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)
MARCH 11, 1999 (MARCH 1, 1999)
SYNAGRO TECHNOLOGIES, INC.
(Exact name of registrant as
specified in its charter)
DELAWARE 0-21054 76-0511324
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1800 BERING, SUITE 1000
HOUSTON, TEXAS 77057
(Address of principal executive offices and zip code)
(713) 369-1700
(Registrant's telephone number,
including area code)
5850 SAN FELIPE, SUITE 500, HOUSTON, TEXAS 77057
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 1, 1999, Synagro Technologies, Inc., a Delaware corporation (the
"Company"), through its wholly-owned subsidiary, NRR Acquisition Corp. ("Merger
Sub"), acquired National Resource Recycling, Inc. ("NRR"), pursuant to an
Agreement and Plan of Merger (the "Merger Agreement") by and among the Company,
Merger Sub, NRR, James R. Rosendall, Jr. and Kevin P. Rosendall, dated the same
date. NRR is a biosolids management company with operations in Michigan.
Pursuant to the Merger Agreement, James R. Rosendall, Jr. and Kevin P.
Rosendall, the shareholders of NRR, received an aggregate of 1,000,001 shares of
the Company's common stock. The Company intends to record the acquisition using
the pooling-of-interests method of accounting. The purchase price was determined
based upon an evaluation of the business of NRR and the results of negotiations
between the parties.
The foregoing discussion is only a summary and is qualified in its
entirety by reference to the attached press release and Agreement and Plan of
Merger filed as exhibits hereto and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
In accordance with Rule 3-05 of Regulation S-X, no financial
statements are required to be filed for the NRR acquisition, either
individually or in the aggregate.
B. PRO FORMA FINANCIAL INFORMATION.
In accordance with Rule 11-01 of Regulation S-X, no pro forma
financial information is required to be filed for the NRR
acquisition.
C. EXHIBITS
Exhibit 1 Agreement and Plan of Merger, dated March 1, 1999,
by and among Synagro Technologies, Inc., NRR
Acquisition Corp., National Resource Recovery,
Inc., James R. Rosendall, Jr. and Kevin P.
Rosendall.
Exhibit 2 Press Release dated March 3, 1999.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SYNAGRO TECHNOLOGIES, INC.
Dated: March 11, 1999 By: /S/ MARK A. ROME
Mark A. Rome, Executive Vice President
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
NRR ACQUISITION CORP.,
NATIONAL RESOURCE RECOVERY, INC.
AND
JAMES R. ROSENDALL, JR. AND KEVIN P. ROSENDALL
MARCH 1, 1999
EXHIBIT 1 - Page 1
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TABLE OF CONTENTS
ARTICLE I THE MERGER....................................................1
Section 1.1. The Merger......................................1
Section 1.2. Effective Time of the Merger....................2
ARTICLE II THE SURVIVING CORPORATION.....................................2
Section 2.1. Certificate of Incorporation....................2
Section 2.2. Bylaws..........................................2
Section 2.3. Directors.......................................2
Section 2.4. Officers........................................2
ARTICLE III CONVERSION OF SHARES..........................................2
Section 3.1. Effect on Capital Stock.........................2
Section 3.2. Exchange of Certificates........................4
Section 3.3. Stock Transfer Books............................4
Section 3.4. No Further Ownership Rights in Company Common
Stock.........................................4
Section 3.5. Tax and Accounting Consequences.................4
Section 3.6. Taking of Necessary Action; Further Action......4
Section 3.7. Closing.........................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......5
Section 4.1. Organization and Qualification..................5
Section 4.2. Capitalization..................................5
Section 4.3. Authority; Non-Contravention; Approvals.........6
Section 4.4. Registration Statement and Proxy Statement......7
Section 4.5. Reports and Financial Statements................7
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS................................................8
Section 5.1. Organization and Qualification..................8
Section 5.2. Capitalization..................................8
Section 5.3. Subsidiaries....................................9
Section 5.4. Authority; Non-Contravention; Approvals.........9
Section 5.5. Financial Statements...........................10
Section 5.6. Absence of Undisclosed Liabilities.............10
Section 5.7. Absence of Certain Changes or Events...........10
Section 5.8. Litigation.....................................10
Section 5.9. Accounts Receivable............................10
Section 5.10. No Violation of Law; Compliance with
Agreements...................................11
Section 5.11. Insurance......................................11
Section 5.12. Taxes..........................................11
Section 5.13. Employee Benefit Plans.........................13
EXHIBIT 1 - Page i
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Section 5.14. Employee and Labor Matters....................14
Section 5.15. Environmental Matters.........................15
Section 5.16. Non-competition Agreements....................17
Section 5.17. Title to Assets...............................17
Section 5.18. Contracts, Agreements, Plans and Commitments..17
Section 5.19. Registration Statement........................19
Section 5.20. Brokers and Finders...........................19
Section 5.21. Intellectual Property.........................19
Section 5.22. Relationships.................................19
Section 5.23. Accounting Matters............................20
Section 5.24. Certain Payments..............................20
Section 5.25. Books and Records.............................20
Section 5.26. Condition and Sufficiency of Assets...........20
Section 5.27. Investment Representations....................20
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER.......................22
Section 6.1. Conduct of Business by the Company Pending the
Merger.......................................22
Section 6.2. Control of the Company's Operations............24
Section 6.3. Other Offers...................................24
ARTICLE VII ADDITIONAL AGREEMENTS........................................24
Section 7.1. Access to Information..........................24
Section 7.2. Registration Statement.........................24
Section 7.3. Exchange Listing...............................25
Section 7.4. Expenses and Fees..............................25
Section 7.5. Agreement to Cooperate.........................25
Section 7.6. Public Statements..............................25
Section 7.7. Notification of Certain Matters................25
Section 7.8. Accounting Treatment. ........................26
ARTICLE VIII CONDITIONS TO CLOSING........................................26
Section 8.1. Conditions to Each Party's Obligation to Effect
the Merger...................................26
Section 8.2. Conditions to Obligation of the Company to
Effect the Merger............................26
Section 8.3. Conditions to Obligations of Parent and Merger
Sub to Effect the Merger.....................27
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER............................29
Section 9.1. Termination....................................29
Section 9.2. Effect of Termination..........................30
Section 9.3. Amendment......................................30
Section 9.4. Extensions; Waiver.............................30
ARTICLE X INDEMNIFICATION..............................................30
Section 10.1. The Shareholders' Indemnity Obligations.......30
EXHIBIT 1 - Page ii
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Section 10.2. Parent's Indemnity Obligations................31
Section 10.3. Indemnification Procedures....................31
Section 10.4. Determination of Indemnified Amounts..........33
Section 10.5. Limitation of Shareholders' Liability.........33
Section 10.6. Limitation of Parent's Liability..............33
Section 10.7. Limitation on Indemnified Amounts.............34
ARTICLE XI GENERAL PROVISIONS...........................................34
Section 11.1. Survival......................................34
Section 11.2. Notices.......................................34
Section 11.3. Interpretation................................35
Section 11.4. Miscellaneous.................................35
Section 11.5. Governing Law.................................35
Section 11.6. Binding Arbitration...........................36
Section 11.7. Counterparts..................................37
Section 11.8. Parties in Interest...........................37
Section 11.9. Enforcement of the Agreement..................37
Section 11.10. Validity.....................................38
EXHIBIT 1 - Page iii
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EXHIBITS:
Exhibit A Glossary
Exhibit B Pooling of Interest Criteria
Exhibit C Pooling Transfer Restrictions Agreement
Exhibit D Employment Agreement
SCHEDULES:
Schedule 2.3 Directors of the Surviving Corporation
Schedule 2.4 Officers of the Surviving Corporation
Schedule 3.1(a) Shareholder Consideration
Schedule 5.2 Capitalization
Schedule 5.4 Authority; Non-Contravention; Approvals
Schedule 5.5 Financial Statements
Schedule 5.6 Absence of Undisclosed Liabilities
Schedule 5.8 Litigation
Schedule 5.11 Insurance Policies Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.14 Employee and Labor Matters
Schedule 5.15 Environmental Matters
Schedule 5.17 Title to Assets
Schedule 5.18 Contracts, Agreements, Plans and Commitments
Schedule 5.21 Intellectual Property
Schedule 5.22 Relationships
EXHIBIT 1 - Page iv
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 1, 1999 (the
"AGREEMENT"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("PARENT"), NRR ACQUISITION CORP., a Michigan corporation and a wholly owned
subsidiary of Parent ("MERGER SUB"), NATIONAL RESOURCE RECOVERY, INC., a
Michigan corporation (the "COMPANY"), JAMES R. ROSENDALL, JR. and KEVIN P.
ROSENDALL (collectively, the "SHAREHOLDERS").
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub, the Company and the Shareholders desire that
Merger Sub merge with and into the Company (the "MERGER");
WHEREAS, Parent, Merger Sub and the Company intend the Merger to qualify
as a tax-free reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "CODE"), and the regulations thereunder.
WHEREAS, Parent, Merger Sub and the Company intend that the Merger be
accounted for as a pooling-of-interests for financial reporting purposes.
WHEREAS, the Company and the Shareholders are making certain
representations, warranties and indemnities as an inducement to Parent and
Merger Sub to enter into this Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Glossary attached as EXHIBIT A.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in SECTION 1.2) in accordance
with the Michigan Business Corporation Act, the Merger Sub shall be merged with
and into the Company and the separate existence of the Merger Sub shall
thereupon cease. The Company shall be the surviving corporation in the Merger
and is hereinafter sometimes referred to as the "SURVIVING CORPORATION."
EXHIBIT 1 - Page 1
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SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "EFFECTIVE TIME") as a certificate of merger is
filed with the Secretary of State of the State of Michigan in accordance with
the Michigan Business Corporation Act (the "MERGER FILING"). The Merger Filing
shall be made simultaneously with or as soon as practicable after the Closing
(as defined in SECTION 3.7) in accordance with Article III. The parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof, and in any event within five (5)
business days after the satisfaction, or waiver, of all conditions to Closing
set forth in Article VIII hereof, subject to the terms and conditions hereof.
Accordingly, subject to the provisions hereof, the parties shall use all
reasonable efforts to consummate, as soon as practicable, the transactions
contemplated by this Agreement in accordance with Article VIII.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Articles of Incorporation
of Merger Sub as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation after the Effective Time,
as the same may thereafter be amended in accordance with its terms and as
provided under the Michigan Business Corporation Act.
SECTION 2.2. BYLAWS. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time, as the same may thereafter be amended in accordance
with their terms and as provided by the Certificate of Incorporation of the
Surviving Corporation and the Michigan Business Corporation Act.
SECTION 2.3. DIRECTORS. The directors of the Surviving Corporation shall
be as designated in SCHEDULE 2.3, and such directors shall serve in accordance
with the Bylaws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified.
SECTION 2.4. OFFICERS. The officers of the Surviving Corporation shall be
as designated in SCHEDULE 2.4, and such officers shall serve in accordance with
the Bylaws of the Surviving Corporation until their respective successors are
duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the Shareholders:
(a) CONVERSION OF SECURITIES. All of the Company's common stock,
$1.00 par value per share ("COMPANY COMMON STOCK"), issued and outstanding
immediately prior to the Effective Time (excluding any shares of the Company
Common Stock to be canceled pursuant to SECTION 3.1(B)) shall be converted,
subject to SECTION 3.1(E), into the right to receive at Closing, in the
aggregate, the number of validly issued, fully paid and nonassessable shares of
common stock, par value $.002 per share, of Parent ("PARENT COMMON STOCK"),
determined by dividing (i) the excess of $5,586,444 over the aggregate long-term
and short-term indebtedness of the Company for
EXHIBIT 1 - Page 2
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borrowed money, trade payables, accrued liabilities and any other liabilities
reflected in the financial statements of the Company (prepared in accordance
with GAAP) as of Closing by (ii) the Average Parent Common Stock Price (as
hereinafter defined). The aggregate consideration payable to each Shareholder is
set forth opposite each Shareholder's name on SCHEDULE 3.1(A).
The capitalized terms used in this Section shall have the following
meanings:
"AVERAGE PARENT COMMON STOCK PRICE" means the average of the Daily Per
Share Prices for the ten (10) consecutive trading days beginning on the twelfth
(12th) trading day prior to the Closing.
"DAILY PER SHARE PRICE" means the per share closing price on the NASDAQ
Small Cap Exchange (the "NASDAQ") of Parent Common Stock (as reported by THE
WALL STREET JOURNAL for that day).
(b) CANCELLATION. Each share of Company Common Stock held in the
treasury of the Company and each share of Company Common Stock held by any
direct or indirect wholly owned Subsidiary of the Company, if any, immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) CAPITAL STOCK OF MERGER SUB. Each share of common stock, no par
value per share, of Merger Sub ("MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, $1.00 par value per share, of the Surviving Corporation.
