (i) made an
effective, valid and binding S election pursuant to Section 1362
of the Code effective February 1, 1987, (ii) has maintained its
status as an S Corporation pursuant to Section 1361 of the Code
without lapse or interruption since the date of said election, and
(iii) made and continuously maintained, since the effective date
of its federal S election, elections similar to the federal S
election in each state or local jurisdiction where A&J does
business or is required to file a tax return to the extent such
states or jurisdictions permit such elections. A&J neither is nor
will or can be subject to the built-in gains tax under Section
1374 of the Code or any similar corporate level tax imposed on A&J
by any taxing authority. A&J (i) has not adopted or used LIFO as
a method of accounting for inventory, and (ii) has no other tax
item, election, agreement or adjustment which will accelerate or
trigger income or deferred deductions of A&J as a result of
termination of A&J's status as an S Corporation.
2.1.12 Intellectual Property. A&J owns or possesses licenses to
use all patents, patent applications, trademarks and service marks
(including registrations and applications therefor), trade names,
copyrights and written know-how, trade secrets and all other similar
proprietary data and the goodwill associated therewith (collectively,
the "Intellectual Property") that are either material to its business or
that are necessary for the rendering of any services rendered by it and
the use or sale of any equipment or products used or sold by it,
including all such Intellectual Property listed in Schedule 2.1.8
hereto. The Intellectual Property so owned or possessed by A&J is owned
or licensed free and clear of any Encumbrance. A&J has not granted to
any other person any license to use any Intellectual Property. A&J has
not received any notice of infringement, misappropriation, or conflict
with, the intellectual property rights of others in connection with the
use by it of the Intellectual Property or otherwise in connection with
the operation of its business.
2.1.13 Title to and Condition of Assets. A&J has good,
indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the Unaudited A&J
Financial Statements or in Schedule 2.1.8 hereto, free and clear of any
Encumbrance, except (i) Encumbrances reflected in Schedule 2.1.8 hereto,
(ii) liens for current taxes not yet due and payable, and (iii) such
imperfections of title, easements and Encumbrances, if any, as are not
substantial in character, amount, or extent and do not and will not
materially detract from the value, or interfere with the present use, of
the property subject thereto or affected thereby, or otherwise
materially impair business operations (the matters described in clauses
(ii) and (iii) collectively, "Permitted Encumbrances"). All leases
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<PAGE> 21
pursuant to which A&J leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing,
valid, and effective; and there is not, under any such leases, any
existing default or event of default or, to A&J's and the Shareholder's
knowledge, any event which with notice or lapse of time, or both, would
constitute a default by A&J and in respect to which A&J has not taken
adequate steps to prevent a default from occurring. The buildings and
premises of A&J that are used in its business are in good operating
condition and repair, subject only to ordinary wear and tear. All
equipment, machinery, vehicles, trailers, transportation equipment,
tools and other major items of equipment of A&J are in good operating
condition and in a state of reasonable maintenance and repair, ordinary
wear and tear excepted, and are free from any known defects except as
may be repaired by routine maintenance and such minor defects as will
not substantially interfere with the continued use thereof in the
conduct of normal operations. To A&J's and the Shareholder's knowledge,
all such assets conform in all material respects to all applicable laws
governing their use. Except as set forth in Schedule 2.1.18 hereto, no
notice of any violation of any law, statute, ordinance, or regulation
relating to any such assets has been (or are being) received by A&J or
the Shareholder, except such as have been fully complied with.
2.1.14 Contracts. All material contracts, leases, plans or other
arrangements to which A&J is a party, by which it is bound or to which
A&J or the assets of A&J are subject are in full force and effect and
constitute valid and binding obligations of A&J. A&J is not, and to the
knowledge of A&J and the Shareholder, no other party to any such
contract, lease, plan or other arrangement, is in default of any
material obligation or provision thereunder, and, to A&J's and the
Shareholder's knowledge, no event has occurred which (with or without
notice, lapse of time, or the happening of any other event) would
constitute a material default thereunder. No contract has been entered
into on terms which could reasonably be expected to have a material
adverse effect on A&J. Neither A&J nor the Shareholder has received any
information that would cause A&J or the Shareholder to conclude that any
customer of A&J will (or is likely to) cease doing business with A&J (or
any successors thereto) as a result of the consummation of the
transactions contemplated hereby.
2.1.15 Licenses and Permits. Except as set forth on Schedule
2.1.15, A&J possesses all Permits necessary under law or otherwise for
it to conduct its business as now being conducted and to construct, own,
operate, maintain and use its assets in the manner in which they are now
being constructed, operated, maintained and used. Each of such Permits
and the rights of A&J with respect thereto is (and will be following the
consummation of the transactions contemplated hereby) valid and
subsisting, in full force and effect, and enforceable by A&J subject to
administrative powers of regulatory agencies having jurisdiction.
Except as set forth in Schedule 2.1.15 hereto, A&J is in compliance in
all material respects with the terms of such Permits and there is no
pending, or to A&J's and the Shareholder's knowledge, threatened claim
that A&J is not in compliance with any Permit. Except as set forth in
Schedule 2.1.15 hereto, none of such Permits have been, or to the
knowledge of A&J and the Shareholder, are threatened to be, revoked,
canceled, suspended or modified.
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2.1.16 Litigation. Except as set forth on Schedule 2.1.16
hereto, there is no suit, action, or legal, administrative, arbitration,
or other proceeding or governmental investigation pending to which A&J
is a party or, to the knowledge of A&J and the Shareholder, might become
a party or which particularly affect A&J. Neither A&J nor the
Shareholder has received notice of any pending change in the zoning or
building ordinances directly affecting the real property or leasehold
interests of A&J, nor, to the knowledge of A&J and the Shareholder, is
any such change threatened.
2.1.17 Environmental Compliance.
2.1.17.1 Environmental Conditions. Except as set
forth in Schedule 2.1.17 hereto, to the best knowledge of A&J and
the Shareholder, there are no environmental conditions or
circumstances, including, without limitation, the presence or
release of any hazardous substance, on any property presently or
previously owned by A&J, or on any property to which hazardous
substances or waste generated by the operations of A&J or by the
use of the assets of A&J were disposed of. The term "hazardous
substance" means (i) asbestos, polychlorinated biphenyls, urea
formaldehyde, lead based paint, radon gas, petroleum, oil, solid
waste, pollutants and contaminants, and (ii) any chemicals,
materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any Applicable
Environmental Laws (as hereinafter defined), including, but not
limited to, substances defined as "hazardous substances,"
"hazardous materials," or "hazardous waste" in CERCLA, RCRA, HMTA
(as such terms are hereinafter defined), or comparable state and
local statutes or in the regulations adopted and promulgated
pursuant to said statutes;
2.1.17.2 Permits, etc. Except as set forth in
Schedule 2.1.17 hereto, to the best knowledge of A&J and the
Shareholder, A&J has in full force and effect all environmental
permits, licenses, approvals and other authorizations required to
conduct its operations, other than those that are not material to
its business or operations, and is operating in substantial
compliance thereunder;
2.1.17.3 Compliance. To the best knowledge of A&J
and the Shareholder, except as set forth on Schedule 2.1.17
hereto, neither the operations of A&J nor the use of the assets
of A&J violate in any respect any applicable federal, state or
local law, statute, ordinance, rule, regulation, order or notice
requirement pertaining to (a) the condition or protection of air,
groundwater, surface water, soil, or other environmental media,
(b) the environment, including natural resources or any activity
which affects the environment, or (c) the regulation of any
pollutants, contaminants, waste, or substances (whether or not
hazardous or toxic), including, without limitation, the
Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.)
("HMTA"), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.) ("RCRA"), the Clean Water Act (33 U.S.C.
1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et
seq.), the
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<PAGE> 23
Toxic Substances Control Act (17 U.S.C. Section 2601 et seq.),
the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Safe Drinking Water Act (42 U.S.C.
Section 201 and Section 300f et seq.), the Rivers and Harbors Act
(33 U.S.C. Section 401 et seq.), the Oil Pollution Act (33 U.S.C.
Section 2701 et seq.) and analogous federal, interstate, state
and local requirements, as any of the foregoing may have been
amended or supplemented from time to time (collectively, the
"Applicable Environmental Laws"), other than violations that in
the aggregate are not material to the business or operations of
A&J;
2.1.17.4 Past Compliance. To the best knowledge of
A&J and the Shareholder, except as set forth in Schedule 2.1.17
hereto, none of the operations or assets of A&J has ever been
conducted or used in such a manner as to constitute a violation
of any of the Applicable Environmental Laws, other than
violations that in the aggregate are not material to the business
or operations of A&J;
2.1.17.5 Environmental Claims. Except as set forth
in Schedule 2.1.17 hereto, no notice has been served on A&J or
the Shareholder from any entity, governmental agency or
individual regarding any existing, pending or threatened
investigation, inquiry, enforcement action or litigation related
to alleged violations under any Applicable Environmental Laws, or
regarding any claims for remedial obligations, response costs or
contribution under any Applicable Environmental Laws;
2.1.17.6 Renewals. Except as set forth on Schedule
2.1.17 hereto, neither A&J nor the Shareholder knows of any
reason A&J or its successors would not be able to renew any of
the permits, licenses, or other authorizations required pursuant
to any of the Applicable Environmental Laws to operate and use
any of assets of A&J for their current purposes and uses; and
2.1.17.7 Asbestos and PCBs. Except as set forth on
Schedule 2.1.17 hereto, to the best knowledge of A&J and the
Shareholder, no material amounts of friable asbestos currently
exist on any property owned or operated by A&J, nor do
polychlorinated biphenyls exist in concentrations of 50 parts per
million or more in electrical equipment owned or being used by
A&J in the operations or on the properties of A&J.
2.1.18 Compliance with Other Laws. Except as set forth on
Schedule 2.1.18, A&J is not in violation of or in default with respect
to, or in alleged violation of or alleged default with respect to, the
Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.), as
amended, or any other applicable law or any applicable rule, regulation,
or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to
any report required to be filed with any governmental commission, board,
bureau, agency or instrumentality, other than such violations, defaults
or delinquencies that in the aggregate are not material to the business
or operations of A&J.
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2.1.19 ERISA Plans or Labor Issues. Schedule 2.1.8 sets forth a
brief description all Employee Compensation Plans which A&J maintains,
to which A&J contributes or has an obligation to contribute, or with
respect to which A&J has any liability or reasonable expectation of
liability (all such plans, policies, programs and arrangements
individually, a "Plan" and collectively, "Plans") as of the Effective
Date. Except as set forth in Schedule 2.1.8, A&J does not maintain any
Plans. For purposes of this Section 2.1.19, all references to A&J shall
be deemed to refer to A&J and any trade or business, whether or not
incorporated, which together with A&J would be deemed or treated as a
"single employer" within the meaning of Section 414 of the Code or ERISA
Section 4001. None of the Plans (i) is an "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) is subject to Title IV
of ERISA or the minimum funding requirements of Section 412 of the Code
or Section 302 of ERISA, (iii) is a plan of the type described in
Section 4063 of ERISA or Section 413(c) of the Code, (iv) is a
"multiemployer plan" (as defined in Section 3(37) of ERISA), (v)
provides for medical, dental, life, disability or other insurance
benefits to current or future retired employees or former employees of
A&J (other than as required for group health plan continuation coverage
under Code Section 4980B or similar state law), (vi) obligates A&J to
pay any severance or similar benefits solely as a result of a change in
control or ownership within the meaning of Code Section 280G, or (vii)
is a "voluntary employees' beneficiary association" within the meaning
of Code Section 501(c)(9). Each Plan is, in all material respects, in
compliance, and has been administered, maintained and funded in all
material respects in accordance, with the applicable provisions of ERISA
and the Code and all other applicable laws, rules and regulations. To
the best knowledge of A&J and the Shareholder, neither A&J nor any
fiduciary to any Plan, with respect to any Plan, has (i) engaged in any
prohibited transaction under ERISA or the Code; (ii) breached any
fiduciary duty owed by it; or (iii) failed to file and distribute,
timely and properly, all reports and information required to be filed or
distributed in accordance with ERISA or the Code. There are no pending
or threatened, actions, suits, investigations, arbitrations or claims
with respect to any Plan (other than routine claims for benefits) which
could reasonably be expected to result in material liability to A&J, and
there are no changes in contributions or benefit levels that have been
implemented, or negotiated and not yet been implemented, with respect to
any Plan that have not been disclosed in Schedule 2.1.8. All
contributions or premiums which are due on or before the Effective Date
with respect to the Plans have been or will be timely paid by A&J. None
of the Plans requires A&J to make any bonus, severance or other payment
to or on behalf of any current or former employee, officer or director
of A&J solely by reason of the change of ownership or control
contemplated by this Agreement. Each Plan may be amended or terminated
after the Effective Date without contravening the terms of such Plan or
any applicable laws and without material liability to the adopting
employer. With respect to each Plan, A&J has provided Synagro with true,
complete and correct copies, to the extent applicable, of (i) all
documents pursuant to which the Plans are maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series)
filed with the Internal Revenue Service (with attachments including,
without limitation, audited financial statements), and (iii) all
rulings, determinations, notices and opinions issued by any governmental
entity in the last three years (and pending requests for governmental
rulings, determinations, and opinions). A&J has not engaged in any
unfair labor practices which
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could reasonably be expected to result in a material adverse effect on
the operations or assets of A&J. Except as described in Schedule
2.1.16 hereto, A&J has no dispute with any of the existing or former
employees of A&J. There are no labor or employment disputes affecting
A&J or, to the knowledge of A&J and the Shareholder, any disputes
threatened by current or former employees of A&J. There will not be any
penalty for the termination of any Plan listed on Schedule 2.1.8 or any
other item listed in Section 2.1.8.7.
2.1.20 Investigations; Litigation. Except as set forth in
Schedule 2.1.20 hereto, neither A&J nor the Shareholder has received
notice of any investigation or review by any governmental entity with
respect to A&J or any of the transactions contemplated by this Agreement
nor, to the knowledge of A&J and the Shareholder, is any such
investigation or review threatened, nor has any governmental entity
indicated to A&J an intention to conduct the same, and there is no
action, suit or proceeding pending or, to the knowledge of A&J and the
Shareholder, threatened against or affecting A&J at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, that either
individually or in the aggregate, has or is likely to result in a
material adverse change in the financial condition, properties or
business of A&J.
2.1.21 Absence of Certain Business Practices. Neither A&J, the
Shareholder nor any officer or director of A&J, nor, to the knowledge of
A&J and the Shareholder, any employee or agent of A&J or any other
person acting on behalf of A&J or the Shareholder, has, directly or
indirectly, within the past five years, given or agreed to give any gift
or similar benefit to any customer, supplier, government employee or
other person who is or may be in a position to help or hinder the
business of A&J (or to assist A&J in connection with any actual or
proposed transaction) which (i) might subject A&J to any damage or
penalty in any civil, criminal or governmental litigation or proceeding,
(ii) if not given in the past, might have had a material adverse effect
on the assets, business or operations of A&J, or (iii) if not continued
in the future, might materially and adversely affect the assets,
business operations or prospects of A&J or which might result in
liability to A&J in a private or governmental litigation or proceeding.
2.1.22 Consents and Approvals. No consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority, or any other person or entity other than the
Shareholder, is required to be made or obtained by A&J in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby except for the
consents, approvals or authorizations listed on Schedule 2.1.22 hereto
(which were obtained on or before the date hereof) or that could not
have a material adverse effect on the business, operations, assets or
financial condition of the Shareholder or A&J.
2.1.23 Finder's Fee. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by A&J and
the Shareholder and their counsel directly with Synagro and its counsel,
without the intervention of any other person as the result of any act of
A&J or the Shareholder in such manner as to give rise to any valid
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<PAGE> 26
claim against Synagro, Sub Corp or A&J for a brokerage commission,
finder's fee or any similar payments.
2.2 Investment Representations. Each of A&J and the Shareholder
acknowledges, represents and agrees that:
2.2.1 Shareholder Investment Suitability and Related Matters.
(i) Synagro has made available to A&J and the Shareholder the
information and documents described in Section 3.4. hereof, (ii) the
Shareholder understands the risks associated with ownership of Synagro
Common Stock, and (iii) the Shareholder is capable of bearing the
financial risks associated with such ownership;
2.2.2 Synagro Shares Not Registered. Except for the Registered
Synagro Shares (as hereinafter defined), the Synagro Shares have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or registered or qualified under any applicable state
securities laws (the Synagro Shares not constituting Registered Synagro
Shares are herein referred to as the "Unregistered Synagro Shares");
2.2.3 Reliance on Representations. The Unregistered Synagro
Shares are being issued to the Shareholder in reliance upon exemptions
from such registration or qualification requirements, and the
availability of such exemptions depends in part upon the Shareholder's
bona fide investment intent with respect to the Synagro Shares;
2.2.4 Investment Intent. The Shareholder's acquisition of the
Unregistered Synagro Shares is solely for its own account for
investment, and the Shareholder is not acquiring the Unregistered
Synagro Shares for the account of any other person or with a view toward
resale, assignment, fractionalization, or distribution thereof;
2.2.5 Permitted Resale. The Shareholder shall not offer for
sale, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the Unregistered Synagro Shares except in accordance with the
registration requirements of the Securities Act and applicable state
securities laws or upon delivery to Synagro of an opinion of legal
counsel reasonably satisfactory to Synagro that an exemption from
registration is available or pursuant to an effective registration
statement covering the Synagro Shares to be sold;
2.2.6 Investor Sophistication. The Shareholder has such
knowledge and experience in financial and business matters that he and
it are capable of evaluating the merits and risks of an investment in
the Synagro Shares, and to make an informed investment decision with
respect thereto;
2.2.7 Availability of Information. The Shareholder has had the
opportunity to ask questions of, and receive answers from Synagro's
officers and directors concerning the Shareholder's acquisition of the
Synagro Shares and to obtain such other information concerning Synagro
and the Synagro Shares, to the extent Synagro's officers and directors
possessed the same or could acquire it without unreasonable effort or
expense, as the
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<PAGE> 27
Shareholder deemed necessary in connection with making an informed
investment decision; and
2.2.8 Restrictive Legends. In addition to any other legends
required by law or the other agreements entered into in connection
herewith, each certificate evidencing the Unregistered Synagro Shares
will bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED EXCEPT
IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT AND
SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS CORPORATION OF AN
OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAGRO
Synagro represents and warrants to A&J and the Shareholder as follows:
3.1 Organization and Standing. Synagro is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business. Sub Corp is, or on the Effective Date will be, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Wisconsin.
3.2 Agreement Authorized and its Effect on Other Obligations. The
execution, delivery and performance of this Agreement have been duly and
validly authorized by all necessary corporate action on the part of Synagro and
Sub Corp, and this Agreement is a valid and binding obligation of Synagro and
Sub Corp enforceable against Synagro in accordance with its terms, except as
such enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Synagro will not
conflict with or result in a violation or breach of any term or provision of,
or constitute a default under (i) the Certificate of Incorporation or Bylaws of
Synagro or Sub Corp or (ii) any obligation, indenture,
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mortgage, deed of trust, lease, contract or other agreement to which Synagro or
Sub Corp or any of their respective properties are bound.
3.3 Capitalization. The capitalization of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock - Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock, but
no such shares are issued or outstanding; and (ii) 100,000,000 shares of
Synagro Common Stock, of which as of June 6, 1998, 9,082, 638 shares were
issued and outstanding, 2,261,031 shares were reserved for issuance pursuant to
stock options and 600,000 shares were reserved for issuance pursuant to
outstanding warrants. Except as set forth in this Section 3.3., there are
outstanding as of the date hereof (i) no securities of Synagro or any other
person convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities of Synagro, and (ii) no subscriptions,
options, warrants, calls, or rights obligating Synagro to issue, deliver, sell,
purchase, redeem or acquire shares of capital stock or other voting securities
of Synagro except as a result of letters of intent or other agreements relating
to acquisitions by Synagro. All of the outstanding Synagro Common Stock is,
and, when issued, the Synagro Shares will be, validly issued, fully paid and
nonassessable and not subject to any preemptive right. There is no stockholder
agreement, voting trust, or other agreement or understanding to which Synagro
is a party or by which it is bound relating to the voting of any shares of
capital stock of Synagro.
3.4 Reports and Financial Statements. Synagro has previously
furnished to the Shareholder true and complete copies of (i) Synagro's annual
report filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), for Synagro's fiscal year ended December 31, 1997; (ii) Synagro's
quarterly and other reports filed with the Commission since December 31, 1997;
(iii) all definitive proxy solicitation materials filed with the Commission
since December 31, 1997; and (iv) any registration statements (other than those
relating to employee benefit plans) declared effective by the Commission since
December 31, 1997. All of the foregoing items are listed on Schedule 3.4
hereto (collectively, the "Synagro SEC Documents"). The consolidated financial
statements of Synagro and its consolidated subsidiaries included in Synagro's
most recent report on Form 10-K and most recent report on Form 10-Q were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present the
consolidated financial position of Synagro and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended; and the Synagro SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were,
made not misleading. Since December 31, 1997, Synagro has filed with the
Commission all material reports, registration statements and other material
filings required to be filed with the Commission under the rules and
regulations of the Commission.
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3.5 Absence of Certain Changes and Events in Synagro. Since March
31, 1998, there has not been:
3.5.1 Financial Change. Any material adverse change in the
financial condition, backlog, operations, assets, liabilities or
business of Synagro; or
3.5.2 Other Material Changes. Any other event or condition
known to Synagro particularly pertaining to and adversely affecting the
operations, assets or business of Synagro which could constitute a
material adverse change in the business, assets or financial condition
of Synagro, other than events or conditions which are of a general or
industry-wide nature and of general public knowledge, or which have been
disclosed to the Shareholder in writing.
3.6 Synagro's Compliance with Other Laws. Synagro is not in
violation of or in default with respect to any applicable law, rule or
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality which could have a material adverse effect upon its
financial condition, properties or business.
3.7 Consents and Approvals. Except for the filing of the
Registration Statement (as hereinafter defined) pursuant to Section 6.3.1
hereof, no consent, approval or authorization of, or filing of a registration
with, any governmental or regulatory authority, or any other person or entity
is required to be made or obtained by Synagro in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.8 Investigations; Litigation. No investigation or review by any
governmental entity with respect to Synagro in connection with any of the
transactions contemplated by this Agreement is pending or, to the best of
Synagro's knowledge, threatened, nor has any governmental entity indicated to
Synagro an intention to conduct the same. There is no action, suit or
proceeding pending or, to the best of Synagro's knowledge, threatened against
or affecting Synagro by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, has or is likely to result in any material
adverse change in the financial condition, properties or businesses of Synagro.
3.9 Finder's Fee. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by Synagro and its
counsel directly with A&J and the Shareholder and their counsel, without the
intervention by any other person as the result of any act of Synagro in such a
manner as to give rise to any valid claim against the Shareholder or A&J for
any brokerage commission, finder's fee or any similar payments.
3.10 Nasdaq Compliance. Synagro meets all current requirements for
listing on the Nasdaq Small-Cap Market and has not received any notice, whether
written or oral, from the National Association of Securities Dealers, Inc.
suggesting that its listing is not in good standing.
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ARTICLE 4
OBLIGATIONS PENDING CLOSING DATE
4.1 Agreements of Synagro and A&J. Except as expressly contemplated
elsewhere in this Agreement, each of Synagro and A&J agree that since April 30,
1998, it has:
4.1.1 Maintenance of Present Business. Operated its business
only in the usual, regular, and ordinary manner so as to maintain the
goodwill it now enjoys and, to the extent consistent with such
operation, used all reasonable efforts to preserve intact its present
business organization, keep available the services of its present
officers and employees, and preserve its relationships with customers,
suppliers, jobbers, distributors, and others having business dealings
with it;
4.1.2 Maintenance of Properties. At its expense, maintained all
of its property and assets in customary repair, order, and condition,
reasonable wear and tear excepted;
4.1.3 Maintenance of Books and Records. Maintained its books of
account and records in the usual, regular, and ordinary manner, in
accordance with generally accepted accounting principles applied on a
consistent basis;
4.1.4 Compliance with Law. Duly complied in all material
respects with all laws, rules, regulations and orders, and fully
complied with all Permits, applicable to it and to the conduct of its
business;
4.1.5 Inspection. Permitted Synagro and its authorized
representatives, during normal business hours, to inspect its records
and to consult with its officers, employees, attorneys, and agents for
the purpose of determining the accuracy of the representations and
warranties herein made and the compliance with covenants contained in
this Agreement; and
4.1.6 Notice of Material Developments. Promptly notified the
other party hereto in writing of any "material adverse change" in, or
any changes which, in the aggregate, could result in a "material adverse
change" in, the consolidated financial condition, business or affairs of
A&J, whether or not occurring in the ordinary course of business. As
used in this Agreement, the term "material adverse change" means any
change, event, circumstance or condition (collectively, a "Change")
which when considered with all other Changes would reasonably be
expected to result in a "loss" having the effect of so fundamentally
adversely affecting the business or financial prospects of A&J or
Synagro, as applicable, that the benefits reasonably expected to be
obtained by Synagro, with respect to losses by A&J, and the Shareholder,
with respect to losses by Synagro, as a result of the consummation of
the transactions contemplated by this Agreement would be jeopardized
with relative certainty. The term "loss" shall mean any and all direct
or indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or
more likely than not to be paid or incurred, or diminutions in value of
any kind or character (whether known or unknown, conditional or
unconditional, choate or inchoate, liquidated or unliquidated, secured
or unsecured, accrued, absolute, contingent or otherwise) that are more
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likely than not to occur, including without limitation penalties,
interest on any amount payable to a third party as a result of the
foregoing and any legal or other expenses reasonably incurred or more
likely than not to be incurred in connection with investigating or
defending any demands, claims, actions or causes of action that, if
adversely determined, would likely result in losses, and all amounts
paid in settlement of claims or actions; provided, that losses shall be
net of any recoveries by A&J or Synagro, as applicable, from third
parties and any insurance proceeds A&J or Synagro, as applicable, is
entitled to receive from a nonaffiliated insurance company on account of
such losses (after taking into account any costs incurred in obtaining
such proceeds and any increase in insurance premiums as a result of a
claim with respect to such proceeds). The parties agree, however, that
a reduction in the trading price of Synagro Common Stock on the Nasdaq
Small-Cap Market shall not, in and of itself, constitute a material
adverse change.
4.2 Additional Agreements of A&J and the Shareholder. Except as
expressly contemplated elsewhere in this Agreement, A&J and the Shareholder
agree that since the Balance Sheet Date, A&J has not:
4.2.1 Prohibition of Certain Employment Contracts. Entered into
any contracts of employment which cannot be terminated on notice of 30
days or less or which provide for any severance payments or benefits
covering a period beyond the earlier of the termination date or notice
thereof;
4.2.2 Prohibition of Certain Loans. Incurred any borrowings
which would exceed $25,000, in the aggregate, for any purpose except (i)
the refunding of indebtedness now outstanding, (ii) the prepayment by
customers of amounts due or to become due for services rendered or to be
rendered in the future, or (iii) as is otherwise approved in writing by
Synagro;
4.2.3 Prohibition of Certain Commitments. Entered into
commitments of a capital expenditure nature or incur any contingent
liabilities which would exceed $10,000 in the aggregate except (i) as
may be necessary for the maintenance of existing facilities, machinery
and equipment in good operating condition and repair in the ordinary
course of business, or (ii) as is otherwise approved in writing by
Synagro;
4.2.4 Disposal of Assets. Sold, disposed of, or encumbered, any
property or assets, except (i) in the usual and ordinary course of
business, (ii) property or assets which individually have a value of
less than $1,000; or (iii) as may be approved in writing by Synagro;
4.2.5 Maintenance of Insurance. Discontinued its current level
of insurance;
4.2.6 Acquisition Proposals. Directly or indirectly (i)
solicited, initiated or encouraged any inquiry or Acquisition Proposal
(as hereinafter defined) from any person or (ii) participated in any
discussions or negotiations regarding, or furnish to any person other
than Synagro or its representatives any information with respect to, or
otherwise facilitate
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or encourage any Acquisition Proposal by any other person. As used
herein "Acquisition Proposal" means any proposal for a merger,
consolidation or other business combination involving A&J or for the
acquisition or purchase of any equity interest in, or a material portion
of the assets of, A&J, other than the transactions with Synagro
contemplated by this Agreement. A&J shall promptly communicate to
Synagro the terms of any such written Acquisition Proposals which it may
receive or any written inquiries made to it or any of its directors,
officers, representatives or agents;
4.2.7 No Amendment to Articles of Incorporation. Amended its
Articles of Incorporation or merged or consolidated with or into any
other corporation or changed in any manner the rights of its common
stock or the character of its business;
4.2.8 No Issuance, Sale, or Purchase of Securities. Issued or
sold, or issued options or rights to subscribe to, or entered into any
contract or commitment to issue or sell (upon conversion or otherwise),
any shares of A&J Stock, or subdivided or in any way reclassified any
shares of A&J Stock, or acquired, or agreed to acquire, any shares of
A&J Stock; and
4.2.9 Prohibition on Dividends. Declared or paid any dividend
on shares of A&J Stock or made any other distribution of assets to the
holders thereof.
4.3 Agreements of Synagro. Synagro agrees that since March 31, 1998
it has not:
4.3.1 No Amendment to Articles of Incorporation. Amended its
Certificate of Incorporation or merged with or into any other
corporation or changed in any manner the rights of the Synagro Shares;
and
4.3.2 Notice of Material Developments. Promptly furnished to
the Shareholder copies of all Synagro's communications to its
stockholders and all reports filed by it with the Commission and the
National Association of Securities Dealers, Inc. and relating to
periodic or other material developments concerning Synagro's financial
condition, business, or affairs.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of A&J and the Shareholder.
The obligations of A&J and the Shareholder to consummate and effect the
transactions contemplated hereunder shall be subject to the satisfaction of the
following conditions, or to the waiver thereof by the Shareholder, on behalf of
himself and A&J, on or before the Effective Date:
5.1.1 Representations and Warranties of Synagro True at
Effective Date. The representations and warranties of Synagro herein
contained shall be, in all material
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respects, true as of and at the Effective Date, except as affected by
transactions permitted or contemplated by this Agreement; Synagro shall
have performed and complied, in all material respects, with all
covenants required by this Agreement to be performed or complied with by
Synagro before the Effective Date; and Synagro shall have delivered to
the Shareholder a certificate, dated the Effective Date and signed by
its president or a vice president and its secretary, to such effect.
5.1.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Synagro's knowledge, threatened,
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit or to obtain damages or provide other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the consolidated assets and business of
Synagro.
5.1.3 Closing Documents. Synagro shall have executed and
delivered to the appropriate parties the documents and instruments to be
executed and delivered by it pursuant to Section 1.11 hereof, the
Exchange shall have occurred, and the Shareholder shall have received
the opinion required by Section 1.11.1 hereof.
5.1.4 Consent of Certain Parties in Privity With Synagro. The
holders of any material indebtedness of Synagro, the lessors of any
material property leased by Synagro, and the other parties to any other
material agreements to which Synagro is a party shall, when and to the
extent necessary in the reasonable opinion of the Shareholder, have
consented to the transactions contemplated hereby.
5.1.5 Other Merger Agreements. The Other Merger Agreements (as
hereinafter defined), and all documents and instruments contemplated
thereby, shall have been duly executed and delivered, and the
transactions contemplated by the Other Merger Agreements shall have been
consummated. As used herein, the "Other Merger Agreements" shall mean
(i) that certain Plan and Agreement of Merger, of even date herewith,
among Synagro, Synagro Sub Corp. Michigan, Inc. ("Synagro Michigan"),
Michigan Organic Resources, Inc. ("MORI"), Hoekstra, and the Shareholder
regarding the merger of Synagro Michigan with and into MORI; and (ii)
that certain Plan and Agreement of Merger, of even date herewith, among
Synagro, Synagro Sub Florida, Inc. ("Synagro Florida"), A&J Cartage,
Inc. Southeast ("A&J Florida"), Sattler and the Shareholder regarding
the merger of Synagro Florida with and into A&J Florida.
5.2 Conditions Precedent to Obligations of Synagro. The obligation
of Synagro to consummate and effect the transactions contemplated hereunder
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Synagro, on or before the Effective Date.
5.2.1 Representations and Warranties of A&J and the Shareholder
True at Effective Date. The representations and warranties of A&J and
the Shareholder herein contained shall be, in all material respects,
true as of and at the Effective Date, except as affected by transactions
permitted or contemplated by this Agreement; A&J and the Shareholder
shall have performed and complied in all material respects, with all
covenants required by this Agreement to be performed or complied with by
them before the Effective
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Date; and A&J and the Shareholder shall have delivered to Synagro a
certificate, dated the Effective Date and signed by an executive officer
of A&J and by the Shareholder to such effect.
5.2.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Shareholder's knowledge,
threatened, before any court or governmental agency in which it will be,
or it is, sought to restrain or prohibit or to obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the assets and business of A&J.
5.2.3 Closing Documents. The Shareholder and A&J shall have
executed and delivered to the appropriate parties the documents and
instruments to be executed and delivered by them pursuant to Section
1.11 hereof, the Exchange shall have occurred and Synagro shall have
received the opinion required by Section 1.11.2 hereof.
5.2.4 Consent of Certain Parties in Privity with A&J or the
Shareholder. The holders of any material indebtedness of A&J or the
Shareholder, the lessors of any material property leased by A&J or the
Shareholder, the other parties to any other material agreements to which
A&J or the Shareholder are a party and the appropriate authority issuing
any Permits shall, when and to the extent necessary in the reasonable
opinion of Synagro, have consented to the transaction contemplated
hereby.
5.2.5 Other Merger Agreements. The Other Merger Agreements, and
all documents and instruments contemplated thereby, shall have been duly
executed and delivered, and the transactions contemplated by the Other
Merger Agreements shall have been consummated.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Further Assurances. From time to time, as and when requested by
any party hereto, any other party hereto shall execute and deliver, or cause to
be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effect the transactions contemplated hereby.
6.2 Payment of Taxes. The Shareholder agrees to pay timely all Taxes
assessed or assessable against him or A&J arising out of or in any way related
to the ownership, business or operations of A&J through the end of the
Effective Date, including, without limitation, any Taxes resulting from the
consummation of the transactions contemplated hereby, except to the extent the
Shareholder is contesting any portion of such taxes in good faith and have made
appropriate reserves for the payment thereof.
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6.3 Registration Matters.
6.3.1 Agreement to Register Resales. Synagro agrees that within
90 days following the Effective Date, it will file with the Commission
on Form S-3, a shelf registration statement pursuant to Rule 415 of the
Securities Act (the "Registration Statement") covering the resale by the
Shareholder of 200,000 of the Synagro Shares (the "Registered Synagro
Shares"), and will use its best efforts to cause the same to be declared
effective promptly by the Commission. Synagro agrees to maintain such
Registration Statement in effect for the maximum period allowable under
the regulations promulgated by the Commission, and in any event to
maintain the same (or, to the extent necessary, successive registration
statements) through at least December 31, 2001. In any offering
pursuant to this Section 6.3.1, Synagro will use its best efforts to
effect any such registration and use its best efforts to effect such
qualification and compliance as may be required and as would permit or
facilitate the resale of the Registered Shares, including, without
limitation, registration under the Securities Act, appropriate
qualifications under applicable blue-sky or other state securities laws
and, appropriate compliance with any other governmental requirements.
6.3.2 Procedures. With respect to sales by the Shareholder of
Registered Synagro Shares through the Nasdaq Market System or any such
other exchange, the Shareholder may only sell such shares on any day
after the first sale of Synagro Stock has occurred through the Nasdaq
Market System or such other exchange on such day and thereafter the
Shareholder may only sell 1,000 Registered Synagro Shares for each 1,000
shares of Synagro Stock sold by unrelated third parties through the
Nasdaq Market System or such other exchange on such day. In no event
shall the plan of distribution of Registered Synagro Shares include the
use of a contractual underwriter, nor shall Synagro have any obligation
to enter into an underwriting agreement with any investment banking firm
participating as a broker in the execution of any such resales. Synagro
agrees that it will furnish to the Shareholder such number of
prospectuses, prospectus supplements, or other documents incident to any
registration, qualification or compliance referred to herein as the
Shareholder from time to time may reasonably request.
6.3.3 Registration Expenses. All expenses (except for
commissions and any legal fees for the Shareholder's counsel) of
registration of the Registered Synagro Shares effected pursuant to this
Section 6.3 (including, but not limited to, the expenses of any
qualifications under the blue-sky or other state securities laws and
compliance with governmental requirements of preparing and filing any
post-effective amendments or prospectus supplements required for the
lawful distribution of the Registered Synagro Shares to the public in
connection with such registration) will be paid by Synagro.
6.3.4 Preparation; Reasonable Investigation. In connection with
the preparation and filing of the Registration Statement under the
Securities Act pursuant to this Section 6.3, Synagro will give the
Shareholder (and any single counsel designated by the Shareholder), the
opportunity to participate in the preparation of the Registration
Statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or
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supplement thereto, and will give each of them such access to its books
and records and such opportunities to discuss the business of Synagro
with its officers and the independent public accountants who have
certified its financial statements as shall be necessary to conduct a
reasonable investigation within the meaning of the Securities Act.
6.3.5 Rights Non-Transferable. The registration rights provided
by this Section 6.3 are for the benefit solely of the Shareholder, are
personal in nature, and shall not be available to any subsequent holder
of the Registered Synagro Shares (other than subsequent holders who have
become such by gift or other transfer by the Shareholder to an immediate
family member of the Shareholder, by will or through operation of the
laws of descent and distribution).
6.3.6 Indemnification by Synagro. Synagro agrees to indemnify
and hold harmless the Shareholder against any and all claims, demands,
losses, costs, expenses, obligations, liabilities, joint or several,
damages, recoveries and deficiencies, including interest, penalties and
attorneys' fees (collectively, "Claims"), to which the Shareholder may
become subject under the Securities Act or otherwise, insofar as such
Claims (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Registration Statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement
thereto, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and Synagro will reimburse the Shareholder for
any legal or any other expenses reasonably incurred by him in connection
with investigating or defending any such Claim (or action or proceeding
in respect thereof); provided that Synagro shall not be liable in any
such case to the extent that any such Claim (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to
Synagro through an instrument duly executed by the Shareholder or A&J
specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Shareholder and shall survive
any transfer of Registered Synagro Shares by the Shareholder.
6.3.7 Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a Claim referred to in this Section 6.3, such
indemnified party will, if a claim in respect thereof is to be made
against Synagro, give written notice to Synagro, in the manner and to
the address specified in Section 8.4 hereof, of the commencement of such
action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve Synagro of its obligations
under this Section 6.3, except the extent that Synagro is actually
prejudiced by such failure to give notice. In case any such action is
brought against Synagro, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such Claim, Synagro shall
be
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entitled to participate in and to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party, and after
notice from Synagro to such indemnified party of its election so to
assume the defense thereof, Synagro shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than
reasonable costs of investigation. Synagro shall not, without the
consent of the indemnified party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such Claim.
6.3.8 Undertaking to File Reports and Cooperate in Rule 144 and
Rule 145 Transactions. For as long as the Shareholder is subject to
Rule 144 or Rule 145 of the Securities Act and continues to hold any
Synagro Shares, Synagro will use reasonable commercial efforts to timely
file all annual, quarterly and other reports required to be filed by it
under Section 13 or 15(d) of the Exchange Act and the rules and
regulations of the Commission thereunder, as amended from time to time.
If the Shareholder proposes to sell any Synagro Shares pursuant to Rules
144 and 145, Synagro shall cooperate with the Shareholder so as to
enable such sale to be made in accordance with applicable laws, rules
and regulations, the requirements of Synagro's transfer agent, and the
reasonable requirements of the broker through which the sales are
proposed to be executed. Without limiting the generality of the
foregoing, Synagro shall, upon request, furnish with respect to each
such sale (i) a written statement certifying that Synagro has complied
with the public information requirements of Rules 144 and 145 and (ii)
an opinion of Synagro's counsel regarding such matters as Synagro's
transfer agent or the Shareholder's broker may reasonably desire to
confirm.
6.3.9 Beneficiaries. The provisions of this Section 6.3 are for
the benefit of the Shareholder and Synagro, and, subject to Section
6.3.5, no other person shall acquire or have any rights under or by
virtue of this Section 6.3.
6.4 Nomination of Director. For a period of ninety (90) days, the
Shareholder shall have the right, subject to approval of the board of directors
of Synagro (the "Board"), to nominate one director for election to the Board in
accordance with the Certificate of Incorporation and Bylaws of Synagro;
provided that said nominee shall be a knowledgeable expert in the industry in
which Synagro and its subsidiaries operate.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Shareholder. After the Effective Date, in
addition to any other remedies available to Synagro under this Agreement, or at
law or in equity, the Shareholder shall indemnify, defend and hold harmless
Synagro, A&J and their respective officers, directors, employees, agents, and
stockholders, against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys' fees
and expenses (collectively, "Damages") that such
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indemnitees shall incur or suffer, which arise, result from or relate to (i)
any breach of, or failure by, A&J or the Shareholder to perform their
respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Synagro by A&J, or the Shareholder under this
Agreement; (ii) the ownership or operations of A&J before the Closing Date, and
(iii) all Taxes arising out of or in any way related to the ownership, business
or operations of A&J through the end of the Effective Date, including, without
limitation, any Taxes resulting from the consummation of the transaction
contemplated hereby.
7.2 Indemnification by Synagro. After the Effective Date, in addition
to any other remedies available to the Shareholder under this Agreement, or at
law or in equity, Synagro shall indemnify, defend and hold harmless and the
Shareholder, against and with respect to any and all Damages that the
Shareholder shall incur or suffer, which arise, result from or relate to (i)
any breach of, or failure by Synagro to perform, any of its representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished or delivered to or the
Shareholder by or on behalf of Synagro under this Agreement; and (ii) the
ownership or operations of A&J from and after the Effective Date.
7.3 Indemnification Procedures. If any party hereto discovers or
otherwise becomes aware of a claim for Damages arising under this Article 7,
such indemnified party shall give written notice (an "Indemnification Notice")
to the indemnifying party, specifying such claim, and may thereafter exercise
any remedies available to such party under this Agreement; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of any obligations hereunder, to the
extent the indemnifying party is not materially prejudiced thereby. Further,
promptly after receipt by an indemnified party hereunder of written notice of
the commencement of any action or proceeding with respect to which a claim for
Damages arising under this Article 7 may be made, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party,
give written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligations hereunder,
to the extent the indemnifying party is not materially prejudiced thereby. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent
that it may wish, with counsel reasonably satisfactory to such indemnified
party, and after such notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof
unless the indemnifying party has failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such indemnified person. An
indemnifying party who elects not to assume the defense of a claim shall not be
liable for the fees and expenses of more than one counsel in any single
jurisdiction for all parties indemnified by such indemnifying party with
respect to such claim or with respect to claims separate but similar or related
in the same jurisdiction arising out of the same general allegations.
Notwithstanding any of the foregoing to the contrary, the indemnified party
will be entitled to select its own counsel and assume the defense of any action
brought against it if the indemnifying party fails to select counsel reasonably
satisfactory to the indemnified party,
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and the expenses of such defense shall be paid by the indemnifying party. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement with respect to a claim without the consent of the indemnified
party, which consent shall not be unreasonably withheld, or unless such
judgment or settlement includes as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld.
7.4 Termination of Indemnity, Representations and Warranties. The
indemnities provided in Sections 7.1 and 7.2 shall terminate with respect to
all Damages which are not the subject of an Indemnification Notice received by
the indemnifying party within two years after the Effective Date; except that
the time period for receipt of an Indemnification Notice for the indemnities
contained in Section 7.1(i), with respect to a breach of the representations,
warranties, covenants and agreements contained in Sections 2.1.4, 2.1.11,
2.1.13, 2.1.15, 2.2, and 6.2, shall survive for the applicable statute of
limitations period; and provided that the indemnity contained in Section
7.2(ii) shall survive indefinitely. The indemnities provided in Sections 7.1
and 7.2 shall survive indefinitely with respect to Damages for which an
Indemnification Notice is received by the indemnifying party within the
applicable period provided in the preceding sentence. The representations and
warranties contained in Articles 2 and 3 hereof shall terminate two years after
the Closing Date, except that the representations warranties, covenants and
agreements contained in Sections 2.1.4, 2.1.11, 2.1.13, 2.1.15, and 6.2, shall
survive for the applicable statute of limitations period.
ARTICLE 8
MISCELLANEOUS
8.1 Press Releases. The Shareholder shall not make any public
statement or announcement concerning this Agreement or the transactions
contemplated herein without the prior consent of Synagro, subject, however, to
the right of the Shareholder to make such an announcement when in the opinion
of its counsel such public statement or announcement is legally required.
Prior to making any public statement or announcement concerning this Agreement
or the transactions contemplated hereby, Synagro shall provide a copy thereof
to the Shareholder.
8.2 Entirety; Conflict. This Agreement and the Letter Agreement
embody the entire agreement among the parties with respect to the subject
matter hereof, and all prior representations, warranties and agreements between
the parties with respect thereto, whether written or oral, are hereby
superseded in their entirety. This Agreement may not be modified or amended in
any manner except by written instrument executed by all of the parties hereto.
In the event of any conflict between the terms and provisions of this Agreement
and those of the Letter Agreement, the terms and provisions of this Agreement
shall control.
8.3 Counterparts and Facsimile Signature. Any number of counterparts
of this Agreement may be executed and each such counterpart shall be deemed to
be an original instrument,
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but all such counterparts together shall constitute but one instrument. This
Agreement may be executed by any party by facsimile signature, with the
original signature to be promptly delivered thereafter, and such facsimile
signature shall be binding upon the party so executing this Agreement.
8.4 Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered in person or by
courier, sent by facsimile transmission or first class registered or certified
mail, postage prepaid, return receipt requested.
IF TO SYNAGRO OR SUB CORP:
Addressed to: With a copy to:
Synagro Technologies, Inc. Porter & Hedges, L.L.P.
5850 San Felipe, Suite 500 700 Louisiana, 35th Floor
Houston, Texas 77057 Houston, Texas 77002
Attention: Mark A. Rome Attention: T. William Porter
Telephone: (713) 706-6185 Telephone: (713) 226-0600
Facsimile: (713) 706-6181 Facsimile: (713) 228-1331
IF TO A&J OR THE SHAREHOLDER:
Addressed to: With a copy to:
A&J Cartage, Inc. Domnitz, Mawicke, Goisman & Rosenberg, S.C.
2841 South 5th Court 1509 North Prospect Avenue
Milwaukee, Wisconsin 53207 Milwaukee, Wisconsin 53202
Attention: James A. Jalovec Attention: Jeffrey J. Mawicke
Telephone: (414) 744-9447 Telephone: (414) 224-0600
Facsimile: (414) 744-9510 Facsimile: (414) 224-9359
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered in
person or by courier or facsimile to such address, upon delivery during normal
business hours on any business day.
8.5 Table of Contents and Captions. The table of contents and
captions contained in this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of any article,
section, or paragraph hereof.
8.6 Successors and Assigns. Neither Synagro, A&J nor the Shareholder
may transfer or assign this Agreement or any of their respective rights, duties
or obligations hereunder without the prior written consent of the other parties
hereto.
8.7 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the
34
<PAGE> 41
parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such which may be hereafter
declared invalid, void or unenforceable.
8.8 Applicable Law. The laws of the State of Texas will govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, except to the extent
that the form and content of the Articles of Merger and the consequences of the
filing thereof shall be governed by the Corporations Act, and the Shareholder,
A&J, Sub Corp and Synagro agree that the state and federal courts situated in
Harris, County, Texas shall have personal jurisdiction over the Shareholder,
A&J, Sub Corp and Synagro, and shall be the sole venue, to hear all disputes
arising under this Agreement. This Agreement is to be at least partially
performed in Harris, County, Texas and, as such, the Shareholder, A&J, Sub Corp
and Synagro, agree that venue shall be proper with the state or federal courts
in Harris County, Texas to hear such disputes. In the event either the
Shareholder, A&J, Sub Corp or Synagro is not able to effect service of process
upon the other with respect to such disputes, the Shareholder, A&J, Sub Corp
and Synagro expressly agree that the Secretary of State for the State of Texas
shall be an agent of the Shareholder, A&J, Sub Corp and/or the Synagro, as
applicable, to receive service of process on behalf of the Shareholder, A&J,
Sub Corp and/or Synagro, as applicable, with respect to such disputes.
35
<PAGE> 42
IN WITNESS WHEREOF, the Shareholder has executed this Agreement, and
Synagro, Sub Corp and A&J have caused this Agreement to be signed in their
respective corporate names by their respective duly authorized representatives,
all as of the day and year first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SYNAGRO SUB CORP. WISCONSIN, INC.
By:
------------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
A&J CARTAGE, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
SHAREHOLDER
---------------------------------------------
JAMES A. JALOVEC
36
<PAGE> 1
================================================================================
PLAN AND AGREEMENT OF MERGER
AMONG
SYNAGRO TECHNOLOGIES, INC.,
SYNAGRO SUB FLORIDA, INC.,
A&J CARTAGE, INC. SOUTHEAST
JAMES A. JALOVEC
AND
KARL R. SATTLER
DATED AS OF JUNE 23, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
ARTICLE 1 MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Stockholder Approval. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Name and Continued Corporate Existence of Surviving Corporation . . . . . . . . . . . . . . . . 3
1.4.1 Name and Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4.2 Federal Income Tax Treatment of Merger . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Governing Law and Articles of Incorporation of Surviving Corporation . . . . . . . . . . . . . 3
1.6 Bylaws of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Directors and Officers of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7.1 Directors of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7.2 Officers of Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Capital Stock of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Conversion of Securities upon Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9.2 Conversion of A&J Southeast Common Stock. . . . . . . . . . . . . . . . . . . . . 4
1.9.2.1 Post-Closing Adjustment to Exchange Value . . . . . . . . . . . . . . . . 5
1.9.3 Exchange of A&J Southeast Stock Certificates . . . . . . . . . . . . . . . . . . . 6
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp Common Stock. . . . . . . 6
1.9.5 Sub Corp Transfer Books Closed . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Assets and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10.1 Assets and Liabilities of Merging Corporations Become Those of Surviving
Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.10.2 Conveyances to Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . 7
1.10.3 Accounting Treatment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Other Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11.1 Opinion of Synagro Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11.2 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND A&J SOUTHEAST . . . . . . . . . . . . . . 9
2.1 Representations and Warranties of the Stockholders and A&J Southeast . . . . . . . . . . . . . . 9
2.1.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.2 Agreement Authorized and its Effect on Other Obligations . . . . . . . . . . . . . 9
2.1.3 Capitalization of A&J Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.4 Ownership of A&J Southeast Shares . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.5 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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2.1.7 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8.1 Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8.2 Machinery and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8.3 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8.4 Payables . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.5 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.6 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.7 Employee Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.8 Certain Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.9 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.10 Employee Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.12 Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.8.13 Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.8.14 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.8.15 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.8.16 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.9 No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10 Absence of Certain Changes and Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10.1 Financial Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10.2 Property Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10.3 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10.4 Capitalization Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.10.5 Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.10.6 Other Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.11.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.11.2 Subchapter S Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.13 Title to and Condition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.14 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.15 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.16 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.17 Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.17.1 Environmental Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.1.17.2 Permits, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.17.3 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.1.17.4 Past Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.17.5 Environmental Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.17.6 Renewals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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2.1.17.7 Asbestos and PCBs . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.18 Compliance with Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.19 ERISA Plans or Labor Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.1.20 Investigations; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1.21 Absence of Certain Business Practices . . . . . . . . . . . . . . . . . . . . . . . 20
2.1.22 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1.23 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.1 Stockholders Investment Suitability and Related Matters . . . . . . . . . . . . . . 21
2.2.2 Synagro Shares Not Registered . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.3 Reliance on Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.4 Investment Intent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.5 Permitted Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.6 Investor Sophistication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.7 Availability of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.2.8 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SYNAGRO . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.1 Organization and Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.2 Agreement Authorized and its Effect on Other Obligations . . . . . . . . . . . . . . . . . . . 22
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.5 Absence of Certain Changes and Events in Synagro . . . . . . . . . . . . . . . . . . . . . . . 24
3.5.1 Financial Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.5.2 Other Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 Synagro's Compliance with Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.8 Investigations; Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.9 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.10 Nasdaq Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 4 OBLIGATIONS PENDING CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Agreements of Synagro and A&J Southeast . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.1 Maintenance of Present Business. . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.2 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.3 Maintenance of Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.4 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.1.6 Notice of Material Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Additional Agreements of A&J Southeast and the Stockholders . . . . . . . . . . . . . . . . . . 26
4.2.1 Prohibition of Certain Employment Contracts . . . . . . . . . . . . . . . . . . . . 26
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4.2.2 Prohibition of Certain Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2.3 Prohibition of Certain Commitments . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2.4 Disposal of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2.5 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.2.6 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2.7 No Amendment to Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . 27
4.2.8 No Issuance, Sale, or Purchase of Securities . . . . . . . . . . . . . . . . . . . 27
4.2.9 Prohibition on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Agreements of Synagro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3.1 No Amendment to Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . 27
4.3.2 Notice of Material Developments . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Conditions Precedent to Obligations of A&J Southeast and the
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1.1 Representations and Warranties of Synagro True at Effective Date . . . . . . . . . 28
5.1.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.1.4 Consent of Certain Parties in Privity With Synagro . . . . . . . . . . . . . . . . 28
5.1.5 Other Merger Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Conditions Precedent to Obligations of Synagro . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2.1 Representations and Warranties of A&J Southeast and the Stockholders True at
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2.2 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2.3 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2.4 Consent of Certain Parties in Privity with A&J Southeast or the Stockholders . . . 29
5.2.5 Other Merger Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 6 ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 Indemnification by the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2 Indemnification by Synagro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Termination of Indemnity, Representations and Warranties . . . . . . . . . . . . . . . . . . . 31
</TABLE>
iv
<PAGE> 6
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C> <C>
PAGE
ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Entirety; Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Counterparts and Facsimile Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4 Notices and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.5 Table of Contents and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.8 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
v
<PAGE> 7
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of June
23, 1998, is by and among Synagro Technologies, Inc., a Delaware corporation
("Synagro"), Synagro Sub Florida, Inc., a Florida corporation and a wholly
owned subsidiary of Synagro formed for the purpose of carrying out the
transactions contemplated hereby ("Sub Corp"), A&J Cartage, Inc. Southeast, a
Florida corporation ("A&J Southeast" or the "Surviving Corporation"), James A.
Jalovec ("Jalovec"), and Karl A. Sattler ("Sattler," and together with Jalovec,
the "Shareholders"). Sub Corp and A&J Southeast are hereinafter collectively
referred to as the "Merging Corporations."
W I T N E S S E T H:
WHEREAS, Synagro is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its registered office at 1209
Orange Street, Wilmington, Delaware 19801 and its principal executive office at
5850 San Felipe, Suite 500, Houston, Texas 77057;
WHEREAS, the authorized capital stock of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock-Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock,
though no such shares are issued or outstanding; all of which were issued and
outstanding; and (ii) 100,000,000 shares of common stock, par value $.002 per
share ("Synagro Common Stock"), of which, at June 6, 1998 9,082,638 shares were
issued and outstanding, and an additional 2,261,031 shares were reserved for
issuance pursuant to stock options and 600,000 shares were reserved for
issuance pursuant to outstanding warrants; at the same date, no shares of
Common Stock were held in Synagro's treasury;
WHEREAS, Sub Corp is a corporation duly organized and validly existing
under the laws of the State of Florida, with its registered office at 1200
South Pine Island Road, Plantation, Florida 33324.
WHEREAS, the authorized capital stock of Sub Corp consists of 1,000
shares of common stock, $.01 par value per share, of which at the date hereof
1,000 shares were issued and outstanding and held beneficially and of record by
Synagro ("Sub Corp Common Stock");
WHEREAS, A&J Southeast is a corporation duly organized and validly
existing under the laws of the State of Florida, with its registered office at
and its principal executive office at 1860 Gulf Boulevard, Unit 3, Clearwater,
Florida 34630.
<PAGE> 8
WHEREAS, the authorized capital stock of A&J Southeast consists of
10,000 shares (the "A&J Southeast Shares") of common stock, $1.00 par value per
share ("A&J Southeast Stock"), 135 of which are issued and outstanding,100 of
which are held beneficially and of record by Jalovec and 35 of which are held
of record and beneficially by Sattler;
WHEREAS, the Shareholders own all of the issued and outstanding A&J
Southeast Shares and, as such, the Shareholders expect to receive, directly or
indirectly, substantial benefit from the transactions contemplated hereby;
WHEREAS, the respective boards of directors of Sub Corp and A&J
Southeast deem it desirable and in the best interests of their respective
corporations and their respective stockholders, and the Shareholders deem it
desirable and in their best interest, that Sub Corp be merged with and into A&J
Southeast, pursuant to the applicable provisions of Section 607.224 of the
Florida General Corporation Act (the "Corporations Act") in exchange for the
consideration herein provided for, and have proposed, declared advisable, and
approved such merger pursuant to this Agreement which has been duly approved by
resolutions of the respective boards of directors of Sub Corp and A&J
Southeast;
WHEREAS, Synagro, A&J Southeast and others have executed a letter
agreement dated April 21, 1998 (the "Letter Agreement") relating to the
acquisition by Synagro of substantially all of the assets of A&J Southeast,
such acquisition being subject to change to accommodate the needs of the
parties thereto; and
WHEREAS, the parties desire to evidence their agreement with respect
to the form of and the other terms and provisions not set forth in the Letter
Agreement with respect to the transaction contemplated by the Letter Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the merger, the mode of carrying the same into effect, the
manner and basis of converting (i) the outstanding shares of Sub Corp Common
Stock into shares of A&J Southeast Stock, and (ii) the outstanding shares of
A&J Southeast Stock into shares of Synagro Common Stock, and such other details
and provisions as are deemed necessary or proper, the parties hereto agree as
follows:
ARTICLE 1
MERGER
1.1 Surviving Corporation. Subject to the adoption and approval
of this Agreement by the requisite vote of the stockholders of Sub Corp and to
the other conditions hereinafter set forth, Sub Corp and A&J Southeast shall
be, upon the Effective Date (as defined in Section 1.3 hereof), merged into a
single surviving corporation, which shall be A&J Southeast, one of the Merging
Corporations, which shall continue its corporate existence and remain a Florida
corporation governed by and subject to the laws of that state.
2
<PAGE> 9
1.2 Stockholder Approval. This Agreement shall be submitted for
adoption and approval by the stockholders of Sub Corp in accordance with its
articles of incorporation and the applicable laws of the State of Florida.
1.3 Effective Date. The merger shall become effective upon the
filing by A&J Southeast of Articles of Merger with the Department of State of
the State of Florida in accordance with the Corporations Act. The date upon
which the merger shall become effective is referred to in this Agreement as the
"Effective Date."
1.4 Name and Continued Corporate Existence of Surviving Corporation
1.4.1 Name and Existence. Effective as of the Effective
Date, the Articles of Incorporation of A&J Southeast (the "A&J
Southeast Articles"), the corporation whose corporate existence is to
survive the merger and continue thereafter as the surviving
corporation, shall be the Articles of Incorporation of the Surviving
Corporation and the identity, existence, purposes, powers, objects,
franchises, rights, and immunities of A&J Southeast, the surviving
corporation of the merger, shall continue unaffected and unimpaired by
the merger, and the corporate identity, existence, purposes, powers,
objects, franchises, rights, and immunities of Sub Corp shall be
wholly merged into A&J Southeast, and A&J Southeast shall be fully
vested therewith. Accordingly, on the Effective Date, the separate
existence of Sub Corp, except insofar as continued by statute, shall
cease.
1.4.2 Federal Income Tax Treatment of Merger. The merger
is intended to qualify as and, subject to the requirements of Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be characterized as a tax-free reverse subsidiary
merger transaction described in Section 368(a)(2)(E) of the Code.
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Florida shall continue to govern the Surviving
Corporation. On the Effective Date, the A&J Southeast Articles shall be the
articles of incorporation of A&J Southeast until further amended in the manner
provided by law.
1.6 Bylaws of Surviving Corporation. Effective as of the
Effective Date, the bylaws of A&J Southeast (the "A&J Southeast Bylaws") shall
be the bylaws of the Surviving Corporation until altered, amended, or repealed,
or until new bylaws shall be adopted in accordance with the provisions of law,
the A&J Southeast Articles and the A&J Southeast Bylaws.
1.7 Directors and Officers of Surviving Corporation
1.7.1 Directors of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall
constitute the board of directors of the Surviving Corporation, and
who shall hold office until the first annual meeting of stockholders
of the Surviving Corporation next following the Effective Date, are as
follows:
3
<PAGE> 10
NAME ADDRESS
---- -------
James A. Jalovec 2841 South 5th Court, Milwaukee, Wisconsin 53207
Ross M. Patten 5850 San Felipe, Suite 500, Houston, Texas 77057
Mark A. Rome 5850 San Felipe, Suite 500, Houston, Texas 77057
1.7.2 Officers of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall
constitute the officers of the Surviving Corporation, and who shall
hold their respective offices of the Surviving Corporation, subject to
the A&J Southeast Bylaws, from and after the Effective Date, are as
follows:
Ross M. Patten President
James A. Jalovec Vice President
Mark A. Rome Secretary and Treasurer
1.7.3 Vacancies. On or after the Effective Date, if a
vacancy shall exist for any reason in the board of directors or in any
of the offices of the Surviving Corporation, such vacancy shall be
filled in the manner provided in the A&J Southeast Articles and/or A&J
Southeast Bylaws.
1.8 Capital Stock of Surviving Corporation. The authorized
number of shares of capital stock of the Surviving Corporation, and the par
value, designations, preferences, rights, and limitations thereof, and the
express terms thereof, shall be as set forth in the A&J Southeast Articles.
1.9 Conversion of Securities upon Merger
1.9.1 General. The manner and basis of converting the
issued and outstanding shares of the capital stock of (A) Sub Corp
into shares of the capital stock of A&J Southeast and (B) A&J
Southeast into shares of the capital stock of Synagro and/or other
consideration herein provided for shall be as hereinafter set forth in
this Section 1.9.
1.9.2 Conversion of A&J Southeast Common Stock. On the
Effective Date, the A&J Southeast Shares, without any action on the
part of the holder thereof, shall automatically become and be
converted into the right to receive (i) certificates evidencing
288,447 fully paid and nonassessable shares of issued and outstanding
Synagro Common Stock (which, together with associated Preferred Stock
Purchase Rights, are hereinafter referred to as the "Synagro Shares"),
(ii) cash in the amount of $251,664 (the "Cash Amount"), and (iii) a
promissory note, substantially in the form of Exhibit A hereto, in the
principal amount of $241,580 (plus any amounts payable under Section
1.9.2(iii) of each of the Other Merger Agreements (as hereinafter
defined)) (the "Promissory Note"), upon surrender, in accordance with
Section 1.9.3 hereof, of certificates theretofore evidencing the A&J
Southeast Shares (the Synagro Shares together with the Cash Amount and
the Promissory Note collectively, the "Exchange Value").
4
<PAGE> 11
1.9.2.1 Post-Closing Adjustment to Exchange
Value
(a) Preparation of Closing Balance
Sheet. Not later than 60 days following the
Effective Date (as hereinafter defined),
Stockholders shall prepare and deliver to Synagro
for its review in accordance with this section a
balance sheet (the "Closing Balance Sheet") of A&J
Southeast prepared as of the Effective Date and
prepared in accordance with generally accepted
accounting principles ("GAAP") in a manner
consistent with the financial statements described
in Section 2.1.6 hereof. All of the parties hereto
shall cooperate fully with each other in the
preparation of the Closing Balance Sheet, and
Synagro shall have access at all reasonable times
to review workpapers, books and records relating to
the preparation of the Closing Balance Sheet.
(b) Right to Dispute Closing Balance
Sheet. Synagro shall have the right to dispute the
Closing Balance Sheet by giving notice of dispute
to Stockholders within 30 days after the Closing
Balance Sheet has been given to Synagro. Such
notice shall set forth in detail the reasons for
the dispute and Synagro's proposed adjustments to
the Closing Balance Sheet. If Synagro does not
give notice of dispute to Stockholders within such
30 day period in accordance with the foregoing, the
Closing Balance Sheet as prepared by Stockholders
shall become final and binding upon Synagro. If
Synagro does give notice of dispute to Stockholders
within such 30 day period, Stockholders and Synagro
shall endeavor in good faith to reach agreement on
all of the disputed items. If the parties are
unable to reach an agreement on the disputed items
during such 30 day period, then the disputed items
which have not been resolved shall be submitted to
the accounting firm of Arthur Andersen, Houston,
Texas for determination and resolution on the basis
of such procedures as such accounting firm, in its
sole judgement, deems applicable and appropriate,
taking into account GAAP and the terms of this
Agreement. Such accounting firm shall review the
disputed matters and as promptly as practicable
deliver to Stockholders and to Synagro a statement
setting forth its determination as to the proper
treatment of the matters in dispute, and such
determination shall be final and binding upon the
parties without any further right of appeal;
provided, however, neither such determination nor
any other provisions of this Section 1.9.2.1 shall
affect Synagro's right to seek indemnification for
any breaches of representations and warranties by
Stockholders pursuant to Article 7 hereof. All
charges of such accounting firm and other expenses
directly incurred in making such determination
shall be borne equally by the parties hereto.
(c) Adjustment of Consideration. In the
event that A&J Southeast's tangible assets net of
liabilities ("Net Assets") as shown on the
5
<PAGE> 12
Closing Balance Sheet, as finally prepared and
binding upon the parties in accordance with Sections
1.9.2.1(a) and (b) is less than the Net Assets on
April 30, 1998, then Synagro shall have the right
to give notice thereof to the Stockholders,
whereupon the Stockholders shall have 10 days to
refund to Synagro a cash amount equal to the amount
by which the Net Assets on April 30,1998 exceeds
the amount of the Net Assets as shown on the
Closing Balance Sheet, or cancel the Promissory
Note and promptly surrender it to Synagro whereupon
Synagro shall execute and deliver to Stockholders a
new promissory note, which note shall be in the
same from and contain the same terms and provisions
as the Promissory Note, in the aggregate principal
amount of $241,580 (plus any amounts payable under
Section 1.9.2(iii) of each of the Other Merger
Agreements) less the difference between the Net
Assets on April 30, 1998 and the Effective Date
(and any other adjustments pursuant to Section
1.9.2.1 of each of the Other Merger Agreements).
1.9.3 Exchange of A&J Southeast Stock Certificates. On
the Effective Date, the Stockholders shall surrender the certificates
representing the A&J Southeast Shares to Synagro, and Stockholders
shall be entitled upon such surrender to receive in exchange therefor
a certificate or certificates representing the Synagro Shares together
with the Cash Amount, and the Promissory Note (the "Exchange"), in the
respective amounts as shown on Exhibit 1.9.3 hereto.
1.9.4 Conversion of, and Exchange of Certificates for Sub
Corp Common Stock. On the Effective Date, each share of Sub Corp
Common Stock then issued and outstanding, without any action on the
part of the holder thereof (and after giving effect to the conversion
in the merger of all then outstanding shares of capital stock of A&J
Southeast into capital stock of Synagro and/or other consideration
herein provided for) shall automatically become and be converted into
one-tenth of one fully paid and nonassessable share of issued and
outstanding A&J Southeast Stock. On the Effective Date, Synagro shall
surrender the outstanding certificate theretofore representing shares
of Sub Corp Common Stock to A&J Southeast, A&J Southeast will cancel
the certificates representing the Sub Corp Common Stock, and shall
receive in exchange therefor a certificate or certificates
representing the number of whole shares of A&J Southeast Stock into
which the shares of Sub Corp Common Stock theretofore represented by
the certificate so surrendered shall have been converted as aforesaid.
1.9.5 Sub Corp Transfer Books Closed. Upon the Effective
Date, the stock transfer books of Sub Corp shall be deemed closed, and
no transfer of any certificates theretofore representing shares of Sub
Corp Common Stock shall thereafter be made or consummated.
6
<PAGE> 13
1.10 Assets and Liabilities
1.10.1 Assets and Liabilities of Merging Corporations
Become Those of Surviving Corporation. On the Effective Date, all
rights, privileges, powers, immunities, and franchises of each of the
Merging Corporations, both of a public and private nature, and all
property, real, personal, and mixed, and all debts due on whatever
account, as well as stock subscriptions and all other choices or
things in action, and all and every other interest of or belonging to
or due to either of the Merging Corporations, shall be taken by and
deemed to be transferred to and shall be vested in the Surviving
Corporation without further act or deed, and all such rights,
privileges, powers, immunities, and franchises, property, debts,
choices or things in action, and all and every other interest of each
of the Merging Corporations shall be thereafter as effectually the
property of the Surviving Corporation as they were of the respective
Merging Corporations, and the title to any real or other property, or
any interest therein, whether vested by deed or otherwise, in either
of the Merging Corporations, shall not revert or be in any way
impaired by reason of the merger, provided, however, that all rights
of creditors and all liens upon any properties of each of the Merging
Corporations shall be preserved unimpaired, and all debts,
liabilities, restrictions, obligations, and duties of the respective
Merging Corporations, including without limitation all obligations,
liabilities and duties as lessee under any existing lease, shall
thenceforth attach to the Surviving Corporation and may be enforced
against and by it to the same extent as if such debts, liabilities,
duties, restrictions and obligations had been incurred or contracted
by it. Any action or proceeding pending by or against either of the
Merging Corporations may be prosecuted to judgment as if the merger
had not taken place, or the Surviving Corporation may be substituted
in place of either of the Merging Corporations.