(d) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration
(as defined in SECTION 3.2(A)) shall be appropriately adjusted to reflect fully
the effect of any stock split, reverse split, stock dividend (including any
dividend of securities convertible into Parent Common Stock), reorganization,
reclassification, recapitalization or other similar change with respect to
Parent Common Stock occurring (including the record date thereof) after the date
hereof and prior to the Effective Time.
(e) FRACTIONAL SHARES. No certificates or scrip representing less
than one share of Parent Common Stock shall be issued upon the surrender for
exchange of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"CERTIFICATES"). In lieu of any such fractional share, each holder of shares of
Company Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange shall
be paid upon such surrender cash (without interest) in an amount equal to such
fraction multiplied by the Daily Per Share Price on the Closing Date.
EXHIBIT 1 - Page 3
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SECTION 3.2. EXCHANGE OF CERTIFICATES.
(a) Immediately after the Effective Time, Parent will deliver to
each Shareholder upon surrender of all such Certificates for cancellation
together with such other customary documents as may be required, and the
Shareholders shall be entitled to receive in exchange therefor, (A) certificates
evidencing that number of whole shares of Parent Common Stock in immediately
available funds which such holder has the right to receive in accordance with
SECTION 3.1 hereof in respect of the shares of Company Common Stock formerly
evidenced by such Certificate, and (B) cash in respect of fractional shares as
provided in SECTION 3.1(E) (the shares of Parent Common Stock and cash being,
collectively, the "MERGER CONSIDERATION"), and the Certificates so surrendered
shall forthwith be canceled.
(b) Parent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Stock such amounts as Parent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.
SECTION 3.3. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 3.4. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled.
SECTION 3.5. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization within the
meaning of Section 368 of the Code and (ii) subject to applicable accounting
standards, qualify for accounting treatment as a pooling of interests. The
parties hereto hereby adopt this Agreement as a "plan of reorganization" within
the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
SECTION 3.6. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If, at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub in office immediately prior to the Effective
EXHIBIT 1 - Page 4
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Time are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
SECTION 3.7. CLOSING. The closing (the "CLOSING") of the transactions
contemplated by this Agreement shall take place at a location mutually agreeable
to Parent and the Company in Houston, Texas, as promptly as practicable (but in
any event within five (5) business days) following the date on which the last of
the conditions set forth in ARTICLE VIII is fulfilled or waived, or at such
other time and place as Parent and the Company shall agree; provided, however,
that upon agreement of the Parent and the Company, the Closing may take place by
telecopy. The date on which the Closing occurs is referred to in this Agreement
as the "CLOSING DATE."
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represent and warrant to the Company as
follows, except as set forth in the Parent SEC Reports (defined in SECTION 4.5):
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect (as defined in EXHIBIT A).
SECTION 4.2. CAPITALIZATION.
(a) As of November 6, 1998, the authorized capital stock of Parent
consisted of 100,000,000 shares of Parent Common Stock, of which 13,248,072
shares were issued and outstanding, and 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 Parent Common Stock, but no such shares are issued and outstanding.
All of the issued and outstanding shares of Parent Common Stock were validly
issued and are fully paid, nonassessable and free of preemptive rights.
(b) As of November 6, 1998, except for options granted pursuant to
Parent incentive or option plans (or to current or former employees of Parent),
warrants to acquire 770,000 shares of Parent Common Stock and shares issuable in
connection with proposed acquisitions, if any, there are no outstanding (i)
securities of Parent convertible into or exchangeable for shares of capital
stock or voting securities of Parent or (ii) options or other rights to acquire
from Parent or other obligations of Parent to issue, any capital stock, voting
securities or securities convertible into or
EXHIBIT 1 - Page 5
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exchangeable for capital stock or voting securities of Parent.
(c) All of the shares of capital stock of Merger Sub are owned
beneficially and of record by Parent.
(d) The shares of Parent Common Stock to be issued as part of the
Merger Consideration have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable, and the issuance thereof is not subject
to any preemptive or other similar right.
SECTION 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Merger Sub each have full corporate power and
authority to execute and deliver this Agreement and, subject to the Parent
Required Statutory Approvals (as defined in SECTION 4.3(C)), to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and Merger Sub, and, assuming the due authorization,
execution and delivery hereof by the Company, constitutes a valid and legally
binding agreement of each of Parent and Merger Sub enforceable against each of
them in accordance with its terms, except that such enforcement may be subject
to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and (ii)
general equitable principles.
(b) The execution and delivery of this Agreement by each of Parent
and Merger Sub and the consummation by each of Parent and Merger Sub of the
transactions contemplated hereby do not and will not violate or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or any of its Subsidiaries under any of the terms, conditions
or provisions of (i) the respective charters or bylaws of Parent or any of its
Subsidiaries, (ii) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or governmental
authority applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets (assuming compliance with the matters referred
to in SECTION 4.3(C)) or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or any of its
Subsidiaries is now a party or by which Parent or any of its Subsidiaries or any
of their respective properties or assets may be bound or affected except, in the
case of clauses (ii) and (iii), for matters as would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect or materially impair the ability of Parent and Merger Sub to
consummate the transactions contemplated by this Agreement.
(c) Except for (i) the filing of the Registration Statement (as
defined in SECTION 4.4) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933, as amended (the "SECURITIES ACT"), and
the declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, and (ii) the making of the Merger Filing
EXHIBIT 1 - Page 6
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with the Secretary of State of the State of Michigan in connection with the
Merger (the filings and approvals referred to in clauses (i) and (ii) are
collectively referred to as the "PARENT REQUIRED STATUTORY APPROVALS"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent or Merger
Sub or the consummation by Parent or Merger Sub of the transactions contemplated
hereby, other than such declarations, filings, registrations, notices,
authorizations, consents or approvals which, if not made or obtained, as the
case may be, would not, have, or could not reasonably be anticipated to have,
individually or in the aggregate, a Material Adverse Effect or materially impair
the ability of Parent or Merger Sub to consummate the transactions contemplated
by this Agreement.
SECTION 4.4. REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Parent or its Subsidiaries for inclusion in the
Registration Statement (as defined in SECTION 7.2) will, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Since January 1, 1998, Parent has filed with the SEC all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Exchange Act and the respective rules and regulations
thereunder, all of which complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
(b) Parent has previously made available or delivered to the Company
or its Shareholders copies of its (a) Annual Reports on Form 10-K for the fiscal
year ended December 31, 1997, and for the immediately preceding fiscal year, as
filed with the SEC, (b) proxy and information statements relating to (i) all
meetings of its shareholders (whether annual or special) and (ii) any actions by
written consent in lieu of a shareholders' meeting from January 1, 1998, until
the date hereof, and (c) all other reports, including quarterly reports, or
registration statements filed by Parent with the SEC since January 1, 1998
(other than Registration Statements filed on Form S-8) (the documents referred
to in clauses (a), (b) and (c), including the exhibits thereto, collectively
referred to as the "PARENT SEC REPORTS").
(c) As of their respective dates, the Parent SEC Reports did not
contain any untrue statement of a material fact or omit to state any 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.
(d) The audited consolidated financial statements and unaudited
interim consolidated financial statements of Parent included in such reports
(collectively, the "PARENT FINANCIAL STATEMENTS") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and the
consolidated results of their
EXHIBIT 1 - Page 7
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operations and cash flows for the periods then ended, subject, in the case of
the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Merger Sub as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Michigan and has the requisite corporate power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
properties owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not have, or could not reasonably be
anticipated to have, individually or in the aggregate, a Material Adverse
Effect. True, accurate and complete copies of the Company's Articles of
Incorporation, as amended, and Bylaws, in each case as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
Parent.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 50,000
shares of Company Common Stock. As of the date of this Agreement there are, and
as of Closing there will be, 10,000 shares of Company Common Stock issued and
outstanding and no other shares of capital stock of the Company issued and
outstanding. All of such issued and outstanding shares of Company Common Stock
are validly issued and are fully paid, nonassessable and free of preemptive
rights and are owned beneficially and of record as set forth on SCHEDULE 5.2,
free and clear of all restrictions, liens, claims and encumbrances. No
Subsidiary of the Company holds any shares of the capital stock of the Company.
(b) There are no outstanding (i) subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, debenture, instrument or other agreement obligating the Company or any
Shareholder to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of the capital stock of the Company or obligating the Company
or any Shareholder to grant, extend or enter into any such agreement or
commitment or (ii) obligations of the Company or any Shareholder to repurchase,
redeem or otherwise acquire any securities referred to in clause (i) above.
There are no voting trusts, proxies or other agreements or understandings to
which the Company or any Shareholder is a party or is bound with respect to the
voting of any shares of capital stock of the Company.
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SECTION 5.3. SUBSIDIARIES. Company does not have any Subsidiaries, nor
does the Company hold any equity interest in or control (directly or indirectly,
through the ownership of securities, by contract, by proxy, alone or in
combination with others, or otherwise) any corporation, limited liability
company, partnership, business organization or other Person.
SECTION 5.4. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to execute
and deliver this Agreement and, subject to the Company Required Statutory
Approvals (as defined in SECTION 5.4(C)), to consummate the transactions
contemplated hereby. This Agreement has been approved by the Board of Directors
of the Company and the Shareholders, and no other corporate proceedings on the
part of the Company or the Shareholders are necessary to authorize the execution
and delivery of this Agreement or the consummation by the Company and the
Shareholders of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Company and the Shareholders, and, assuming
the due authorization, execution and delivery hereof by Parent and Merger Sub,
constitutes a valid and legally binding agreement of the Company and the
Shareholders, enforceable against the Company and the Shareholders in accordance
with its terms.
(b) Except as set forth in SCHEDULE 5.4, the execution and delivery
of this Agreement by the Company and the Shareholders and the consummation by
the Company and the Shareholders of the transactions contemplated hereby do not
and will not violate or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or the
Shareholders under any of the terms, conditions or provisions of (i) the charter
or bylaws of the Company, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
governmental authority applicable to the Company or the Shareholders, or any of
their respective properties or assets (assuming compliance with the matters
referred to in SECTION 5.4(C)), or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which the Company or the
Shareholders is now a party or by which the Company or the Shareholders or any
of their respective properties or assets may be bound or affected.
(c) Except for the Merger Filing with the Secretary of State of the
State of Michigan in connection with the Merger (the "COMPANY REQUIRED STATUTORY
APPROVALS"), no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any governmental or regulatory body or
authority is necessary for the execution and delivery of this Agreement by the
Company and the Shareholders or the consummation by the Company and the
Shareholders of the transactions contemplated hereby.
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SECTION 5.5. FINANCIAL STATEMENTS. The unaudited, but compiled financial
statements and unaudited interim financial statements of the Company attached as
Schedule 5.5 (collectively, the "COMPANY FINANCIAL STATEMENTS") have been
prepared in accordance with GAAP (except as may be indicated therein or in the
notes thereto) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended, subject, in the case of
the unaudited interim financial statements, to normal year-end and audit
adjustments and any other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
SCHEDULE 5.6, the Company has not incurred any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except
liabilities, obligations or contingencies (i) which are accrued or reserved
against the Company Financial Statements or reflected in the notes thereto or
(ii) which were incurred after December 31, 1998, and were incurred in the
ordinary course of business and consistent with past practices.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1998, (i) the Company has not declared or set aside or paid any dividend or made
any other distribution with respect to its outstanding securities, or, directly
or indirectly, purchased, redeemed or otherwise acquired any of its securities;
(ii) the Company has not granted any general increase in the compensation of its
officers, directors or employees (including any increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) and has not paid any
bonuses to any officers, directors or employees; (iii) the Company has not
adopted, entered into or amended any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, health care, employment or
other employee benefit plan, agreement, trust fund or arrangement for the
benefit or welfare of any employee or retiree, except as required to comply with
changes in applicable law; (iv) the business of the Company has been conducted
in the ordinary course of business consistent with past practices; and (v) there
has not been any event, occurrence, development or state of circumstances or
facts which has had, or could reasonably be anticipated to have, individually or
in the aggregate, a Material Adverse Effect.
SECTION 5.8. LITIGATION. Except as described in SCHEDULE 5.8, there are no
claims, suits, actions, Environmental Claims, inspections, investigations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company before any court, governmental department,
commission, agency, instrumentality, authority, or any mediator or arbitrator,
and there is no basis for the same. Except as described in SCHEDULE 5.8, the
Company is not subject to any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality, authority,
or any mediator or arbitrator.
SECTION 5.9. ACCOUNTS RECEIVABLE. All accounts receivable reflected on the
Company Financial Statements represent sales actually made in the ordinary
course of business and are collectible (within 60 days after the applicable
billing date) except as reflected in the reserve for doubtful accounts in the
Company Financial Statements. The reserve for doubtful accounts reflected in the
Company Financial Statements has been determined in accordance with GAAP.