1.10.2 Conveyances to Surviving Corporation. The Merging
Corporations hereby agree, respectively, that from time to time, as
and when requested by the Surviving Corporation, or by its successors
and assigns, they will execute and deliver or cause to be executed and
delivered, all such deeds, conveyances, assignments, permits, licenses
and other instruments, and will take or cause to be taken such further
or other action as the Surviving Corporation, its successors or
assigns, may deem necessary or desirable to vest or perfect in or
confirm to the Surviving Corporation, its successors and assigns,
title to and possession of all the property, rights, privileges,
powers, immunities, franchises, and interests referred to in Section
1.10.1 and otherwise carry out the intent and purposes of this
Agreement.
1.10.3 Accounting Treatment. The assets and liabilities
of the Merging Corporations shall be taken up on the books of the
Surviving Corporation in accordance with generally accepted accounting
principles, and the capital surplus and retained earnings accounts of
the Surviving Corporation shall be determined, in accordance with
generally accepted accounting principles, by the board of directors of
the Surviving Corporation. Nothing herein shall prevent the board of
directors of the Surviving Corporation from making any future changes
in its accounts in accordance with law.
7
<PAGE> 14
1.11 Other Closing Deliveries. Contemporaneously with the
Exchange, (i) Synagro shall execute and deliver to Stockholders the Promissory
Note; (ii) Synagro shall deliver to the Stockholders the certificate required
by Section 5.1.1 hereof, and the Stockholders shall deliver to Synagro the
certificate required by Section 5.2.1 hereof; and (iii) Synagro and the
Stockholders will deliver to one another the opinions of counsel described
below:
1.11.1 Opinion of Synagro Counsel. Porter & Hedges,
L.L.P., counsel for Synagro, shall issue an opinion to the
Stockholders, in form and substance satisfactory to the Stockholders,
to the effect that (i) Synagro has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware; (ii) all corporate proceedings required to be
taken by or on the part of Synagro to authorize the execution of this
Agreement and the implementation of the transactions contemplated
hereby have been taken; (iii) the shares of Synagro Common Stock which
are to be delivered in accordance with this Agreement will, when
issued, be validly issued, fully paid and nonassessable outstanding
securities of Synagro; (iv) this Agreement and the Promissory Note to
which Synagro is a party have been duly executed and delivered by, are
the legal, valid and binding obligation of, and are enforceable
against Synagro in accordance with their respective terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights of
creditors generally; provided that said opinion shall be limited to
federal law, the laws of the State of Texas and the general corporate
law of the State of Delaware; and (v) except as specified by such
counsel (such exceptions to be acceptable to A&J Southeast) such
counsel does not know of any material litigation, proceedings, or
governmental investigation pending or threatened against or relating
to Synagro, any of its subsidiaries, or their respective properties or
businesses in which it is sought to restrain, prohibit or otherwise
affect the consummation of the transactions contemplated by this
Agreement. Such opinion also shall cover such other matters incident
to the transactions herein contemplated as A&J Southeast and its
counsel may reasonably request. In rendering such opinion, such
counsel may rely upon (i) certificates of public officials and of
officers of Synagro as to matters of fact and (ii) the opinion or
opinions of other counsel, which opinions shall be reasonably
satisfactory to A&J Southeast, as to matters other than federal or
Texas law.
1.11.2 Opinion of Counsel. Domnitz, Mawicke, Goisman &
Rosenberg, S.C., counsel to A&J Southeast and the Stockholders, shall
issue an opinion to Synagro in form and substance satisfactory to
Synagro, to the effect that (i) A&J Southeast has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Florida; (ii) all corporate proceedings
required to be taken by or on the part of the Stockholders to
authorize the execution of this Agreement and the implementation of
the transactions contemplated hereby have been taken; (iii) all
outstanding shares of the A&J Southeast Stock have been validly issued
and are fully paid and nonassessable; (iv) this Agreement has been
duly executed and delivered by, and are the legal, valid and binding
obligation of the Stockholders, and are enforceable against the
Stockholders in accordance with its terms, except as the
enforceability may be limited by (a) equitable principles of
8
<PAGE> 15
general applicability or (b) bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights of
creditors generally; and (v) except as specified by such counsel (such
exceptions to be acceptable to Synagro) such counsel does not know of
any material litigation, proceedings or governmental investigation,
pending or threatened against or relating to A&J Southeast, its
properties or businesses, or the Stockholders in which it is sought to
restrain, prohibit or otherwise affect consummation of the
transactions contemplated by this Agreement. Such opinion shall also
cover such other matters incident to the transactions herein
contemplated as Synagro and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of A&J Southeast as to matters of
fact and (ii) on the opinion or opinions of other counsel, which
opinions shall be reasonably satisfactory to Synagro, as to matters
other than federal or Florida law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AND A&J SOUTHEAST
2.1 Representations and Warranties of the Stockholders and A&J
Southeast. The Stockholders and A&J Southeast jointly and severally represent
and warrant to Synagro as follows:
2.1.1 Organization and Standing. A&J Southeast is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Florida, has full requisite corporate
power and authority to carry on its business as it is currently
conducted and to own and operate the properties currently owned and
operated by it, and is duly qualified or licensed to do business and
is in good standing as a foreign corporation authorized to do business
in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such
qualification or licensing necessary, except where the failure to be
so qualified or licensed would not have a material adverse effect on
its financial condition, properties or business.
2.1.2 Agreement Authorized and its Effect on Other
Obligations. The execution, delivery and performance of this
Agreement have been duly and validly authorized by all necessary
corporate action on the part of A&J Southeast. This Agreement is a
valid and binding obligation of A&J Southeast and the Stockholders
enforceable against A&J Southeast and the Stockholders in accordance
with its terms, except as such enforceability may be limited by (a)
equitable principles of general applicability or (b) bankruptcy,
insolvency, reorganization, fraudulent conveyance or similar laws
affecting the rights of creditors generally. The execution, delivery
and performance of this Agreement by A&J Southeast and the
Stockholders will not conflict with or result in a violation or breach
of any term or provision of, nor constitute a default under (i) the
Articles of Incorporation or Bylaws of A&J Southeast or (ii) to the
extent such conflict, violation, breach or default could have a
material adverse effect on the business, operations, assets or
financial condition of A&J Southeast or the Stockholders, any
obligation, indenture, mortgage, deed of trust, lease,
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contract or other agreement to which A&J Southeast or the Shareholders
are a party or by which A&J Southeast or the Stockholders or their
respective properties are bound.
2.1.3 Capitalization of A&J Southeast. The authorized
capitalization of A&J Southeast consists of 10,000 shares of A&J
Southeast Stock, 100 shares of which are issued and outstanding and
all of which are held beneficially and of record by the Stockholders.
A&J Southeast does not have any outstanding options, warrants, calls
or commitments of any character relating to its capital stock. All
issued and outstanding shares of A&J Southeast Stock are validly
issued, fully paid and non-assessable. None of the outstanding shares
of A&J Southeast Stock is subject to any voting trust, voting
agreement or other agreement or understanding with respect to the
voting thereof, nor is any proxy in existence with respect thereto.
2.1.4 Ownership of A&J Southeast Shares. The
Shareholders hold good and valid title to all of the A&J Southeast
Shares free and clear of all Encumbrances. The Shareholders possess
full authority and legal right to sell, transfer and assign to Synagro
the A&J Southeast Shares, free and clear of all Encumbrances. Upon
transfer to Synagro by the Stockholders of the A&J Southeast Shares,
Synagro will own the A&J Southeast Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of A&J
Southeast, and the Stockholders, threatened, against A&J Southeast or
the Stockholders that concern or affect title to the A&J Southeast
Shares, or that seek to compel the issuance of capital stock or other
securities of A&J Southeast.
2.1.5 No Subsidiaries. As of the date hereof, A&J
Southeast has no subsidiaries, whether wholly or partially owned, and
does not own, beneficially or of record, or have any obligation to
acquire, any material amount of, or have any material investment in,
any stock, partnership or membership interest or other equity or debt
securities of any other business, enterprise or entity.
2.1.6 Financial Statements. The Shareholders have
delivered to Synagro A&J Southeast's audited balance sheet and related
statements of income, retained earnings and cash flows, with appended
notes which are an integral part of such statements, as of and for the
twelve months ended December 31, 1997 (the "Audited A&J Southeast
Financial Statements"), and also has delivered to Synagro copies of
A&J Southeast's unaudited balance sheet and related statements of
income, retained earnings and cash flows as of and for the four-month
period ending April 30, 1998 (the "Unaudited A&J Southeast Financial
Statements", and, together with the Audited A&J Southeast Financial
Statements" the "A&J Southeast Financial Statements"). Copies of the
A&J Southeast Financial Statements are attached hereto as Schedule
2.1.6. All of the A&J Southeast Financial Statements are complete in
all material respects (except, with respect to the Unaudited A&J
Southeast Financial Statements, for the omission of notes and
schedules), present fairly the financial condition of A&J Southeast as
of the dates indicated, and the results of operations for the
respective periods indicated, and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis, except as noted therein and subject, in
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the case of the Unaudited A&J Southeast Financial Statements, to
normal year-end adjustments and other adjustments described therein;
in addition, the Unaudited A&J Southeast Financial Statements, though
unaudited, include all adjustments which A&J Southeast, the
Stockholders and consider necessary for a fair presentation of A&J
Southeast's results for that period. December 31, 1997 may sometimes
be hereinafter referred to as the "Balance Sheet Date".
2.1.7 Liabilities. Except as disclosed on Schedule 2.1.7
hereto, A&J Southeast has no pending or, to A&J Southeast's and the
Shareholders' knowledge, threatened liabilities or obligations, either
accrued, absolute or contingent, nor does A&J Southeast or
Stockholders have any knowledge of any potential liabilities or
obligations, which would materially adversely affect the value and
conduct of the business of A&J Southeast, other than those (i)
reflected or reserved against in the Unaudited A&J Southeast Financial
Statements or (ii) incurred in the ordinary course of business since
the Balance Sheet Date.
2.1.8 Additional Information. Attached as Schedule 2.1.8
hereto are true, complete and correct lists of the following items:
2.1.8.1 Real Estate. All real property and
structures thereon (i) owned, or subject to a contract of
purchase and sale, by A&J Southeast, with a description of
the nature and amount of any Encumbrances thereon created by
A&J Southeast or Stockholders, or (ii) leased, or subject to
a lease commitment, by A&J Southeast, with a description of
the terms of each lease and lease commitment. The term
"Encumbrances" means all liens, security interests, pledges,
mortgages, deeds of trust, claims, rights of first refusal,
options, charges, restrictions or conditions to transfer or
assignment, liabilities, obligations, privileges, equities,
easements, rights-of-way, limitations, reservations,
restrictions and other encumbrances of any kind or nature;
2.1.8.2 Machinery and Equipment. All machinery,
vehicles, trailers, transportation equipment, tools,
equipment, furnishings, and fixtures (i) owned or subject to
a contract of purchase and sale, by A&J Southeast with a
description of the nature and amount of any Encumbrances
thereon or (ii) leased, or subject to a lease commitment, by
A&J Southeast, with a description of each lease and lease
commitment;
2.1.8.3 Receivables. All accounts and notes
receivable of A&J Southeast, together with (i) aging
schedules by invoice date and due date, (ii) the amounts
provided for as an allowance for bad debts, (iii) the
identity and location of any asset in which A&J Southeast
holds a security interest to secure payment of the underlying
indebtedness, and (iv) a description of the nature and amount
of any Encumbrance on such accounts and notes receivable;
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2.1.8.4 Payables. All accounts and notes
payable of A&J Southeast, together with an appropriate aging
schedule;
2.1.8.5 Insurance. All insurance policies or
bonds currently maintained by A&J Southeast, including title
insurance policies, and those covering A&J Southeast's
properties, machinery, equipment, fixtures, employees and
operations, as well as a listing of any deductibles,
premiums, audit adjustments or retroactive adjustments due or
pending on such policies or any predecessor policies;
2.1.8.6 Contracts. All sludge contracts,
bulking agent contracts and all other material contracts to
which A&J Southeast is a party which are to be performed in
whole or in part after the date hereof;
2.1.8.7 Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation,
profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other fringe benefit plans,
arrangements or trust agreements of A&J Southeast, whether or
not subject to ERISA (as hereinafter defined), together with
copies of the most recent reports with respect to such plans,
arrangements, or trust agreements filed with any governmental
agency, and all Internal Revenue Service determination
letters that have been received with respect to such plans;
2.1.8.8 Certain Salaries. The names and salary
rates of all present employees of A&J Southeast who have
salaries in excess of $25,000, and all arrangements with
respect to any bonuses to be paid to them from and after the
date of this Agreement;
2.1.8.9 Bank Accounts. The name of each bank in
which A&J Southeast has an account, the account numbers of
each account and the names of all persons authorized to draw
thereon;
2.1.8.10 Employee Agreements. Any collective
bargaining agreements of A&J Southeast with any labor union
or other representative of employees, including amendments,
supplements, and written or oral understandings, and all
employment and consulting and severance agreements of A&J
Southeast;
2.1.8.11 Intellectual Property. All patents,
trademarks, copyrights and other intellectual property rights
owned, licensed, or used by A&J Southeast;
2.1.8.12 Trade Names. All trade names, assumed
names and fictitious names used or held by A&J Southeast,
whether and where such names are registered, and where used;
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2.1.8.13 Promissory Notes. All long-term and
short-term promissory notes, installment contracts, loan
agreements, credit agreements, and any other agreements of
A&J Southeast relating thereto or with respect to collateral
securing the same;
2.1.8.14 Guaranties. All indebtedness,
liabilities and commitments of others and as to which A&J
Southeast is a , endorser, co-maker, surety, or accommodation
maker, or contingently liable therefor and all letters of
credit, whether stand-by or documentary, issued by any third
party;
2.1.8.15 Leases. All material leases to which
A&J Southeast is a party whether as lessor or lessee not
previously described on Schedule 2.1.8.1 or Schedule 2.1.8.2;
and
2.1.8.16 Permits. All permits, authorizations,
variances, waivers, exemptions, rights-of-way, franchises,
ordinances, approvals, certifications, licenses,
registrations, orders, decrees and other similar rights
applicable to current operations conducted by A&J Southeast
(collectively, "Permits") and all environmental audits,
assessments, investigations and reviews conducted by or on
behalf of A&J Southeast within the last five years on any
property owned or used by it.
2.1.9 No Defaults. Except as set forth on Schedule 2.1.9,
A&J Southeast is not in default in any material obligation or covenant on
its part to be performed under any obligation, lease, contract, order,
plan or other agreement or arrangement.
2.1.10 Absence of Certain Changes and Events. Other than as
a result of the transactions contemplated by this Agreement, since the
Balance Sheet Date, there has not been:
2.1.10.1 Financial Change. Any material adverse
change in the financial condition, backlog, operations,
assets, liabilities or business of A&J Southeast;
2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of A&J
Southeast (whether or not covered by insurance);
2.1.10.3 Dividends. Except as set forth on
Schedule 2.1.10.3, any declaration, setting aside, or payment
of any dividend or other distribution in respect of the A&J
Southeast Stock, or any direct or indirect redemption,
purchase or any other acquisition by A&J Southeast of any
such stock;
2.1.10.4 Capitalization Change. Any change in
the capital stock or in the number of shares or classes of
the authorized or outstanding capital stock of A&J Southeast
as described in Section 2.1.3 hereof;
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2.1.10.5 Labor Disputes. Except as disclosed on
Schedule 2.1.16, any labor disputes involving A&J Southeast;
or
2.1.10.6 Other Material Changes. Except as set
forth on Schedule 2.1.10.6, any other event or condition
known to A&J Southeast or the Stockholders pertaining to and
adversely affecting the operations, assets or business of A&J
Southeast which could constitute a material adverse change in
the business, assets or financial condition of A&J Southeast,
other than events or conditions which are of a general or
industry wide nature and of general public knowledge, or
which have been disclosed to Synagro in writing.
2.1.11 Taxes.
2.1.11.1 General. All federal, state and local
income, value added, sales, use, franchise, gross revenue,
turnover, excise, payroll, property, employment, customs
duties (collectively, "Taxes") and any and all other tax
returns, reports, and estimates have been filed with
appropriate governmental agencies, domestic and foreign, by
A&J Southeast for each period for which any such returns,
reports, or estimates were due; all taxes shown by such
returns to be payable and, except as set forth in Schedule
2.1.11, any and all other taxes due and payable have been
paid other than those being contested in good faith by A&J
Southeast; and the tax provisions reflected in the Unaudited
A&J Southeast Balance Sheet are adequate, in accordance with
generally accepted accounting principles, to cover
liabilities of A&J Southeast at the date thereof for all
taxes, including any assessed interest, assessed penalties
and additions to taxes of any character whatsoever applicable
to A&J Southeast or its assets or business. No waiver of any
statute of limitations executed by A&J Southeast with respect
to any income or other tax is in effect for any period.
Except as set forth on Schedule 2.1.11 hereto, the income tax
returns of A&J Southeast have never been examined by the
Internal Revenue Service or the taxing authorities of any
other jurisdiction. There are no tax liens on any assets of
A&J Southeast except for taxes not yet currently due.
2.1.11.2 Subchapter S Matters. A&J Southeast (i)
made an effective, valid and binding S election pursuant to
Section 1362 of the Code effective January 30, 1997 (ii) has
maintained its status as an S Corporation pursuant to Section
1361 of the Code without lapse or interruption since the date
of said election, and (iii) made and continuously maintained,
since the effective date of its federal S election, elections
similar to the federal S election in each state or local
jurisdiction where A&J Southeast does business or is required
to file a tax return to the extent such states or
jurisdictions permit such elections. A&J Southeast neither
is nor will or can be subject to the built-in gains tax under
Section 1374 of the Code or any similar corporate level tax
imposed on A&J Southeast by any taxing authority. A&J
Southeast (i) has not adopted or used LIFO as a method of
accounting for inventory, and (ii) has no other tax item,
election, agreement or
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adjustment which will accelerate or trigger income or
deferred deductions of A&J Southeast as a result of
termination of A&J Southeast's status as an S Corporation.
2.1.12 Intellectual Property. A&J Southeast owns or
possesses licenses to use all patents, patent applications, trademarks
and service marks (including registrations and applications therefor),
trade names, copyrights and written know-how, trade secrets and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "Intellectual Property") that are either material
to its business or that are necessary for the rendering of any
services rendered by it and the use or sale of any equipment or
products used or sold by it, including all such Intellectual Property
listed in Schedule 2.1.8 hereto. The Intellectual Property so owned
or possessed by A&J Southeast is owned or licensed free and clear of
any Encumbrance. A&J Southeast has not granted to any other person
any license to use any Intellectual Property. A&J Southeast has not
received any notice of infringement, misappropriation, or conflict
with, the intellectual property rights of others in connection with
the use by it of the Intellectual Property or otherwise in connection
with the operation of its business.
2.1.13 Title to and Condition of Assets. A&J Southeast has
good, indefeasible and marketable title to all its properties,
interests in properties and assets, real and personal, reflected in
the Unaudited A&J Southeast Financial Statements or in Schedule 2.1.8
hereto, free and clear of any Encumbrance, except (i) Encumbrances
reflected in Schedule 2.1.8 hereto, (ii) liens for current taxes not
yet due and payable, and (iii) such imperfections of title, easements
and Encumbrances, if any, as are not substantial in character, amount,
or extent and do not and will not materially detract from the value,
or interfere with the present use, of the property subject thereto or
affected thereby, or otherwise materially impair business operations
(the matters described in clauses (ii) and (iii) collectively,
"Permitted Encumbrances"). All leases pursuant to which A&J Southeast
leases (whether as lessee or lessor) any substantial amount of real or
personal property are in good standing, valid, and effective; and
there is not, under any such leases, any existing default or event of
default or, to A&J Southeast's and the Shareholders' knowledge, any
event which with notice or lapse of time, or both, would constitute a
default by A&J Southeast and in respect to which A&J Southeast has not
taken adequate steps to prevent a default from occurring. The
buildings and premises of A&J Southeast that are used in its business
are in good operating condition and repair, subject only to ordinary
wear and tear. All equipment, machinery, vehicles, trailers,
transportation equipment, tools and other major items of equipment of
A&J Southeast are in good operating condition and in a state of
reasonable maintenance and repair, ordinary wear and tear excepted,
and are free from any known defects except as may be repaired by
routine maintenance and such minor defects as will not substantially
interfere with the continued use thereof in the conduct of normal
operations. To A&J Southeast's and the Shareholders' knowledge, all
such assets conform in all material respects to all applicable laws
governing their use. Except as set forth in Schedule 2.1.18 hereto,
no notice of any violation of any law, statute, ordinance, or
regulation relating to any such assets has been (or are being)
received by A&J Southeast or the Stockholders, except such as have
been fully complied with.
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2.1.14 Contracts. All material contracts, leases, plans
or other arrangements to which A&J Southeast is a party, by which it
is bound or to which A&J Southeast or the assets of A&J Southeast are
subject are in full force and effect and constitute valid and binding
obligations of A&J Southeast. A&J Southeast is not, and to the
knowledge of A&J Southeast and the Stockholders, no other party to
any such contract, lease, plan or other arrangement, is in default of
any material obligation or provision thereunder, and, to A&J
Southeast's and the Shareholders' knowledge, no event has occurred
which (with or without notice, lapse of time, or the happening of any
other event) would constitute a material default thereunder. No
contract has been entered into on terms which could reasonably be
expected to have a material adverse effect on A&J Southeast. Neither
A&J Southeast nor the Stockholders has received any information that
would cause A&J Southeast or the Stockholders to conclude that any
customer of A&J Southeast will (or is likely to) cease doing business
with A&J Southeast (or any successors thereto) as a result of the
consummation of the transactions contemplated hereby.
2.1.15 Licenses and Permits. Except as set forth on
Schedule 2.1.15, A&J Southeast possesses all Permits necessary under
law or otherwise for it to conduct its business as now being conducted
and to construct, own, operate, maintain and use its assets in the
manner in which they are now being constructed, operated, maintained
and used. Each of such Permits and the rights of A&J Southeast with
respect thereto is (and will be following the consummation of the
transactions contemplated hereby) valid and subsisting, in full force
and effect, and enforceable by A&J Southeast subject to administrative
powers of regulatory agencies having jurisdiction. Except as set
forth in Schedule 2.1.15 hereto, A&J Southeast is in compliance in all
material respects with the terms of such Permits and there is no
pending, or to A&J Southeast's and the Shareholders' knowledge,
threatened claim that A&J Southeast is not in compliance with any
Permit. Except as set forth in Schedule 2.1.15 hereto, none of such
Permits have been, or to the knowledge of A&J Southeast and the
Stockholders, are threatened to be, revoked, canceled, suspended or
modified.
2.1.16 Litigation. Except as set forth on Schedule 2.1.16
hereto, there is no suit, action, or legal, administrative,
arbitration, or other proceeding or governmental investigation pending
to which A&J Southeast is a party or, to the knowledge of A&J
Southeast and the Stockholders, might become a party or which
particularly affect A&J Southeast. Neither A&J Southeast nor the
Shareholders have received notice of any pending change in the zoning
or building ordinances directly affecting the real property or
leasehold interests of A&J Southeast, nor, to the knowledge of A&J
Southeast and the Stockholders, is any such change threatened.
2.1.17 Environmental Compliance.
2.1.17.1 Environmental Conditions. Except as set
forth in Schedule 2.1.17 hereto, to the best knowledge of A&J
Southeast and the Stockholders, there are no environmental
conditions or circumstances, including,
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<PAGE> 23
without limitation, the presence or release of any hazardous
substance, on any property presently or previously owned by
A&J Southeast, or on any property to which hazardous
substances or waste generated by the operations of A&J
Southeast or by the use of the assets of A&J Southeast were
disposed of. The term "hazardous substance" means (i)
asbestos, polychlorinated biphenyls, urea formaldehyde, lead
based paint, radon gas, petroleum, oil, solid waste,
pollutants and contaminants, and (ii) any chemicals,
materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any
Applicable Environmental Laws (as hereinafter defined),
including, but not limited to, substances defined as
"hazardous substances," "hazardous materials," or "hazardous
waste" in CERCLA, RCRA, HMTA (as such terms are hereinafter
defined), or comparable state and local statutes or in the
regulations adopted and promulgated pursuant to said
statutes;
2.1.17.2 Permits, etc. Except as set forth in
schedule 2.1.17 hereto, to the best knowledge of A&J
Southeast and the Stockholders, A&J Southeast has in full
force and effect all environmental permits, licenses,
approvals and other authorizations required to conduct its
operations, other than those that are not material to its
business or operations, and is operating in substantial
compliance thereunder;
2.1.17.3 Compliance. To the best knowledge of
A&J Southeast and the Stockholders, except as set forth on
Schedule 2.1.17 hereto, neither the operations of A&J
Southeast nor the use of the assets of A&J Southeast violate
in any respect any applicable federal, state or local law,
statute, ordinance, rule, regulation, order or notice
requirement pertaining to (a) the condition or protection of
air, groundwater, surface water, soil, or other environmental
media, (b) the environment, including natural resources or
any activity which affects the environment, or (c) the
regulation of any pollutants, contaminants, waste, or
substances (whether or not hazardous or toxic), including,
without limitation, the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 et seq.) ("HMTA"), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et
seq.) ("RCRA"), the Clean Water Act (33 U.S.C. 1251 et seq.),
the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (17 U.S.C. Section 2601 et seq.), the
Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Safe Drinking Water Act (42 U.S.C.
Section 201 and Section 300f et seq.), the Rivers and Harbors
Act (33 U.S.C. Section 401 et seq.), the Oil Pollution Act
(33 U.S.C. Section 2701 et seq.) and analogous federal,
interstate, state and local requirements, as any of the
foregoing may have been amended or supplemented from time to
time (collectively, the "Applicable Environmental Laws"),
other than violations that in the aggregate are not material
to the business or operations of A&J Southeast;
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2.1.17.4 Past Compliance. To the best knowledge
of A&J Southeast and the Stockholders, except as set forth in
Schedule 2.1.17 hereto, none of the operations or assets of
A&J Southeast has ever been conducted or used in such a
manner as to constitute a violation of any of the Applicable
Environmental Laws, other than violations that in the
aggregate are not material to the business or operations of
A&J Southeast;
2.1.17.5 Environmental Claims. Except as set
forth in Schedule 2.1.17 hereto, no notice has been served on
A&J Southeast or the Stockholders from any entity,
governmental agency or individual regarding any existing,
pending or threatened investigation, inquiry, enforcement
action or litigation related to alleged violations under any
Applicable Environmental Laws, or regarding any claims for
remedial obligations, response costs or contribution under
any Applicable Environmental Laws;
2.1.17.6 Renewals. Except as set forth on
Schedule 2.1.17 hereto, neither A&J Southeast nor the
Stockholders knows of any reason A&J Southeast or its
successors would not be able to renew any of the permits,
licenses, or other authorizations required pursuant to any of
the Applicable Environmental Laws to operate and use any of
assets of A&J Southeast for their current purposes and uses;
and
2.1.17.7 Asbestos and PCBs. Except as set forth
on Schedule 2.1.17 hereto, to the best knowledge of A&J
Southeast and the Stockholders, no material amounts of
friable asbestos currently exist on any property owned or
operated by A&J Southeast, nor do polychlorinated biphenyls
exist in concentrations of 50 parts per million or more in
electrical equipment owned or being used by A&J Southeast in
the operations or on the properties of A&J Southeast.
2.1.18 Compliance with Other Laws. Except as set forth on
Schedule 2.1.18, A&J Southeast is not in violation of or in default
with respect to, or in alleged violation of or alleged default with
respect to, the Occupational Safety and Health Act (29 U.S.C. Sections
651 et seq.), as amended, or any other applicable law or any
applicable rule, regulation, or any writ or decree of any court or any
governmental commission, board, bureau, agency, or instrumentality, or
delinquent with respect to any report required to be filed with any
governmental commission, board, bureau, agency or instrumentality,
other than such violations, defaults or delinquencies that in the
aggregate are not material to the business or operations of A&J
Southeast.
2.1.19 ERISA Plans or Labor Issues. Schedule 2.1.8 sets
forth a brief description all Employee Compensation Plans which A&J
Southeast maintains, to which A&J Southeast contributes or has an
obligation to contribute, or with respect to which A&J Southeast has
any liability or reasonable expectation of liability (all such plans,
policies, programs and arrangements individually, a "Plan" and
collectively, "Plans") as of the Effective Date.
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<PAGE> 25
Except as set forth in Schedule 2.1.8, A&J Southeast does not maintain
any Plans. For purposes of this Section 2.1.19, all references to A&J
Southeast shall be deemed to refer to A&J Southeast and any trade or
business, whether or not incorporated, which together with A&J
Southeast would be deemed or treated as a "single employer" within the
meaning of Section 414 of the Code or ERISA Section 4001. None of the
Plans (i) is an "employee pension benefit plan" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), (ii) is subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code or Section 302
of ERISA, (iii) is a plan of the type described in Section 4063 of
ERISA or Section 413(c) of the Code, (iv) is a "multiemployer plan"
(as defined in Section 3(37) of ERISA), (v) provides for medical,
dental, life, disability or other insurance benefits to current or
future retired employees or former employees of A&J Southeast (other
than as required for group health plan continuation coverage under
Code Section 4980B or similar state law), (vi) obligates A&J Southeast
to pay any severance or similar benefits solely as a result of a
change in control or ownership within the meaning of Code Section
280G, or (vii) is a "voluntary employees' beneficiary association"
within the meaning of Code Section 501(c)(9). Each Plan is, in all
material respects, in compliance, and has been administered,
maintained and funded in all material respects in accordance, with the
applicable provisions of ERISA and the Code and all other applicable
laws, rules and regulations. To the best knowledge of A&J Southeast
and the Stockholders, neither A&J Southeast nor any fiduciary to any
Plan, with respect to any Plan, has (i) engaged in any prohibited
transaction under ERISA or the Code; (ii) breached any fiduciary duty
owed by it; or (iii) failed to file and distribute, timely and
properly, all reports and information required to be filed or
distributed in accordance with ERISA or the Code. There are no
pending or threatened, actions, suits, investigations, arbitrations or
claims with respect to any Plan (other than routine claims for
benefits) which could reasonably be expected to result in material
liability to A&J Southeast, and there are no changes in contributions
or benefit levels that have been implemented, or negotiated and not
yet been implemented, with respect to any Plan that have not been
disclosed in Schedule 2.1.8. All contributions or premiums which are
due on or before the Effective Date with respect to the Plans have
been or will be timely paid by A&J Southeast. None of the Plans
requires A&J Southeast to make any bonus, severance or other payment
to or on behalf of any current or former employee, officer or
director of A&J Southeast solely by reason of the change of ownership
or control contemplated by this Agreement. Each Plan may be amended or
terminated after the Effective Date without contravening the terms of
such Plan or any applicable laws and without material liability to the
adopting employer. With respect to each Plan, A&J Southeast has
provided Synagro with true, complete and correct copies, to the extent
applicable, of (i) all documents pursuant to which the Plans are
maintained, funded and administered, (ii) the most recent annual
report (Form 5500 series) filed with the Internal Revenue Service
(with attachments including, without limitation, audited financial
statements), and (iii) all rulings, determinations, notices and
opinions issued by any governmental entity in the last three years
(and pending requests for governmental rulings, determinations, and
opinions). A&J Southeast has not engaged in any unfair labor
practices which could reasonably be expected to result in a material
adverse effect on the operations or assets of A&J Southeast. Except
as described in Schedule 2.1.16 hereto, A&J Southeast
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has no dispute with any of the existing or former employees of A&J
Southeast. There are no labor or employment disputes affecting A&J
Southeast or, to the knowledge of A&J Southeast and the Stockholders,
any disputes threatened by current or former employees of A&J
Southeast. There will not be any penalty for the termination of any
Plan listed on Schedule 2.1.8 or any other item listed in Section
2.1.8.7.
2.1.20 Investigations; Litigation. Except as set forth in
Schedule 2.1.20 hereto, neither A&J Southeast nor the Stockholders has
received notice of any investigation or review by any governmental
entity with respect to A&J Southeast or any of the transactions
contemplated by this Agreement nor, to the knowledge of A&J Southeast
and the Stockholders, is any such investigation or review threatened,
nor has any governmental entity indicated to A&J Southeast an
intention to conduct the same, and there is no action, suit or
proceeding pending or, to the knowledge of A&J Southeast and the
Stockholders, threatened against or affecting A&J Southeast at law or
in equity, or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, that either individually or in the aggregate, has or
is likely to result in a material adverse change in the financial
condition, properties or business of A&J Southeast.
2.1.21 Absence of Certain Business Practices. Neither A&J
Southeast, the Stockholders nor any officer or director of A&J
Southeast, nor, to the knowledge of A&J Southeast and the
Stockholders, any employee or agent of A&J Southeast or any other
person acting on behalf of A&J Southeast or the Shareholders, have
directly or indirectly, within the past five years, given or agreed to
give any gift or similar benefit to any customer, supplier, government
employee or other person who is or may be in a position to help or
hinder the business of A&J Southeast (or to assist A&J Southeast in
connection with any actual or proposed transaction) which (i) might
subject A&J Southeast to any damage or penalty in any civil, criminal
or governmental litigation or proceeding, (ii) if not given in the
past, might have had a material adverse effect on the assets, business
or operations of A&J Southeast, or (iii) if not continued in the
future, might materially and adversely affect the assets, business
operations or prospects of A&J Southeast or which might result in
liability to A&J Southeast in a private or governmental litigation or
proceeding.
2.1.22 Consents and Approvals. No consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority, or any other person or entity other than the
Shareholders, is required to be made or obtained by A&J Southeast in
connection with the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby
except for the consents, approvals or authorizations listed on
Schedule 2.1.22 hereto (which were obtained on or before the date
hereof) or that could not have a material adverse effect on the
business, operations, assets or financial condition of the
Stockholders or A&J Southeast.
2.1.23 Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried
on by A&J Southeast and the Stockholders and their counsel directly
with Synagro and its counsel, without the
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intervention of any other person as the result of any act of A&J
Southeast or the Stockholders in such manner as to give rise to any
valid claim against Synagro, Sub Corp or A&J Southeast for a brokerage
commission, finder's fee or any similar payments.
2.2 Investment Representations. Each of A&J Southeast and the
Stockholders acknowledge, represent and agree that:
2.2.1 Stockholders Investment Suitability and Related
Matters. (i) Synagro has made available to A&J Southeast and the
Stockholders the information and documents described in Section 3.4.
hereof, (ii) the Shareholders understand the risks associated with
ownership of Synagro Common Stock, and (iii) the Shareholders are
capable of bearing the financial risks associated with such ownership;
2.2.2 Synagro Shares Not Registered. The Synagro Shares
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or registered or qualified under any
applicable state securities laws.