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SECTION 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) The Company is not in violation of and has not been given notice
or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
Environmental Law) of any governmental or regulatory body or authority. No
investigation or review by any governmental or regulatory body or authority is
pending or threatened, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same. The Company has all permits
(including without limitation Environmental Permits), licenses, franchises,
variances, exemptions, orders and other governmental authorizations, consents
and approvals required or necessary to conduct its business as presently
conducted (collectively, the "COMPANY PERMITS"). The Company is not in violation
of the terms of any Company Permit.
(b) The Company and each of the Shareholders are not in breach or
violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by a
third party, could result in a default under, (a) the charter, bylaws or similar
organizational instruments of the Company or (b) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which the Company is a party or by which it is
bound or to which any of its property is subject.
SECTION 5.11. INSURANCE. SCHEDULE 5.11 hereto sets forth a list of all
insurance policies owned by the Company or by which the Company or any of its
properties or assets is covered against present losses, all of which are now in
full force and effect. No insurance has been refused with respect to any
operations, properties or assets of the Company nor has coverage of any
insurance been limited by any insurance carrier that has carried, or received
any application for, any such insurance during the last three years. No
insurance carrier has denied any claims made against any of the policies listed
on SCHEDULE 5.11 hereto.
SECTION 5.12. TAXES.
(a) Except as set forth on SCHEDULE 5.12, (i) the Company has (x)
duly filed (or there has been filed on its behalf) with the appropriate taxing
authorities all Tax Returns (as hereinafter defined) required to be filed by it
on or prior to the date hereof, and (y) duly paid in full or made adequate
provision therefor on its financial statements in accordance with GAAP (or there
has been paid or adequate provision has been made on its behalf) for the payment
of all Taxes (as hereinafter defined) for all periods ending through the date
hereof; (ii) all such Tax Returns filed by or on behalf of the Company are true,
correct and complete in all material respects; (iii) the Company is not the
beneficiary of any extension of time within which to file any Tax Return; (iv)
no claim has ever been made by any authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction; (v) the liabilities and reserves for Taxes reflected in the most
recent balance sheet included in the Company Financial Statements to cover all
Taxes for all periods ending at or prior to the date of such balance sheet have
been determined in accordance with GAAP, and there is no material liability for
Taxes for any period beginning after such date other than Taxes arising in the
ordinary course of business; (vi) there are no liens for Taxes
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upon any property or assets of the Company, except for liens for Taxes not yet
due; (vii) the Company has not made any change in accounting methods since
December 31, 1998; (viii) the Company has not received a ruling from any taxing
authority or signed an agreement with any taxing authority; (ix) the Company has
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code, as amended
or similar provisions under any foreign laws) and has, within the time and the
manner prescribed by law, withheld and paid over to the appropriate taxing
authority all amounts required to be so withheld and paid over under all
applicable laws in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party; (x) no
federal, state, local or foreign audits or other administrative proceedings or
court proceedings are presently pending with regard to any Taxes or Tax Returns
of the Company, and, as of the date of this Agreement, the Company has not
received a written notice of any pending audits or proceedings; (xi) no
shareholder or director or officer (or employee responsible for Tax matters) of
the Company expects any authority to assess any additional Taxes for any period
for which Tax Returns have been filed; (xii) the federal income Tax Returns of
the Company have been examined by the Internal Revenue Service ("IRS") (which
examination has been completed) or the statute of limitations for the assessment
of federal income Taxes of the Company has expired, for all periods through and
including December 31, 1994, and no deficiencies were asserted as a result of
such examinations which have not been resolved and fully paid; (xiii) no
adjustments or deficiencies relating to Tax Returns of the Company have been
proposed, asserted or assessed by any taxing authority, except for such
adjustments or deficiencies which have been fully paid or finally settled; and
(xiv) the Company has delivered to the Parent true, correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since December 31,
1991.
(b) There are no outstanding requests, agreements, consents or
waivers to extend the statute of limitations applicable to the assessment of any
Taxes or deficiencies against the Company, and no power of attorney granted by
the Company with respect to any Taxes is currently in force. The Company has
disclosed on its federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code. The Company is not a party to any agreement
providing for the allocation or sharing of Taxes. The Company has not, with
regard to any assets or property held, acquired or to be acquired by it, filed a
consent to the application of Section 341(f) of the Code, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the Company.
The Company (i) has not been a member of an affiliate group filing a
consolidated federal income Tax Return (other than a group the common parent of
which was the Company) and (ii) has no liability for Taxes of any person (other
than any of the Company and its Subsidiaries) under Section 1.1502-6 of the
United States Treasury Regulations (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract, or otherwise.
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SECTION 5.13. EMPLOYEE BENEFIT PLANS.
(a) Each Plan and each Benefit Program (as such terms are defined
below) is listed on SCHEDULE 5.13 hereto. No Plan or Benefit Program is or has
been (i) covered by Title IV of the Employer Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) subject to the minimum funding requirements of
Section 412 of the Code or (iii) a "multi-employer plan" as defined in Section
3(37) of ERISA, nor has the Company contributed to, or ever had any obligation
to contribute to, any multi-employer plan. Each Plan and Benefit Program
intended to be qualified under Section 401(a) of the Code is designated as a
tax-qualified plan on SCHEDULE 5.13 and is so qualified. No Plan or Benefit
Program provides for any retiree health benefits for any employees or dependents
of the Company other than as required by COBRA (as hereinafter defined). There
are no claims pending with respect to, or under, any Plan or any Benefit
Program, other than routine claims for benefits, and there are no disputes or
litigation pending or, to the knowledge of the Company, threatened, with respect
to any such Plans or Benefit Programs.
(b) The Company has heretofore delivered to Parent true and correct
copies of the following, if any:
(i) each Plan and each Benefit Program listed on SCHEDULE
5.13, all amendments thereto as of the date hereof and all current summary plan
descriptions provided to employees regarding the Plans and Benefit Programs;
(ii) each trust agreement and annuity contract (or any other
funding instruments) pertaining to any of the Plans or Benefit Programs,
including all amendments to such documents to the date hereof;
(iii) each management or employment contract or contract for
personal services and a complete description of any understanding or commitment
between the Company and any officer, consultant, director, employee or
independent contractor of the Company; and
(iv) a complete description of each other plan, policy,
contract, program, commitment or arrangement providing for bonuses, deferred
compensation, retirement payments, profit sharing, incentive pay, commissions,
hospitalization or medical expenses or insurance or any other benefits for any
officer, consultant, director, annuitant, employee or independent contractor of
the Company as such or members of their families (other than directors' and
officers' liability policies), whether or not insured (a "BENEFIT PROGRAM"). For
purposes of this Agreement, "PLAN" means an "employee benefit plan" (as defined
in Section 3(3) of ERISA) which is or has been established or maintained, or to
which contributions are or have been made, by the Company or by any trade or
business, whether or not incorporated, which, together with the Company, is
under common control, as described in Section 414(b) or (c) of the Code.
(c) Each Plan and Benefit Program has been maintained and
administered in compliance with its terms and in accordance with all applicable
laws, rules and regulations. The Company has no commitment or obligation to
establish or adopt any new or additional Plans or Benefit Programs or to
increase the benefits under any existing Plan or Benefit Program.
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(d) Except as set forth in SCHEDULE 5.13, neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) result in any payment to be made by the Company,
including, without limitation, severance, unemployment compensation, golden
parachute (defined in Section 280G of the Code) or otherwise, becoming due to
any employee of the Company, or (ii) increase any benefits otherwise payable
under any Plan or any Benefit Program.
SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Company has provided Parent with a true and complete list dated
as of December 31, 1998 (the "EMPLOYEE SCHEDULE ") of all employees of the
Company listing the title or position held, base salary or wage rate and any
bonuses, commissions, profit sharing, the Company's vehicles, club memberships
or other compensation or perquisites payable, all employee benefits received by
such employees and any other material terms of any written agreement with the
Company. As of the date of this Agreement and as of the Closing Date, the
Company has not entered into any agreement or agreements pursuant to which the
combined annual payroll of the Company, including projected pay increases,
overtime and fringe benefit costs, required to operate its business (including
all administrative and support personnel) would be greater than as listed on the
Employee Schedule. Set forth on SCHEDULE 5.14 is a detailed description of all
health, dental, life and disability insurance plans of the Company and a
description of the cost per employee under each such plan for individual
coverage as well as for coverage of such employee's dependents.
(b) Except as set forth on SCHEDULE 5.14, the Company is not a party
to or bound by any written employment agreements or commitments, other than on
an at-will basis. The Company is in compliance with all applicable laws
respecting the employment and employment practices, terms and conditions of
employment and wages and hours of its employees and is not engaged in any unfair
labor practice. All employees of the Company who work in the United States are
lawfully authorized to work in the United States according to federal
immigration laws. There is no labor strike or labor disturbance pending or, to
the knowledge of the Company, threatened against the Company with respect to the
Business and, during the past five years, the Company has not experienced a work
stoppage.
(c) Except as set forth on SCHEDULE 5.14, (i) the Company is not a
party to or bound by the terms of any collective bargaining agreement or other
union contract applicable to any employee of the Company and no such agreement
or contract has been requested by any employee or group of employees of the
Company, nor has there been any discussion with respect thereto by management of
the Company with any employees of the Company, (ii) the Company is not aware of
any union organizing activities or proceedings involving, or any pending
petitions for recognition of, a labor union or association as the exclusive
bargaining agent for, or where the purpose is to organize, any group or groups
of employees of the Company, or (iii) there is not currently pending, with
regard to any of its facilities, any proceeding before the National Labor
Relations Board, wherein any labor organization is seeking representation of any
employees of the Company.
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SECTION 5.15. ENVIRONMENTAL MATTERS. Without in any manner limiting any
other representations and warranties set forth in this Agreement:
(a) Neither the Company nor any of its Business Facilities is in
violation of, or has violated, or has been or is in non-compliance with, any
Environmental Laws, including but not limited to in connection with the
ownership, use, maintenance or operation of, or conduct of the business of the
Company or any of its Business Facilities.
(b) Without in any manner limiting the generality of (a) above:
(i) Except in compliance with Environmental Laws (including,
without limitation, by obtaining necessary Environmental Permits), no Materials
of Environmental Concern (as defined in EXHIBIT A) have been used, generated,
extracted, mined, beneficiated, manufactured, stored, treated, or disposed of,
or in any other way released (and no release is threatened), on, under or about
any Business Facility (as defined in EXHIBIT A) or transferred or transported to
or from any Business Facility, and no Materials of Environmental Concern have
been generated, manufactured, stored or treated or disposed of, or in any other
way released (and no release is threatened), on, under, about or from any
property adjacent to any current Business Facility;
(ii) The Company is not now, and will not be in the future, as
a result of the operation or condition of the business of the Company on or
prior to the date of Closing, subject to any: (a) contingent liability in
connection with any release or threatened release of any Materials of
Environmental Concern into the environment whether on or off any Business
Facility; (b) reclamation, decontamination or Remediation (as defined in EXHIBIT
A) requirements under Environmental Laws, or any reporting requirements related
thereto; or (c) consent order, compliance order or administrative order relating
to or issued under any Environmental Law;
(iii) There are no Environmental Claims known, pending or
threatened against the Company or any of its Business Facilities, and there is
no basis for same;
(iv) The Company and all of its Business Facilities have and
have timely filed applications for renewal of all Environmental Permits; the
Company has all environmental and pollution control equipment necessary to
comply with all Environmental Laws (including, without limitation, to comply
with all applicable Environmental Permits) and operation of the business of the
Company as presently conducted, and the Company and its Business Facilities, are
in compliance with all terms and conditions of such Environmental Permits;
(v) Regarding all Environmental Permits for which renewal,
amendment, or modification is sought or pending, no material expenditures,
capital improvements, or changes in operation will be necessary as a condition
or as a result of such renewal, amendment, or modification.
(vi) The Company has received no notice and has no knowledge
that any occupant or tenant of any current Business Facility (a) is in violation
of any Environmental Law; (b) is the subject of any Environmental Claims; or (c)
does not have or has not renewed any
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Environmental Permits applicable to its assets or operations.
(vii) There are no, nor have there ever been any, storage
tanks or solid waste management units located on or under any Business Facility
of the Company or any of its Subsidiaries, and there are no Materials of
Environmental Concern on any Business Facility of the Company exceeding any
standard or limitation established, published or promulgated pursuant to
Environmental Laws, or which would require reporting to any governmental
authority or Remediation to comply with Requirements of Environmental Laws (as
defined in EXHIBIT A);
(viii) To the knowledge of the Company and the Shareholders,
none of the off-site locations where Materials of Environmental Concern
generated from any Business Facility of the Company or for which the Company has
arranged for their disposal, treatment or application, has been nominated or
identified as a facility which is subject to an existing or potential claim
under Environmental Laws;
(ix) The Company has not been named as a potentially
responsible party under, and no Business Facility of the Company has been
nominated or identified as a facility which is subject to an existing or
potential claim under CERCLA or comparable Environmental Laws, and no Business
Facility of the Company is subject to any lien arising under Environmental Laws;
(x) The Company has not received any notice of any release or
threatened release of Materials of Environmental Concern, or of any violation
of, noncompliance with, or remedial obligation under, Environmental Laws or
Permits, relating to the ownership, use, maintenance, operation of any Business
Facility or in connection with the business of the Company, nor is there any
basis for any of the foregoing, nor has the Company voluntarily undertaken
Remediation or other decontamination or cleanup of any facility or site or
entered into any agreement for the payment of costs associated with such
activity;
(xi) There is no Requirement of Environmental Laws that will
require future compliance costs on the part of the Company in excess of $10,000
above costs currently expended in the ordinary course of business;
(xii) Except as set forth on SCHEDULE 5.15, there are no
present or past events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued
compliance by the Company with Requirements of Environmental Laws or which may
give rise to any common law or statutory liability under Environmental Laws or
form the basis of an Environmental Claim against the Company;
(xiii) There are no obligations, undertakings or liabilities
arising out of or relating to Environmental Laws which the Company has agreed
to, assumed or retained, by contract or otherwise.
(xiv) The Company has filed all notices, notifications,
financial security, waste managements plans, or applications which are required
to be obtained or filed by the Company for the operation of its business or the
use or operation of any Business Facility of the Company;
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(xv) The Company and all Business Facilities are in compliance
with all other applicable limitations, restrictions, conditions, schedules and
timetables contained in Environmental Laws or contained in any plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; and
(xvi) No current Business Facility (or equipment thereon) of
the Company contains any asbestos containing materials or polychlorinated
biphenyls in any form nor any wetland areas or other land subject to restricted
development under Environmental Laws.
For purposes of this Section, the "Company" shall include any entity which is,
in whole or in part, a predecessor of the Company and all of its former
Subsidiaries and their predecessors.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Neither the Company nor any
Shareholder is a party to any agreement which purports to restrict or prohibit
any of them from, directly or indirectly, engaging in any business currently
engaged in by the Company. None of the Company's shareholders, officers,
directors, or key employees is a party to any agreement which, by virtue of such
person's relationship with the Company, restricts the Company or any Subsidiary
of the Company from, directly or indirectly, engaging in any of the businesses
described above.
SECTION 5.17. TITLE TO ASSETS. The Company has good and marketable title
in fee simple to all its real property and good title to all its leasehold
interests and other properties, as reflected in the most recent balance sheet
included in the Company Financial Statements, except for properties and assets
that have been disposed of in the ordinary course of business since the date of
the latest balance sheet included therein, free and clear of all mortgages,
liens, pledges, charges or encumbrances of any nature whatsoever, except (i)
liens for current taxes, payments of which are not yet delinquent, (ii) such
imperfections in title and easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not detract from the value, or
interfere with the present use or marketability of the property subject thereto
or affected thereby, or otherwise impair the Company's business operations (in
the manner presently carried on by the Company), or (iii) any lien securing any
debt or obligation described on SCHEDULE 5.17 which is expressly referenced as
being secured. All leases under which the Company leases any real property have
been delivered to Parent and are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both
would become a default by or on behalf of the Company or its Subsidiaries, or by
or on behalf of any third party.
SECTION 5.18. CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. SCHEDULE 5.18
hereto sets forth a complete list of the following contracts, agreements, plans
and commitments (collectively, the "CONTRACTS") to which the Company is a party
or by which the Company or any of its properties is bound as of the date hereof:
(a) any contract, commitment or agreement that involves aggregate
expenditures by the Company of more than $10,000 per year;
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(b) any contract or agreement (including any such contracts or
agreements entered into with any Governmental Authority) relating to the
maintenance or operation of the business that involves aggregate expenditures by
the Company of more than $10,000;
(c) any indenture, loan agreement or note under which the Company
has outstanding indebtedness, obligations or liabilities for borrowed money;
(d) any lease or sublease for the use or occupancy of real
property;
(e) any agreement that restricts the right of the Company to engage
in any type of business;
(f) any guarantee, direct or indirect, by any person of any
contract, lease or agreement entered into by the Company;
(g) any partnership, joint venture or construction and operation
agreement;
(h) any agreement of surety, guarantee or indemnification with
respect to which the Company is the obligor, outside of the ordinary course of
business;
(i) any contract that requires the Company to pay for goods or
services substantially in excess of its estimated needs for such items or the
fair market value of such items;
(j) any contract, agreement, agreed order or consent agreement that
requires the Company to take any actions or incur expenses to remedy
non-compliance with any Environmental Law; and
(k) any other contract material to the Company or its business.
True, correct and complete copies of each of such contracts, agreements, plans
and commitments have been delivered to or made available for inspection by
Parent. All such contracts, agreements, plans and commitments (i) were duly and
validly executed and delivered by the Company and the other parties thereto and
(ii) are valid and in full force and effect. The Company has fulfilled all
material obligations required of the Company under each such contract,
agreement, plan or commitment to have been performed by it prior to the date
hereof, including timely paying all interest on its debt as such interest has
become due and payable. Except as set forth on SCHEDULE 5.18, there are no
counterclaims or offsets under any of such contracts, agreements, plans and
commitments. The consummation of the Merger will vest in the Survivor
Corporation all rights and benefits under the Contracts and the right to operate
the Company's business and assets under the terms of the Contracts in the manner
currently operated and used by the Company.
SECTION 5.19. REGISTRATION STATEMENT. None of the information to be
supplied by the Company or the Shareholders for inclusion in the Registration
Statement will contain any untrue statement of any material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
EXHIBIT 1 - Page 18
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are made, not misleading. The Registration Statement will comply, as of its
effective date and thereafter while effective, as to form in all material
respects with all applicable laws, including the provisions of the Securities
Act and the rules and regulations promulgated thereunder, except that no
representation is made by the Company or the Shareholders with respect to
information supplied by Parent or Merger Sub for inclusion therein.
SECTION 5.20. BROKERS AND FINDERS. Neither the Company nor the
Shareholders have entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of the Company to pay any
finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. There is no claim for
payment by the Company of any investment banking fees, finder's fees, brokerage
or agent commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
SECTION 5.21. INTELLECTUAL PROPERTY. The Company has rights to use,
whether through ownership, licensing or otherwise, all patents, trademarks,
service marks, trade names, copyrights, software, trade secrets and other
proprietary rights and processes that are material to its business as now
conducted (collectively the "INTELLECTUAL PROPERTY RIGHTS"). Except as set forth
on SCHEDULE 5.21, the Company does not own any patents. The Company has no
knowledge of any infringement by any other person of any of the Intellectual
Property Rights, and the Company has not entered into any agreement to indemnify
any other party against any charge of infringement of any of the Intellectual
Property Rights. The Company has not and does not violate or infringe any
intellectual property right of any other person, and the Company has not
received any communication alleging that it violates or infringes the
intellectual property right of any other person. The Company has not been sued
for infringing any intellectual property right of another person. There is no
claim or demand of any person pertaining to, or any proceeding which is pending
or, to the knowledge of the Company, threatened, that challenges the rights of
the Company in respect of any Intellectual Property Rights, or that claims that
any default exists under any Intellectual Property Rights. None of the
Intellectual Property Rights is subject to any outstanding order, ruling,
decree, judgment or stipulation by or with any court, tribunal, arbitrator, or
other governmental authority.
SECTION 5.22. RELATIONSHIPS. Except as set forth on SCHEDULE 5.22, since
January 1, 1998, the Company has not received notice from any customer, supplier
or any party to any Contract involving more than $10,000 annually with the
Company (each a "CONTRACT Party") that such customer, supplier or Contract Party
intends to discontinue doing business with the Company, and since such date, no
customer, supplier or Contract Party, has indicated any intention (a) to
terminate its existing business relationship with the Company or (b) not to
continue its business relationship with the Company, whether as a result of the
transactions contemplated hereby or otherwise. The Company has not entered into
or participated in any related party transaction during the past three years.
SECTION 5.23. ACCOUNTING MATTERS. The Company has not taken or agreed to
take any action that would prevent the Parent from accounting for the business
combination as a pooling of interests, including but not limited to any action
inconsistent with the provisions of EXHIBIT B attached hereto.
EXHIBIT 1 - Page 19
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SECTION 5.24. CERTAIN PAYMENTS. Neither the Company nor any shareholder,
officer, director or employee of the Company has paid or received or caused to
be paid or received, directly or indirectly, in connection with the business of
the Company (a) any bribe, kickback or other similar payment to or from any
domestic or foreign government or agency thereof or any other person or (b) any
contribution to any domestic or foreign political party or candidate (other than
from personal funds of such shareholder, officer, director or employee not
reimbursed by the Company or as permitted by applicable law).
SECTION 5.25. BOOKS AND RECORDS. The corporate minute books, and other
corporate records of the Company are correct and complete in all material
respects and the signatures appearing on all documents contained therein are the
true signatures of the person purporting to have signed the same. All actions
reflected in said books and records were duly and validly taken in compliance
with the laws of the applicable jurisdiction and no meeting of the board of
directors of the Company or any committee thereof has been held for which
minutes have not been prepared and are not contained in the minute books. To the
extent that they exist, all personnel files, reports, strategic planning
documents, financial forecasts, accounting and tax records and all other records
of every type and description that relate to the business of the Company have
been prepared and maintained in accordance with good business practices and,
where applicable, in conformity with GAAP and applicable laws and regulations.
All such books and records are located in the offices of the Company.
SECTION 5.26. CONDITION AND SUFFICIENCY OF ASSETS. All buildings,
improvements and equipment owned or leased by the Company are structurally
sound, are in good operating condition and repair (subject to normal wear and
tear) and are adequate for the uses to which they are being put, and none of
such buildings, improvements or equipment is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
SECTION 5.27. INVESTMENT REPRESENTATIONS. Each of the Company and the
Shareholders acknowledges, represents and agrees that:
(a) (i) Parent has made available to the Company and the
Shareholders the information and documents described in SECTION 4.5 hereof, (ii)
the Shareholders understand the risks associated with ownership of Parent Common
Stock, and (iii) the Shareholders are capable of bearing the financial risks
associated with such ownership;
(b) the Parent Common Stock included within the Merger Consideration
(the "PARENT SHARES") has not been registered under the Securities Act or
registered or qualified under any applicable state securities laws;
(c) The Parent 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 Parent Shares;
EXHIBIT 1 - Page 20
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(d) Each Shareholder's acquisition of the Parent Shares is solely
for its own account for investment, and such Shareholder is not acquiring such
Parent Shares for the account of any other person or with a view toward resale,
assignment, fractionalization, or distribution thereof;
(e) The Shareholders shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Parent Shares except in
accordance with this Agreement and (i) the registration requirements of the
Securities Act and applicable state securities laws or (ii) upon delivery to
Parent of an opinion of legal counsel reasonably satisfactory to Parent that an
exemption from registration is available or pursuant to an effective
registration statement covering the Parent Shares to be sold;
(f) 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 Parent Shares, and to make an informed investment decision
with respect thereto;
(g) The Shareholders have had the opportunity to ask questions of,
and receive answers from Parent's officers and directors concerning the
Shareholders' acquisition of the Parent Shares and to obtain such other
information concerning Parent and the Parent Shares, to the extent Parent'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
(h) In addition to any other legends required by law or the other
agreements entered into in connection herewith, each certificate evidencing the
Parent 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 VI
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. After
the date hereof and prior to the Closing Date, unless Parent shall otherwise
agree in writing, the Company shall, and the Shareholders shall cause the
Company to:
(a) conduct its businesses in the ordinary and usual course of
business and consistent with past practice;
EXHIBIT 1 - Page 21
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(b) not (i) amend or propose to amend its charter or bylaws, (ii)
split, combine, reorganize, reclassify, recapitalize or take any similar action
with respect to their outstanding capital stock or (iii) declare, set aside or
pay any dividend or distribution payable in cash, stock, property or otherwise;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional share of, or any options, warrants or
rights of any kind to acquire any share of, its capital stock of any class or
any debt or equity securities convertible into or exchangeable for such capital
stock;
(d) not (i) incur or become contingently liable with respect to any
indebtedness for borrowed money, (ii) redeem, purchase, acquire or offer to
redeem, purchase or acquire any shares of its capital stock or any options,
warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock, (iii) make any
acquisition of any assets or businesses other than expenditures for fixed or
capital assets in the ordinary course of business not exceeding $10,000 in any
instance or $50,000 in the aggregate, (iv) sell, pledge, dispose of or encumber
any assets or businesses other than sales in the ordinary course of business or
(v) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(e) use all reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of their respective
present officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with them
and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement;
(f) not enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees;
(g) not adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law;
(h) use commercially reasonable efforts to maintain with financially
responsible insurance companies insurance on its tangible assets and its
businesses in such amounts and against such risks and losses as are consistent
with past practice;
(i) not make, change or revoke any material Tax election or make any
material agreement or settlement regarding Taxes with any taxing authority;
(j) not make any change in the Company's financial, Tax or
accounting methods, practices or policies, or in any assumption underlying such
a method, practice or policy;
EXHIBIT 1 - Page 22
<PAGE>
(k) give prompt written notice to Parent of the commencement of any
Environmental Claim, or non-routine inspection by any governmental authority
with responsibility for enforcing or implementing any applicable Environmental
Laws, and provide to Parent such information as Parent may reasonably request
regarding such Environmental Claim, any developments in connection therewith,
and, as applicable, the Company's anticipated or actual response thereto;
(l) use its commercially reasonable efforts to cause the transfer of
Environmental Permits (on the same terms and conditions), and any financial
assurance required thereunder to Parent or Merger Sub as may be necessary under
applicable Environmental Laws in connection with the consummation of the
transactions under this Agreement to allow Parent or Merger Sub to conduct the
business of the Company, as currently conducted;
(m) not enter into or assume any contracts or agreements having a
value or imposing an obligation upon the Company in excess of $10,000 annually
and all contracts or agreements having a value to or imposing an obligation on
the Company that have remaining obligations of $50,000 or more, regardless of
the annual payment;
(n) maintain its books of account and records in the usual, regular
and ordinary manner consistent with past policies and practice;
(o) not compromise, settle, grant any waiver or release relating to
or otherwise adjust any litigation or claims of any nature whatsoever pending
against the Company;
(p) not take any action or omit to take any action, which action or
omission would result in a breach of any of the representations and warranties
set forth in this Agreement;
(q) not make or commit to make any capital expenditures, except for
capital expenditures in the ordinary course of business not in excess of $50,000
in the aggregate; and
(r) not take or agree to take any action that would prevent Parent
from accounting for the business combination to be effected by the Merger as a
pooling of interests, including but not limited to any actions inconsistent with
EXHIBIT B attached hereto.