2.2.3 Reliance on Representations. The Synagro Shares
are being issued to the Stockholders in reliance upon exemptions from
such registration or qualification requirements, and the availability
of such exemptions depends in part upon the Shareholders' bona fide
investment intent with respect to the Synagro Shares;
2.2.4 Investment Intent. The Shareholders' acquisition
of the Synagro Shares is solely for their own accounts for investment,
and the Shareholders are not acquiring the Synagro Shares for the
account of any other person or with a view toward resale, assignment,
fractionalization, or distribution thereof;
2.2.5 Permitted Resale. The Stockholders shall not offer
for sale, sell, transfer, pledge, hypothecate or otherwise dispose of
any of the Synagro Shares except in accordance with the registration
requirements of the Securities Act and applicable state securities
laws or upon delivery to Synagro of an opinion of legal counsel
reasonably satisfactory to Synagro that an exemption from registration
is available or pursuant to an effective registration statement
covering the Synagro Shares to be sold;
2.2.6 Investor Sophistication. The Shareholders have
such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of an investment
in the Synagro Shares, and to make an informed investment decision
with respect thereto;
2.2.7 Availability of Information. The Shareholders have
had the opportunity to ask questions of, and receive answers from
Synagro's officers and directors concerning the Shareholders'
acquisition of the Synagro Shares and to obtain such other information
concerning Synagro and the Synagro Shares, to the extent Synagro's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as the
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Shareholders deemed necessary in connection with making an informed
investment decision; and
2.2.8 Restrictive Legends. In addition to any other
legends required by law or the other agreements entered into in
connection herewith, each certificate evidencing the Synagro Shares
will bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR
UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH OTHER STATE LAWS OR UPON
DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAGRO
Synagro represents and warrants to A&J Southeast and the Stockholders
as follows:
3.1 Organization and Standing. Synagro is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business. Sub Corp is, or on the Effective Date will be, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida.
3.2 Agreement Authorized and its Effect on Other Obligations.
The execution, delivery and performance of this Agreement have been duly and
validly authorized by all necessary corporate action on the part of Synagro and
Sub Corp, and this Agreement is a valid and binding obligation of Synagro and
Sub Corp enforceable against Synagro in accordance with its terms, except as
such enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Synagro will not
conflict with or result in a violation or breach of any term or provision of,
or constitute a default under (i) the Certificate of Incorporation or Bylaws of
Synagro or Sub Corp or (ii) any obligation, indenture,
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mortgage, deed of trust, lease, contract or other agreement to which Synagro or
Sub Corp or any of their respective properties are bound.
3.3 Capitalization. The capitalization of Synagro consists of
(i) 10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock - Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock, but
no such shares are issued or outstanding, and (ii) 100,000,000 shares of
Synagro Common Stock, of which as of June 6, 1998, 9,082,638 shares were issued
and outstanding, 2,261,031 shares were reserved for issuance pursuant to stock
options and 600,000 shares were reserved for issuance pursuant to outstanding
warrants. Except as set forth in this Section 3.3., there are outstanding as
of the date hereof (i) no securities of Synagro or any other person convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities of Synagro, and (ii) no subscriptions, options, warrants, calls, or
rights obligating Synagro to issue, deliver, sell, purchase, redeem or acquire
shares of capital stock or other voting securities of Synagro except as a
result of letters of intent or other agreements relating to acquisitions by
Synagro. All of the outstanding Synagro Common Stock is, and, when issued, the
Synagro Shares will be, validly issued, fully paid and nonassessable and not
subject to any preemptive right. There is no stockholder agreement, voting
trust, or other agreement or understanding to which Synagro is a party or by
which it is bound relating to the voting of any shares of capital stock of
Synagro.
3.4 Reports and Financial Statements. Synagro has previously
furnished to the Stockholders true and complete copies of (i) Synagro's annual
report filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), for Synagro's fiscal year ended December 31, 1997; (ii) Synagro's
quarterly and other reports filed with the Commission since December 31, 1997;
(iii) all definitive proxy solicitation materials filed with the Commission
since December 31, 1997; and (iv) any registration statements (other than those
relating to employee benefit plans) declared effective by the Commission since
December 31, 1997. All of the foregoing items are listed on Schedule 3.4
hereto (collectively, the "Synagro SEC Documents"). The consolidated financial
statements of Synagro and its consolidated subsidiaries included in Synagro's
most recent report on Form 10-K and most recent report on Form 10-Q were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present the
consolidated financial position of Synagro and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended; and the Synagro SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were,
made not misleading. Since December 31, 1997, Synagro has filed with the
Commission all material reports, registration statements and other material
filings required to be filed with the Commission under the rules and
regulations of the Commission.
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3.5 Absence of Certain Changes and Events in Synagro. Since
March 31, 1998, there has not been:
3.5.1 Financial Change. Any material adverse change in
the financial condition, backlog, operations, assets, liabilities or
business of Synagro; or
3.5.2 Other Material Changes. Any other event or
condition known to Synagro particularly pertaining to and adversely
affecting the operations, assets or business of Synagro which could
constitute a material adverse change in the business, assets or
financial condition of Synagro, other than events or conditions which
are of a general or industry-wide nature and of general public
knowledge, or which have been disclosed to the Stockholders in
writing.
3.6 Synagro's Compliance with Other Laws. Synagro is not in
violation of or in default with respect to any applicable law, rule or
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality which could have a material adverse effect upon its
financial condition, properties or business.
3.7 Consents and Approvals. No consent, approval or
authorization of, or filing of a registration with, any governmental or
regulatory authority, or any other person or entity is required to be made or
obtained by Synagro in connection with the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
3.8 Investigations; Litigation. No investigation or review by
any governmental entity with respect to Synagro in connection with any of the
transactions contemplated by this Agreement is pending or, to the best of
Synagro's knowledge, threatened, nor has any governmental entity indicated to
Synagro an intention to conduct the same. There is no action, suit or
proceeding pending or, to the best of Synagro's knowledge, threatened against
or affecting Synagro by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, which either
individually or in the aggregate, has or is likely to result in any material
adverse change in the financial condition, properties or businesses of Synagro.
3.9 Finder's Fee. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by Synagro and
its counsel directly with A&J Southeast and the Stockholders and their counsel,
without the intervention by any other person as the result of any act of
Synagro in such a manner as to give rise to any valid claim against the
Stockholders or A&J Southeast for any brokerage commission, finder's fee or any
similar payments.
3.10 Nasdaq Compliance. Synagro meets all current requirements
for listing on the Nasdaq Market for Small- Cap Issues and has not received any
notice, whether written or oral, from the National Association of Securities
Dealers, Inc. suggesting that its listing is not in good standing.
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ARTICLE 4
OBLIGATIONS PENDING CLOSING DATE
4.1 Agreements of Synagro and A&J Southeast. Except as expressly
contemplated elsewhere in this Agreement, each of Synagro and A&J Southeast
agree that since March 31, 1998, it has not:
4.1.1 Maintenance of Present Business. Operated its
business only in the usual, regular, and ordinary manner so as to
maintain the goodwill it now enjoys and, to the extent consistent with
such operation, used all reasonable efforts to preserve intact its
present business organization, keep available the services of its
present officers and employees, and preserve its relationships with
customers, suppliers, jobbers, distributors, and others having
business dealings with it;
4.1.2 Maintenance of Properties. At its expense,
maintained all of its property and assets in customary repair, order,
and condition, reasonable wear and tear excepted;
4.1.3 Maintenance of Books and Records. Maintained its
books of account and records in the usual, regular, and ordinary
manner, in accordance with generally accepted accounting principles
applied on a consistent basis;
4.1.4 Compliance with Law. Duly complied in all material
respects with all laws, rules, regulations and orders, and fully
complied with all Permits, applicable to it and to the conduct of its
business;
4.1.5 Inspection. Permitted Synagro and its authorized
representatives, during normal business hours, to inspect its records
and to consult with its officers, employees, attorneys, and agents for
the purpose of determining the accuracy of the representations and
warranties herein made and the compliance with covenants contained in
this Agreement; and
4.1.6 Notice of Material Developments. Promptly notified
the other party hereto in writing of any "material adverse change" in,
or any changes which, in the aggregate, could result in a "material
adverse change" in, the consolidated financial condition, business or
affairs of A&J Southeast, whether or not occurring in the ordinary
course of business. As used in this Agreement, the term "material
adverse change" means any change, event, circumstance or condition
(collectively, a "Change") which when considered with all other
Changes would reasonably be expected to result in a "loss" having the
effect of so fundamentally adversely affecting the business or
financial prospects of A&J Southeast or Synagro, as applicable, that
the benefits reasonably expected to be obtained by Synagro, with
respect to losses by A&J Southeast, and the Stockholders, with respect
to losses by Synagro, as a result of the consummation of the
transactions contemplated by this Agreement would be jeopardized with
relative certainty. The term "loss" shall mean any and all direct or
indirect payments, obligations, assessments, losses, loss of income,
liabilities, fines, penalties, costs and expenses paid or incurred or
more likely than not to be paid or incurred,
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or diminutions in value of any kind or character (whether known or
unknown, conditional or unconditional, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise) that are more likely than not to occur, including
without limitation penalties, interest on any amount payable to a
third party as a result of the foregoing and any legal or other
expenses reasonably incurred or more likely than not to be incurred in
connection with investigating or defending any demands, claims,
actions or causes of action that, if adversely determined, would
likely result in losses, and all amounts paid in settlement of claims
or actions; provided, that losses shall be net of any recoveries by
A&J Southeast or Synagro, as applicable, from third parties and any
insurance proceeds A&J Southeast or Synagro, as applicable, is
entitled to receive from a nonaffiliated insurance company on account
of such losses (after taking into account any costs incurred in
obtaining such proceeds and any increase in insurance premiums as a
result of a claim with respect to such proceeds). The parties agree,
however, that a reduction in the trading price of Synagro Common Stock
on the Nasdaq National Market for Small-Cap Issues shall not, in and
of itself, constitute a material adverse change.
4.2 Additional Agreements of A&J Southeast and the Stockholders.
Except as expressly contemplated elsewhere in this Agreement, A&J Southeast and
the Stockholders agree that since the Balance Sheet Date, A&J Southeast has
not:
4.2.1 Prohibition of Certain Employment Contracts.
Entered into any contracts of employment which cannot be terminated on
notice of 30 days or less or which provide for any severance payments
or benefits covering a period beyond the earlier of the termination
date or notice thereof;
4.2.2 Prohibition of Certain Loans. Incurred any
borrowings which would exceed $25,000, in the aggregate, for any
purpose except (i) the refunding of indebtedness now outstanding, (ii)
the prepayment by customers of amounts due or to become due for
services rendered or to be rendered in the future, or (iii) as is
otherwise approved in writing by Synagro;
4.2.3 Prohibition of Certain Commitments. Entered into
commitments of a capital expenditure nature or incur any contingent
liabilities which would exceed $10,000 in the aggregate except (i) as
may be necessary for the maintenance of existing facilities, machinery
and equipment in good operating condition and repair in the ordinary
course of business, or (ii) as is otherwise approved in writing by
Synagro;
4.2.4 Disposal of Assets. Sold, disposed of, or
encumbered, any property or assets, except (i) in the usual and
ordinary course of business, (ii) property or assets which
individually have a value of less than $1,000; or (iii) as may be
approved in writing by Synagro;
4.2.5 Maintenance of Insurance. Discontinued its current
level of insurance;
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4.2.6 Acquisition Proposals. Directly or indirectly (i)
solicited, initiated or encouraged any inquiry or Acquisition Proposal
(as hereinafter defined) from any person or (ii) participated in any
discussions or negotiations regarding, or furnish to any person other
than Synagro or its representatives any information with respect to,
or otherwise facilitate or encourage any Acquisition Proposal by any
other person. As used herein "Acquisition Proposal" means any
proposal for a merger, consolidation or other business combination
involving A&J Southeast or for the acquisition or purchase of any
equity interest in, or a material portion of the assets of, A&J
Southeast, other than the transactions with Synagro contemplated by
this Agreement. A&J Southeast shall promptly communicate to Synagro
the terms of any such written Acquisition Proposals which it may
receive or any written inquiries made to it or any of its directors,
officers, representatives or agents;
4.2.7 No Amendment to Articles of Incorporation. Amended
its Articles of Incorporation or merged or consolidated with or into
any other corporation or changed in any manner the rights of its
common stock or the character of its business;
4.2.8 No Issuance, Sale, or Purchase of Securities.
Issued or sold, or issued options or rights to subscribe to, or
entered into any contract or commitment to issue or sell (upon
conversion or otherwise), any shares of A&J Southeast Stock, or
subdivided or in any way reclassified any shares of A&J Southeast
Stock, or acquired, or agreed to acquire, any shares of A&J Southeast
Stock; and
4.2.9 Prohibition on Dividends. Declared or paid any
dividend on shares of A&J Southeast Stock or made any other
distribution of assets to the holders thereof.
4.3 Agreements of Synagro. Synagro agrees that since March 31,
1998 it has not:
4.3.1 No Amendment to Articles of Incorporation. Amended
its Certificate of Incorporation or merged with or into any other
corporation or changed in any manner the rights of the Synagro Shares;
and
4.3.2 Notice of Material Developments. Promptly
furnished to the Stockholders copies of all Synagro's communications
to its stockholders and all reports filed by it with the Commission
and the National Association of Securities Dealers, Inc. and relating
to periodic or other material developments concerning Synagro's
financial condition, business, or affairs.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of A&J Southeast and the
Stockholders. The obligations of A&J Southeast and the Stockholders to
consummate and effect the transactions contemplated hereunder shall be subject
to the satisfaction of the following conditions, or to the
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waiver thereof by the Stockholders, on behalf of himself and A&J Southeast, on
or before the Effective Date:
5.1.1 Representations and Warranties of Synagro True at
Effective Date. The representations and warranties of Synagro herein
contained shall be, in all material respects, true as of and at the
Effective Date, except as affected by transactions permitted or
contemplated by this Agreement; Synagro shall have performed and
complied, in all material respects, with all covenants required by
this Agreement to be performed or complied with by Synagro before the
Effective Date; and Synagro shall have delivered to the Stockholders a
certificate, dated the Effective Date and signed by its president or a
vice president and its secretary, to such effect.
5.1.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Synagro's knowledge, threatened,
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit or to obtain damages or provide other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the consolidated assets and business of
Synagro.
5.1.3 Closing Documents. Synagro shall have executed and
delivered to the appropriate parties the documents and instruments to
be executed and delivered by it pursuant to Section 1.11 hereof, the
Exchange shall have occurred, and the Stockholders shall have received
the opinion required by Section 1.11.1 hereof.
5.1.4 Consent of Certain Parties in Privity With Synagro.
The holders of any material indebtedness of Synagro, the lessors of
any material property leased by Synagro, and the other parties to any
other material agreements to which Synagro is a party shall, when and
to the extent necessary in the reasonable opinion of the Stockholders,
have consented to the transactions contemplated hereby.
5.1.5 Other Merger Agreements. The Other Merger
Agreements (as hereinafter defined), and all documents and instruments
contemplated thereby, shall have been duly executed and delivered, and
the transactions contemplated by the Other Merger Agreements shall
have been consummated. As used herein, the "Other Merger Agreements"
shall mean (i) that certain Plan and Agreement of Merger, of even date
herewith, among Synagro, Synagro Sub Corp. Michigan, Inc. ("Synagro
Michigan"), Michigan Organic Resources, Inc. ("MORI"), Donald R.
Hoekstra, and the Stockholders regarding the merger of Synagro
Michigan with and into MORI; and (ii) that certain Plan and Agreement
of Merger, of even date herewith, among Synagro, Synagro Sub Corp.
Wisconsin, Inc. ("Synagro Wisconsin"), A&J Cartage, Inc. ("A&J"), and
the Stockholders regarding the merger of Synagro Wisconsin with and
into A&J.
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5.2 Conditions Precedent to Obligations of Synagro. The
obligation of Synagro to consummate and effect the transactions contemplated
hereunder shall be subject to the satisfaction of the following conditions, or
to the waiver thereof by Synagro, on or before the Effective Date.
5.2.1 Representations and Warranties of A&J Southeast and
the Stockholders True at Effective Date. The representations and
warranties of A&J Southeast and the Stockholders herein contained
shall be, in all material respects, true as of and at the Effective
Date, except as affected by transactions permitted or contemplated by
this Agreement; A&J Southeast and the Stockholders shall have
performed and complied in all material respects, with all covenants
required by this Agreement to be performed or complied with by them
before the Effective Date; and A&J Southeast and the Stockholders
shall have delivered to Synagro a certificate, dated the Effective
Date and signed by an executive officer of A&J Southeast and by the
Stockholders to such effect.
5.2.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Shareholders' knowledge,
threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby or which might result in a
material adverse change in the value of the assets and business of A&J
Southeast.
5.2.3 Closing Documents. The Stockholders and A&J
Southeast shall have executed and delivered to the appropriate parties
the documents and instruments to be executed and delivered by them
pursuant to Section 1.11 hereof, the Exchange shall have occurred and
Synagro shall have received the opinion required by Section 1.11.2
hereof.
5.2.4 Consent of Certain Parties in Privity with A&J
Southeast or the Stockholders. The holders of any material
indebtedness of A&J Southeast or the Stockholders, the lessors of any
material property leased by A&J Southeast or the Stockholders, the
other parties to any other material agreements to which A&J Southeast
or the Stockholders are a party and the appropriate authority issuing
any Permits shall, when and to the extent necessary in the reasonable
opinion of Synagro, have consented to the transaction contemplated
hereby.
5.2.5 Other Merger Agreements. The Other Merger
Agreements, and all documents and instruments contemplated thereby,
shall have been duly executed and delivered, and the transactions
contemplated by the Other Merger Agreements shall have been
consummated.
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ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Further Assurances. From time to time, as and when requested
by any party hereto, any other party hereto shall execute and deliver, or cause
to be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effect the transactions contemplated hereby.
6.2 Payment of Taxes. The Shareholders agree to pay timely all
Taxes assessed or assessable against him or A&J Southeast arising out of or in
any way related to the ownership, business or operations of A&J Southeast
through the end of the Effective Date, including, without limitation, any Taxes
resulting from the consummation of the transactions contemplated hereby, except
to the extent the Shareholders are contesting any portion of such taxes in good
faith and have made appropriate reserves for the payment thereof.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Stockholders. After the Effective
Date, in addition to any other remedies available to Synagro under this
Agreement, or at law or in equity, the Stockholders shall indemnify, defend and
hold harmless Synagro, A&J Southeast and their respective officers, directors,
employees, agents, and stockholders, against and with respect to any and all
claims, costs, damages, losses, expenses, obligations, liabilities, recoveries,
suits, causes of action and deficiencies, including interest, penalties and
reasonable attorneys' fees and expenses (collectively, "Damages") that such
indemnitees shall incur or suffer, which arise, result from or relate to (i)
any breach of, or failure by, A&J Southeast or the Stockholders to perform
their respective representations, warranties, covenants or agreements in this
Agreement or in any schedule, certificate, exhibit or other instrument
furnished or delivered to Synagro by A&J Southeast, or the Stockholders under
this Agreement; (ii) the ownership or operations of A&J Southeast before the
Closing Date, and (iii) all Taxes arising out of or in any way related to the
ownership, business or operations of A&J Southeast through the end of the
Effective Date, including, without limitation, any Taxes resulting from the
consummation of the transaction contemplated hereby.
7.2 Indemnification by Synagro. After the Effective Date, in
addition to any other remedies available to the Stockholders under this
Agreement, or at law or in equity, Synagro shall indemnify, defend and hold
harmless and the Stockholders, against and with respect to any and all Damages
that the Stockholders shall incur or suffer, which arise, result from or relate
to (i) any breach of, or failure by Synagro to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in
any schedule, certificate, exhibit or other instrument furnished or delivered
to or the Stockholders by or on behalf of Synagro under this Agreement; and
(ii) the ownership or operations of A&J Southeast from and after the Effective
Date.
7.3 Indemnification Procedures. If any party hereto discovers or
otherwise becomes aware of a claim for Damages arising under this Article 7,
such indemnified party shall give written
30
<PAGE> 37
notice (an "Indemnification Notice") to the indemnifying party, specifying such
claim, and may thereafter exercise any remedies available to such party under
this Agreement; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of any
obligations hereunder, to the extent the indemnifying party is not materially
prejudiced thereby. Further, promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding
with respect to which a claim for Damages arising under this Article 7 may be
made, such indemnified party shall, if a claim in respect thereof is to be made
against any indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of any obligations hereunder, to the extent the indemnifying
party is not materially prejudiced thereby. In case any such action is brought
against an indemnified party, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after such
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof unless the indemnifying party
has failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such indemnified person. An indemnifying party who elects not
to assume the defense of a claim shall not be liable for the fees and expenses
of more than one counsel in any single jurisdiction for all parties indemnified
by such indemnifying party with respect to such claim or with respect to claims
separate but similar or related in the same jurisdiction arising out of the
same general allegations. Notwithstanding any of the foregoing to the
contrary, the indemnified party will be entitled to select its own counsel and
assume the defense of any action brought against it if the indemnifying party
fails to select counsel reasonably satisfactory to the indemnified party, and
the expenses of such defense shall be paid by the indemnifying party. No
indemnifying party shall consent to entry of any judgment or enter into any
settlement with respect to a claim without the consent of the indemnified
party, which consent shall not be unreasonably withheld, or unless such
judgment or settlement includes as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such claim. No indemnified party shall consent to
entry of any judgment or enter into any settlement of any such action, the
defense of which has been assumed by an indemnifying party, without the consent
of such indemnifying party, which consent shall not be unreasonably withheld.
7.4 Termination of Indemnity, Representations and Warranties.
The indemnities provided in Sections 7.1 and 7.2 shall terminate with respect
to all Damages which are not the subject of an Indemnification Notice received
by the indemnifying party within two years after the Effective Date; except
that the time period for receipt of an Indemnification Notice for the
indemnities contained in Section 7.1(i), with respect to a breach of the
representations, warranties, covenants and agreements contained in Sections
2.1.4, 2.1.11, 2.1.13, 2.1.15, 2.2, and 6.2, shall survive for the applicable
statute of limitations period; and provided that the indemnity contained in
Section 7.2(ii) shall survive indefinitely. The indemnities provided in
Sections 7.1 and 7.2 shall survive indefinitely with respect to Damages for
which an Indemnification Notice is received by the indemnifying party within
the applicable period provided in the preceding sentence. The
31
<PAGE> 38
representations and warranties contained in Articles 2 and 3 hereof shall
terminate two years after the Closing Date, except that the representations
warranties, covenants and agreements contained in Sections 2.1.4, 2.1.11,
2.1.13, 2.1.15, and 6.2, shall survive for the applicable statute of
limitations period.
ARTICLE 8
MISCELLANEOUS
8.1 Press Releases. The Stockholders shall not make any public
statement or announcement concerning this Agreement or the transactions
contemplated herein without the prior consent of Synagro, subject, however, to
the right of the Stockholders to make such an announcement when in the opinion
of its counsel such public statement or announcement is legally required.
Prior to making any public statement or announcement concerning this Agreement
or the transactions contemplated hereby, Synagro shall provide a copy thereof
to the Stockholders.
8.2 Entirety; Conflict. This Agreement and the Letter Agreement
embody the entire agreement among the parties with respect to the subject
matter hereof, and all prior representations, warranties and agreements between
the parties with respect thereto, whether written or oral, are hereby
superseded in their entirety. This Agreement may not be modified or amended in
any manner except by written instrument executed by all of the parties hereto.
In the event of any conflict between the terms and provisions of this Agreement
and those of the Letter Agreement, the terms and provisions of this Agreement
shall control.
8.3 Counterparts and Facsimile Signature. Any number of
counterparts of this Agreement may be executed and each such counterpart shall
be deemed to be an original instrument, but all such counterparts together
shall constitute but one instrument. This Agreement may be executed by any
party by facsimile signature, with the original signature to be promptly
delivered thereafter, and such facsimile signature shall be binding upon the
party so executing this Agreement.
8.4 Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered in person or by
courier, sent by facsimile transmission or first class registered or certified
mail, postage prepaid, return receipt requested.
IF TO SYNAGRO OR SUB CORP:
Addressed to: With a copy to:
Synagro Technologies, Inc. Porter & Hedges, L.L.P.
5850 San Felipe, Suite 500 700 Louisiana, 35th Floor
Houston, Texas 77057 Houston, Texas 77002
Attention: Mark A. Rome Attention: T. William Porter
Telephone: (713) 706-6185 Telephone: (713) 226-0600
Facsimile: (713) 706-6181 Facsimile: (713) 228-1331
32
<PAGE> 39
IF TO A&J SOUTHEAST OR THE STOCKHOLDERS:
Addressed to: With a copy to:
James A. Jolvec Domnitz, Mawicke, Goisman
c/o A&J Cartage, Inc. & Rosenberg, S.C.
2841 South 5th Court 1509 North Prospect Avenue
Milwaukee, Wisconsin Milwaukee, Florida
Telephone: (414) 744-9447 Attention: Jeffrey J. Mawicke
Facsimile: (414) 744-9510 Telephone: (414) 224-0600
Facsimile: (414) 224-9359
Karl R. Sattler
883 Airport Park Road, Suite A
Glenn Burnie, Maryland 21061
Telephone: (410) 590-3060
Facsimile: (410) 590-0277
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered in
person or by courier or facsimile to such address, upon delivery during normal
business hours on any business day.
8.5 Table of Contents and Captions. The table of contents and
captions contained in this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of any article,
section, or paragraph hereof.
8.6 Successors and Assigns. Neither Synagro, A&J Southeast nor
the Stockholders may transfer or assign this Agreement or any of their
respective rights, duties or obligations hereunder without the prior written
consent of the other parties hereto.
8.7 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any
of such which may be hereafter declared invalid, void or unenforceable.
8.8 Applicable Law. The laws of the State of Texas will govern
the interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, except to the extent
that the form and content of the Articles of Merger and the consequences of the
filing thereof shall be governed by the Corporations Act, and the Stockholders,
A&J Southeast, Sub Corp and Synagro agree that the state and federal courts
situated in Harris, County, Texas shall have personal jurisdiction over the
Stockholders, A&J Southeast, Sub Corp and Synagro, and shall be the sole venue,
to hear all disputes arising under this Agreement. This Agreement is to be at
least partially performed in Harris, County, Texas and, as such, the
33
<PAGE> 40
Stockholders, A&J Southeast, Sub Corp and Synagro, agree that venue shall be
proper with the state or federal courts in Harris County, Texas to hear such
disputes. In the event either the Stockholders, A&J Southeast, Sub Corp or
Synagro is not able to effect service of process upon the other with respect to
such disputes, the Stockholders, A&J Southeast, Sub Corp and Synagro expressly
agree that the Secretary of State for the State of Texas shall be an agent of
the Stockholders, A&J Southeast, Sub Corp and/or the Synagro, as applicable, to
receive service of process on behalf of the Stockholders, A&J Southeast, Sub
Corp and/or Synagro, as applicable, with respect to such disputes.
34
<PAGE> 41
IN WITNESS WHEREOF, the Shareholders have executed this Agreement, and
Synagro, Sub Corp. and A&J Southeast have caused this Agreement to be signed in
their respective corporate names by their respective duly authorized
representatives, all as of the day and year first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SYNAGRO SUB FLORIDA, INC.
By:
------------------------------------
Name:
---------------------------------
Title:
--------------------------------
A&J CARTAGE, INC. SOUTHEAST
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SHAREHOLDERS
---------------------------------------
JAMES A. JALOVEC
---------------------------------------
KARL R. SATTLER
35
<PAGE> 1
================================================================================
PLAN AND AGREEMENT OF MERGER
AMONG
SYNAGRO TECHNOLOGIES, INC.,
SYNAGRO SUB CORP. MICHIGAN, INC.,
MICHIGAN ORGANIC RESOURCES, INC.,
JAMES A. JALOVEC
AND
DONALD R. HOEKSTRA
DATED AS OF JUNE 23, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 MERGER...............................................................................................2
1.1 Surviving Corporation....................................................................................2
1.2 Stockholder Approval.....................................................................................2
1.3 Effective Date...........................................................................................3
1.4 Name and Continued Corporate Existence of Surviving Corporation..........................................3
1.4.1 Name and Existence..........................................................................3
1.4.2 Federal Income Tax Treatment of Merger......................................................3
1.5 Governing Law and Articles of Incorporation of Surviving Corporation.....................................3
1.6 Bylaws of Surviving Corporation..........................................................................3
1.7 Directors and Officers of Surviving Corporation..........................................................3
1.7.1 Directors of Surviving Corporation..........................................................3
1.7.2 Officers of Surviving Corporation...........................................................4
1.7.3 Vacancies...................................................................................4
1.8 Capital Stock of Surviving Corporation...................................................................4
1.9 Conversion of Securities upon Merger.....................................................................4
1.9.1 General.....................................................................................4
1.9.2 Conversion of MORI Common Stock. ..........................................................4
1.9.2.1 Post-Closing Adjustment to Exchange Value.....................................4
1.9.3 Exchange of MORI Stock Certificates.........................................................6
1.9.4 Conversion of, and Exchange of Certificates for Sub Corp Common
Stock.......................................................................................6
1.9.5 Sub Corp Transfer Books Closed..............................................................6
1.10 Assets and Liabilities...................................................................................6
1.10.1 Assets and Liabilities of Merging Corporations Become Those of
Surviving Corporation.......................................................................6
1.10.2 Conveyances to Surviving Corporation........................................................7
1.10.3 Accounting Treatment........................................................................7
1.11 Other Closing Deliveries.................................................................................7
1.11.1 Opinion of Synagro Counsel..................................................................8
1.11.2 Opinion of Counsel..........................................................................8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND MORI..........................................9
2.1 Representations and Warranties of the Shareholders and MORI..............................................9
2.1.1 Organization and Standing...................................................................9
2.1.2 Agreement Authorized and its Effect on Other Obligations....................................9
2.1.3 Capitalization of MORI......................................................................9
2.1.4 Ownership of MORI Shares...................................................................10
2.1.5 No Subsidiaries............................................................................10
2.1.6 Financial Statements.......................................................................10
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
2.1.7 Liabilities................................................................................11
2.1.8 Additional Information.....................................................................11
2.1.8.1 Real Estate..................................................................11
2.1.8.2 Machinery and Equipment......................................................11
2.1.8.3 Receivables..................................................................11
2.1.8.4 Payables.....................................................................11
2.1.8.5 Insurance....................................................................11
2.1.8.6 Contracts....................................................................12
2.1.8.7 Employee Compensation Plans..................................................12
2.1.8.8 Certain Salaries.............................................................12
2.1.8.9 Bank Accounts................................................................12
2.1.8.10 Employee Agreements..........................................................12
2.1.8.11 Intellectual Property........................................................12
2.1.8.12 Trade Names..................................................................12
2.1.8.13 Promissory Notes.............................................................12
2.1.8.14 Guaranties...................................................................12
2.1.8.15 Leases.......................................................................13
2.1.8.16 Permits......................................................................13
2.1.9 No Defaults................................................................................13
2.1.10 Absence of Certain Changes and Events......................................................13
2.1.10.1 Financial Change.............................................................13
2.1.10.2 Property Damage..............................................................13
2.1.10.3 Dividends....................................................................13
2.1.10.4 Capitalization Change........................................................13
2.1.10.5 Labor Disputes...............................................................13
2.1.10.6 Other Material Changes.......................................................13
2.1.11 Taxes......................................................................................14
2.1.11.1 General......................................................................14
2.1.11.2 Subchapter S Matters.........................................................14
2.1.12 Intellectual Property......................................................................14
2.1.13 Title to and Condition of Assets...........................................................15
2.1.14 Contracts..................................................................................15
2.1.15 Licenses and Permits.......................................................................16
2.1.16 Litigation.................................................................................16
2.1.17 Environmental Compliance...................................................................16
2.1.17.1 Environmental Conditions.....................................................16
2.1.17.2 Permits, etc.................................................................16
2.1.17.3 Compliance...................................................................17
2.1.17.4 Past Compliance..............................................................17
2.1.17.5 Environmental Claims.........................................................17
2.1.17.6 Renewals.....................................................................17
2.1.17.7 Asbestos and PCBs............................................................18
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
2.1.18 Compliance with Other Laws.................................................................18
2.1.19 ERISA Plans or Labor Issues................................................................18
2.1.20 Investigations; Litigation.................................................................19
2.1.21 Absence of Certain Business Practices......................................................19
2.1.22 Consents and Approvals.....................................................................20
2.1.23 Finder's Fee...............................................................................20
2.2 Investment Representations..............................................................................20
2.2.1 Shareholders Investment Suitability and Related Matters....................................20
2.2.2 Synagro Shares Not Registered..............................................................20
2.2.3 Reliance on Representations................................................................20
2.2.4 Investment Intent..........................................................................20
2.2.5 Permitted Resale...........................................................................21
2.2.6 Investor Sophistication....................................................................21
2.2.7 Availability of Information................................................................21
2.2.8 Restrictive Legends........................................................................21
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SYNAGRO...........................................................22
3.1 Organization and Standing...............................................................................22
3.2 Agreement Authorized and its Effect on Other Obligations................................................22
3.3 Capitalization..........................................................................................22
3.4 Reports and Financial Statements........................................................................23
3.5 Absence of Certain Changes and Events in Synagro........................................................23
3.5.1 Financial Change...........................................................................23
3.5.2 Other Material Changes.....................................................................23
3.6 Synagro's Compliance with Other Laws....................................................................23
3.7 Consents and Approvals..................................................................................24
3.8 Investigations; Litigation..............................................................................24
3.9 Finder's Fee............................................................................................24
3.10 Nasdaq Compliance.......................................................................................24
ARTICLE 4 OBLIGATIONS PENDING CLOSING DATE....................................................................24
4.1 Agreements of Synagro and MORI..........................................................................24
4.1.1 Maintenance of Present Business............................................................24
4.1.2 Maintenance of Properties..................................................................24
4.1.3 Maintenance of Books and Records...........................................................24
4.1.4 Compliance with Law........................................................................25
4.1.5 Inspection.................................................................................25
4.1.6 Notice of Material Developments............................................................25
4.2 Additional Agreements of MORI and the Shareholders......................................................26
4.2.1 Prohibition of Certain Employment Contracts................................................26
4.2.2 Prohibition of Certain Loans...............................................................26
4.2.3 Prohibition of Certain Commitments.........................................................26
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
4.2.4 Disposal of Assets.........................................................................26
4.2.5 Maintenance of Insurance...................................................................26
4.2.6 Acquisition Proposals......................................................................26
4.2.7 No Amendment to Articles of Incorporation..................................................26
4.2.8 No Issuance, Sale, or Purchase of Securities...............................................27
4.2.9 Prohibition on Dividends...................................................................27
4.3 Agreements of Synagro...................................................................................27
4.3.1 No Amendment to Articles of Incorporation..................................................27
4.3.2 Notice of Material Developments............................................................27
ARTICLE 5 CONDITIONS PRECEDENT TO OBLIGATIONS.................................................................27
5.1 Conditions Precedent to Obligations of MORI and the Shareholders........................................27
5.1.1 Representations and Warranties of Synagro True at Effective Date...........................27
5.1.2 No Material Litigation.....................................................................27
5.1.3 Closing Documents..........................................................................28
5.1.4 Consent of Certain Parties in Privity With Synagro.........................................28
5.2 Conditions Precedent to Obligations of Synagro..........................................................28
5.2.1 Representations and Warranties of MORI and the Shareholders True at
Effective Date.............................................................................28
5.2.2 No Material Litigation.....................................................................28
5.2.3 Closing Documents..........................................................................29
5.2.4 Consent of Certain Parties in Privity with , MORI or the Shareholders......................29
ARTICLE 6 ADDITIONAL AGREEMENTS ..............................................................................29
6.1 Further Assurances......................................................................................29
6.2 Payment of Taxes........................................................................................29
ARTICLE 7 INDEMNIFICATION.....................................................................................29
7.1 Indemnification by the Shareholders.....................................................................29
7.2 Indemnification by Synagro..............................................................................30
7.3 Indemnification Procedures..............................................................................30
7.4 Termination of Indemnity, Representations and Warranties................................................31
ARTICLE 8 MISCELLANEOUS.......................................................................................31
8.1 Press Releases..........................................................................................31
8.2 Entirety; Conflict......................................................................................31
8.3 Counterparts and Facsimile Signature....................................................................31
8.4 Notices and Waivers.....................................................................................32
8.5 Table of Contents and Captions..........................................................................32
8.6 Successors and Assigns..................................................................................32
8.7 Severability............................................................................................32
8.8 Applicable Law..........................................................................................33
</TABLE>
iv
<PAGE> 6
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as June 23,
1998, is by and among Synagro Technologies, Inc., a Delaware corporation
("Synagro"), Synagro Sub Corp. Michigan, Inc., a Michigan corporation and a
wholly owned subsidiary of Synagro formed for the purpose of carrying out the
transactions contemplated hereby ("Sub Corp"), Michigan Organic Resources, Inc.,
a Michigan corporation ("MORI" or the "Surviving Corporation"), James A. Jalovec
("Jalovec"), and Donald R. Hoekstra ("Hoekstra," and together with Jalovec, the
"Shareholders"). Sub Corp and MORI are hereinafter collectively referred to as
the "Merging Corporations."
W I T N E S S E T H:
WHEREAS, Synagro is a corporation duly organized and validly existing
under the laws of the State of Delaware, with its registered office at 1209
Orange Street, Wilmington, Delaware 19801 and its principal executive office at
5850 San Felipe, Suite 500, Houston, Texas 77057;
WHEREAS, the authorized capital stock of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock-Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock, though
no such shares are issued or outstanding; and (ii) 100,000,000 shares of common
stock, par value $.002 per share ("Synagro Common Stock"), of which, at June 6,
1998 9,082,638 shares were issued and outstanding, and an additional 2,261,031
shares were reserved for issuance pursuant to stock options and 600,000 shares
were reserved for issuance pursuant to outstanding warrants; at the same date,
no shares of Common Stock were held in Synagro's treasury;
WHEREAS, Sub Corp is a corporation duly organized and validly existing
under the laws of the State of Michigan, with its registered office at 30600
Telegraph Road, Bingham Farms, Michigan 48025.
WHEREAS, the authorized capital stock of Sub Corp consists of 1,000
shares of common stock, $.01 par value per share, of which at the date hereof
1,000 shares were issued and outstanding and held beneficially and of record by
Synagro ("Sub Corp Common Stock");
WHEREAS, MORI is a corporation duly organized and validly existing
under the laws of the State of Michigan, with its registered office at and its
principal executive office at 2675 44th Street S.W., Suite 303, Wyoming,
Michigan 49509.
WHEREAS, the authorized capital stock of MORI consists of 50,000 shares
(the "MORI Shares") of common stock, $1.00 par value per share ("MORI Stock"),
1,599 of which are issued and outstanding and 2,401 of which are held in
treasury;
<PAGE> 7
WHEREAS, the Shareholders own all of the issued and outstanding MORI
Shares and, as such, the Shareholders expect to receive, directly or indirectly,
substantial benefit from the transactions contemplated hereby;
WHEREAS, the respective boards of directors of Sub Corp and MORI deem
it desirable and in the best interests of their respective corporations and
their respective stockholders, and the Shareholders deem it desirable and in
their best interests, that Sub Corp be merged with and into MORI, pursuant to
the applicable provisions of Sections 450, 1707, 450.1712 and 450.1701 of the
Michigan Business Corporation Act (the "Corporations Act") in exchange for the
consideration herein provided for, and have proposed, declared advisable, and
approved such merger pursuant to this Agreement which has been duly approved by
resolutions of the respective boards of directors of Sub Corp and MORI;
WHEREAS, Synagro, MORI and others have executed a letter agreement
dated April 21, 1998 (the "Letter Agreement") relating to the acquisition by
Synagro of substantially all of the assets of MORI, such acquisition being
subject to change to accommodate the needs of the parties thereto; and
WHEREAS, the parties desire to evidence their agreement with respect to
the form of and the other terms and provisions not set forth in the Letter
Agreement with respect to the transaction contemplated by the Letter Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, and in order to set forth the terms
and conditions of the merger, the mode of carrying the same into effect, the
manner and basis of converting (i) the outstanding shares of Sub Corp Common
Stock into shares of MORI Stock, and (ii) the outstanding shares of MORI Stock
into shares of Synagro Common Stock, and such other details and provisions as
are deemed necessary or proper, the parties hereto agree as follows:
ARTICLE 1
MERGER
1.1 Surviving Corporation. Subject to the adoption and approval of
this Agreement by the requisite vote of the stockholders of Sub Corp and to the
other conditions hereinafter set forth, Sub Corp and MORI shall be, upon the
Effective Date (as defined in Section 1.3 hereof), merged into a single
surviving corporation, which shall be MORI, one of the Merging Corporations,
which shall continue its corporate existence and remain a Michigan corporation
governed by and subject to the laws of that state.
1.2 Stockholder Approval. This Agreement shall be submitted for
adoption and approval by the stockholders of Sub Corp in accordance with its
articles of incorporation and the applicable laws of the State of Michigan.
2
<PAGE> 8
1.3 Effective Date. The merger shall become effective upon the
filing by MORI of a Certificate of Merger with the State of the State of
Michigan in accordance with the Corporations Act. The date upon which the merger
shall become effective is referred to in this Agreement as the "Effective Date."
1.4 Name and Continued Corporate Existence of Surviving Corporation
1.4.1 Name and Existence. Effective as of the Effective
Date, the Articles of Incorporation of MORI (the "MORI Articles"), the
corporation whose corporate existence is to survive the merger and
continue thereafter as the surviving corporation, shall be the Articles
of Incorporation of the Surviving Corporation and the identity,
existence, purposes, powers, objects, franchises, rights, and
immunities of MORI, the surviving corporation of the merger, shall
continue unaffected and unimpaired by the merger, and the corporate
identity, existence, purposes, powers, objects, franchises, rights, and
immunities of Sub Corp shall be wholly merged into MORI, and MORI shall
be fully vested therewith. Accordingly, on the Effective Date, the
separate existence of Sub Corp, except insofar as continued by statute,
shall cease.
1.4.2 Federal Income Tax Treatment of Merger. The merger is
intended to qualify as and, subject to the requirements of ss.
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"), shall be characterized as a tax-free reverse subsidiary merger
transaction described in ss. 368(a)(2)(E) of the Code.
1.5 Governing Law and Articles of Incorporation of Surviving
Corporation. The laws of Michigan shall continue to govern the Surviving
Corporation. On the Effective Date, the MORI Articles shall be the articles of
incorporation of MORI until further amended in the manner provided by law.
1.6 Bylaws of Surviving Corporation. Effective as of the Effective
Date, the bylaws of MORI (the "MORI Bylaws") shall be the bylaws of the
Surviving Corporation until altered, amended, or repealed, or until new bylaws
shall be adopted in accordance with the provisions of law, the MORI Articles and
the MORI Bylaws.
1.7 Directors and Officers of Surviving Corporation
1.7.1 Directors of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the board of directors of the Surviving Corporation, and who shall hold
office until the first annual meeting of stockholders of the Surviving
Corporation next following the Effective Date, are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
James A. Jalovec 2841 South 5th Court, Milwaukee, Wisconsin 53207
Ross M. Patten 5850 San Felipe, Suite 500, Houston, Texas 77057
Mark A. Rome 5850 San Felipe, Suite 500, Houston, Texas 77057
</TABLE>
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1.7.2 Officers of Surviving Corporation. The names and
addresses of the persons who, upon the Effective Date, shall constitute
the officers of the Surviving Corporation, and who shall hold their
respective offices of the Surviving Corporation, subject to the MORI
Bylaws, from and after the Effective Date, are as follows:
Ross M. Patten President
James A. Jalovec Vice President
Mark A. Rome Secretary and Treasurer
1.7.3 Vacancies. On or after the Effective Date, if a
vacancy shall exist for any reason in the board of directors or in any
of the offices of the Surviving Corporation, such vacancy shall be
filled in the manner provided in the MORI Articles and/or MORI Bylaws.
1.8 Capital Stock of Surviving Corporation. The authorized number
of shares of capital stock of the Surviving Corporation, and the par value,
designations, preferences, rights, and limitations thereof, and the express
terms thereof, shall be as set forth in the MORI Articles.
1.9 Conversion of Securities upon Merger
1.9.1 General. The manner and basis of converting the issued
and outstanding shares of the capital stock of (A) Sub Corp into shares
of the capital stock of MORI and (B) MORI into shares of the capital
stock of Synagro and/or other consideration herein provided for shall
be as hereinafter set forth in this Section 1.9.
1.9.2 Conversion of MORI Common Stock. On the Effective
Date, the MORI Shares, without any action on the part of the holder
thereof, shall automatically become and be converted into the right to
receive (i) certificates evidencing 177,157 fully paid and
nonassessable shares of issued and outstanding Synagro Common Stock
(which, together with associated Preferred Stock Purchase Rights, are
hereinafter referred to as the "Synagro Shares"), (ii) cash in the
amount of $154,566 (the "Cash Amount"), and (iii) a promissory note,
substantially in the form of Exhibit A hereto, in the principal amount
of $78,838 (plus all principal amounts payable under Section 1.9.2(iii)
of each of the Other Merger Agreement (as hereinafter defined)) (the
"Promissory Note"), upon surrender, in accordance with Section 1.9.3
hereof, of certificates theretofore evidencing the MORI Shares (the
Synagro Shares together with the Cash Amount and the Promissory Note
collectively, the "Exchange Value").
1.9.2.1 Post-Closing Adjustment to Exchange Value
(a) Preparation of Closing Balance Sheet.
Not later than 60 days following the Effective Date
(as hereinafter defined), Shareholders shall
prepare and deliver to Synagro for its review in
accordance with this
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section a balance sheet (the "Closing Balance
Sheet") of MORI prepared as of the Effective Date
and prepared in accordance with generally accepted
accounting principles ("GAAP") in a manner
consistent with the financial statements described
in Section 2.1.6 hereof. All of the parties hereto
shall cooperate fully with each other in the
preparation of the Closing Balance Sheet, and
Synagro shall have access at all reasonable times
to review workpapers, books and records relating to
the preparation of the Closing Balance Sheet.
(b) Right to Dispute Closing Balance Sheet.
Synagro shall have the right to dispute the Closing
Balance Sheet by giving notice of dispute to
Shareholders within 30 days after the Closing
Balance Sheet has been given to Synagro. Such
notice shall set forth in detail the reasons for
the dispute and Synagro's proposed adjustments to
the Closing Balance Sheet. If Synagro does not give
notice of dispute to Shareholders within such 30
day period in accordance with the foregoing, the
Closing Balance Sheet as prepared by Shareholders
shall become final and binding upon Synagro. If
Synagro does give notice of dispute to Shareholders
within such 30 day period, Shareholders and Synagro
shall endeavor in good faith to reach agreement on
all of the disputed items. If the parties are
unable to reach an agreement on the disputed items
during such 30 day period, then the disputed items
which have not been resolved shall be submitted to
the accounting firm of Arthur Andersen, Houston,
Texas for determination and resolution on the basis
of such procedures as such accounting firm, in its
sole judgement, deems applicable and appropriate,
taking into account GAAP and the terms of this
Agreement. Such accounting firm shall review the
disputed matters and as promptly as practicable
deliver to Shareholders and to Synagro a statement
setting forth its determination as to the proper
treatment of the matters in dispute, and such
determination shall be final and binding upon the
parties without any further right of appeal;
provided, however, neither such determination nor
any other provisions of this Section 1.9.2.1 shall
affect Synagro's right to seek indemnification for
any breaches of representations and warranties by
Shareholders pursuant to Article 7 hereof. All
charges of such accounting firm and other expenses
directly incurred in making such determination
shall be borne equally by the parties hereto.
(c) Adjustment of Consideration. In the
event that MORI's tangible assets net of
liabilities ("Net Assets") as shown on the Closing
Balance Sheet, as finally prepared and binding upon
the parties in accordance with Sections 1.9.2.1(a)
and (b) is less than the Net Assets on April 30,
1998 then Synagro shall have the right to give
notice thereof to the Shareholders, whereupon the
Shareholders shall have 10 days to refund to
Synagro a cash amount equal to the amount by which
the Net Assets on
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April 30, 1998 exceeds the amount of the Net Assets
as shown on the Closing Balance Sheet, or cancel
the Promissory Note and promptly surrender it to
Synagro whereupon Synagro shall execute and deliver
to Shareholders a new promissory note, which shall
be in the same form and contain the same terms and
conditions as the Promissory Note, in the aggregate
principal amount of $78,838 (plus all amounts under
Section 1.9.2(iii) of each of the Other Merger
Agreements) less the difference between the Net
Assets on April 30, 1998 and the Effective Date
(and any other adjustments made under Section
1.9.2.1 of each of the Other Merger Agreements.)
1.9.3 Exchange of MORI Stock Certificates. On the Effective
Date, the Shareholders shall surrender the certificates representing
the MORI Shares to Synagro, and Shareholders shall be entitled upon
such surrender to receive in exchange therefor a certificate or
certificates representing the Synagro Shares together with the Cash
Amount, and the Promissory Note (the "Exchange"), in the respective
amounts as shown on Exhibit 1.9.3 hereto.
1.9.4 Conversion of, and Exchange of Certificates for Sub
Corp Common Stock. On the Effective Date, each share of Sub Corp Common
Stock then issued and outstanding, without any action on the part of
the holder thereof (and after giving effect to the conversion in the
merger of all then outstanding shares of capital stock of MORI into
capital stock of Synagro and/or other consideration herein provided
for) shall automatically become and be converted into 1.599 fully paid
and nonassessable shares of issued and outstanding MORI Stock. On the
Effective Date, Synagro shall surrender the outstanding certificate
theretofore representing shares of Sub Corp Common Stock to MORI, MORI
will cancel the certificates representing the Sub Corp Common Stock,
and shall receive in exchange therefor a certificate or certificates
representing the number of whole shares of MORI Stock into which the
shares of Sub Corp Common Stock theretofore represented by the
certificate so surrendered shall have been converted as aforesaid.
1.9.5 Sub Corp Transfer Books Closed. Upon the Effective
Date, the stock transfer books of Sub Corp shall be deemed closed, and
no transfer of any certificates theretofore representing shares of Sub
Corp Common Stock shall thereafter be made or consummated.
1.10 Assets and Liabilities
1.10.1 Assets and Liabilities of Merging Corporations Become
Those of Surviving Corporation. On the Effective Date, all rights,
privileges, powers, immunities, and franchises of each of the Merging
Corporations, both of a public and private nature, and all property,
real, personal, and mixed, and all debts due on whatever account, as
well as stock subscriptions and all other choices or things in action,
and all and every other interest of or belonging to or due to either of
the Merging Corporations, shall be taken by and deemed to
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be transferred to and shall be vested in the Surviving Corporation
without further act or deed, and all such rights, privileges, powers,
immunities, and franchises, property, debts, choices or things in
action, and all and every other interest of each of the Merging
Corporations shall be thereafter as effectually the property of the
Surviving Corporation as they were of the respective Merging
Corporations, and the title to any real or other property, or any
interest therein, whether vested by deed or otherwise, in either of the
Merging Corporations, shall not revert or be in any way impaired by
reason of the merger, provided, however, that all rights of creditors
and all liens upon any properties of each of the Merging Corporations
shall be preserved unimpaired, and all debts, liabilities,
restrictions, obligations, and duties of the respective Merging
Corporations, including without limitation all obligations, liabilities
and duties as lessee under any existing lease, shall thenceforth attach
to the Surviving Corporation and may be enforced against and by it to
the same extent as if such debts, liabilities, duties, restrictions and
obligations had been incurred or contracted by it. Any action or
proceeding pending by or against either of the Merging Corporations may
be prosecuted to judgment as if the merger had not taken place, or the
Surviving Corporation may be substituted in place of either of the
Merging Corporations.
1.10.2 Conveyances to Surviving Corporation. The Merging
Corporations hereby agree, respectively, that from time to time, as and
when requested by the Surviving Corporation, or by its successors and
assigns, they will execute and deliver or cause to be executed and
delivered, all such deeds, conveyances, assignments, permits, licenses
and other instruments, and will take or cause to be taken such further
or other action as the Surviving Corporation, its successors or
assigns, may deem necessary or desirable to vest or perfect in or
confirm to the Surviving Corporation, its successors and assigns, title
to and possession of all the property, rights, privileges, powers,
immunities, franchises, and interests referred to in Section 1.10.1 and
otherwise carry out the intent and purposes of this Agreement.
1.10.3 Accounting Treatment. The assets and liabilities of
the Merging Corporations shall be taken up on the books of the
Surviving Corporation in accordance with generally accepted accounting
principles, and the capital surplus and retained earnings accounts of
the Surviving Corporation shall be determined, in accordance with
generally accepted accounting principles, by the board of directors of
the Surviving Corporation. Nothing herein shall prevent the board of
directors of the Surviving Corporation from making any future changes
in its accounts in accordance with law.
1.11 Other Closing Deliveries. Contemporaneously with the Exchange,
(i) Synagro shall execute and deliver to Shareholders the Promissory Note; (ii)
Synagro shall deliver to the Shareholders the certificate required by Section
5.1.1 hereof, and the Shareholders shall deliver to Synagro the certificate
required by Section 5.2.1 hereof; (iii) the Shareholders shall execute and
deliver to Synagro right of first refusal with respect to Prism Resource
Management, Ltd. in substantially the form of Exhibit B hereto (the "Right of
First Refusal") and (iv) Synagro and the Shareholders will deliver to one
another the opinions of counsel described below:
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1.11.1 Opinion of Synagro Counsel. Porter & Hedges, L.L.P.,
counsel for Synagro, shall issue an opinion to the Shareholders, in
form and substance satisfactory to the Shareholders, to the effect that
(i) Synagro has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware;
(ii) all corporate proceedings required to be taken by or on the part
of Synagro to authorize the execution of this Agreement and the
implementation of the transactions contemplated hereby have been taken;
(iii) the shares of Synagro Common Stock which are to be delivered in
accordance with this Agreement will, when issued, be validly issued,
fully paid and nonassessable outstanding securities of Synagro; (iv)
this Agreement and the Ancillary Documents (as hereinafter defined) to
which Synagro is a party have been duly executed and delivered by, are
the legal, valid and binding obligation of, and are enforceable against
Synagro in accordance with their respective terms, except as
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally;
provided that said opinion shall be limited to federal law, the laws of
the State of Texas and the general corporate law of the State of
Delaware; and (v) except as specified by such counsel (such exceptions
to be acceptable to MORI) such counsel does not know of any material
litigation, proceedings, or governmental investigation pending or
threatened against or relating to Synagro, any of its subsidiaries, or
their respective properties or businesses in which it is sought to
restrain, prohibit or otherwise affect the consummation of the
transactions contemplated by this Agreement. Such opinion also shall
cover such other matters incident to the transactions herein
contemplated as MORI and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of Synagro as to matters of fact and
(ii) the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to MORI, as to matters other than federal or
Texas law. As used herein, "Ancillary Documents" means the Promissory
Note and the Right of First Refusal.
1.11.2 Opinion of Counsel. Domnitz, Mawicke, Goisman &
Rosenberg, S. C. counsel to MORI and the Shareholders, shall issue an
opinion to Synagro in form and substance satisfactory to Synagro, to
the effect that (i) MORI has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Michigan; (ii) all corporate proceedings required to be taken by or
on the part of the Shareholders to authorize the execution of this
Agreement and the implementation of the transactions contemplated
hereby have been taken; (iii) all outstanding shares of the MORI Stock
have been validly issued and are fully paid and nonassessable; (iv)
this Agreement and the Ancillary Documents to which each Shareholder is
a party have been duly executed and delivered by, and are the legal,
valid and binding obligation of such Shareholder, and are enforceable
against such Shareholder, in accordance with their respective terms,
except as the enforceability may be limited by (a) equitable principles
of general applicability or (b) bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws affecting the rights of creditors
generally; and (v) except as specified by such counsel (such exceptions
to be acceptable to Synagro) such counsel does not know of any material
litigation, proceedings or governmental investigation, pending or
threatened against or relating to
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MORI, its properties or businesses, or the Shareholders in which it is
sought to restrain, prohibit or otherwise affect consummation of the
transactions contemplated by this Agreement. Such opinion shall also
cover such other matters incident to the transactions herein
contemplated as Synagro and its counsel may reasonably request. In
rendering such opinion, such counsel may rely upon (i) certificates of
public officials and of officers of MORI as to matters of fact and (ii)
on the opinion or opinions of other counsel, which opinions shall be
reasonably satisfactory to Synagro, as to matters other than federal or
Michigan law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS AND MORI
2.1 Representations and Warranties of the Shareholders and MORI.
The Shareholders and MORI jointly and severally represent and warrant to Synagro
as follows:
2.1.1 Organization and Standing. MORI is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Michigan, has full requisite corporate power and authority to
carry on its business as it is currently conducted and to own and
operate the properties currently owned and operated by it, and is duly
qualified or licensed to do business and is in good standing as a
foreign corporation authorized to do business in all jurisdictions in
which the character of the properties owned or the nature of the
business conducted by it would make such qualification or licensing
necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition,
properties or business.
2.1.2 Agreement Authorized and its Effect on Other
Obligations. The execution, delivery and performance of this Agreement
have been duly and validly authorized by all necessary corporate action
on the part of MORI. This Agreement is a valid and binding obligation
of MORI and the Shareholders enforceable against MORI and the
Shareholders in accordance with its terms, except as such
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally.
The execution, delivery and performance of this Agreement by MORI and
the Shareholders will not conflict with or result in a violation or
breach of any term or provision of, nor constitute a default under (i)
the Articles of Incorporation or Bylaws of MORI or (ii) to the extent
such conflict, violation, breach or default could have a material
adverse effect on the business, operations, assets or financial
condition of MORI or either of the Shareholders, any obligation,
indenture, mortgage, deed of trust, lease, contract or other agreement
to which MORI or either of the Shareholders is a party or by which MORI
or either of the Shareholders or their respective properties are bound.
2.1.3 Capitalization of MORI. The authorized capitalization
of MORI consists of 50,000 shares of MORI Stock, 1,599 of which are
issued and outstanding, 799 of which
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are held beneficially and of record by Jalovec, 800 of which are held
beneficially and of record by Hoekstra, and 2,401 of which are held in
treasury. MORI does not have any outstanding options, warrants, calls
or commitments of any character relating to its capital stock. All
issued and outstanding shares of MORI Stock are validly issued, fully
paid and non-assessable. None of the outstanding shares of MORI Stock
is subject to any voting trust, voting agreement or other agreement or
understanding with respect to the voting thereof, nor is any proxy in
existence with respect thereto.
2.1.4 Ownership of MORI Shares. The Shareholders hold good
and valid title to all of the MORI Shares free and clear of all
Encumbrances. The Shareholders possesses full authority and legal right
to sell, transfer and assign to Synagro the MORI Shares, free and clear
of all Encumbrances. Upon transfer to Synagro by the Shareholders of
the MORI Shares, Synagro will own the MORI Shares free and clear of all
Encumbrances. There are no claims pending or, to the knowledge of MORI,
and the Shareholders, threatened, against MORI or the Shareholders that
concern or affect title to the MORI Shares, or that seek to compel the
issuance of capital stock or other securities of MORI.
2.1.5 No Subsidiaries. As of the date hereof, MORI has no
subsidiaries, whether wholly or partially owned, and does not own,
beneficially or of record, or have any obligation to acquire, any
material amount of, or have any material investment in, any stock,
partnership or membership interest or other equity or debt securities
of any other business, enterprise or entity.
2.1.6 Financial Statements. The Shareholders have delivered
to Synagro MORI's audited balance sheet and related statements of
income, retained earnings and cash flows, with appended notes which are
an integral part of such statements, as of and for the twelve months
ended December 31, 1997 (the "Audited MORI Financial Statements"), and
also has delivered to Synagro copies of MORI's unaudited balance sheet
and related statements of income, retained earnings and cash flows as
of and for the four-month period ending April 30, 1998 (the "Unaudited
MORI Financial Statements", and, together with the Audited MORI
Financial Statements" the "MORI Financial Statements"). Copies of the
MORI Financial Statements are attached hereto as Schedule 2.1.6. All of
the MORI Financial Statements are complete in all material respects
(except, with respect to the Unaudited MORI Financial Statements, for
the omission of notes and schedules), present fairly the financial
condition of MORI as of the dates indicated, and the results of
operations for the respective periods indicated, and have been prepared
in accordance with generally accepted accounting principles applied on
a consistent basis, except as noted therein and subject, in the case of
the Unaudited MORI Financial Statements, to normal year-end adjustments
and other adjustments described therein; in addition, the Unaudited
MORI Financial Statements, though unaudited, include all adjustments
which MORI and the Shareholders consider necessary for a fair
presentation of MORI's results for that period. December 31, 1997 may
sometimes be hereinafter referred to as the "Balance Sheet Date".
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2.1.7 Liabilities. Except as disclosed on Schedule 2.1.7
hereto, MORI has no pending or, to MORI's and the Shareholders'
knowledge, threatened liabilities or obligations, either accrued,
absolute or contingent, nor does MORI or either of the Shareholders
have any knowledge of any potential liabilities or obligations, which
would materially adversely affect the value and conduct of the business
of MORI, other than those (i) reflected or reserved against in the
Unaudited MORI Financial Statements or (ii) incurred in the ordinary
course of business since the Balance Sheet Date.
2.1.8 Additional Information. Attached as Schedule 2.1.8
hereto are true, complete and correct lists of the following items:
2.1.8.1 Real Estate. All real property and
structures thereon (i) owned, or subject to a contract of
purchase and sale, by MORI, with a description of the nature
and amount of any Encumbrances thereon created by MORI or
either of the Shareholders, or (ii) leased, or subject to a
lease commitment, by MORI, with a description of the terms of
each lease and lease commitment. The term "Encumbrances"
means all liens, security interests, pledges, mortgages,
deeds of trust, claims, rights of first refusal, options,
charges, restrictions or conditions to transfer or
assignment, liabilities, obligations, privileges, equities,
easements, rights-of-way, limitations, reservations,
restrictions and other encumbrances of any kind or nature;
2.1.8.2 Machinery and Equipment. All machinery,
vehicles, trailers, transportation equipment, tools,
equipment, furnishings, and fixtures (i) owned or subject to
a contract of purchase and sale, by MORI with a description
of the nature and amount of any Encumbrances thereon or (ii)
leased, or subject to a lease commitment, by MORI, with a
description of each lease and lease commitment;
2.1.8.3 Receivables. All accounts and notes
receivable of MORI, together with (i) aging schedules by
invoice date and due date, (ii) the amounts provided for as
an allowance for bad debts, (iii) the identity and location
of any asset in which MORI holds a security interest to
secure payment of the underlying indebtedness, and (iv) a
description of the nature and amount of any Encumbrance on
such accounts and notes receivable;
2.1.8.4 Payables. All accounts and notes payable of
MORI, together with an appropriate aging schedule;
2.1.8.5 Insurance. All insurance policies or bonds
currently maintained by MORI, including title insurance
policies, and those covering MORI's properties, machinery,
equipment, fixtures, employees and operations, as well as a
listing of any deductibles, premiums, audit adjustments or
retroactive adjustments due or pending on such policies or
any predecessor policies;
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2.1.8.6 Contracts. All sludge contracts, bulking
agent contracts and all other material contracts to which
MORI is a party which are to be performed in whole or in part
after the date hereof;
2.1.8.7 Employee Compensation Plans. All bonus,
incentive compensation, deferred compensation,
profit-sharing, retirement, pension, welfare, group
insurance, death benefit, or other fringe benefit plans,
arrangements or trust agreements of MORI, whether or not
subject to ERISA (as hereinafter defined), together with
copies of the most recent reports with respect to such plans,
arrangements, or trust agreements filed with any governmental
agency, and all Internal Revenue Service determination
letters that have been received with respect to such plans;
2.1.8.8 Certain Salaries. The names and salary
rates of all present employees of MORI who have salaries in
excess of $25,000, and all arrangements with respect to any
bonuses to be paid to them from and after the date of this
Agreement;
2.1.8.9 Bank Accounts. The name of each bank in
which MORI has an account, the account numbers of each
account and the names of all persons authorized to draw
thereon;
2.1.8.10 Employee Agreements. Any collective
bargaining agreements of MORI with any labor union or other
representative of employees, including amendments,
supplements, and written or oral understandings, and all
employment and consulting and severance agreements of MORI;
2.1.8.11 Intellectual Property. All patents,
trademarks, copyrights and other intellectual property rights
owned, licensed, or used by MORI;
2.1.8.12 Trade Names. All trade names, assumed names
and fictitious names used or held by MORI, whether and where
such names are registered, and where used;
2.1.8.13 Promissory Notes. All long-term and
short-term promissory notes, installment contracts, loan
agreements, credit agreements, and any other agreements of
MORI relating thereto or with respect to collateral securing
the same;
2.1.8.14 Guaranties. All indebtedness, liabilities
and commitments of others and as to which MORI is a,
endorser, co-maker, surety, or accommodation maker, or
contingently liable therefor and all letters of credit,
whether stand-by or documentary, issued by any third party;
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2.1.8.15 Leases. All material leases to which MORI
is a party whether as lessor or lessee not previously
described on Schedule 2.1.8.1 or Schedule 2.1.8.2; and
2.1.8.16 Permits. All permits, authorizations,
variances, waivers, exemptions, rights-of-way, franchises,
ordinances, approvals, certifications, licenses,
registrations, orders, decrees and other similar rights
applicable to current operations conducted by MORI
(collectively, "Permits") and all environmental audits,
assessments, investigations and reviews conducted by or on
behalf of MORI within the last five years on any property
owned or used by it.
2.1.9 No Defaults. Except as set forth on Schedule 2.1.9,
MORI is not in default in any material obligation or covenant on its
part to be performed under any obligation, lease, contract, order, plan
or other agreement or arrangement.
2.1.10 Absence of Certain Changes and Events. Other than as
a result of the transactions contemplated by this Agreement, since the
Balance Sheet Date, there has not been:
2.1.10.1 Financial Change. Any material adverse
change in the financial condition, backlog, operations,
assets, liabilities or business of MORI;
2.1.10.2 Property Damage. Any material damage,
destruction, or loss to the business or properties of MORI
(whether or not covered by insurance);
2.1.10.3 Dividends. Except as set forth on Schedule
2.1.10.3, any declaration, setting aside, or payment of any
dividend or other distribution in respect of the MORI Stock,
or any direct or indirect redemption, purchase or any other
acquisition by MORI of any such stock;
2.1.10.4 Capitalization Change. Any change in the
capital stock or in the number of shares or classes of the
authorized or outstanding capital stock of MORI as described
in Section 2.1.3 hereof;
2.1.10.5 Labor Disputes. Except as disclosed on
Schedule 2.1.16, any labor disputes involving MORI; or
2.1.10.6 Other Material Changes. Except as set
forth on Schedule 2.1.10.6, any other event or condition
known to MORI or either of the Shareholders pertaining to and
adversely affecting the operations, assets or business of
MORI which could constitute a material adverse change in the
business, assets or financial condition of MORI, other than
events or conditions which are of a general or industry wide
nature and of general public knowledge, or which have been
disclosed to Synagro in writing.
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2.1.11 Taxes.
2.1.11.1 General. All federal, state and local
income, value added, sales, use, franchise, gross revenue,
turnover, excise, payroll, property, employment, customs
duties (collectively, "Taxes") and any and all other tax
returns, reports, and estimates have been filed with
appropriate governmental agencies, domestic and foreign, by
MORI for each period for which any such returns, reports, or
estimates were due; all taxes shown by such returns to be
payable and, except as set forth in Schedule 2.1.11, any and
all other taxes due and payable have been paid other than
those being contested in good faith by MORI; and the tax
provisions reflected in the Unaudited MORI Balance Sheet are
adequate, in accordance with generally accepted accounting
principles, to cover liabilities of MORI at the date thereof
for all taxes, including any assessed interest, assessed
penalties and additions to taxes of any character whatsoever
applicable to MORI or its assets or business. No waiver of
any statute of limitations executed by MORI with respect to
any income or other tax is in effect for any period. Except
as set forth on Schedule 2.1.11 hereto, the income tax
returns of MORI have never been examined by the Internal
Revenue Service or the taxing authorities of any other
jurisdiction. There are no tax liens on any assets of MORI
except for taxes not yet currently due.
2.1.11.2 Subchapter S Matters. MORI (i) made an
effective, valid and binding S election pursuant to Section
1362 of the Code effective Mary 1, 1996, (ii) has maintained
its status as an S Corporation pursuant to Section 1361 of
the Code without lapse or interruption since the date of said
election, and (iii) made and continuously maintained, since
the effective date of its federal S election, elections
similar to the federal S election in each state or local
jurisdiction where MORI does business or is required to file
a tax return to the extent such states or jurisdictions
permit such elections. MORI neither is nor will or can be
subject to the built-in gains tax under Section 1374 of the
Code or any similar corporate level tax imposed on MORI by
any taxing authority. MORI (i) has not adopted or used LIFO
as a method of accounting for inventory, and (ii) has no
other tax item, election, agreement or adjustment which will
accelerate or trigger income or deferred deductions of MORI
as a result of termination of MORI's status as an S
Corporation.