SECTION 6.2. CONTROL OF THE COMPANY'S OPERATIONS. Nothing contained in
this Agreement shall give to Parent, directly or indirectly, rights to control
or direct the Company's operations prior to the Effective Time. Prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
SECTION 6.3. OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, the Company and
the Shareholders shall not, and shall not permit any of the Company's officers,
directors, employees, Affiliates, representatives or agents to, directly or
indirectly, (i) solicit, initiate or knowingly encourage any offer or proposal
for, or any indication of interest in, a merger or business combination
involving the Company or the acquisition of an equity interest in, or any
substantial portion of the assets of, the Company or (ii) engage in
EXHIBIT 1 - Page 23
<PAGE>
negotiations with or disclose any nonpublic information relating to the Company
or Parent, or afford access to the properties, books or records of the Company,
to any Person. The Company shall promptly notify and provide copies to Parent of
any offer, proposal or indication of interest, or communication with respect
thereto, delivered to or received from any third party.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1. ACCESS TO INFORMATION. The Company shall afford to Parent and
Merger Sub and their respective accountants, counsel, financial advisors and
other representatives (the "PARENT REPRESENTATIVES") full access during normal
business hours throughout the period prior to the Effective Time to all of its
respective properties (including without limitation to conduct soil,
groundwater, ambient air or other environmental testing or analyses), books,
contracts, personnel, representatives of or contacts with governmental or
regulatory authorities, agencies or bodies, commitments, and records (including,
but not limited to, Tax Returns and any and all records or documents which are
within the possession of governmental or regulatory authorities, agencies or
bodies, and the disclosure of which the Company can facilitate or control) and,
during such period, shall furnish promptly to Parent and Merger Sub all such
information concerning its respective businesses, properties and personnel as
Parent or Merger Sub, as the case may be, shall request. No investigation
pursuant to this Section shall affect any representation or warranty made by any
party.
SECTION 7.2. REGISTRATION STATEMENT.
(a) Parent shall use reasonable efforts to file with the SEC within
ninety (90) days of the Closing a registration statement on Form S-3 covering
the Parent Shares (the "REGISTRATION STATEMENT"), and shall use reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as reasonably practicable thereafter. Parent shall also take any action
required to be taken under applicable state blue sky or securities laws in
connection with the issuance of Parent Common Stock pursuant hereto. Parent and
the Company shall promptly furnish to each other all information, and take such
other actions, as may reasonably be requested in connection with any action by
any of them in connection with this Section.
(b) In no event shall the Parent have any obligation to enter into
an underwriting agreement with any investment banking firm participating as a
broker in the execution of any resales of the Parent Shares. Parent agrees that
it will furnish to the Shareholders such number of prospectuses, prospectus
supplements, or other documents incident to any registration, qualification or
compliance referred to herein as the Shareholders from time to time may
reasonably request.
(c) Parent shall pay all expenses incurred in connection with a
proposed registration by Parent under this SECTION 7.2, whether or not effected
or consummated, including, without limitation, all registration and filing fees,
printing expenses, and fees and disbursements of counsel and accountants for
Parent.
EXHIBIT 1 - Page 24
<PAGE>
SECTION 7.3. EXCHANGE LISTING. Parent shall use its reasonable efforts to
effect, at or before the effective date of the Registration Statement,
authorization for listing on NASDAQ, upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the Merger.
SECTION 7.4. EXPENSES AND FEES. Prior to the Closing, the Company shall
pay all reasonable out-of-pocket costs and expenses incurred by the Company and
the Shareholders in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, any and all broker's
commissions and the fees and expenses of the Company's and the Shareholders'
attorneys and accountants. The Shareholders shall pay any such costs or expenses
of the Company or Shareholders after the Closing, and the Shareholders will make
all necessary arrangements so that the Company, Parent or Merger Sub will not be
charged with any such cost or expense after Closing; provided, however, that the
Company Required Statutory Approvals and the expenses under SECTION 7.2 shall be
paid by Parent. Parent shall pay all costs and expenses incurred by Parent and
Merger Sub in connection with this Agreement and the transactions contemplated
hereby, including without limitation, the fees and expenses of their attorneys
and accountants.
SECTION 7.5. AGREEMENT TO COOPERATE. Subject to the terms and conditions
herein provided, each of the parties hereto shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary, proper or
advisable waivers, consents and approvals under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to
preserve material contractual relationships of the Company.
SECTION 7.6. PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such press release or written public statement prior to such consultation.
SECTION 7.7. NOTIFICATION OF CERTAIN MATTERS. Each of the Company, Parent
and Merger Sub agrees to give prompt notice to each other of, and to use their
respective reasonable best efforts to prevent or promptly remedy, (i) the
occurrence or failure to occur or the impending or threatened occurrence or
failure to occur, of any event which occurrence or failure to occur would be
likely to cause any of its representations or warranties in this Agreement to be
untrue or inaccurate in any material respect (or in all respects in the case of
any representation or warranty containing any materiality qualification) at any
time from the date hereof to the Effective Time and (ii) any material failure
(or any failure in the case of any covenant, condition or agreement containing
any materiality qualification) on its part to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
EXHIBIT 1 - Page 25
<PAGE>
SECTION 7.8. ACCOUNTING TREATMENT. The Company shall use its reasonable
best efforts to (i) cause the Merger to receive accounting treatment as a
pooling-of-interests transaction, (ii) obtain the opinions from Arthur Andersen
LLP and BDO Siedman confirming that their respective clients qualify as poolable
entities for purposes of treating the Merger as a pooling-of-interests
transaction, and (iii) not to take any action reasonably likely to cause the
Merger not to so qualify.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, if permissible, at or prior to the Effective Time
of the following conditions:
(a) no preliminary or permanent injunction or other order or decree
by any federal or state court which prevents the consummation of the Merger
shall have been issued and remain in effect (each party agreeing to use its
reasonable efforts to have any such injunction, order or decree lifted); and
(b) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
Unless waived by the Company, the obligation of the Company to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) Parent and Merger Sub shall have performed in all material
respects (or in all respects in the case of any agreement containing any
materiality qualification) their agreements contained in this Agreement required
to be performed on or prior to the Closing Date;
(b) the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material respects
(or in all respects in the case of any representation or warranty containing any
materiality qualification) on and as of the date made and on and as of the
Closing Date as if made at and as of such date; and
(c) Parent shall have removed the Shareholders from any and all
personal guaranties and/or surety obligations in connection with the Company's
debts or operations listed on SCHEDULE 8.1(C) hereto.
(d) the Company shall have received a certificate executed on behalf
of Parent by the Chief Executive Officer or a Vice President of Parent and on
behalf of Merger Sub by the President or a Vice President of Merger Sub with
respect to (a) and (b) above.
EXHIBIT 1 - Page 26
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SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. Unless waived by Parent and Merger Sub, the obligations of Parent
and Merger Sub to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) the Company shall have performed in all material respects (or in
all respects in the case of any agreement containing any materiality
qualification) its agreements contained in this Agreement required to be
performed on or prior to the Closing Date;
(b) the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects (or in all
respects in the case of any representation or warranty containing any
materiality qualification) on and as of the date made and on and as of the
Closing Date as if made at and as of such date;
(c) since the date hereof, there shall have been no changes that
constitute, and no event or events shall have occurred which have resulted in or
constitute, a Material Adverse Effect;
(d) all governmental waivers, consents, orders, permit transfers
(including without limitation Environmental Permits) and approvals legally
required for the consummation of the Merger and the transactions contemplated
hereby or to permit Parent to carry on the business of the Company after Closing
in accordance with past customs and practice shall have been obtained and be in
effect at the Closing Date, and no governmental authority shall have promulgated
any statute, rule or regulation which, when taken together with all such
promulgations, would materially impair the value of the Company to Parent;
(e) all waivers, consents and approvals from third parties necessary
for the transfer of any material contracts, financial assurances and any other
rights and benefits in connection with the Merger, or necessary for the
consummation of the Merger and the transactions contemplated hereby shall have
been obtained and be in effect at the Closing Date;
(f) all transactions, contracts, agreements and guarantees between
the Company and any Shareholder or any Affiliate of the Company or any
Shareholder shall have been terminated and all amounts owed by the Shareholders
and their Affiliates to the Company shall have been paid in full;
(g) the Company shall have entered into new real property leases
with respect to property owned by the Shareholders, or any Affiliates of the
Shareholders, in form and upon terms satisfactory to Parent; PROVIDED, HOWEVER,
in no event shall such lease payments under such leases exceed the aggregate
amount paid for such properties under current leases;
(h) the board of directors and Shareholders of the Company shall
approve this Agreement and the closing of the transactions contemplated herein;
(i) the board of directors of Parent shall approve this Agreement
and the closing of the transactions contemplated herein;
EXHIBIT 1 - Page 27
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(j) the officers and directors of the Company shall deliver to
Parent an instrument dated the Closing Date releasing the Company from any and
all claims of such officers and directors (except as to accrued compensation
prior to the Closing Date in accordance with the terms of the Agreement);
(k) Parent shall have completed its due diligence review regarding
the Company and its business, operations, assets, liabilities, taxes, insurance,
contracts, prospects and environmental and other matters as Parent deems
relevant and Parent shall be satisfied, in its sole discretion, with the results
of such review;
(l) Parent shall have received letters from Arthur Andersen LLP and
BDO Siedman, dated as of the Effective Time, to the effect that their respective
clients qualify as poolable entities for purposes of treating the Merger as a
pooling-of-interests transaction if closed and consummated in accordance with
this Agreement;
(m) the Shareholders shall have entered into a Pooling Transfer
Restrictions Agreement, in the form attached as EXHIBIT C hereto;
(n) Parent shall have received a legal opinion from Wardrop &
Wardrop, P.C., in the form reasonably satisfactory to Parent;
(o) James R. Rosendall, Jr. shall have entered into an
Employment Agreement, in the form attached as EXHIBIT D hereto;
(p) Parent shall have received a certificate, dated within ten (10)
days of the Closing Date, of the Secretary of the State of Michigan establishing
that the Company is in existence and is in good standing to transact business in
the state of incorporation;
(q) Parent shall have received the resignations of the directors and
officers of the Company; and
(r) Parent shall have received a certificate executed on behalf of
the Company by the President or Chief Executive Officer of the Company and each
of the Shareholders with respect to (a) through (g) above.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time as follows:
(a) The Company shall have the right to terminate this Agreement:
(i) if the representations and warranties of Parent and
Merger Sub shall
EXHIBIT 1 - Page 28
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fail to be true and correct in all material respects (or in all respects in the
case of any representation or warranty containing any materiality qualification)
on and as of the date made or, except in the case of any such representations
and warranties made as of a specified date, on and as of any subsequent date as
if made at and as of subsequent date and such failure shall not have been cured
in all material respects (or in all respects in the case of any representation
or warranty containing any materiality qualification) within 30 days after
written notice of such failure is given to Parent by the Company;
(ii) if the Merger is not completed by March 15, 1999
(PROVIDED that the right to terminate this Agreement under this SECTION
9.1(A)(II) shall not be available to the Company if the failure of the Company
or the Shareholders to fulfill any obligation to Parent under or in connection
with this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(iii) if the Merger is enjoined by a final, unappealable court
order; or
(iv) if Parent or Merger Sub (A) fails to perform in any
material respect any of its covenants (or in all respects in the case of any
covenant containing any materiality qualification) in this Agreement and (B)
does not cure such default in all material respects (or in all respects in the
case of any covenant containing any materiality qualification) within 30 days
after notice of such default is given to Parent by the Company.