2.1.12 Intellectual Property. MORI owns or possesses
licenses to use all patents, patent applications, trademarks and
service marks (including registrations and applications therefor),
trade names, copyrights and written know-how, trade secrets and all
other similar proprietary data and the goodwill associated therewith
(collectively, the "Intellectual Property") that are either material to
its business or that are necessary for the rendering of any services
rendered by it and the use or sale of any equipment or products used or
sold by it, including all such Intellectual Property listed in Schedule
2.1.8 hereto. The Intellectual Property so owned or possessed by MORI
is owned or licensed free and clear of any Encumbrance. MORI has not
granted to any other person any license to use any Intellectual
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<PAGE> 20
Property. MORI has not received any notice of infringement,
misappropriation, or conflict with, the intellectual property rights of
others in connection with the use by it of the Intellectual Property or
otherwise in connection with the operation of its business.
2.1.13 Title to and Condition of Assets. MORI has good,
indefeasible and marketable title to all its properties, interests in
properties and assets, real and personal, reflected in the Unaudited
MORI Financial Statements or in Schedule 2.1.8 hereto, free and clear
of any Encumbrance, except (i) Encumbrances reflected in Schedule 2.1.8
hereto, (ii) liens for current taxes not yet due and payable, and (iii)
such imperfections of title, easements and Encumbrances, if any, as are
not substantial in character, amount, or extent and do not and will not
materially detract from the value, or interfere with the present use,
of the property subject thereto or affected thereby, or otherwise
materially impair business operations (the matters described in clauses
(ii) and (iii) collectively, "Permitted Encumbrances"). All leases
pursuant to which MORI leases (whether as lessee or lessor) any
substantial amount of real or personal property are in good standing,
valid, and effective; and there is not, under any such leases, any
existing default or event of default or, to MORI's and the
Shareholders' knowledge, any event which with notice or lapse of time,
or both, would constitute a default by MORI and in respect to which
MORI has not taken adequate steps to prevent a default from occurring.
The buildings and premises of MORI that are used in its business are in
good operating condition and repair, subject only to ordinary wear and
tear. All equipment, machinery, vehicles, trailers, transportation
equipment, tools and other major items of equipment of MORI are in good
operating condition and in a state of reasonable maintenance and
repair, ordinary wear and tear excepted, and are free from any known
defects except as may be repaired by routine maintenance and such minor
defects as will not substantially interfere with the continued use
thereof in the conduct of normal operations. To MORI's and the
Shareholders' knowledge, all such assets conform in all material
respects to all applicable laws governing their use. Except as set
forth in Schedule 2.1.18 hereto, no notice of any violation of any law,
statute, ordinance, or regulation relating to any such assets has been
(or are being) received by MORI or either of the Shareholders, except
such as have been fully complied with.
2.1.14 Contracts. All material contracts, leases, plans or
other arrangements to which MORI is a party, by which it is bound or to
which MORI or the assets of MORI are subject are in full force and
effect and constitute valid and binding obligations of MORI. MORI is
not, and to the knowledge of MORI and the Shareholders, no other party
to any such contract, lease, plan or other arrangement, is in default
of any material obligation or provision thereunder, and, to MORI's and
the Shareholders' knowledge, no event has occurred which (with or
without notice, lapse of time, or the happening of any other event)
would constitute a material default thereunder. No contract has been
entered into on terms which could reasonably be expected to have a
material adverse effect on MORI. Neither MORI nor the Shareholders have
received any information that would cause MORI or the Shareholders to
conclude that any customer of MORI will (or is likely to) cease doing
business with MORI (or any successors thereto) as a result of the
consummation of the transactions contemplated hereby.
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<PAGE> 21
2.1.15 Licenses and Permits. Except as set forth on
Schedule 2.1.15, MORI possesses all Permits necessary under law or
otherwise for it to conduct its business as now being conducted and to
construct, own, operate, maintain and use its assets in the manner in
which they are now being constructed, operated, maintained and used.
Each of such Permits and the rights of MORI with respect thereto is
(and will be following the consummation of the transactions
contemplated hereby) valid and subsisting, in full force and effect,
and enforceable by MORI subject to administrative powers of regulatory
agencies having jurisdiction. Except as set forth in Schedule 2.1.15
hereto, MORI is in compliance in all material respects with the terms
of such Permits and there is no pending, or to MORI's and the
Shareholders' knowledge, threatened claim that MORI is not in
compliance with any Permit. Except as set forth in Schedule 2.1.15
hereto, none of such Permits have been, or to the knowledge of MORI and
the Shareholders, are threatened to be, revoked, canceled, suspended or
modified.
2.1.16 Litigation. Except as set forth on Schedule 2.1.16
hereto, there is no suit, action, or legal, administrative,
arbitration, or other proceeding or governmental investigation pending
to which MORI is a party or, to the knowledge of MORI and the
Shareholders, might become a party or which particularly affect MORI.
Neither MORI nor the Shareholders have received notice of any pending
change in the zoning or building ordinances directly affecting the real
property or leasehold interests of MORI, nor, to the knowledge of MORI
and the Shareholders, is any such change threatened.
2.1.17 Environmental Compliance.
2.1.17.1 Environmental Conditions. Except as set
forth in Schedule 2.1.17 hereto, to the best knowledge of
MORI and the Shareholders, there are no environmental
conditions or circumstances, including, without limitation,
the presence or release of any hazardous substance, on any
property presently or previously owned by MORI, or on any
property to which hazardous substances or waste generated by
the operations of MORI or by the use of the assets of MORI
were disposed of. The term "hazardous substance" means (i)
asbestos, polychlorinated biphenyls, urea formaldehyde, lead
based paint, radon gas, petroleum, oil, solid waste,
pollutants and contaminants, and (ii) any chemicals,
materials, wastes or substances that are defined, regulated,
determined or identified as toxic or hazardous in any
Applicable Environmental Laws (as hereinafter defined),
including, but not limited to, substances defined as
"hazardous substances," "hazardous materials," or "hazardous
waste" in CERCLA, RCRA, HMTA (as such terms are hereinafter
defined), or comparable state and local statutes or in the
regulations adopted and promulgated pursuant to said
statutes;
2.1.17.2 Permits, etc. Except as set forth in
Schedule 2.1.17 hereto, to the best knowledge of MORI and the
Shareholders, MORI has in full force and effect all
environmental permits, licenses, approvals and other
authorizations required to
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<PAGE> 22
conduct its operations, other than those that are not
material to its business or operations, and is operating in
substantial compliance thereunder;
2.1.17.3 Compliance. To the best knowledge of
MORI and the Shareholders, except as set forth on Schedule
2.1.17 hereto, neither the operations of MORI nor the use of
the assets of MORI violate in any respect any applicable
federal, state or local law, statute, ordinance, rule,
regulation, order or notice requirement pertaining to (a) the
condition or protection of air, groundwater, surface water,
soil, or other environmental media, (b) the environment,
including natural resources or any activity which affects the
environment, or (c) the regulation of any pollutants,
contaminants, waste, or substances (whether or not hazardous
or toxic), including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act (42
U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous
Materials Transportation Act (49 U.S.C. Section .1801 et
seq.) ("HMTA"), the Resource Conservation and Recovery Act
(42 U.S.C. Section .6901 et seq.) ("RCRA"), the Clean Water
Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42 U.S.C.
Section .7401 et seq.), the Toxic Substances Control Act (17
U.S.C. Section .2601 et seq.), the Federal Insecticide
Fungicide and Rodenticide Act (7 U.S.C. Section .136 et
seq.), the Safe Drinking Water Act (42 U.S.C. Section .201
and Section 300f et seq.), the Rivers and Harbors Act (33
U.S.C. Section .401 et seq.), the Oil Pollution Act (33
U.S.C. Section .2701 et seq.) and analogous federal,
interstate, state and local requirements, as any of the
foregoing may have been amended or supplemented from time to
time (collectively, the "Applicable Environmental Laws"),
other than violations that in the aggregate are not material
to the business or operations of MORI;
2.1.17.4 Past Compliance. To the best knowledge
of MORI and the Shareholders, except as set forth in Schedule
2.1.17 hereto, none of the operations or assets of MORI has
ever been conducted or used in such a manner as to constitute
a violation of any of the Applicable Environmental Laws,
other than violations that in the aggregate are not material
to the business or operations of MORI;
2.1.17.5 Environmental Claims. Except as set
forth in Schedule 2.1.17 hereto, no notice has been served on
MORI or the Shareholders from any entity, governmental agency
or individual regarding any existing, pending or threatened
investigation, inquiry, enforcement action or litigation
related to alleged violations under any Applicable
Environmental Laws, or regarding any claims for remedial
obligations, response costs or contribution under any
Applicable Environmental Laws;
2.1.17.6 Renewals. Except as set forth on
Schedule 2.1.17 hereto, neither MORI nor the Shareholders
knows of any reason MORI or its successors would not be able
to renew any of the permits, licenses, or other
authorizations required pursuant to any of the Applicable
Environmental Laws to operate and use any of assets of MORI
for their current purposes and uses; and
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<PAGE> 23
2.1.17.7 Asbestos and PCBs. Except as set forth
on Schedule 2.1.17 hereto, to the best knowledge of MORI and
the Shareholders, no material amounts of friable asbestos
currently exist on any property owned or operated by MORI,
nor do polychlorinated biphenyls exist in concentrations of
50 parts per million or more in electrical equipment owned or
being used by MORI in the operations or on the properties of
MORI.
2.1.18 Compliance with Other Laws. Except as set forth on
Schedule 2.1.18, MORI is not in violation of or in default with respect
to, or in alleged violation of or alleged default with respect to, the
Occupational Safety and Health Act (29 U.S.C. Sections .651 et seq.),
as amended, or any other applicable law or any applicable rule,
regulation, or any writ or decree of any court or any governmental
commission, board, bureau, agency, or instrumentality, or delinquent
with respect to any report required to be filed with any governmental
commission, board, bureau, agency or instrumentality, other than such
violations, defaults or delinquencies that in the aggregate are not
material to the business or operations of MORI.
2.1.19 ERISA Plans or Labor Issues. Schedule 2.1.8 sets
forth a brief description all Employee Compensation Plans which MORI
maintains, to which MORI contributes or has an obligation to
contribute, or with respect to which MORI has any liability or
reasonable expectation of liability (all such plans, policies, programs
and arrangements individually, a "Plan" and collectively, "Plans") as
of the Effective Date. Except as set forth in Schedule 2.1.8, MORI does
not maintain any Plans. For purposes of this Section 2.1.19, all
references to MORI shall be deemed to refer to MORI and any trade or
business, whether or not incorporated, which together with MORI would
be deemed or treated as a "single employer" within the meaning of
Section 414 of the Code or ERISA Section 4001. None of the Plans (i) is
an "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
(ii) is subject to Title IV of ERISA or the minimum funding
requirements of Section 412 of the Code or Section 302 of ERISA, (iii)
is a plan of the type described in Section 4063 of ERISA or Section
413(c) of the Code, (iv) is a "multiemployer plan" (as defined in
Section 3(37) of ERISA), (v) provides for medical, dental, life,
disability or other insurance benefits to current or future retired
employees or former employees of MORI (other than as required for group
health plan continuation coverage under Code Section 4980B or similar
state law), (vi) obligates MORI to pay any severance or similar
benefits solely as a result of a change in control or ownership within
the meaning of Code Section 280G, or (vii) is a "voluntary employees'
beneficiary association" within the meaning of Code Section 501(c)(9).
Each Plan is, in all material respects, in compliance, and has been
administered, maintained and funded in all material respects in
accordance, with the applicable provisions of ERISA and the Code and
all other applicable laws, rules and regulations. To the best knowledge
of MORI and the Shareholders, neither MORI nor any fiduciary to any
Plan, with respect to any Plan, has (i) engaged in any prohibited
transaction under ERISA or the Code; (ii) breached any fiduciary duty
owed by it; or (iii) failed to file and distribute, timely and
properly, all reports and information required to be filed or
distributed in accordance with ERISA or the
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<PAGE> 24
Code. There are no pending or threatened, actions, suits,
investigations, arbitrations or claims with respect to any Plan (other
than routine claims for benefits) which could reasonably be expected to
result in material liability to MORI, and there are no changes in
contributions or benefit levels that have been implemented, or
negotiated and not yet been implemented, with respect to any Plan that
have not been disclosed in Schedule 2.1.8. All contributions or
premiums which are due on or before the Effective Date with respect to
the Plans have been or will be timely paid by MORI. None of the Plans
requires MORI to make any bonus, severance or other payment to or on
behalf of any current or former employee, officer or director of MORI
solely by reason of the change of ownership or control contemplated by
this Agreement. Each Plan may be amended or terminated after the
Effective Date without contravening the terms of such Plan or any
applicable laws and without material liability to the adopting
employer. With respect to each Plan, MORI has provided Synagro with
true, complete and correct copies, to the extent applicable, of (i) all
documents pursuant to which the Plans are maintained, funded and
administered, (ii) the most recent annual report (Form 5500 series)
filed with the Internal Revenue Service (with attachments including,
without limitation, audited financial statements), and (iii) all
rulings, determinations, notices and opinions issued by any
governmental entity in the last three years (and pending requests for
governmental rulings, determinations, and opinions). MORI has not
engaged in any unfair labor practices which could reasonably be
expected to result in a material adverse effect on the operations or
assets of MORI. Except as described in Schedule 2.1.16 hereto, MORI has
no dispute with any of the existing or former employees of MORI. There
are no labor or employment disputes affecting MORI or, to the knowledge
of MORI and the Shareholders, any disputes threatened by current or
former employees of MORI. There will not be any penalty for the
termination of any Plan listed on Schedule 2.1.8 or any other item
listed in Section 2.1.8.7.
2.1.20 Investigations; Litigation. Except as set forth in
Schedule 2.1.20 hereto, neither MORI nor the Shareholders has received
notice of any investigation or review by any governmental entity with
respect to MORI or any of the transactions contemplated by this
Agreement nor, to the knowledge of MORI and the Shareholders, is any
such investigation or review threatened, nor has any governmental
entity indicated to MORI an intention to conduct the same, and there is
no action, suit or proceeding pending or, to the knowledge of MORI and
the Shareholders, threatened against or affecting MORI at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, that
either individually or in the aggregate, has or is likely to result in
a material adverse change in the financial condition, properties or
business of MORI.
2.1.21 Absence of Certain Business Practices. Neither MORI,
the Shareholders nor any officer or director of MORI, nor, to the
knowledge of MORI and the Shareholders, any employee or agent of MORI
or any other person acting on behalf of MORI or the Shareholders, has,
directly or indirectly, within the past five years, given or agreed to
give any gift or similar benefit to any customer, supplier, government
employee or other person who is or may be in a position to help or
hinder the business of MORI (or to assist MORI in
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<PAGE> 25
connection with any actual or proposed transaction) which (i) might
subject MORI to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) if not given in the past,
might have had a material adverse effect on the assets, business or
operations of MORI, or (iii) if not continued in the future, might
materially and adversely affect the assets, business operations or
prospects of MORI or which might result in liability to MORI in a
private or governmental litigation or proceeding.
2.1.22 Consents and Approvals. No consent, approval or
authorization of, or filing or registration with, any governmental or
regulatory authority, or any other person or entity other than the
Shareholders, is required to be made or obtained by MORI in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby except for the
consents, approvals or authorizations listed on Schedule 2.1.22 hereto
(which were obtained on or before the date hereof) or that could not
have a material adverse effect on the business, operations, assets or
financial condition of the Shareholders or MORI.
2.1.23 Finder's Fee. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on
by MORI and the Shareholders and their counsel directly with Synagro
and its counsel, without the intervention of any other person as the
result of any act of MORI or the Shareholders in such manner as to give
rise to any valid claim against Synagro, Sub Corp or MORI for a
brokerage commission, finder's fee or any similar payments.
2.2 Investment Representations. Each of MORI and the Shareholders
acknowledges, represents and agrees that:
2.2.1 Shareholders Investment Suitability and Related
Matters. (i) Synagro has made available to MORI and the Shareholders
the information and documents described in Section 3.4. hereof, (ii)
the Shareholders understand the risks associated with ownership of
Synagro Common Stock, and (iii) the Shareholders are capable of bearing
the financial risks associated with such ownership;
2.2.2 Synagro Shares Not Registered. The Synagro Shares
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or registered or qualified under any applicable
state securities laws;
2.2.3 Reliance on Representations. The Synagro Shares are
being issued to the Shareholders in reliance upon exemptions from such
registration or qualification requirements, and the availability of
such exemptions depends in part upon the Shareholders' bona fide
investment intent with respect to the Synagro Shares;
2.2.4 Investment Intent. The Shareholders' acquisition of
the Synagro Shares is solely for its own account for investment, and
the Shareholders are not acquiring the Synagro
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<PAGE> 26
Shares for the account of any other person or with a view toward
resale, assignment, fractionalization, or distribution thereof;
2.2.5 Permitted Resale. The Shareholders shall not offer
for sale, sell, transfer, pledge, hypothecate or otherwise dispose of
any of the Synagro Shares except in accordance with the registration
requirements of the Securities Act and applicable state securities laws
or upon delivery to Synagro of an opinion of legal counsel reasonably
satisfactory to Synagro that an exemption from registration is
available or pursuant to an effective registration statement covering
the Synagro Shares to be sold;
2.2.6 Investor Sophistication. The Shareholders have such
knowledge and experience in financial and business matters that he and
it are capable of evaluating the merits and risks of an investment in
the Synagro Shares, and to make an informed investment decision with
respect thereto;
2.2.7 Availability of Information. The Shareholders have
had the opportunity to ask questions of, and receive answers from
Synagro's officers and directors concerning the Shareholders'
acquisition of the Synagro Shares and to obtain such other information
concerning Synagro and the Synagro Shares, to the extent Synagro's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as the Shareholders deemed necessary in
connection with making an informed investment decision; and
2.2.8 Restrictive Legends. In addition to any other
legends required by law or the other agreements entered into in
connection herewith, each certificate evidencing the Synagro Shares
will bear a conspicuous restrictive legend substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR
UNDER ANY APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
HYPOTHECATED EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH OTHER STATE LAWS OR UPON
DELIVERY TO THIS CORPORATION OF AN OPINION OF LEGAL COUNSEL
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SYNAGRO
Synagro represents and warrants to MORI and the Shareholders as
follows:
3.1 Organization and Standing. Synagro is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has full requisite corporate power and authority to carry on its
business as it is currently conducted, and to own and operate the properties
currently owned and operated by it, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation authorized to do
business in all jurisdictions in which the character of the properties owned or
the nature of the business conducted by it would make such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a material adverse effect on its financial condition, properties
or business. Sub Corp is, or on the Effective Date will be, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan.
3.2 Agreement Authorized and its Effect on Other Obligations. The
execution, delivery and performance of this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Synagro and Sub
Corp, and this Agreement is a valid and binding obligation of Synagro and Sub
Corp enforceable against Synagro in accordance with its terms, except as such
enforceability may be limited by (a) equitable principles of general
applicability or (b) bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws affecting the rights of creditors generally. The
execution, delivery and performance of this Agreement by Synagro will not
conflict with or result in a violation or breach of any term or provision of, or
constitute a default under (i) the Certificate of Incorporation or Bylaws of
Synagro or Sub Corp or (ii) any obligation, indenture, mortgage, deed of trust,
lease, contract or other agreement to which Synagro or Sub Corp or any of their
respective properties are bound.
3.3 Capitalization. The capitalization of Synagro consists of (i)
10,000,000 shares of preferred stock, par value $.002 per share, of which
500,000 shares have been designated as "Preferred Stock - Junior Participating
Series A" and reserved for issuance upon exercise of Rights evidenced by the
certificates representing all outstanding shares of Synagro Common Stock, but no
such shares are issued or outstanding, and (ii) 100,000,000 shares of Synagro
Common Stock, of which as of June 6, 1998 9,082,638 shares were issued and
outstanding, 2,261,031 shares were reserved for issuance pursuant to stock
options and 600,000 shares were reserved for issuance pursuant to outstanding
warrants. Except as set forth in this Section 3.3., there are outstanding as of
the date hereof (i) no securities of Synagro or any other person convertible
into or exchangeable or exercisable for shares of capital stock or other voting
securities of Synagro, and (ii) no subscriptions, options, warrants, calls, or
rights obligating Synagro to issue, deliver, sell, purchase, redeem or acquire
shares of capital stock or other voting securities of Synagro except as a result
of letters of intent or other agreements relating to acquisitions by Synagro.
All of the outstanding Synagro Common Stock is, and, when issued, the Synagro
Shares will be, validly issued, fully paid and nonassessable and not subject to
any preemptive right. There is no stockholder agreement,
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<PAGE> 28
voting trust, or other agreement or understanding to which Synagro is a party or
by which it is bound relating to the voting of any shares of capital stock of
Synagro.
3.4 Reports and Financial Statements. Synagro has previously
furnished to the Shareholders true and complete copies of (i) Synagro's annual
report filed with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), for Synagro's fiscal year ended December 31, 1997; (ii) Synagro's
quarterly and other reports filed with the Commission since December 31, 1997;
(iii) all definitive proxy solicitation materials filed with the Commission
since December 31, 1997; and (iv) any registration statements (other than those
relating to employee benefit plans) declared effective by the Commission since
December 31, 1997. All of the foregoing items are listed on Schedule 3.4 hereto
(collectively, the "Synagro SEC Documents"). The consolidated financial
statements of Synagro and its consolidated subsidiaries included in Synagro's
most recent report on Form 10-K and most recent report on Form 10-Q were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved and fairly present the
consolidated financial position of Synagro and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended; and the Synagro SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were,
made not misleading. Since December 31, 1997, Synagro has filed with the
Commission all material reports, registration statements and other material
filings required to be filed with the Commission under the rules and regulations
of the Commission.
3.5 Absence of Certain Changes and Events in Synagro. Since March
31, 1998, there has not been:
3.5.1 Financial Change. Any material adverse change in
the financial condition, backlog, operations, assets, liabilities or
business of Synagro; or
3.5.2 Other Material Changes. Any other event or condition
known to Synagro particularly pertaining to and adversely affecting the
operations, assets or business of Synagro which could constitute a
material adverse change in the business, assets or financial condition
of Synagro, other than events or conditions which are of a general or
industry-wide nature and of general public knowledge, or which have
been disclosed to the Shareholders in writing.
3.6 Synagro's Compliance with Other Laws. Synagro is not in
violation of or in default with respect to any applicable law, rule or
regulation, or any writ or decree of any court or any governmental commission,
board, bureau, agency, or instrumentality, or delinquent with respect to any
report required to be filed with any governmental commission, board, bureau,
agency or instrumentality which could have a material adverse effect upon its
financial condition, properties or business.
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<PAGE> 29
3.7 Consents and Approvals. Except for the filing of the
Registration Statement (as hereinafter defined) pursuant to Section 7.3.1
hereof, no consent, approval or authorization of, or filing of a registration
with, any governmental or regulatory authority, or any other person or entity is
required to be made or obtained by Synagro in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.8 Investigations; Litigation. No investigation or review by any
governmental entity with respect to Synagro in connection with any of the
transactions contemplated by this Agreement is pending or, to the best of
Synagro's knowledge, threatened, nor has any governmental entity indicated to
Synagro an intention to conduct the same. There is no action, suit or proceeding
pending or, to the best of Synagro's knowledge, threatened against or affecting
Synagro by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which either individually
or in the aggregate, has or is likely to result in any material adverse change
in the financial condition, properties or businesses of Synagro.
3.9 Finder's Fee. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by Synagro and its
counsel directly with MORI and the Shareholders and their counsel, without the
intervention by any other person as the result of any act of Synagro in such a
manner as to give rise to any valid claim against the Shareholders or MORI for
any brokerage commission, finder's fee or any similar payments.
3.10 Nasdaq Compliance. Synagro meets all current requirements for
listing on the Nasdaq Market for Small-Cap Issues and has not received any
notice, whether written or oral, from the National Association of Securities
Dealers, Inc. suggesting that its listing is not in good standing.
ARTICLE 4
OBLIGATIONS PENDING CLOSING DATE
4.1 Agreements of Synagro and MORI. Except as expressly
contemplated elsewhere in this Agreement, each of Synagro and MORI agree that
since April 30, 1998, it has:
4.1.1 Maintenance of Present Business. Operated its business
only in the usual, regular, and ordinary manner so as to maintain the
goodwill it now enjoys and, to the extent consistent with such
operation, used all reasonable efforts to preserve intact its present
business organization, keep available the services of its present
officers and employees, and preserve its relationships with customers,
suppliers, jobbers, distributors, and others having business dealings
with it;
4.1.2 Maintenance of Properties. At its expense, maintained
all of its property and assets in customary repair, order, and
condition, reasonable wear and tear excepted;
4.1.3 Maintenance of Books and Records. Maintained its books
of account and records in the usual, regular, and ordinary manner, in
accordance with generally accepted accounting principles applied on a
consistent basis;
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4.1.4 Compliance with Law. Duly complied in all material
respects with all laws, rules, regulations and orders, and fully
complied with all Permits, applicable to it and to the conduct of its
business;
4.1.5 Inspection. Permitted Synagro and its authorized
representatives, during normal business hours, to inspect its records
and to consult with its officers, employees, attorneys, and agents for
the purpose of determining the accuracy of the representations and
warranties herein made and the compliance with covenants contained in
this Agreement; and
4.1.6 Notice of Material Developments. Promptly notified the
other party hereto in writing of any "material adverse change" in, or
any changes which, in the aggregate, could result in a "material
adverse change" in, the consolidated financial condition, business or
affairs of MORI, whether or not occurring in the ordinary course of
business. As used in this Agreement, the term "material adverse change"
means any change, event, circumstance or condition (collectively, a
"Change") which when considered with all other Changes would reasonably
be expected to result in a "loss" having the effect of so fundamentally
adversely affecting the business or financial prospects of MORI or
Synagro, as applicable, that the benefits reasonably expected to be
obtained by Synagro, with respect to losses by MORI, and the
Shareholders, with respect to losses by Synagro, as a result of the
consummation of the transactions contemplated by this Agreement would
be jeopardized with relative certainty. The term "loss" shall mean any
and all direct or indirect payments, obligations, assessments, losses,
loss of income, liabilities, fines, penalties, costs and expenses paid
or incurred or more likely than not to be paid or incurred, or
diminutions in value of any kind or character (whether known or
unknown, conditional or unconditional, choate or inchoate, liquidated
or unliquidated, secured or unsecured, accrued, absolute, contingent or
otherwise) that are more likely than not to occur, including without
limitation penalties, interest on any amount payable to a third party
as a result of the foregoing and any legal or other expenses reasonably
incurred or more likely than not to be incurred in connection with
investigating or defending any demands, claims, actions or causes of
action that, if adversely determined, would likely result in losses,
and all amounts paid in settlement of claims or actions; provided, that
losses shall be net of any recoveries by MORI or Synagro, as
applicable, from third parties and any insurance proceeds MORI or
Synagro, as applicable, is entitled to receive from a nonaffiliated
insurance company on account of such losses (after taking into account
any costs incurred in obtaining such proceeds and any increase in
insurance premiums as a result of a claim with respect to such
proceeds). The parties agree, however, that a reduction in the trading
price of Synagro Common Stock on the Nasdaq National Market for
Small-Cap Issues shall not, in and of itself, constitute a material
adverse change.
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<PAGE> 31
4.2 Additional Agreements of MORI and the Shareholders. Except as
expressly contemplated elsewhere in this Agreement, MORI and the Shareholders
agree that since the Balance Sheet Date, MORI has not:
4.2.1 Prohibition of Certain Employment Contracts. Entered
into any contracts of employment which cannot be terminated on notice
of 30 days or less or which provide for any severance payments or
benefits covering a period beyond the earlier of the termination date
or notice thereof;
4.2.2 Prohibition of Certain Loans. Incurred any borrowings
which would exceed $25,000, in the aggregate, for any purpose except
(i) the refunding of indebtedness now outstanding, (ii) the prepayment
by customers of amounts due or to become due for services rendered or
to be rendered in the future, or (iii) as is otherwise approved in
writing by Synagro;
4.2.3 Prohibition of Certain Commitments. Entered into
commitments of a capital expenditure nature or incur any contingent
liabilities which would exceed $10,000 in the aggregate except (i) as
may be necessary for the maintenance of existing facilities, machinery
and equipment in good operating condition and repair in the ordinary
course of business, or (ii) as is otherwise approved in writing by
Synagro;
4.2.4 Disposal of Assets. Sold, disposed of, or encumbered,
any property or assets, except (i) in the usual and ordinary course of
business, (ii) property or assets which individually have a value of
less than $1,000; or (iii) as may be approved in writing by Synagro;
4.2.5 Maintenance of Insurance. Discontinued its current
level of insurance;
4.2.6 Acquisition Proposals. Directly or indirectly (i)
solicited, initiated or encouraged any inquiry or Acquisition Proposal
(as hereinafter defined) from any person or (ii) participated in any
discussions or negotiations regarding, or furnish to any person other
than Synagro or its representatives any information with respect to, or
otherwise facilitate or encourage any Acquisition Proposal by any other
person. As used herein "Acquisition Proposal" means any proposal for a
merger, consolidation or other business combination involving MORI or
for the acquisition or purchase of any equity interest in, or a
material portion of the assets of, MORI, other than the transactions
with Synagro contemplated by this Agreement. MORI shall promptly
communicate to Synagro the terms of any such written Acquisition
Proposals which it may receive or any written inquiries made to it or
any of its directors, officers, representatives or agents;
4.2.7 No Amendment to Articles of Incorporation. Amended
its Articles of Incorporation or merged or consolidated with or into
any other corporation or changed in any manner the rights of its common
stock or the character of its business;
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<PAGE> 32
4.2.8 No Issuance, Sale, or Purchase of Securities. Issued
or sold, or issued options or rights to subscribe to, or entered into
any contract or commitment to issue or sell (upon conversion or
otherwise), any shares of MORI Stock, or subdivided or in any way
reclassified any shares of MORI Stock, or acquired, or agreed to
acquire, any shares of MORI Stock; and
4.2.9 Prohibition on Dividends. Declared or paid any
dividend on shares of MORI Stock or made any other distribution of
assets to the holders thereof.
4.3 Agreements of Synagro. Synagro agrees that since March 31,
1998 it has not:
4.3.1 No Amendment to Articles of Incorporation. Amended
its Certificate of Incorporation or merged with or into any other
corporation or changed in any manner the rights of the Synagro Shares;
and
4.3.2 Notice of Material Developments. Promptly furnished to
the Shareholders copies of all Synagro's communications to its
stockholders and all reports filed by it with the Commission and the
National Association of Securities Dealers, Inc. and relating to
periodic or other material developments concerning Synagro's financial
condition, business, or affairs.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS
5.1 Conditions Precedent to Obligations of MORI and the
Shareholders. The obligations of MORI and the Shareholders to consummate and
effect the transactions contemplated hereunder shall be subject to the
satisfaction of the following conditions, or to the waiver thereof by the
Shareholders, on behalf of themselves and MORI, on or before the Effective Date:
5.1.1 Representations and Warranties of Synagro True at
Effective Date. The representations and warranties of Synagro herein
contained shall be, in all material respects, true as of and at the
Effective Date, except as affected by transactions permitted or
contemplated by this Agreement; Synagro shall have performed and
complied, in all material respects, with all covenants required by this
Agreement to be performed or complied with by Synagro before the
Effective Date; and Synagro shall have delivered to the Shareholders a
certificate, dated the Effective Date and signed by its president or a
vice president and its secretary, to such effect.
5.1.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to Synagro's knowledge, threatened,
before any court or governmental agency in which it will be, or it is,
sought to restrain or prohibit or to obtain damages or provide other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby or which might result in a material
adverse change in the value of the consolidated assets and business of
Synagro.
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<PAGE> 33
5.1.3 Closing Documents. Synagro shall have executed and
delivered to the appropriate parties the documents and instruments to
be executed and delivered by it pursuant to Section 1.11 hereof, the
Exchange shall have occurred, and the Shareholders shall have received
the opinion required by Section 1.11.1 hereof.
5.1.4 Consent of Certain Parties in Privity With Synagro.
The holders of any material indebtedness of Synagro, the lessors of any
material property leased by Synagro, and the other parties to any other
material agreements to which Synagro is a party shall, when and to the
extent necessary in the reasonable opinion of the Shareholders, have
consented to the transactions contemplated hereby.
5.1.5 Other Merger Agreements. The Other Merger Agreements
(as hereinafter defined), and all documents and instruments
contemplated thereby, shall have been duly executed and delivered, and
the transactions contemplated by the Other Merger Agreements shall have
been consummated. As used herein, the "Other Merger Agreements" shall
mean (i) that certain Plan and Agreement of Merger, of even date
herewith, among Synagro, Synagro Sub Corp. Wisconsin, Inc. ("Synagro
Wisconsin"), A&J Cartage, Inc. ("A&J"), and Jalovec regarding the
merger of Synagro Wisconsin with and into A&J; and (ii) that certain
Plan and Agreement of Merger, of even date herewith, among Synagro,
Synagro Sub Florida, Inc. ("Synagro Florida"), A&J Cartage, Inc.
Southeast ("A&J Florida"), Karl R. Sattler and Jalovec regarding the
merger of Synagro Florida with and into A&J Florida.
5.2 Conditions Precedent to Obligations of Synagro. The obligation
of Synagro to consummate and effect the transactions contemplated hereunder
shall be subject to the satisfaction of the following conditions, or to the
waiver thereof by Synagro, on or before the Effective Date.
5.2.1 Representations and Warranties of MORI and the
Shareholders True at Effective Date. The representations and warranties
of MORI and the Shareholders herein contained shall be, in all material
respects, true as of and at the Effective Date, except as affected by
transactions permitted or contemplated by this Agreement; MORI and the
Shareholders shall have performed and complied in all material
respects, with all covenants required by this Agreement to be performed
or complied with by them before the Effective Date; and MORI and the
Shareholders shall have delivered to Synagro a certificate, dated the
Effective Date and signed by an executive officer of MORI and by the
Shareholders to such effect.
5.2.2 No Material Litigation. No suit, action, or other
proceeding shall be pending, or to the Shareholders' knowledge,
threatened, before any court or governmental agency in which it will
be, or it is, sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby or which might result in a
material adverse change in the value of the assets and business of
MORI.
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5.2.3 Closing Documents. The Shareholders and MORI shall
have executed and delivered to the appropriate parties the documents
and instruments to be executed and delivered by them pursuant to
Section 1.11 hereof, the Exchange shall have occurred and Synagro shall
have received the opinion required by Section 1.11.2 hereof.