(b) Parent shall have the right to terminate this Agreement;
(i) if the representations and warranties of the Company and
the Shareholders shall fail to be true and correct in all material respects (or
in all respects in the case of any representation or warranty containing any
materiality qualification) on and as of the date made or, except in the case of
any such representations and warranties made as of a specified date, on and as
of any subsequent date as if made at and as of such subsequent date and such
failure shall not have been cured in all material respects (or in all respects
in the case of any representation or warranty containing any materiality
qualification) within 30 days after written notice of such failure is given to
the Company by Parent;
(ii) if the Merger is not completed by March 15, 1999
(PROVIDED that the right to terminate this Agreement under this SECTION
9.1(B)(II) shall not be available to Parent if the failure of Parent to fulfill
any obligation to the Company under or in connection with this Agreement has
been the cause of or resulted in the failure of the Merger to occur on or before
such date); or
(iii) if the Company or the Shareholders (A) fail to perform
in any material respect (or in all respects in the case of any covenant
containing any materiality qualification) any of its covenants in this Agreement
and (B) do not cure such default in all material respects (or in all respects in
the case of any covenant containing any materiality qualification) within 30
days after notice of such default is given to the Company by Parent.
(c) The Board of Directors of the Company and Parent mutually agree.
EXHIBIT 1 - Page 29
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SECTION 9.2. EFFECT OF TERMINATION. The following provisions shall
apply in the event of a termination of the Agreement:
(a) If this Agreement is terminated by either Parent or the Company
pursuant to the provisions of SECTION 9.1, this Agreement shall forthwith become
void and there shall be no further obligations on the part of the Company,
Parent, Merger Sub, or their respective stockholders, directors, officers,
employees, agents or representatives (except as set forth in SECTIONS 10.2, 11.5
and 11.6, each of which shall survive termination in its entirety).
Notwithstanding any other provision set forth herein, nothing in this SECTION
9.2 shall relieve any party from liability for any breach of this Agreement.
(b) The parties hereto acknowledge and agree that Parent, as a
result of the actual damages Parent would sustain by reason of such negligent or
willful failure of Company or Shareholders to perform its or their obligations
hereunder, could not be made whole by monetary damages, and it is accordingly
agreed that Parent shall have the right to elect, in addition to any and all
other remedies at law or in equity, to enforce specific performance under this
Agreement and Company and Shareholders waive the defense in any such action for
specific performance that a remedy at law would be adequate.
SECTION 9.3. AMENDMENT. This Agreement may not be amended except by
an instrument in writing signed on behalf of all of the parties.
SECTION 9.4. EXTENSIONS; WAIVER. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS. The Shareholders
shall indemnify and hold harmless the Company, Parent and the Company's and
Parent's respective officers, directors, stockholders, employees, agents,
representatives and Affiliates (each a "PARENT INDEMNIFIED PARTY") from and
against any and all claims (including without limitation, Environmental Claims),
actions, causes of action, arbitrations, proceedings, losses, damages,
remediations, liabilities, strict liabilities, judgments, fines, penalties and
expenses (including, without limitation, reasonable attorneys' fees)
(collectively, the "INDEMNIFIED AMOUNTS") paid, imposed on or incurred by a
Parent Indemnified Party, directly or indirectly, relating to, resulting from or
arising out of, or any allegation of a third party of (a) any breach or
misrepresentation in any of the representations and warranties made by or on
behalf of the Company and/or the Shareholders in this Agreement, including
without limitation with respect to environmental matters, or any certificate or
instrument delivered in connection with this Agreement, (b) any violation or
breach by the Company and/or the Shareholders of or default by the Company
and/or the Shareholders under the terms of this
EXHIBIT 1 - Page 30
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Agreement or any certificate or instrument delivered in connection with this
Agreement, (c) any act or omission by the Company, the Shareholders or any
officer, director, employee, agent or representative of the Company, occurring
on or prior to the Closing Date (including any claim by a third party, including
employees and customers arising out of or related to any act or omission by the
Company, any of the Shareholders or any shareholder, officer, director,
employee, agent or representative of the Company occurring on or prior to the
Closing Date), (d) any Environmental Claim and/or any violation of any
Requirements of Environmental Law if such Environmental Claim or violation
relates, directly or indirectly, to events, conditions, operations, facts or
circumstances which occurred or commenced on or prior to the Closing Date, or
(e) any Taxes incurred by the Shareholders, Company or Surviving Corporation as
a result of the consummation of the transactions contemplated by this Agreement.
For purposes of this SECTION 10.1, Indemnified Amounts shall include without
limitation those Indemnified Amounts ARISING OUT OF THE STRICT LIABILITY
(INCLUDING BUT NOT LIMITED TO STRICT LIABILITY ARISING PURSUANT TO ENVIRONMENTAL
LAWS) OR NEGLIGENCE OF ANY PARTY, INCLUDING ANY PARENT INDEMNIFIED PARTY,
WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE.
SECTION 10.2. PARENT'S INDEMNITY OBLIGATIONS. Parent shall indemnify and
hold harmless the Shareholders and the Shareholders' agents, representatives and
Affiliates (each a "SHAREHOLDERS' INDEMNIFIED PARTY") from and against any and
all Indemnified Amounts incurred by a Shareholders' Indemnified Party as a
result of (a) any breach or misrepresentation in any of the representations and
warranties made by or on behalf of Parent or Merger Sub in this Agreement or any
certificate or instrument delivered in connection with this Agreement, or (b)
any violation or breach by Parent or Merger Sub of or default by Parent under
the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement.
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"INDEMNIFIED PARTY") shall with reasonable promptness (i) notify the party from
whom indemnification is sought (the "INDEMNIFYING PARTY") of any third-party
claim or claims asserted against the Indemnified Party ("THIRD PARTY CLAIM") for
which indemnification is sought and (ii) transmit to the Indemnifying Party a
copy of all papers served with respect to such claim (if any) and a written
notice ("CLAIM NOTICE") containing a description in reasonable detail of the
nature of the Third Party Claim, an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of such claim) and the basis of the
Indemnified Party's request for indemnification under this Agreement.
Within 15 days after receipt of any Claim Notice (the "ELECTION Period"),
the Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
with respect to such Third Party Claim and (ii) whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against such Third Party Claim.
EXHIBIT 1 - Page 31
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If the Indemnifying Party notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, such Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this SECTION 10.3(A). The Indemnifying
Party shall have full control of such defense and proceedings. The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall reasonably deem necessary or
appropriate to protect its interests. If requested by the Indemnifying Party,
the Indemnified Party agrees to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. Except as otherwise provided herein, the
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party claim controlled by the Indemnifying Party pursuant to this
SECTION 10.3 and shall bear its own costs and expenses with respect to such
participation.
If the Indemnifying Party fails to notify the Indemnified Party within the
Election Period that the Indemnifying Party elects to defend the Indemnified
Party pursuant to the preceding paragraph, or if the Indemnifying Party elects
to defend the Indemnified Party but fails to prosecute or settle the Third Party
Claim as herein provided or if the Indemnified Party reasonably objects to such
election on the grounds that counsel for such Indemnifying Party cannot
represent both the Indemnified Party and the Indemnifying Parties because such
representation would be reasonably likely to result in a conflict of interest,
then the Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings. The Indemnifying Party
may participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this SECTION 10.3, and the Indemnifying Party
shall bear its own costs and expenses with respect to such participation.
The Indemnifying Party shall not settle or compromise any Third Party
Claim unless (i) the terms of such compromise or settlement require no more than
the payment of money (i.e., such compromise or settlement does not require the
Indemnified Party to admit any wrongdoing or take or refrain from taking any
action), (ii) the full amount of such monetary compromise or settlement will be
paid by the Indemnifying Party, and (iii) the Indemnified Party receives as part
of such settlement a legal, binding and enforceable unconditional satisfaction
and/or release, in form and substance reasonably satisfactory to it, providing
that such Third Party Claim and any claimed lability of the Indemnified Party
with respect thereto is being fully satisfied by reason of such compromise or
settlement and that the Indemnified Party is being released from any and all
obligations or liabilities it may have with respect thereto. The Indemnified
Party shall not settle or admit liability to any Third Party Claim without the
prior written consent of the Indemnifying Party unless (x) the Indemnifying
Party has disputed its potential liability to the Indemnified Party, and such
dispute either has not been resolved or has been resolved in favor of the
Indemnifying Party or (y) the Indemnifying Party has failed to respond to the
Indemnified Party's Claim Notice.
EXHIBIT 1 - Page 32
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(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice (the
"INDEMNITY NOTICE") describing in reasonable detail the nature of the claim, an
estimate of the amount of damages attributable to such claim to the extent
feasible (which estimate shall not be conclusive of the final amount of such
claim) and the basis of the Indemnified Party's request for indemnification
under this Agreement.
SECTION 10.4. DETERMINATION OF INDEMNIFIED AMOUNTS. The Indemnified
Amounts payable by an Indemnifying Party hereunder shall be determined (i) by
the written agreement of the parties, (ii) by mediation, (iii) by binding
arbitration pursuant to SECTION 11.6 hereof, (iv) by a final judgment or decree
of any court of competent jurisdiction, or (v) by any other means agreed to in
writing by the parties. A judgment or decree of a court shall be deemed final
when the time for appeal, if any, shall have expired and no appeal shall have
been taken or when all appeals taken have been fully determined. In calculating
or determining the Indemnified Amounts, such calculation or determination shall
take into account the actual receipt of any amounts from any third party and the
reductions to such Indemnified Amounts in SECTION 10.7.
SECTION 10.5. LIMITATION OF SHAREHOLDERS' LIABILITY.
(a) Notwithstanding anything to the contrary contained in ARTICLE X,
the aggregate liability of the Shareholders for any event or occurrence giving
rise to the Shareholders being required to indemnify Parent Indemnified Parties
pursuant to SECTION 10.1 of this Agreement shall be limited to the sum of the
Merger Consideration plus the amounts deducted from the cash portion of the
Merger Consideration pursuant to SECTION 3.1(A)(ii).
(b) Parent Indemnified Parties are entitled to indemnification
pursuant to SECTION 10.1 only to the extent that the amount of any Indemnified
Amount, individually or in the aggregate, exceeds $25,000 and then to the full
amount of such Indemnified Amount.
SECTION 10.6. LIMITATION OF PARENT'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in ARTICLE X,
the aggregate liability of Parent for any event or occurrence giving rise to
Parent being required to indemnify Shareholders' Indemnified Parties pursuant to
SECTION 10.2 shall be limited to $1,000,000.
(b) Company Indemnified Parties are entitled to indemnification
pursuant to SECTION 10.2 only to the extent that the amount of any Indemnified
Amount, individually or in the aggregate, exceeds $25,000 and then to the full
amount of such Indemnified Amount.
SECTION 10.7. LIMITATION ON INDEMNIFIED AMOUNTS. Notwithstanding any
provision of this ARTICLE X to the contrary, Indemnified Amounts owed by an
Indemnifying Party to an Indemnified Party shall be reduced by the amount of any
mitigating recovery or benefit (net of reasonable expenses and tax and other
costs incurred in obtaining such recovery or benefit) an Indemnified Party shall
have received or otherwise enjoyed with respect thereto from: (i) any recovery
under any insurance policies, without regard to whether the Indemnified Party or
another person paid the
EXHIBIT 1 - Page 33
<PAGE>
premiums therefor; and (ii) the amount of tax or other economic benefit (if any)
to any Indemnified Party or its affiliate occurring in connection with the
occurrence of any action, cause of action, arbitration, proceeding, loss,
damage, remediation, liability, strict liability, judgment, fine, penalty and
expense in connection with an event leading to the accrual of Indemnified
Amounts. If such a mitigating recovery or benefit set forth in SECTION 10.7(I)
and (II) above is received or enjoyed by an Indemnified Party after it receives
payment or other credit under this Agreement with respect to Indemnified
Amounts, then a refund equal in aggregate amount to the mitigating recovery, net
of reasonable expenses and tax or other costs incurred in obtaining recovery,
shall be made promptly to the Indemnifying Party.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.1. SURVIVAL. The representations, warranties, covenants and
agreements (including but not limited to indemnification obligations) set forth
in this Agreement and in any certificate or instrument delivered in connection
herewith shall be continuing and shall survive the Closing for a period of one
year following the Closing Date; PROVIDED, however, that in the case of all such
representations, warranties, covenants and agreements, there shall be no such
termination with respect to any such representation, warranty, covenant or
agreement as to which a bona fide claim has been asserted by written notice of
such claim delivered to the party or parties making such representation,
warranty, covenant or agreement (or otherwise obligated with respect thereto)
prior to the expiration of such survival period.
SECTION 11.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, mailed by
registered or certified mail (return receipt requested) or sent via facsimile to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Merger Sub to:
Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, Texas 77057
Attention: Mark A. Rome
Telecopy: 713/369-1760
with a copy to:
Locke Liddell & Sapp LLP
3400 Chase Tower
600 Travis
Houston, Texas 77002
Attention: Michael T. Peters
Telecopy: 713/223-3717
EXHIBIT 1 - Page 34
<PAGE>
(b) if to the Company (prior to Closing) or the Shareholders, to:
National Resource Recovery, Inc.
323 Martindale Street
Sparta, Michigan 49345
Attention: James R. Rosendall, Jr.
Telecopy: 616/887-1188
with a copy to:
Wardrop & Wardrop, P.C.
800 NBD Bank Building
200 Ottawa Avenue Northwest
Grand Rapids, Michigan 49503
Telecopy: 616/459-7273
SECTION 11.3. INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way or interpretation of
this Agreement. In this Agreement, unless a contrary intention appears, (i) the
words "herein", "hereof" and "hereunder" and other words of similar import refer
to this Agreement as a whole and not to any particular Article, Section or other
subdivision and (ii) reference to any Article or Section means such Article or
Section hereof. No provision of this Agreement shall be interpreted or construed
against any party hereto solely because such party or its legal representative
drafted such provision.
SECTION 11.4. MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
and (b) shall not be assigned by operation of law or otherwise except that
Merger Sub may assign this Agreement to any other wholly-owned Subsidiary of
Parent, but no such assignment shall relieve the Parent or the Merger Sub, as
the case may be, of its obligations hereunder.
SECTION 11.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE.
SECTION 11.6. BINDING ARBITRATION.
(a) GENERAL. Notwithstanding any provision of this Agreement to the
contrary, upon the request of any party (defined for the purpose of this
provision to include affiliates, principles and agents of any such party), any
dispute, controversy or claim arising out of, relating to, or in connection
with, this Agreement or any agreement executed in connection herewith or
contemplated hereby, or the breach, termination, interpretation, or validity
hereof or thereof (hereinafter referred to as a "DISPUTE"), shall be finally
resolved by mandatory and binding arbitration in accordance with the terms
hereof. Any party to this Agreement may bring an action
EXHIBIT 1 - Page 35
<PAGE>
in court to compel arbitration of any Dispute. Any party who fails or refuses to
submit any Dispute to binding arbitration following a lawful demand by the
opposing party shall bear all costs and expenses incurred by the opposing party
in compelling arbitration of such Dispute.
(b) GOVERNING RULES. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of the arbitration, except as they may be
modified herein or by mutual agreement of the parties. The seat of the
arbitration shall be Houston, Texas. Notwithstanding SECTION 11.5, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. ss.ss. 1 et seq. (the "FEDERAL ARBITRATION ACT"). The arbitrator shall
award all reasonable and necessary costs (including the reasonable fees and
expenses of counsel) incurred in conducting the arbitration to the prevailing
party in any such Dispute. The parties expressly waive all rights whatsoever to
file an appeal against or otherwise to challenge any award by the arbitrators
hereunder; PROVIDED, that the foregoing shall not limit the rights of either
party to bring a proceeding in any applicable jurisdiction to confirm, enforce
or enter judgment upon such award (and the rights of the other party, if such
proceeding is brought to contest such confirmation, enforcement or entry of
judgment, but only to the extent permitted by the Federal Arbitration Act).
(c) NO WAIVER; PRESERVATION OF REMEDIES. No provision of, nor the
exercise of any rights under this Agreement shall limit the right of any party
to apply for injunctive relief or similar equitable relief with respect to the
enforcement of this Agreement or any agreement executed in connection herewith
or contemplated hereby, and any such action shall not be deemed an election of
remedies. Such rights can be exercised at any time except to the extent such
action is contrary to a final award or decision in any arbitration proceeding.
The institution and maintenance of an action for injunctive relief or similar
equitable relief shall not constitute a waiver of the right of any party,
including without limitation the plaintiff, to submit any Dispute to arbitration
nor render inapplicable the compulsory arbitration provisions of this Agreement.
(d) ARBITRATION PROCEEDING. In addition to the authority conferred
on the arbitration tribunal by the rules specified above, the arbitration
tribunal shall have the authority to order reasonable discovery, including the
deposition of party witnesses and production of documents. The arbitral award
shall be in writing, state the reasons for the award, and be final and binding
on the parties. All statutes of limitations that would otherwise be applicable
shall apply to any arbitration proceeding. Any attorney-client privilege and
other protection against disclosure of confidential information, including
without limitation any protection afforded the work-product of any attorney,
that could otherwise be claimed by any party shall be available to and may be
claimed by any such party in any arbitration proceeding. No party waives any
attorney-client privilege or any other protection against disclosure of
confidential information by reason of anything contained in or done pursuant to
or in connection with this Agreement. Each party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information to the parties' legal counsel or auditors or those required by
applicable law. The arbitrators shall determine the matters in dispute in
accordance with the substantive law of Delaware, without regard to conflict of
law rules.
(e) APPOINTMENT OF ARBITRATORS. The arbitration shall be conducted
by three
EXHIBIT 1 - Page 36
<PAGE>
(3) arbitrators. The party initiating arbitration (the "CLAIMANT") shall appoint
its arbitrator in its request for arbitration (the "REQUEST"). The other party
(the "RESPONDENT") shall appoint its arbitrator within thirty (30) days after
receipt of the Request and shall notify the Claimant of such appointment in
writing. If the Respondent fails to appoint an arbitrator within such thirty
(30) day period, the arbitrator named in the Request shall decide the
controversy or claim as sole arbitrator. Otherwise, the two (2) arbitrators
appointed by the parties shall appoint a third (3rd) arbitrator within thirty
(30) days after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the third (3rd) arbitrator has accepted the
appointment, the two (2) party-appointed arbitrators shall promptly notify the
parties of the appointment. If the two (2) arbitrators appointed by the parties
fail to appoint a third (3rd) arbitrator or so to notify the parties within the
time period prescribed above, then the appointment of the third (3rd) arbitrator
shall be made by the American Arbitration Association, which shall promptly
notify the parties of the appointment. The third (3rd) arbitrator shall act as
Chair of the panel.
(f) OTHER MATTERS. This arbitration provision constitutes the entire
agreement of the parties with respect to its subject matter and supersedes all
prior discussions, arrangements, negotiations and other communications on
dispute resolution. This arbitration provision shall survive any termination,
amendment, renewal, extension or expiration of this Agreement or any agreement
executed in connection herewith or contemplated hereby unless the parties
otherwise expressly agree in writing. The obligation to arbitrate any dispute
shall be binding upon the successors and assigns of each of the parties.
SECTION 11.7. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 11.8. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 11.9. ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof.
SECTION 11.10. VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
EXHIBIT 1 - Page 37
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and the Shareholders
have executed and delivered this Agreement effective as of the date first
written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
Ross M. Patten, Chairman and CEO
NRR ACQUISITION CORP.
By: /s/ ROSS M. PATTEN
Ross M. Patten, President
NATIONAL RESOURCE RECOVERY, INC.
By: /s/ JAMES R. ROSENDALL, JR.
James R. Rosendall, Jr., President
THE SHAREHOLDERS
/s/ JAMES R. ROSENDALL, JR.
James R. Rosendall, Jr.
/s/ KEVIN P. ROSENDALL
Kevin P. Rosendall
EXHIBIT 1 - Page 38
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EXHIBIT A
GLOSSARY
For purposes of this Agreement, the following terms shall have the meaning
specified or referred to below when capitalized (or if not capitalized, unless
the context clearly requires otherwise) when used in this Agreement.
"BUSINESS FACILITY" includes any property (whether real or personal) which
the Company or any of its Subsidiaries currently leases, operates, or owns or
manages in any manner or which the Company or any of its Subsidiaries or any of
their respective organizational predecessors formerly leased, operated, owned or
managed in any manner.
"ENVIRONMENTAL CLAIM" means any claim; litigation; demand; action; cause
of action; suit; loss; cost, including, but not limited to, attorneys' fees,
diminution in value, and expert's fees; damage; punitive damage; fine, penalty,
expense, liability, criminal liability, strict liability, judgment, governmental
or private investigation and testing; notification of status of being
potentially responsible for clean-up of any facility or for being in violation
or in potential violation of any Requirement of Environmental Law; proceeding;
consent or administrative orders, agreements or decrees; lien; personal injury
or death of any person; or property damage, whether threatened, sought, brought
or imposed, that is related to or that seeks to recover losses, damages, costs,
expenses and/or liabilities related to, or seeks to impose liability for: (i)
improper use or treatment of wetlands, pinelands or other protected land or
wildlife; (ii) noise; (iii) radioactive materials (including naturally occurring
radioactive materials ["NORM"]; (iv) explosives; (v) pollution, contamination,
preservation, protection, decontamination, remediation or clean-up of the air,
surface water, groundwater, soil or protected lands; (vi) solid, gaseous or
liquid waste generation, handling, discharge, release, threatened release,
treatment, storage, disposal or transportation; (vii) exposure of persons or
property to Materials of Environmental Concern and the effects thereof; (viii)
the release or threatened release (into the indoor or outdoor environment),
generation, extraction, mining, beneficiating, manufacture, processing,
distribution in commerce, use, application, transfer, transportation, treatment,
storage, disposal or Remediation of Materials of Environmental Concern; (ix)
injury to, death of or threat to the health or safety of any person or persons
caused directly or indirectly by Materials of Environmental Concern; (x)
destruction caused directly or indirectly by Materials of Environmental Concern
or the release or threatened release of any Materials of Environmental Concern
or any property (whether real or personal); (xi) the implementation of spill
prevention and/or disaster plans relating to Material of Environmental Concern;
(xiii) community right-to-know and other disclosure laws; or (xiii) maintaining,
disclosing or reporting information to Governmental Authorities of any other
third person under any Environmental Law. The term, "Environmental Claim," also
includes, without limitation, any losses, damages, costs, expenses and/or
liabilities incurred in testing.
"ENVIRONMENTAL LAW" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, legal doctrine, guidance document, order, consent agreement,
order or consent judgment, decree, injunction, requirement or
Exhibit A to
Exhibit 1 - Page 1
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agreement with any governmental entity or any judicial or administrative
decision relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water, vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety, (y) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, application, production, release
or disposal of Materials of Environmental Concern, in each case as amended from
time to time, or (z) health, worker protection or community's right to know. The
term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and
the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Occupational Safety and Health Act of 1970,
each as amended from time to time, and (ii) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability
or obligations for injuries or damages due to, or threatened as a result of, the
presence of, effects of or exposure to any Materials of Environmental Concern.
"ENVIRONMENTAL PERMITS" means all permits, licenses, certificates,
registrations, identification numbers, applications, consents, approvals,
variances, notices of intent, and exemptions necessary for the ownership, use
and/or operation of any current Business Facility or to conduct the Company's
business as currently conducted in compliance with Requirements of Environmental
Laws.
"GAAP" means generally accepted accounting principals applied on a
consistent basis.
"INTELLECTUAL PROPERTY" includes all fictitious business names, trade
names, brand names, registered and unregistered trademarks, service marks and
applications, all patents and patent applications, all copyrights in both
published works and unpublished works, and all inventions, processes, formulas,
patterns, designs, know-how, trade secrets, confidential information, software,
technical information, process technology, plans, drawings and blue prints
owned, used or licensed by the Company or its Subsidiaries as licensee or
licensor.