5.2.4 Consent of Certain Parties in Privity with, MORI or
the Shareholders. The holders of any material indebtedness of MORI or
the Shareholders, the lessors of any material property leased by MORI
or the Shareholders, the other parties to any other material agreements
to which MORI or the Shareholders are a party and the appropriate
authority issuing any Permits shall, when and to the extent necessary
in the reasonable opinion of Synagro, have consented to the transaction
contemplated hereby.
5.2.5 Other Merger Agreements. The Other Merger Agreements,
and all documents and instruments contemplated thereby, shall have been
duly executed and delivered, and the transactions contemplated by the
Other Merger Agreements shall have been consummated.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 Further Assurances. From time to time, as and when requested
by any party hereto, any other party hereto shall execute and deliver, or cause
to be executed and delivered, such documents and instruments and shall take, or
cause to be taken, such further or other actions as may be reasonably necessary
to effect the transactions contemplated hereby.
6.2 Payment of Taxes. The Shareholders agrees to pay timely all
Taxes assessed or assessable against him or MORI arising out of or in any way
related to the ownership, business or operations of MORI through the end of the
Effective Date, including, without limitation, any Taxes resulting from the
consummation of the transactions contemplated hereby, except to the extent the
Shareholders is contesting any portion of such taxes in good faith and have made
appropriate reserves for the payment thereof.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Shareholders. After the Effective Date,
in addition to any other remedies available to Synagro under this Agreement, or
at law or in equity, the Shareholders shall indemnify, defend and hold harmless
Synagro, MORI and their respective officers, directors, employees, agents, and
stockholders, against and with respect to any and all claims, costs, damages,
losses, expenses, obligations, liabilities, recoveries, suits, causes of action
and deficiencies, including interest, penalties and reasonable attorneys' fees
and expenses (collectively, "Damages") that such indemnitees shall incur or
suffer, which arise, result from or relate to (i) any breach of, or failure by,
MORI or the Shareholders to perform their respective representations,
warranties, covenants or agreements in this Agreement or in any schedule,
certificate, exhibit or other instrument furnished
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or delivered to Synagro by MORI, or the Shareholders under this Agreement; (ii)
the ownership or operations of MORI before the Closing Date, and (iii) all Taxes
arising out of or in any way related to the ownership, business or operations of
MORI through the end of the Effective Date, including, without limitation, any
Taxes resulting from the consummation of the transaction contemplated hereby.
7.2 Indemnification by Synagro. After the Effective Date, in
addition to any other remedies available to the Shareholders under this
Agreement, or at law or in equity, Synagro shall indemnify, defend and hold
harmless and the Shareholders, against and with respect to any and all Damages
that the Shareholders shall incur or suffer, which arise, result from or relate
to (i) any breach of, or failure by Synagro to perform, any of its
representations, warranties, covenants or agreements in this Agreement or in any
schedule, certificate, exhibit or other instrument furnished or delivered to or
the Shareholders by or on behalf of Synagro under this Agreement; and (ii) the
ownership or operations of MORI from and after the Effective Date.
7.3 Indemnification Procedures. If any party hereto discovers or
otherwise becomes aware of a claim for Damages arising under this Article 7,
such indemnified party shall give written notice (an "Indemnification Notice")
to the indemnifying party, specifying such claim, and may thereafter exercise
any remedies available to such party under this Agreement; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of any obligations hereunder, to the
extent the indemnifying party is not materially prejudiced thereby. Further,
promptly after receipt by an indemnified party hereunder of written notice of
the commencement of any action or proceeding with respect to which a claim for
Damages arising under this Article 7 may be made, such indemnified party shall,
if a claim in respect thereof is to be made against any indemnifying party, give
written notice to the latter of the commencement of such action; provided,
however, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of any obligations hereunder, to
the extent the indemnifying party is not materially prejudiced thereby. In case
any such action is brought against an indemnified party, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
such notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof unless the
indemnifying party has failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such indemnified person. An indemnifying
party who elects not to assume the defense of a claim shall not be liable for
the fees and expenses of more than one counsel in any single jurisdiction for
all parties indemnified by such indemnifying party with respect to such claim or
with respect to claims separate but similar or related in the same jurisdiction
arising out of the same general allegations. Notwithstanding any of the
foregoing to the contrary, the indemnified party will be entitled to select its
own counsel and assume the defense of any action brought against it if the
indemnifying party fails to select counsel reasonably satisfactory to the
indemnified party, and the expenses of such defense shall be paid by the
indemnifying party. No indemnifying party shall consent to entry of any judgment
or enter into any settlement with respect to a claim without
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<PAGE> 36
the consent of the indemnified party, which consent shall not be unreasonably
withheld, or unless such judgment or settlement includes as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability with respect to such claim. No indemnified party
shall consent to entry of any judgment or enter into any settlement of any such
action, the defense of which has been assumed by an indemnifying party, without
the consent of such indemnifying party, which consent shall not be unreasonably
withheld.
7.4 Termination of Indemnity, Representations and Warranties. The
indemnities provided in Sections 7.1 and 7.2 shall terminate with respect to all
Damages which are not the subject of an Indemnification Notice received by the
indemnifying party within two years after the Effective Date; except that the
time period for receipt of an Indemnification Notice for the indemnities
contained in Section 7.1(i), with respect to a breach of the representations,
warranties, covenants and agreements contained in Sections 2.1.4, 2.1.11,
2.1.13, 2.1.15, 2.2, and 6.2, shall survive for the applicable statute of
limitations period; and provided that the indemnity contained in Section 7.2(ii)
shall survive indefinitely. The indemnities provided in Sections 7.1 and 7.2
shall survive indefinitely with respect to Damages for which an Indemnification
Notice is received by the indemnifying party within the applicable period
provided in the preceding sentence. The representations and warranties contained
in Articles 2 and 3 hereof shall terminate two years after the Effective Date,
except that the representations warranties, covenants and agreements contained
in Sections 2.1.4, 2.1.11, 2.1.13, 2.1.15, and 6.2, shall survive for the
applicable statute of limitations period.
ARTICLE 8
MISCELLANEOUS
8.1 Press Releases. The Shareholders shall not make any public
statement or announcement concerning this Agreement or the transactions
contemplated herein without the prior consent of Synagro, subject, however, to
the right of the Shareholders to make such an announcement when in the opinion
of its counsel such public statement or announcement is legally required. Prior
to making any public statement or announcement concerning this Agreement or the
transactions contemplated hereby, Synagro shall provide a copy thereof to the
Shareholders.
8.2 Entirety; Conflict. This Agreement and the Letter Agreement
embody the entire agreement among the parties with respect to the subject matter
hereof, and all prior representations, warranties and agreements between the
parties with respect thereto, whether written or oral, are hereby superseded in
their entirety. This Agreement may not be modified or amended in any manner
except by written instrument executed by all of the parties hereto. In the event
of any conflict between the terms and provisions of this Agreement and those of
the Letter Agreement, the terms and provisions of this Agreement shall control.
8.3 Counterparts and Facsimile Signature. Any number of
counterparts of this Agreement may be executed and each such counterpart shall
be deemed to be an original instrument, but all such counterparts together shall
constitute but one instrument. This Agreement may be
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executed by any party by facsimile signature, with the original signature to be
promptly delivered thereafter, and such facsimile signature shall be binding
upon the party so executing this Agreement.
8.4 Notices and Waivers. Any notice or waiver to be given to any
party hereto shall be in writing and shall be delivered in person or by courier,
sent by facsimile transmission or first class registered or certified mail,
postage prepaid, return receipt requested.
IF TO SYNAGRO OR SUB CORP:
Addressed to: With a copy to:
Synagro Technologies, Inc. Porter & Hedges, L.L.P.
5850 San Felipe, Suite 500 700 Louisiana, 35th Floor
Houston, Texas 77057 Houston, Texas 77002
Attention: Mark Rome Attention: T. William Porter
Telephone: (713) 706-6185 Telephone: (713) 226-0600
Facsimile: (713) 706-6181 Facsimile: (713) 228-1331
IF TO MORI OR THE SHAREHOLDERS:
Addressed to: With a copy to:
James A Jalovec Domnitz, Mawicke, Goisman & Rosenberg, S.C.
c/o A&J Cartage, Inc. 1509 North Prospect Avenue
2841 South 5th Court Milwaukee, Michigan 53202
Milwaukee, Wisconsin 53207 Attention: Jeffrey J. Mawicke
Telephone: (414) 744-9447 Telephone: (414) 224-0600
Facsimile: (414) 744-9510 Facsimile: (414) 224-9359
Any communication so addressed and mailed by first-class registered or
certified mail, postage prepaid, with return receipt requested, shall be deemed
to be received on the third business day after so mailed, and if delivered in
person or by courier or facsimile to such address, upon delivery during normal
business hours on any business day.
8.5 Table of Contents and Captions. The table of contents and
captions contained in this Agreement are solely for convenient reference and
shall not be deemed to affect the meaning or interpretation of any article,
section, or paragraph hereof.
8.6 Successors and Assigns. Neither Synagro, MORI nor the
Shareholders may transfer or assign this Agreement or any of their respective
rights, duties or obligations hereunder without the prior written consent of the
other parties hereto.
8.7 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. It is hereby stipulated and declared to be
the intention of the
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parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
8.8 Applicable Law. The laws of the State of Texas will govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof, except to the extent
that the form and content of the Certificate of Merger and the consequences of
the filing thereof shall be governed by the Corporations Act, and the
Shareholders, MORI, Sub Corp and Synagro agree that the state and federal courts
situated in Harris, County, Texas shall have personal jurisdiction over the
Shareholders, MORI, Sub Corp and Synagro, and shall be the sole venue, to hear
all disputes arising under this Agreement. This Agreement is to be at least
partially performed in Harris, County, Texas and, as such, the Shareholders,
MORI, Sub Corp and Synagro, agree that venue shall be proper with the state or
federal courts in Harris County, Texas to hear such disputes. In the event
either the Shareholders, MORI, Sub Corp or Synagro is not able to effect service
of process upon the other with respect to such disputes, the Shareholders, MORI,
Sub Corp and Synagro expressly agree that the Secretary of State for the State
of Texas shall be an agent of the Shareholders, MORI, Sub Corp and/or the
Synagro, as applicable, to receive service of process on behalf of the
Shareholders, MORI, Sub Corp and/or Synagro, as applicable, with respect to such
disputes.
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<PAGE> 39
IN WITNESS WHEREOF, the Shareholders has executed this Agreement, and
Synagro, Sub Corp. and MORI have caused this Agreement to be signed in their
respective corporate names by their respective duly authorized representatives,
all as of the day and year first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SYNAGRO SUB CORP. MICHIGAN, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
MICHIGAN ORGANIC RESOURCES, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SHAREHOLDERS
---------------------------------------
JAMES A. JALOVEC
---------------------------------------
DONALD R. HOEKSTRA
34
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of June 23, 1998, between Synagro Technologies, Inc., a Delaware
corporation ("Synagro"), and James A. Jalovec ("Jalovec"), Donald R. Hoekstra
("Hoekstra") and Karl R. Sattler ("Sattler," and, collectively with Jalovec and
Hoekstra, the "Stockholders").
WHEREAS, pursuant to (i) that certain Plan and Agreement of Merger, dated
June 23, 1998, among Synagro, Synagro Sub Corp, Wisconsin, Inc., a Wisconsin
corporation ("Wisconsin Sub Corp."), A&J Cartage, Inc., a Wisconsin corporation
("A&J"), and Jalovec; (ii) that certain Plan and Agreement of Merger, dated
June 23, 1998, among Synagro, Synagro Sub Corp. Michigan, Inc., a Michigan
corporation ("Michigan Sub Corp."), Michigan Organic Resources, Inc., a
Michigan corporation ("MORI"), and Stockholders; and (iii) that certain Plan
and Agreement of Merger, dated June 23, 1998, among Synagro, Synagro Sub
Florida, Inc., a Florida corporation ("Florida Sub Corp."), A&J Cartage, Inc.
Southeast, a Florida corporation ("A&J Southeast"), Jalovec and Sattler
(collectively, the "Merger Agreements"), the Stockholders have received on the
date hereof an aggregate of 1,612,533 shares of common stock, par value $.002
per share, of Synagro ("Common Stock"), the resale of which by the Stockholders
have not been registered pursuant to the Securities Act (as hereinafter
defined; said shares being "Unregistered Common Stock"); and
WHEREAS, in order to induce the Stockholders to enter into the Merger
Agreements, Synagro has agreed to provide registration rights on the terms set
forth in this Agreement for the benefit of the Stockholders;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. The following capitalized terms shall have the
meanings assigned to them in this Section 1 or in the parts of this Agreement
referred to below:
Code: the Internal Revenue Code of 1986, as amended, and any
successor thereto.
Commission: the Securities and Exchange Commission, and
any successor thereto.
Exchange Act: the Securities Exchange Act of 1934, as amended, and
any successor thereto, and the rules and regulations thereunder.
Exempt Offering: as defined in Section 2.
Registrable Common: shares of Unregistered Common Stock that were
issued and received by the Stockholders on the date hereof, pursuant to
the Merger Agreements and any additional shares of Common Stock issued or
distributed in respect of any other shares of Registrable Common by way
of a stock dividend or distribution or stock split or in connection with
a combination of shares, recapitalization, reorganization, merger,
consolidation or otherwise. For purposes of this Agreement, shares of
Registrable Common
<PAGE> 2
will cease to be Registrable Common when and to the extent that (i) a
registration statement covering such shares has been declared effective
under the Securities Act and such shares have been disposed of pursuant
to such effective registration statement, (ii) such shares are sold
pursuant to Rule 144 or become saleable under Rule 144(k), or (iii) such
shares have been otherwise transferred to any person or entity other
than the Stockholders, other than pursuant to Section 10.
Registration Notice: as defined in Section 2.
Rule 144: Securities Act Rule 144 (or any similar or
successor provision under the Securities Act).
Securities Act: the Securities Act of 1933, as amended, and
any successor thereto, and the rules and regulations thereunder.
2. Piggyback Registration Rights. Each time that Synagro
proposes to register any Common Stock for its own account under the Securities
Act for a public offering for cash, other than a registration relating to the
offering or issuance of shares in connection with (i) employee compensation or
benefit plans or (ii) one or more acquisition transactions under a Registration
Statement on Form S-4 or Form S-1 under the Securities Act (or a successor to
Form S-4 or Form S-1) (any such offering or issuance being an "Exempt
Offering"), Synagro will give the Stockholders written notice of its intent to
do so (a "Registration Notice") at least 20 days prior to the filing of the
related registration statement with the Commission. Such notice shall specify
the approximate date on which Synagro proposes to file such registration
statement and shall contain a statement that the Stockholders are entitled to
participate in such offering and shall set forth the number of shares of
Registrable Common that represents the best estimate of the lead managing
underwriter (or if not known or applicable, Synagro) that will be available for
sale by the Stockholders in the proposed offering. If Synagro shall have
delivered a Registration Notice, the Stockholders shall be entitled to
participate on the same terms and conditions as Synagro in the public offering
to which the Registration Notice relates (except that the underwriter shall
have no over-subscription rights on the Registrable Common) and to offer and
sell shares of Registrable Common therein only to the extent provided in this
Section 2. The Stockholders shall notify Synagro no later than ten days
following receipt of the Registration Notice of the aggregate number of shares
of Registrable Common that the Stockholders then desires to sell in the
offering. The Stockholders may include shares of Registrable Common in the
registration statement relating to the offering, to the extent that the
inclusion of such shares shall not reduce the number of shares of Common Stock
to be offered and sold by Synagro to be included therein. If the lead managing
underwriter selected by Synagro for a public offering (or, if the offering is
not underwritten, a financial advisor to Synagro) determines that marketing
factors require a limitation on the number of shares of Registrable Common to
be offered and sold in such offering, there shall be included in the offering
only that number of shares of Registrable Common, if any, requested to be
included in the offering that such lead managing underwriter or financial
advisor, as the case may be, reasonably and in good faith believes will not
jeopardize the success of the offering; and provided, further, that to the
extent the lead managing underwriter or the financial advisor limits the number
of Shares of Registerable Common to be offered and sold in an offering, the
Registrable Common to be included
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<PAGE> 3
in such offering shall be included on a pro rata basis with other holders
having comparable rights under agreements similar to this Agreement.
3. Registration Procedures. In connection with registrations
under Section 2, and subject to the terms and conditions contained therein,
Synagro shall (a) use its best efforts to prepare and file with the Commission
as soon as reasonably practicable after giving a Registration Notice (but not
less than 20 days after giving such notice), a registration statement with
respect to the Registrable Common and use its best efforts to cause such
registration to promptly become and remain effective for a period of at least
120 days (or such shorter period during which the Stockholder shall have sold
all Registrable Common, as limited by Section 2 hereof, which it requested to
be registered); (b) prepare and file with the Commission such amendments
(including post-effective amendments) to such registration statement and
supplements to the related prospectus to reflect appropriately the plan of
distribution of the securities registered thereunder until the completion of
the distribution contemplated by such registration statement or for so long
thereafter as a dealer is required by law to deliver a prospectus in connection
with the offer and sale of the shares of Registrable Common covered by such
registration statement and/or as shall be necessary so that neither such
registration statement nor the related prospectus shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
so that such registration statement and the related prospectus will otherwise
comply with applicable legal requirements; (c) provide to the Stockholders and
their counsel, which counsel shall be reasonably satisfactory to Synagro, an
opportunity to review and provide comments with respect to such registration
statement (and any post- effective amendment thereto) prior to such
registration statement (or post-effective amendment) becoming effective; (d)
use its best efforts to register and qualify the Registrable Common covered by
such registration statement under applicable securities or "Blue Sky" laws of
such jurisdictions as the Stockholders shall reasonably request for the
distribution of the Registrable Common; (e) take such other actions as are
reasonable and necessary to comply with the requirements of the Securities Act;
(f) furnish such number of prospectuses (including preliminary prospectuses)
and documents incident thereto as the Stockholders from time to time may
reasonably request; (g) provide to the Stockholder and any managing underwriter
participating in any distribution thereof, and to any attorney, accountant or
other agent retained by the Stockholders or managing underwriter, reasonable
access to appropriate officers and directors of Synagro to ask questions and to
obtain information reasonably requested by the Stockholders, managing
underwriter, attorney, accountant or other agent in connection with such
registration statement or any amendment thereto; provided, however, that (i) in
connection with any such access or request, any such requesting persons shall
cooperate to the extent reasonably practicable to minimize any disruption to
the operation by Synagro of its business and (ii) any records, information or
documents shall be kept confidential by such requesting persons, unless (A)
such records, information or documents are in the public domain or otherwise
publicly available or (B) disclosure of such records, information or documents
is required by court or administrative order or by applicable law (including,
without limitation, the Securities Act); (h) notify the Stockholders and the
managing underwriters participating in the distribution pursuant to such
registration statement promptly (i) when Synagro is informed that such
registration statement or any post-effective amendment to such registration
statement becomes effective, (ii) of any request by the Commission for an
amendment or any supplement to such registration statement or any related
prospectus, (iii) of the issuance by the Commission of any stop order
suspending the
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<PAGE> 4
effectiveness of such registration statement or of any order preventing or
suspending the use of any related prospectus or the initiation or threat of any
proceeding for that purpose, (iv) of the suspension of the qualification of any
shares of Registrable Common included in such registration statement for sale
in any jurisdiction or the initiation or threat of a proceeding for that
purpose, (v) of any determination by Synagro that any event has occurred which
makes untrue any statement of a material fact made in such registration
statement or any related prospectus or which requires the making of a change in
such registration statement or any related prospectus in order that the same
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (vi) of the completion of the distribution
contemplated by such registration statement if it relates to an offering by
Synagro; (i) in the event of the issuance of any stop order suspending the
effectiveness of such registration statement or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any shares of Registrable Common included in such registration statement for
sale in any jurisdiction, use reasonable efforts to obtain its withdrawal; (j)
otherwise use reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, but not later than fifteen months after the
effective date of such registration statement, an earnings statement covering
the period of at least twelve months beginning with the first full fiscal
quarter after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11 (a) of the Securities Act;
(k) use reasonable diligence to cause all shares of Registrable Common included
in such registration statement to be listed on any securities exchange
(including, for this purpose, the Nasdaq Small-Cap Market) on which the Common
Stock is then listed at the initiation of Synagro; (l) use reasonable diligence
to obtain an opinion from legal counsel (which may include any General Counsel
of Synagro) in customary form and covering such matters of the type customarily
covered by opinions as the underwriters, if any, may reasonably request; (m)
provide a transfer agent and registrar for all such Registrable Common not
later than the effective date of such registration statement; (n) enter into
such customary agreements (including an underwriting agreement in customary
form) as the underwriters, if any, may reasonably request in order to expedite
or facilitate the disposition of such shares of Registrable Common; and (o) use
reasonable diligence to obtain a "comfort letter" from Synagro's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters as the underwriters, if any, may
reasonably request. As used in this Section 3 and elsewhere herein, the term
"underwriters" does not include the Stockholders.
4. Underwriting Agreement. In connection with each registration
pursuant to Section 2 covering an underwritten registered public offering,
Synagro and the Stockholders agree to enter into a written agreement with the
managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of Synagro's size and investment stature, including
provisions for indemnification by Synagro and the Stockholders as more fully
described in Section 11.
5. Availability of Rule 144. Notwithstanding anything contained
herein to the contrary, (including Section 2), Synagro shall not be obligated
to register shares of Registrable Common held by the Stockholders when the
resale provisions of Rule 144(k) are available to the Stockholders or the
Stockholders is otherwise entitled to sell the shares of Registrable Common
held by them in a
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<PAGE> 5
brokerage transaction without registration under the Securities Act and without
limitation as to volume or manner of sale or both. In addition, the
Stockholders agree to give at least ten days prior written notice to the
Company before selling any shares of Registrable Common pursuant to Rule 144.
6. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit
the sale of the shares of Registrable Common held by the Stockholders to the
public without registration, Synagro agrees to:
(a) make and keep public information available (as those
terms are understood and defined in Rule 144) at all times from and
after 90 days following the effective date of the registration
statement;
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of Synagro
under the Securities Act and the Exchange Act at any time that it is
subject to such reporting requirements;
(c) so long as the Stockholders own any shares of
Registrable Common, furnish to the Stockholders forthwith upon request
a written statement by Synagro as to its compliance with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act (at
any time that it is subject to such reporting requirements), a copy of
the most recent annual or quarterly report of Synagro, and such other
reports and documents filed in accordance with such reporting
requirements as the Stockholders may reasonably request in availing
themselves of any rule or regulation of the Commission allowing the
Stockholders to sell any such securities without registration; and
(d) if required by the transfer agent and registrar for
the Common Stock, use reasonable diligence to obtain an opinion from
legal counsel (which may include any General Counsel of Synagro)
addressed to such transfer agent and registrar, with respect to any
sale of shares of Registerable Common pursuant to Rule 144 (or, at the
option of Synagro, pay the reasonable fees and expenses of legal
counsel retained by the Stockholder to provide such an opinion).
7. Market Standoff. In consideration of the granting to the
Stockholders of the registration rights pursuant to this Agreement, the
Stockholders agree that, for so long as the Stockholders hold shares of
Registrable Common, except as permitted by Section 2, the Stockholders will not
sell, transfer or otherwise dispose of, including, without limitation, through
put or short sale arrangements, shares of Common Stock in the ten days prior to
the effectiveness of any registration (other than relating to an Exempt
Offering) of Common Stock for sale to the public and for up to 90 days
following the effectiveness of such registration (other than relating to an
Exempt Offering).
8. Registration Expenses. All expenses incurred in connection
with any registration, qualification and compliance under this Agreement,
including, without limitation, all registration, filing, qualification, legal,
printing and accounting fees, shall be borne by Synagro, except that all
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<PAGE> 6
fees of counsel, accountants and consultants, acting on behalf of the
Stockholders ("Stockholder Consultant Fees") shall be borne by the
Stockholders. All underwriting commissions and discounts applicable to shares
of Registrable Common included in the registrations under this Agreement shall
be borne by the Stockholders. Subject to the foregoing, all expenses incident
to Synagro's performance of or compliance with this Agreement, including,
without limitation, all filing fees, fees and expenses of compliance with
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Common), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
Synagro's officers and employees performing legal or accounting duties), the
fees and expenses applicable to shares of Registrable Common included in
connection with the listing of the securities to be registered on each
securities exchange (including, for this purpose, the Nasdaq Small-Cap Market)
on which similar securities issued by Synagro are then listed at the initiation
of Synagro, registrar and transfer agents' fees and fees and disbursements of
counsel for Synagro and its independent certified public accountants,
securities act liability insurance of Synagro and its officers and directors
(if Synagro elects to obtain such insurance), the fees and expenses of any
special experts retained by Synagro in connection with such registration and
fees and expenses of other persons retained by Synagro and incurred in
connection with each registration hereunder (but not including, without
limitation, any underwriting fees, discounts or commissions attributable to the
sale of Registrable Common, Stockholder Consultant Fees and transfer taxes, if
any), will be borne by Synagro.
9. Participation in Underwritten Registrations. The Stockholders
may not participate in any underwritten registration hereunder unless they (a)
agree to sell the Registrable Common held by them on the basis provided in any
underwriting arrangements approved by Synagro's authorized officers and (b)
complete and execute all questionnaires, powers of attorney, custody
agreements, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Transfer of Registration Rights; Additional Grants of
Registration Rights. The registration rights provided to the Stockholders
under Section 2 hereof shall be available, at the option of the Stockholders,
to subsequent holders of the Registrable Common Stock. Each such subsequent
holder entitled to registration rights under this Agreement shall be bound by
the terms and subject to the obligations of this Agreement as if it were an
original signatory hereto. Nothing herein shall limit the ability of Synagro
to grant to any person or entity any registration or similar rights in the
future with respect to Common Stock or other securities of Synagro. In the
event Synagro commences a public offering in which Stockholder and other
holders of Common Stock have a right to participate and the lead managing
underwriter or financial advisor, as applicable, limits the number of shares of
Common Stock to be offered and sold in such offering, the number of shares of
Registrable Common and Common Stock to be offered and sold by Stockholders and
the other participating stockholders, respectively, shall be allocated among
the Stockholders and participating stockholders on a pro rata basis based on
their holdings of Registrable Common and Common Stock, respectively, in
accordance with the last sentence of Section 2.
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<PAGE> 7
11. Indemnification and Contribution.
(a) Indemnification by the Company. To the extent
permitted by law, Synagro agrees to indemnify and hold harmless the
Stockholders, from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable legal expenses) arising
out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or
prospectus relating to the Registrable Common or in any amendment or
supplement thereto or in any related preliminary prospectus, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are
based upon, any such untrue statement or omission or allegation
thereof based upon information furnished in writing to Synagro by the
Stockholders or on the Stockholders' behalf expressly for use therein.
In connection with an underwritten offering of shares of Registrable
Common, Synagro will indemnify any underwriters of the Registrable
Common, their partners, officers and directors and each person who
controls such underwriters (within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act) on substantially
the same basis as that of the indemnification of the Stockholder
provided in this Section 11(a). Notwithstanding the foregoing,
Synagro's indemnification obligations with respect to any preliminary
prospectus shall not inure to the benefit of the Stockholder or
underwriter with respect to any loss, claim, damage, liability (or
actions in respect thereof) or expense arising out of or based on any
untrue statement or alleged untrue statement or omission or alleged
omission to state a material fact in such preliminary prospectus, in
any case where (i) a copy of the prospectus used to confirm sales of
shares of Registrable Common was sent or given to the person asserting
such loss, claim, damage or liability at or prior to the written
confirmation of the sale to such person and (ii) such untrue statement
or alleged untrue statement or omission or alleged omission was
corrected in such prospectus.
(b) Conduct of Indemnification Proceedings. Promptly
after receipt by the Stockholders of notice of any claim or the
commencement of any action or proceeding brought or asserted against
the Stockholders in respect of which indemnity may be sought from
Synagro, the Stockholders shall notify Synagro in writing of the claim
or the commencement of that action or proceeding; provided, however,
that the failure to so notify Synagro shall not relieve Synagro from
any liability that it may have to the Stockholders otherwise than
pursuant to the indemnification provisions of this Agreement. If any
such claim or action or proceeding shall be brought against the
Stockholders and the Stockholders shall have duly notified Synagro
thereof, Synagro shall have the right to assume the defense thereof,
including the employment of counsel. The Stockholders shall have the
right to employ separate counsel in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Stockholders unless (i) Synagro has
agreed to pay such fees and expenses or (ii) the named parties to any
such action or proceeding include both the Stockholders and Synagro,
and the Stockholders shall have been advised by counsel that there may
be one or more legal defenses available to the Stockholders which are
different from or additional to those available to Synagro, in which
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<PAGE> 8
case, if the Stockholders notify Synagro in writing that they elect to
employ separate counsel at the expense of Synagro, Synagro shall not
have the right to assume the defense of such action or proceeding on
behalf of the Stockholders; it being understood, however, that Synagro
shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings
in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel)
at any time for the Stockholders. Synagro shall not be liable for any
settlement of any such action or proceeding effected without
Synagro's written consent.
(c) Indemnification by Stockholders. In connection with
any registration in which the Stockholders are participating, the
Stockholders will furnish to Synagro in writing such information and
affidavits as Synagro reasonably requests for use in connection with
any related registration statement or prospectus. To the extent
permitted by law, the Stockholders agrees to indemnify and hold
harmless Synagro, its directors and officers who sign the registration
statement relating to shares of Registrable Common offered by the
Stockholders and each person, if any, who controls Synagro within the
meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from
Synagro to the Stockholders, but only with respect to information
concerning the Stockholders furnished in writing by the Stockholders
or on the Stockholders' behalf expressly for use in any registration
statement or prospectus relating to shares of Registrable Common
offered by the Stockholders, or any amendment or supplement thereto,
or any related preliminary prospectus. In case any action or
proceeding shall be brought against Synagro or its directors or
officers, or any such controlling person, in respect of which
indemnity may be sought against the Stockholders, the Stockholders
shall have the rights and duties given to Synagro, and Synagro or its
directors or officers or such controlling persons shall have the
rights and duties given to the Stockholders, by the preceding
paragraph. The Stockholders also agree to indemnify and hold harmless
any underwriters of the Registrable Common, their partners, officers
and directors and each person who controls such underwriters (within
the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act) on substantially the same basis as that of the
indemnification of Synagro provided in this Section 11(c).
Notwithstanding anything to the contrary herein, in no event shall the
amount paid or payable by the Stockholders under this Section 11(c)
exceed the amount of proceeds received by the Stockholders from the
offering of the Registrable Common.
(d) Contribution. If the indemnification provided for in
this Section 11 is unavailable to any indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to
herein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities and expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the
indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other
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<PAGE> 9
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
such indemnified party or indemnified parties and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. Synagro and the Stockholder agree
that it would not be just and equitable if contribution pursuant to
this Section 11(d) were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this Section 11(d). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. If
indemnification is available under this Section 11, the indemnifying
parties shall indemnify each indemnified party to the full extent
provided in Sections 11(a) and (c) without regard to the relative
fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 11(d).
12. Miscellaneous
(a) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, except by written instrument
signed by the parties hereto.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by
telex or telecopy, or registered or certified mail (return receipt
requested), postage prepaid, or courier to the parties at the
following addresses (or at such other address for any party as shall
be specified by like notice), provided that notices of a change of
address shall be effective only upon receipt thereof. Notices sent by
mail shall be effective upon receipt thereof by the addressee, notices
sent by telecopier shall be effective when receipt is acknowledged,
and notices sent by courier guaranteeing next day delivery shall be
effective on the next business day after timely delivery by the
courier. Notices shall be sent to the following addresses:
(i) if to the Stockholders, at the following
addresses:
James A. Jalovec
c/o A&J Cartage, Inc.
2841 South 5th Court
Milwaukee, Wisconsin 53207
Telephone: (414) 744-9447
Telecopier: (414) 744-9510
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<PAGE> 10
Donald R. Hoekstra
c/o A&J Cartage, Inc.
2841 South 5th Court
Milwaukee, Wisconsin 53207
Telephone: (414) 744-9447
Telecopier: (414) 744-9510
Karl R. Sattler
883 Airport Park Road, Suite A
Glenn Burnie, Maryland 21061
Telephone: (410) 590-3060
Telecopier: (410) 590-0277
with copies to:
Domnitz, Mawicke, Goisman &
Rosenberg, S.C.
1509 North Prospect Avenue
Milwaukee, Wisconsin 53202
Attention: Jeffrey J. Mawicke
Telephone: (414) 224-0600
Telecopier: (414) 224-9359
(ii) if to Synagro, at the following address:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: Daniel L. Shook
Telephone: (713) 706-6184
Telecopier: (713) 706-6181
with copies to: Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attention: T. William Porter, Esq.
Telephone: (713) 226-0600
Telecopier: (713) 226-1331
(c) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective
successors and assigns.
(d) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
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<PAGE> 11
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(f) Section References. Unless the context requires
otherwise, references in this Agreement to "Sections" are to Sections
of this Agreement.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THAT
STATE.
(h) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason,
the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained herein
shall not be in any way impaired thereby, it being intended that all
the rights and privileges of the Stockholder shall be enforceable to
the fullest extent permitted by law.
(i) Entire Agreement; Termination. This Agreement is
intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject
matter. This Agreement, except the provisions of Section 11 (which
shall survive until the expiration of the applicable statutes of
limitations) and this Section 12, shall terminate and be of no further
force or effect when all of the Common Stock delivered to the
Stockholders ceases to be Registrable Common.
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<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SYNAGRO TECHNOLOGIES, INC.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
James A. Jalovec
----------------------------------
Donald R. Hoekstra
----------------------------------
Karl R. Sattler
12
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made and entered into as of the _____ day
of June, 1998 (the "EFFECTIVE DATE"), by and between Synagro Technologies,
Inc., a Delaware corporation (hereafter "COMPANY") and James A. Jalovec
(hereafter "EXECUTIVE"), an individual;
W I T N E S S E T H:
WHEREAS, Company wishes to secure the services of the Executive
subject to the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing to enter into this Agreement upon
the terms and conditions hereafter set forth,
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto agree as follows:
1. EMPLOYMENT. During the Employment Period (as defined in
Section 4 hereof), the Company shall employ Executive, and Executive shall
serve, as Chief Operating Officer of the Company. Executive's principal place
of employment shall be at the Company's offices in Milwaukee, Wisconsin.
2. COMPENSATION. The Company shall pay or cause to be paid to
Executive during the Employment Period an annual base salary for his services
under this Agreement of not less than $100,000, payable in equal monthly or
semi-monthly installments in accordance with the Company's normal payroll
procedures. The Executive's base salary shall be subject to annual review and
may be increased, depending upon the performance of the Company and Executive,
upon the recommendation of the Board of Directors of the Company (hereafter
"BOARD OF DIRECTORS"). Nothing contained herein shall preclude the payment of
a bonus, supplemental or incentive compensation to Executive provided that the
Board of Directors authorizes any such compensation payment. As additional
compensation to Executive for the services to be rendered by him pursuant to,
and Executive's other duties and obligations arising under this Agreement,
including, without limitation, his obligations under Sections 12 and 14 hereof,
contemporaneously with the execution of this Agreement by Executive, the
Company has granted to Executive an option to purchase 400,000 shares of common
stock of the Company, par value $.002 per share, pursuant to a Non-
Initials:
--------
Initials:
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<PAGE> 2
Qualified Stock Option Agreement, of even date herewith, between the Company
and Executive.
3. DUTIES AND RESPONSIBILITIES OF EXECUTIVE. During the
Employment Period, Executive shall devote his services full time to the
business of the Company and perform the duties and responsibilities assigned to
him by the Board of Directors to the best of his ability and with reasonable
diligence. In determining Executive's duties and responsibilities, the Board
of Directors shall act in good faith and shall not assign duties and
responsibilities to Executive that are not appropriate or customary with
respect to the position of Executive hereunder. This Section 3 shall not be
construed as preventing Executive from engaging in reasonable volunteer
services for charitable, educational or civic organizations, or from investing
his assets in such form or manner as will not require a material amount of his
services in the operations of the companies or businesses in which such
investments are made.
4. TERM OF EMPLOYMENT. Executive's term of employment with the
Company under this Agreement shall be for twenty-four (24) consecutive months
beginning on the Effective Date and continuing thereafter so that the remaining
term of employment hereunder is always 24 months, unless Notice of Termination
pursuant to Section 7 is given by either the Company or Executive to the other
party. The Company and Executive shall each have the right to give Notice of
Termination at will, with or without cause, at any time, subject to the terms
of this Agreement regarding rights and duties of the parties upon termination
of employment. This "evergreen" 24-month employment period hereunder shall be
referred to herein as the "TERM OF EMPLOYMENT." The period from the Effective
Date through the date of Executive's termination of employment for whatever
reason shall be referred to herein as the "EMPLOYMENT PERIOD."
5. BENEFITS. Subject to the terms and conditions of this
Agreement, during the Employment Period, Executive shall be entitled to the
following:
(a) REIMBURSEMENT OF EXPENSES. The Company shall pay or
reimburse Executive for all reasonable travel, entertainment and other
reasonable expenses paid or incurred by Executive in performing his
business obligations hereunder. The Company shall also provide
Executive with suitable office space and secretarial help. Executive
shall provide substantiating documentation for expense reimbursement
requests as reasonably required by the Company for its tax and other
business records.
(b) EXPENSE ALLOWANCES. Executive shall be entitled to:
(i) a car allowance of $800 per month, and (ii) if for any reason
Employee shall not be covered by a health insurance policy of
Employer, a medical insurance coverage expense allowance of $360 per
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month.
(c) OTHER BENEFITS. Executive shall be entitled to
participate in any pension, profit-sharing, stock option, deferred
compensation, or similar plan or program of the Company established by
the Company, to the extent that he is eligible under the provisions
thereof. Executive shall also be entitled to participate in any group
insurance, hospitalization, medical, health and accident, disability
or similar plan or program established by the Company, to the extent
that he is eligible under the provisions thereof.
(d) PAID VACATION. Executive shall be entitled to the
number of days of paid vacation each year that is accorded under the
Company's vacation policy as in effect from time to time. Without
limiting the generality of the foregoing, Executive shall initially be
entitled to four (4) weeks' of paid vacation during each 12-month
period of employment with the Company (which shall accrue monthly on a
pro rata basis). Unused vacation days in one year shall be carried
forward for a period not to exceed 12 months in accordance with
Company's vacation policy as in effect from time to time.
6. RIGHTS AND PAYMENTS UPON TERMINATION. The Executive's right
to compensation and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "TERMINATION DATE") shall
be determined in accordance with this Section 6,
(a) MINIMUM PAYMENTS. Executive shall be entitled to the
following payments, in addition to any payments or benefits to which
the Executive is entitled under the terms of any employee benefit plan
or the following provisions of this Section 6:
(1) his unpaid salary for the full month in which
his Termination Date occurred; provided, however, if Executive
is terminated for Cause pursuant to Section 6(b) below, he
shall only be entitled to receive his accrued but unpaid
salary through his Termination Date; and
(2) his accrued but unpaid vacation pay for the
period ending on his Termination Date in accordance with the
Company's vacation pay policy as in effect at such time.
(b) SEVERANCE PAYMENT. Notwithstanding any other
provision of this Agreement to the contrary, in the event that (i)
Executive's employment hereunder is terminated by the Company at any
time for any reason except (A) for Cause (as defined below) or (B)
Executive's death or Disability (as defined below) or (ii) Executive
terminates his own
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employment hereunder at any time for Good Reason (as defined below),
then, in either such event, Executive shall be entitled to receive,
and the Company shall be obligated to pay, a lump sum cash payment
equal to two hundred percent (200%) of the sum of X and Y. For
purposes of the immediately preceding sentence, X is the present value
of Executive's base annual salary pursuant to Section 2 or the annual
salary then being paid to him, whichever is greater, and Y is the
Executive's bonus payment(s) made by the Company to Executive in the
Company's fiscal year immediately preceding the fiscal year in which
his termination of employment occurred. For purposes of the
immediately preceding sentence, the "present value" of such base
annual salary shall be determined in accordance with the regulations
under Section 280G of the Code (as defined below). Also, except as
otherwise specifically provided in this Section 6(b), such severance
payment shall be in addition to, and shall not reduce or offset, any
other payments that are due to Executive from the Company or any other
source or under any other agreements, except any severance pay plan or
program maintained by the Company that covers employees generally.
The provisions of this Section 6(b) shall supersede any conflicting
provisions of this Agreement but shall not be construed to curtail,
offset or limit Executive's rights to any other payments, whether
contingent upon a Change in Control (as defined below) or otherwise,
under the Agreement or any other agreement, contract, plan or other
source of payment except as specifically provided herein. In
addition, in the event of a Change in Control, Executive shall be
entitled to receive the bonus payment described in Section 9 hereof,
if applicable.
Notwithstanding any provision of this Section 6(b) to the
contrary, the Executive must first execute an appropriate release and
waiver agreement whereby Executive agrees to release and waive, in
return for the severance payment described in this Section 6(b), any
claims that he may have against the Company for (1) unlawful
discrimination (including, without limitation, age discrimination) and
(2) severance pay under any other severance pay plan or program
maintained by the Company that covers Executive; provided, however,
such agreement shall not release or waive any claims that may be
brought by Executive for payments that may be due under this
Agreement, without Executive's express written consent. Any severance
payment required under this Section 6(b)shall be paid to Executive
within twenty (20) days after Executive executes such release and
waiver agreement, unless the parties agree in writing before then to
another payment date or method of payment, e.g., installment payments.
Executive shall not be required to mitigate any damages under this
Section 6(b) or any other provision of this Agreement.
A "CHANGE IN CONTROL" of the Company shall be deemed to have
occurred if any of the following shall have taken place: (1) a change
in control is reported by the Company in response to either Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the
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Securities Exchange Act of 1934 (the "EXCHANGE ACT") or Item 1 of Form
8-K promulgated under the Exchange Act, or any successor provisions
thereto; (2) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), or any successor
provisions thereto, directly or indirectly, of securities of the
Company representing twenty-five (25%) or more of the combined voting
power of the Company's then-outstanding securities; (3) the approval
by the stockholders of the Company of a reorganization, merger, or
consolidation, in each case with respect to which persons who were
stockholders of the Company immediately prior to such reorganization,
merger, or consolidation do not, immediately thereafter, own or
control more than fifty percent (50%) of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged or consolidated Company's then outstanding
securities, or a liquidation or dissolution of the Company or of the
sale of all or substantially all of the Company's assets; (4) in the
event any person shall be elected by the stockholders of the Company
to the Board of Directors who shall have not been nominated for
election by a majority of the Board of Directors or any duly appointed
committee thereof; or (5) following the election or removal of
directors, a majority of the Board of Directors consists of
individuals who were not members of the Board of Directors two (2)
years before such election or removal, unless the election of each
director who is not a director at the beginning of such two-year
period has been approved in advance by directors representing at least
a majority of the directors then in office who were directors at the
beginning of the two-year period.
"DISABILITY" means a "permanent and total disability" as
defined in Section 22(e)(3) of the Code and the Treasury regulations
thereunder. Evidence of such Disability shall be certified by a
physician acceptable to both the Company and Executive. In the event
that the parties are not able to agree on the choice of a physician,
each shall select a physician who, in turn, shall select a third
physician to render such certification. All costs relating to the
determination of whether Executive has incurred a Disability shall be
paid by the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
References in this Agreement to any Section of the Code shall include
any "Successor Provisions" as defined in Section 9(e).
"CAUSE" means a termination of employment directly resulting
from (1) the Executive having engaged in intentional misconduct
causing a serious and material violation by the Company of any state
or federal laws, (2) the Executive having engaged in a material theft
of corporate funds or corporate assets or in a material act of fraud
upon the Company, (3) an act of personal dishonesty taken by the
Executive that was intended to result in
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substantial personal enrichment of the Executive at the expense of the
Company, (4) repeated violations by the Executive of Executive's
material obligations under this Agreement or under written policies of
the Company which are demonstrably willful on the Executive's part,
and for which Executive has received more than one written warning
that specifies each area of Executive's violations, (5) Executive's
use of illegal drugs as evidenced by a drug test authorized by
Company, (6) Executive's final conviction (or the entry of a plea of
nolo contendere or equivalent plea) in a court of competent
jurisdiction of a felony, and (7) a breach by the Executive during the
Employment Period of the provisions of Sections 11, 12, 13 or 14
below, if such breach results in a material injury to the Company.
"GOOD REASON" means the occurrence of any of the following
events without Executive's express written consent:
(1) A ten percent (10%) or greater reduction in
Executive's annual base salary; or
(2) Any breach by the Company or its successors
of any material provision of this Agreement; or
(3) A substantial and adverse change in the
Executive's duties, control, authority, status or position, or
the assignment to the Executive of any duties or
responsibilities which are materially inconsistent with such
status or position, or a material reduction in the duties and
responsibilities previously exercised by the Executive, or a
loss of title, loss of office, loss of significant authority,
power or control, or any removal of Executive from, or any
failure to reappoint or reelect him to, such positions, except
in connection with the termination of his employment for
Cause, Disability or death; or
(4) Following a Change in Control (as defined in
Section 6(b)) any of the following events:
(A) the failure by the Company or its
successor to expressly assume and agree to continue
and perform this Agreement in the same manner and to
the same extent that the Company would be required to
perform if such Change in Control had not occurred;
(B) a relocation of more than
twenty-five (25) miles of Executive's principal
office from the location of such office immediately
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prior to the Change in Control date;
(C) A substantial increase in the
business travel required of Executive by the Company
or its successor; or
(D) the Company or its successor fails
to continue in effect any pension plan,
health-and-accident plan, or disability income plan
in which Executive was participating at the time of
the Change in Control (or plans providing Executive
with substantially equal and similar benefits), or
the taking of any action by the Company or its
successor which would adversely affect Executive's
participation in or materially reduce his benefits
under any such plan that was enjoyed by him
immediately prior to the Change in Control.
(c) STOCK OPTIONS. In the event that there is a
termination of Executive's employment hereunder for any reason except
for Cause, Executive shall be entitled to exercise any and all
nonstatutory stock options (as opposed to any incentive stock options
described in Section 422 of the Internal Revenue Code) that were
previously granted to him by the Company, and are outstanding, vested
and unexercised as of his Termination Date, during the exercise period
ending on the shorter of (i) two (2) years from his Termination Date
or (ii) the expiration date of the stock option as specified in the
stock option plan or stock option agreement, as applicable,
notwithstanding any provision in such plan or agreement that provides
for a more limited time period to exercise stock options following
termination of employment; provided however, if said stock option plan
or stock option agreement provides therein for a longer period of time
to exercise such outstanding, vested and unexercised stock options
following his Termination Date, then such stock option plan or
agreement shall control and the remaining provisions of this Section
6(c) shall be inapplicable and without further force or effect.
During the extension period specified in the previous
paragraph, if applicable, the Executive shall be considered an
employee of the Company who shall make himself available to provide
consulting services to the Company in consideration for such extension
of the option exercise period and any post-termination payments
provided to Executive under Section 6(a) or (b) of this Agreement. In
this regard, Executive agrees to be classified as an employee of the
Company solely for the limited purpose of making himself available to
provide consulting services on an as-needed basis; provided, however,
Executive hereby specifically waives any right, entitlement, claim or
demand to (i) any additional compensation for such consulting services
and (ii) coverage or benefits under any of the
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Company's employee benefit plans or programs, or other perquisites,
terms and conditions of employment, except as expressly specified in
other provisions of this Agreement. Except as expressly provided in
this Section 6(c), the provision of consulting services by Executive
shall not expand his rights or duties under this Agreement. Executive
hereby agrees to provide, upon request of the Company, consulting
services to the Company on the following terms and conditions:
(1) Executive will make himself available, on an
as-needed basis, to provide consulting services to
the Company for up to three (3) days per month during
the period beginning on the day after his Termination
Date and ending on the last day of the extension
period for exercising stock options as provided in
the first paragraph of Section 6(c) above, subject to
the following conditions:
(A) At least five (5) days written advance notice
to Executive is provided by the Company;
(B) There is no concurrent illness
of Executive or his spouse;
(C) There is no prior commitment of Executive
including, without limitation, vacation or
attention to personal affairs; and
(D) No travel is required of Executive in excess
of 200 miles round-trip.
Executive, in any particular instance, may waive any
or all of the conditions set forth in clauses (A),
(B), (C) or (D) above in his complete discretion.
Any such waiver shall not be a continuing waiver and
shall not release Executive of any of his rights
hereunder.
(2) Executive agrees to provide such information,
services, advice and recollection of events as may
from time to time be reasonably requested by, or on
behalf of, the Company regarding corporate,
regulatory or business matters of which Executive may
have knowledge, information or understanding,
including testifying truthfully in any litigation or
other proceedings involving the Employer, provided
that (i) Executive first determines that his
interests are not adverse, or potentially adverse, to
those of the Company, and (ii) the Company has
indemnified Executive to his satisfaction including,
without limitation, for reasonable attorney's fees
and costs. The parties hereto agree that it is the
quality, and not the quantity, of
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the consulting services to be provided by Executive
that is important to the Company.
(3) The Company will reimburse Executive for all
reasonable out-of-pocket expenses incurred by
Executive in the course of his performance of
consulting services, including, without limitation,
supplies, mileage and travel expenses. Executive
agrees not to incur any expense, obligation, or
liability on behalf of the Company without its prior
written consent.
(4) The provision of consulting services by Executive for
the Company is non-exclusive and shall not, in any
way, limit the rights of Executive to seek and
maintain other employment or to perform compensatory
services on behalf of any other person or entity.
(5) The consulting services contemplated under this
Section 6(c) shall not be considered part of
Executive's Employment Period pursuant to Section 4,
nor affect his Termination Date.
7. NOTICE OF TERMINATION. Any termination by the Company or the
Executive shall be communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, the term "NOTICE OF TERMINATION" means
a written notice which indicates the specific termination provision of this
Agreement relied upon and sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
8. NO MITIGATION REQUIRED. Executive shall not be required to
mitigate the amount of any payment provided for under this Agreement by seeking
other employment or in any other manner.
9. CHANGE IN CONTROL: REQUIREMENT OF BONUS PAYMENT IN CERTAIN
CIRCUMSTANCES.
(a) In the event that Executive is deemed to have
received an "excess parachute payment" (as such term is defined in
Section 280G(b) of the Code) which is subject to the excise taxes (the
"EXCISE TAXES") imposed by Section 4999 of the Code in respect of any
payment pursuant to this Agreement, or any other agreement, plan,
instrument or obligation, in whatever form, the Company shall make the
Bonus Payment (defined below) to Executive promptly after the date on
which Executive received or is deemed to have received any excess
parachute payment notwithstanding any contrary provision herein.
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(b) The term "BONUS PAYMENT" means a cash payment in an
amount equal to the sum of (i) all Excise Taxes payable by Executive,
plus (ii) all additional Excise Taxes and federal or state income
taxes to the extent such taxes are imposed in respect of the Bonus
Payment, such that Executive shall be in the same after- tax position
and shall have received the same benefits that he would have received
if the Excise Taxes had not been imposed. For purposes of calculating
any income taxes attributable to the Bonus Payment, Executive shall be
deemed for all purposes to be paying income taxes at the highest
marginal federal income tax rate, taking into account any applicable
surtaxes and other generally applicable taxes which have the effect of
increasing the marginal federal income tax rate and, if applicable, at
the highest marginal state income tax rate, to which the Bonus Payment
and Executive are subject. An example of the calculation of the Bonus
Payment is set forth below: Assume that the Excise Tax rate is 20%,
the highest federal marginal income tax rate is 40% and Executive is
not subject to state income taxes. Further assume that Executive has
received an excess parachute payment in the amount of $200,000, on
which $40,000 in Excise Taxes are payable. The amount of the required
Bonus Payment is thus $100,000. The Bonus Payment of $100,000, less
additional Excise Taxes on the Bonus Payment of $20,000 (i.e., 20% x
$100,000) and income taxes of $40,000 (i.e., 40% x $100,000), yields
$40,000, the amount of the Excise Taxes payable in respect of the
original excess parachute payment.
(c) Executive agrees to reasonably cooperate with the
Company to minimize the amount of the excess parachute payments,
including, without limitation, assisting the Company in establishing
that some or all of the payments received by Executive that are
"contingent on a change", as described in Section 280G(b)(2)(A)(i) of
the Code, are reasonable compensation for personal services actually
rendered by Executive before the date of such change or to be rendered
by Executive on or after the date of such change. In the event that
the Company is able to establish that the amount of the excess
parachute payments is less than originally anticipated by Executive,
Executive shall refund to the Company any excess Bonus Payment to the
extent not required to pay Excise Taxes or income taxes (including
those incurred in respect of receipt of the Bonus Payment).
Notwithstanding the foregoing, Executive shall not be required to take
any action which his attorney or tax advisor advises him in writing
(i) is improper or (ii) exposes Executive to material personal
liability. Executive may require the Company to deliver to Executive
an indemnification agreement in form and substance satisfactory to
Executive as a condition to taking any action required by this
subsection (c).
(d) The Company shall make any payment required to be
made under this Section 9 in cash and on demand. Any payment required
to be paid by the Company under this Section 9 which is not paid
within 30 days of receipt by the Company of Executive's
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written demand therefor shall thereafter be deemed delinquent, and the
Company shall pay to Executive immediately upon demand interest at the
highest nonusurious rate per annum allowed by applicable law from the
date such payment becomes delinquent to the date of payment of such
delinquent sum with interest.
(e) In the event that there is any change to the Code
which results in the recodification of Section 280G or Section 4999 of
the Code, or in the event that either such section of the Code is
amended, replaced or supplemented by other provisions of the Code of
similar import ("SUCCESSOR PROVISIONS"), then this Agreement shall be
applied and enforced with respect to such new Code provisions in a
manner consistent with the intent of the parties as expressed herein,
which is to assure that Employee is in the same after-tax position and
has received the same benefits that he would have been in and received
if any taxes imposed by Section 4999 or any Successor Provisions had
not been imposed.
10. POST-TERMINATION MEDICAL COVERAGE. If the employment of
Executive is terminated for any reason except for Cause (as defined in Section
6(b)) or death, then the Company shall provide post-employment medical coverage
in accordance with the terms and conditions of this Section 10. The Company
shall continue to cover Executive and his spouse (hereinafter referred to as
"SPOUSE") and his eligible dependent children, if any, from the Termination
Date until two (2) years following the Termination Date, under the group health
care plan maintained by the Company to provide major medical insurance coverage
for employees and their dependents (such group medical plan or its successor
shall be hereinafter referred to as the "HEALTH CARE PLAN").
Executive, on behalf of himself and his Spouse and other dependents,
if any, shall be required to pay premiums for their coverage under the Health
Care Plan at the rates, if any, charged by the Company to active employees who
are senior officers of the Company at the time the premium is charged. Any
post-employment coverage under the Health Care Plan provided under this Section
10 shall run concurrently with COBRA continuation coverage under the Health
Care Plan and, therefore, Executive and the other qualifying beneficiaries
shall elect any COBRA continuation coverage offered to them under the Health
Care Plan following the Termination Date. The Company shall not be responsible
for the payment of any income or other taxes which may be imposed on Executive,
or on his Spouse or dependents, as the result of receiving coverage under the
Health Care Plan pursuant to this Section 10.
Executive, on behalf of himself and his Spouse and dependents, hereby
agrees and consents to acquire and maintain any coverage that of any them are
entitled to at any time during the two year period (as specified above in this
Section 10) under the Medicare program or any similar or succeeding plan or
program that is sponsored or maintained by the United States Government or any
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agency thereof (hereinafter referred to as "MEDICARE"). The coverage described
in the immediately preceding sentence includes, without limitation, parts A and
B of Medicare and any additional or successor parts of Medicare. Executive, on
behalf of himself and his Spouse, further agrees and consents to pay all
required premiums and other costs for Medicare coverage from their personal
funds. Medicare coverage shall be primary payor to the coverage provided under
the Health Care Plan to the extent permitted by applicable federal law.
11. CONFLICTS OF INTEREST. In keeping with his fiduciary duties
to Company, Executive hereby agrees that he shall not become involved in a
conflict of interest, or upon discovery thereof, allow such a conflict to
continue at any time during the Employment Period. Moreover, Executive agrees
that he shall immediately disclose to the Board of Directors any facts which
might involve a conflict of interest that has not been approved by the Board of
Directors.
Executive and Company recognize and acknowledge that it is not
possible to provide an exhaustive list of actions or interests which may
constitute a "conflict of interest." Moreover, Company and Executive recognize
there are many borderline situations. In some instances, full disclosure of
facts by the Executive to the Board of Directors may be all that is necessary
to enable Company to protect its interests. In others, if no improper
motivation appears to exist and Company's interests have not demonstrably
suffered, prompt elimination of the outside interest may suffice. In other
egregious instances, it may be necessary for Company to terminate Executive's
employment for Cause pursuant to Section 6(b) hereof. The Board of Directors
reserves the right to take such action as, in its good faith judgment, will
resolve the conflict of interest.
Executive hereby agrees that any direct or indirect interest in,
connection with, or benefit from any outside activities, particularly
commercial activities, which interest might adversely affect the Company or any
of its affiliated entities, involves a possible conflict of interest.
Circumstances in which a conflict of interest on the part of Executive would or
might arise, and which should be reported immediately to the Board of
Directors, include, but are not limited to, any of the following:
12. REMEDIES. In the event of any pending, threatened or actual
breach of any of the covenants or provisions of Section 11, it is understood
and agreed by Executive that the remedy at law for a breach of any of the
covenants or provisions of these Sections may be inadequate, and, therefore,
Company shall be entitled to a restraining order or injunctive relief from any
court of competent jurisdiction, in addition to any other remedies at law and
in equity. In the event that Company seeks to obtain a restraining order or
injunctive relief, Executive hereby agrees that Company shall not be required
to post any bond in connection therewith. Should a court of competent
jurisdiction or an arbitrator (pursuant to Section 24) declare any provision of
Section 11 to be unenforceable due to an unreasonable restriction of duration
or geographical area, or for any
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other reason, such court or arbitrator is hereby granted the consent of each of
Executive and the Company to reform such provision and/or to grant the Company
any relief, at law or in equity, reasonably necessary to protect the reasonable
business interests of Company or any of its affiliated entities. Executive
hereby acknowledges and agrees that all of the covenants and other provisions
of Sections 11 are reasonable and necessary for the protection of the Company's
reasonable business interests. Executive hereby agrees that if the Company
prevails in any action, suit or proceeding with respect to any matter arising
out of or in connection with Section 11, Company shall be entitled to all
equitable and legal remedies, including, but not limited to, injunctive relief
and compensatory damages.
13. DEFENSE OF CLAIMS. Executive agrees that, during the
Employment Period and for a period of two (2) years after his Termination Date,
upon reasonable request from the Company, he will cooperate with the Company
and its affiliated entities in the defense of any claims or actions that may be
made by or against the Company or any of its affiliated entities that affect
his prior areas of responsibility, except if Executive's reasonable interests
are adverse to the Company (or affiliated entity) in such claim or action. To
the extent travel is required to comply with the requirements of this Section
16, the Company shall, to the extent possible, provide Executive with notice at
least 10 days prior to the date on which such travel would be required. The
Company agrees to promptly pay or reimburse Executive upon demand for all of
his reasonable travel and other direct expenses incurred, or to be reasonably
incurred, to comply with his obligations under this Section 16.
14. DETERMINATIONS BY THE BOARD OF DIRECTORS.
(a) TERMINATION OF EMPLOYMENT. Prior to a Change in
Control (as defined in Section 6(b)), any question as to whether and
when there has been a termination of Executive's employment, and the
cause of such termination, shall be determined by the Board of
Directors in its discretion.
(b) COMPENSATION. Prior to a Change in Control (as
defined in Section 6(b)), any question regarding salary, bonus and
other compensation payable to Executive pursuant to this Agreement
shall be determined by the Board of Directors in its discretion.
15. WITHHOLDINGS: RIGHT OF OFFSET. Company may withhold and
deduct from any benefits and payments made or to be made pursuant to this
Agreement (a) all federal, state, local and other taxes as may be required
pursuant to any law or governmental regulation or ruling, (b) all other normal
employee deductions made with respect to Company's employees generally, and (c)
any advances made to Executive and owed to Company.
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16. NONALIENATION. The right to receive payments under this
Agreement shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge or encumbrance by Executive, his dependents or
beneficiaries, or to any other person who is or may become entitled to receive
such payments hereunder. The right to receive payments hereunder shall not be
subject to or liable for the debts, contracts, liabilities, engagements or
torts of any person who is or may become entitled to receive such payments, nor
may the same be subject to attachment or seizure by any creditor of such person
under any circumstances, and any such attempted attachment or seizure shall be
void and of no force and effect.
17. INCOMPETENT OR MINOR PAYEES. Should the Board of Directors
determine that any person to whom any payment is payable under this Agreement
has been determined to be legally incompetent or is a minor, any payment due
hereunder may, notwithstanding any other provision of this Agreement to the
contrary, be made in any one or more of the following ways: (a) directly to
such minor or person; (b) to the legal guardian or other duly appointed
personal representative of the person or estate of such minor or person; or (c)
to such adult or adults as have, in the good faith knowledge of the Board of
Directors, assumed custody and support of such minor or person; and any payment
so made shall constitute full and complete discharge of any liability under
this Agreement in respect to the amount paid.
18. SEVERABILITY. It is the desire of the parties hereto that
this Agreement be enforced to the maximum extent permitted by law, and should
any provision contained herein be held unenforceable by a court of competent
jurisdiction or arbitrator (pursuant to Section 24), the parties hereby agree
and consent that such provision shall be reformed to create a valid and
enforceable provision to the maximum extent permitted by law; provided,
however, if such provision cannot be reformed, it shall be deemed ineffective
and deleted here from without affecting any other provision of this Agreement.
19. TITLE AND HEADINGS; CONSTRUCTION. Titles and headings to
Sections hereof are for the purpose of reference only and shall in no way
limit, define or otherwise affect the provisions hereof. Any and all Exhibits
referred to in this Agreement are, by such reference, incorporated herein and
made a part hereof for all purposes. The words "herein", "hereof", "hereunder"
and other compounds of the word "here" shall refer to the entire Agreement and
not to any particular provision hereof.
20. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAW.
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21. ARBITRATION.
(a) ARBITRABLE MATTERS. If any dispute or controversy
arises between Executive and the Company as to their respective rights
or obligations under this Agreement, then either party may submit the
dispute or controversy to arbitration under the then-current National
Employment Dispute Resolution Rules of the American Arbitration
Association (AAA) (the "RULES"); provided, however, the Company shall
retain its rights to seek a restraining order or injunctive relief
pursuant to Section 15. Any arbitration hereunder shall be conducted
before a single arbitrator unless the parties mutually agree to a
panel of three arbitrators. The site for any arbitration hereunder
shall be in Montgomery County or Harris County, Texas, unless
otherwise mutually agreed by the parties.
(b) SUBMISSION TO ARBITRATION. The party submitting any
matter to arbitration shall do so in accordance with the Rules.
Notice to the other party shall state the question or questions to be
submitted for decision or award by arbitration. Notwithstanding any
provision in this Section 24, Executive shall be entitled to seek
specific performance of the Executive's right to be paid during the
pendency of any dispute or controversy arising under this Agreement.
In order to prevent irreparable harm, the arbitrator may grant
temporary or permanent injunctive or other equitable relief for the
protection of property rights.
(c) ARBITRATION PROCEDURES. The arbitrator shall set the
date, time and place for each hearing, and shall give the parties
advance written notice in accordance with the Rules. Any party may be
represented by counsel or other authorized representative at any
hearing. The arbitration shall be governed by the Federal Arbitration
Act, 9 U.S.C. Sections 1 et. seq. (or its successor). The arbitrator
shall apply the substantive law (and the law of remedies, if
applicable) of the State of Texas to the claims asserted to the extent
that the arbitrator determines that federal law is not controlling.
(d) COMPLIANCE WITH AWARD.
(1) Any award of an arbitrator shall be final and
binding upon the parties to such arbitration, and each party
shall immediately make such changes in its conduct or provide
such monetary payment or other relief as such award requires.
The parties agree that the award of the arbitrator shall be
final and binding and shall be subject only to the judicial
review permitted by the Federal Arbitration Act.
(2) The parties hereto agree that the arbitration
award may be entered with any court having jurisdiction and
the award may then be enforced as between the
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parties, without further evidentiary proceedings, the same as
if entered by the court at the conclusion of a judicial
proceeding in which no appeal was taken. The Company and the
Executive hereby agree that a judgment upon any award rendered
by an arbitrator may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(e) COSTS AND EXPENSES. Each party shall pay any
monetary amount required by the arbitrator's award, and the
fees, costs and expenses for its own counsel, witnesses and
exhibits, unless otherwise determined by the arbitrator in the
award. The compensation and costs and expenses assessed by
the arbitrator and AAA shall be paid by the losing party
unless otherwise determined by the arbitrator in the award.
If court proceedings to stay litigation or compel arbitration
are necessary, the party who unsuccessfully opposes such
proceedings shall pay all associated costs, expenses, and
attorney's fees which are reasonably incurred by the other
party as determined by the arbitrator.
22. BINDING EFFECT: THIRD PARTY BENEFICIARIES. This Agreement
shall be binding upon and inure to the benefit of the parties hereto, and to
their respective heirs, executors, personal representatives, successors and
permitted assigns hereunder, but otherwise this Agreement shall not be for the
benefit of any third parties.
23. ENTIRE AGREEMENT AND AMENDMENT. This Agreement contains the
entire agreement of the parties with respect to Executive's employment and the
other matters covered herein; moreover, this Agreement supersedes all prior and
contemporaneous agreements and understandings, oral or written, between the
parties hereto concerning the subject matter hereof. This Agreement may be
amended, waived or terminated only by a written instrument executed by both
parties hereto.
24. SURVIVAL OF CERTAIN PROVISIONS. Wherever appropriate to the
intention of the parties hereto, the respective rights and obligations of said
parties, including, but not limited to, the rights and obligations set forth in
Sections 6 through 17 and 24 hereof, shall survive any termination or
expiration of this Agreement.
25. WAIVER OF BREACH. No waiver by either party hereto of a
breach of any provision of this Agreement by any other party, or of compliance
with any condition or provision of this Agreement to be performed by such other
party, will operate or be construed as a waiver of any subsequent breach by
such other party or any similar or dissimilar provision or condition at the
same or any subsequent time. The failure of either party hereto to take any
action by reason of any breach will not deprive such party of the right to take
action at any time while such breach continues.
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26. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of Company and its affiliated entities, and its and
their successors, and upon any person or entity acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
assets and business of Company. Any reference herein to "Company" shall mean
the Company as first written above, as well as any successor or successors
thereto.
This Agreement is personal to Executive, and Executive may not assign,
delegate or otherwise transfer all or any of his rights, duties or obligations
hereunder without the consent of the Board of Directors. Any attempt by the
Executive to assign, delegate or otherwise transfer this Agreement, any portion
hereof, or his rights, duties or obligations hereunder without the prior
written consent of the Board of Directors shall be deemed void and of no force
and effect. Subject to the preceding provisions of this paragraph, this
Agreement shall be binding upon and inure to the benefit of Executive and his
heirs and assigns.
27. NOTICES. Notices provided for in this Agreement shall be in
writing and shall be deemed to have been duly received (a) when delivered in
person or sent by facsimile transmission, (b) on the first business day after
it is sent by air express overnight courier service, or (c) on the third
business day following deposit in the United States mail, registered or
certified mail, return receipt requested, postage prepaid and addressed, to the
following address, as applicable:
(1) If to Company, addressed to:
Synagro Technologies, Inc.
5850 San Felipe, Suite 500
Houston, Texas 77057
Attention: Secretary
(2) If to Executive, addressed to the address set forth
below his name on the execution page hereof;
or to such other address as either party may have furnished to the other party
in writing in accordance with this Section 27.
28. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a copy hereof containing multiple
signature pages, each signed by one party hereto, but together signed by both
of the parties hereto.
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29. EXECUTIVE ACKNOWLEDGMENT/NO STRICT CONSTRUCTION. The
Executive represents to Company that he is knowledgeable and sophisticated as
to business matters, including the subject matter of this Agreement, that he
has read the Agreement and that he understands its terms and conditions. The
parties hereto agree that the language used in this Agreement shall be deemed
to be the language chosen by them to express their mutual intent, and no rule
of strict construction shall be applied against either party hereto. Executive
also represents that he is free to enter into this Agreement including, without
limitation, that he is not subject to any other contract of employment or
covenant not to compete that would conflict in any way with his duties under
this Agreement. Executive acknowledges that he has had the opportunity to
consult with counsel of his choice, independent of Employer's counsel,
regarding the terms and conditions of this Agreement and has done so to the
extent that he, in his unfettered discretion, deemed to be appropriate.
30. SUPERSEDING AGREEMENT. This Employment Agreement shall
supersede any prior employment agreement entered into between the Company and
Executive.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand, and
Company has caused these presents to be executed in its name and on its behalf,
to be effective as of the Effective Date first above written.
WITNESS: EXECUTIVE:
Signature: Signature:
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Printed Name: Printed Name:
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Date: Date:
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Address for Notices:
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ATTEST: SYNAGRO TECHNOLOGIES, INC.:
By: By:
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Title: Its:
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Printed Name: Printed Name:
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Date: Date:
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