When used in this Agreement in connection with the Company and its
Subsidiaries, or Parent and its Subsidiaries, as the case may be, "MATERIAL
ADVERSE EFFECT" means any event, occurrence, fact, condition, change,
development or effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including intangible assets),
liabilities, financial condition, results of operations, properties (including
intangible properties) or business prospects of the Company and all of its
Subsidiaries or the Parent and all of its Subsidiaries, as applicable, taken as
a whole.
"MATERIALS OF ENVIRONMENTAL CONCERN" means: (i) those substances included
within the statutory and/or regulatory definitions or listings of "hazardous
substance," "solid waste," "medical waste," "special waste," "hazardous waste,"
"extremely hazardous substance," "regulated
Exhibit A to
Exhibit 1 - Page 2
<PAGE>
substance," "hazardous materials," or "toxic substances," under any
Environmental Law; (ii) any material, waste or substance which is or contains:
(A) petroleum, oil or a fraction thereof, (B) explosives, or (C) radioactive
materials (including naturally occurring radioactive materials); and (iii) such
other substances, materials, or wastes that are or become classified or
regulated as hazardous or toxic under any applicable federal, state or local law
or regulation. To the extent that the laws or regulations of any applicable
state or local jurisdiction establish a meaning for any term defined herein
through reference to federal Environmental Laws which is broader than the
meaning under such federal Environmental Laws, such broader meaning shall apply.
"NET WORKING CAPITAL" means current assets less current liabilities as
determined in accordance with GAAP.
"REMEDIATION" means any action necessary to: (i) comply with and ensure
compliance with the Requirements of Environmental Laws and (ii) the taking of
all reasonably necessary precautions to protect against and/or respond to,
remove or remediate or monitor the release or threatened release of Materials of
Environmental Concern at, on, in, about, under, within or near the air, soil,
surface water, groundwater or soil vapor at any Business Facility of the Company
or any of its Subsidiaries or of any property affected by the business
operations, acts, omissions or Materials of Environmental Concern of the Company
or any of its Subsidiaries.
"REQUIREMENT(S) OF ENVIRONMENTAL LAW(S)"means all requirements,
conditions, restrictions or stipulations of Environmental Laws imposed upon or
related to the Company or any of its Subsidiaries or the assets, Business
Facilities and/or the business of the Company or any of its Subsidiaries.
"SUBSIDIARY" shall mean, when used with reference to an entity, any other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions, or a majority of the outstanding voting securities of which,
are owned directly or indirectly by such entity.
"TAXES" shall mean any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
severance, environmental, license, net worth, payroll, employment, franchise,
transfer and recording taxes, fees and charges, imposed by the IRS or any other
taxing authority (whether domestic or foreign including, without limitation, any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.
"TAX RETURN" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns and documents (i) with respect
Exhibit A to
Exhibit 1 - Page 3
<PAGE>
to or accompanying payments of estimated Taxes or (ii) with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information, including any
schedule or attachment thereto and any amendment thereof.
Exhibit A to
Exhibit 1 - Page 4
<PAGE>
EXHIBIT B
POOLING OF INTEREST CRITERIA
ATTRIBUTES OF COMBINING ENTERPRISES
(a) AUTONOMY CONDITION. Each of the combining enterprises is autonomous and
has not been a subsidiary or division of another enterprise within two
years before the plan of combination is initiated.
(b) INDEPENDENCE CONDITION. Each of the combining enterprises is
independent of the other combining enterprises.
MANNER OF COMBINING INTERESTS
(c) ONE-YEAR RULE. The combination is effected in a single transaction or is
completed in accordance with a specific plan within one year after the
plan is initiated.
(d) COMMON-STOCK-FOR-COMMON-STOCK-CONDITION. An enterprise offers and issues
only common stock with rights identical to those of the majority of its
outstanding voting common stock in exchange for substantially all of the
voting common stock interest of another enterprise at the date the plan of
combination is consummated.
(e) CHANGE-IN-EQUITY-INTERESTS CONDITION. None of the combining enterprises
changes the equity interest of the voting common stock in contemplation of
effecting the combination either within two years before the plan of
combination is initiated or between the dates the combination is initiated
and consummated; changes in contemplation of effecting the combination may
include distributions to stockholders and additional issuances, exchanges,
and retirements of securities.
(f) TREASURY-STOCK CONDITION. Each of the combining enterprises reacquires
shares of voting common stock only for purposes other than business
combinations, and no enterprise reacquires more than a normal number of
shares between the dates the plan of combination is initiated and
consummated.
(g) PROPORTIONATE-INTEREST CONDITION. The ratio of the interest of an
individual common stockholder to those of other common stockholders in a
combining enterprise remains the same as a result of the exchange of stock
to effect the combination.
(h) VOTING-RIGHTS CONDITION. The voting rights to which the common stock
ownership interests in the resulting combined enterprise are entitled are
exercisable by the stockholders; the stockholders are neither deprived of
nor restricted in exercising those rights for a period.
Exhibit B to
Exhibit 1 - Page 1
<PAGE>
(i) CONTINGENCY CONDITION. The combination is resolved at the date the plan is
consummated and no provisions of the plan relating to the issue of
securities or other consideration are pending.
ABSENCE OF PLANNED TRANSACTIONS
(j) The combined enterprise does not agree directly or indirectly to retire or
reacquire all or part of the common stock issued to effect the
combination.
(k) The combined enterprise does not enter into other financial arrangements
for the benefit of the former stockholders of a combining enterprise, such
as a guaranty of loans secured by stock issued in the combination, that in
effect negates the exchange of equity securities.
(l) The combined enterprise does not intend or plan to dispose of a
significant part of the assets of the combining enterprises within two
years after the combination other than disposals in the ordinary course of
business of the formerly separate enterprise and to eliminate duplicate
facilities or excess capacity.
Exhibit B to
Exhibit 1 - Page 2
<PAGE>
EXHIBIT C
POOLING TRANSFER RESTRICTIONS AGREEMENT
This Pooling Transfer Restrictions Agreement (this "AGREEMENT") is
executed and delivered this 1st day of March, 1999 by and between Synagro
Technologies, Inc. ("SYNAGRO"), National Resource Recovery, Inc. (the
"COMPANY"), and the undersigned shareholders of the Company (the
"SHAREHOLDERS").
WHEREAS, Synagro and the Company entered into an Agreement and Plan of
Merger of even date herewith (the "MERGER AGREEMENT") pursuant to which NRR
Acquisition Corp., a subsidiary of Synagro, will be merged with the Company (the
"MERGER"), and
WHEREAS, Synagro has required as a condition to entering into the Merger
Agreement that the Company and the Shareholders and each other affiliate of the
Company deliver to Synagro an agreement in substantially the form hereof.
NOW, THEREFORE, in consideration of Synagro's agreement to enter into the
Merger Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned, intending to be
legally bound, hereby agree as follows:
1. The Shareholders agree that they will not sell, pledge, transfer or
otherwise dispose of any shares of the Company's common stock, par value $1.00
per share ("COMPANY COMMON STOCK"), within 30 days prior to the Closing Date (as
defined in the Merger Agreement). The Shareholders further agree that until the
publication of financial results covering at least 30 days of post-Merger
combined operations of the Company and Synagro, they will not sell, pledge,
transfer or otherwise dispose of any shares of the Synagro common stock, $.002
par value per share ("SYNAGRO COMMON STOCK"), to be acquired by them in the
Merger. The Shareholders further agree that they will not sell, pledge, transfer
or otherwise dispose of any shares of the Synagro Common Stock to be acquired by
them in the Merger except in a manner which is consistent with any additional
requirements for Synagro's accounting for the Merger as a pooling of interests,
including without limitation any new requirements imposed by the applicable
provisions of the Securities Act of 1933, as amended (the "SECURITIES ACT"), the
Securities Exchange Act of 1934 (the "EXCHANGE ACT"), and the respective rules
and regulations thereunder.
2. The Shareholders further acknowledge and agree that they will be
subject to Rule 145 promulgated by the Securities and Exchange Commission under
the Securities Act, and agree not to transfer any Synagro Common Stock received
by them in the Merger except in compliance with the applicable provisions of the
Securities Act, the Exchange Act, and the respective rules and regulations
thereunder.
3. The Shareholders agree that the shares of Synagro Common Stock to be
issued to them in the Merger will bear a restrictive transfer legend in
substantially the following form:
Exhibit C to
Exhibit 1 - Page 1
<PAGE>
The shares represented by this certificate are subject to a Pooling
Transfer Restrictions Agreement dated March 1, 1999 which restricts any
sale or other transfer of such shares prior to the earlier to occur of (i)
public release by Synagro Technologies, Inc. of 30 days of post-merger
combined operations of National Resource Recovery, Inc. and Synagro
Technologies, Inc., or (ii) May 15, 1999. The issuer will furnish to the
record holder of this certificate, without charge, upon written request to
the issuer at its principal place of business, a copy of the Pooling
Transfer Restrictions Agreement.
Synagro agrees to instruct its transfer agent to remove the restrictive legend
from any certificates evidencing shares subject hereto promptly following the
expiration of the transfer restrictions described in Section 1.
4. The Company agrees and the Shareholders acknowledge and agree that the
Company will not permit the transfer of any shares of Company Common Stock by
the Shareholders or any other Company affiliate within 30 days prior to the
Effective Time.
5. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
Exhibit C to
Exhibit 1 - Page 2
<PAGE>
IN WITNESS WHEREOF, the undersigned set his hand effective as of the day
first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ ROSS M. PATTEN
Ross M. Patten, Chairman and CEO
NATIONAL RESOURCE RECOVERY, INC.
By: /s/ JAMES R. ROSENDALL, JR.
James R. Rosendall, Jr., President
SHAREHOLDERS
/s/ JAMES R. ROSENDALL, JR.
James R. Rosendall, Jr.
/s/ KEVIN P. ROSENDALL
Kevin P. Rosendall
Exhibit C to
Exhibit 1 - Page 3
<PAGE>
EXHIBIT D
EMPLOYMENT AND CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made between NATIONAL RESOURCE RECOVERY, INC., ("NRR") a
Michigan corporation with its principal place of business at 323 Martindale St.,
Sparta, MI 49345 and James R. Rosendall, Jr. residing at 1284 Valley View Ct.,
Grand Rapids, Michigan 49544 ("ROSENDALL").
WHEREAS, ROSENDALL and NRR desire and agree to formalize the employment
relationship that will commence between NRR and ROSENDALL upon the merger of NRR
Acquisition Corp.with NRR (the "Merger") by means of this Employment and
Confidentiality Agreement (the "Agreement");
NOW, THEREFORE, IN CONSIDERATION OF THE PROMISES AND MUTUAL COVENANTS
HEREIN CONTAINED, AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, IT IS MUTUALLY COVENANTED AND
AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS.
1. BASIC COMPENSATION
For the services rendered by ROSENDALL to NRR, NRR shall pay ROSENDALL a
base salary at the rate of $100,000 per year (the "Basic Compensation") during
the Initial Term, and then as agreed upon from time to time by the parties
hereto.
2. BONUSES
IN ADDITION TO BASIC COMPENSATION, ROSENDALL SHALL ALSO BE ELIGIBLE TO
PARTICIPATE IN THE NRR BONUS PROGRAM THAT MAY BE ESTABLISHED FROM TIME TO TIME.
SUCH BONUS PROGRAM CHANGES FROM TIME TO TIME AND NRR MAKES NO GUARANTEE THAT ANY
BONUS SHALL BE PAID. ANY SUCH BONUS PAID WILL BE DISCRETIONARY AND BASED ON THE
FINANCIAL PERFORMANCE OF THE COMPANIES AND ROSENDALL'S INDIVIDUAL JOB
PERFORMANCE AS DETERMINED BY NRR MANAGEMENT. ROSENDALL WILL BE ELIGIBLE TO
PARTICIPATE IN THE BONUS PROGRAM AT THE REGIONAL MARKETING LEVEL. ROSENDALL WILL
RECEIVE A COPY OF THE PLAN IN MARCH 1999 WHEN IT IS FINALIZED.
3. INITIAL TERM
Commencing on the effective date of the Merger, ROSENDALL agrees to be
employed by NRR, and NRR agrees to employ ROSENDALL, to serve as Regional Vice
President-Market Development and to perform by and on behalf of NRR such
services for NRR (i) as are typical of that position or an employee in a
substantially similar position, and (ii) as may be requested by the senior
officers or the board of directors of NRR. During the period beginning on the
date of this Agreement and extending for one year (the "INITIAL TERM"),
ROSENDALL's employment hereunder
Exhibit D to
Exhibit 1 - Page 1
<PAGE>
may not be voluntarily terminated by NRR or ROSENDALL; provided, however, that
NRR may terminate ROSENDALL for cause at any time, if any of the following
events ("Cause") has occurred:
(a) ROSENDALL willfully and continually, without proper legal cause,
has failed or refused to use his best efforts to follow the directions of
the senior officers or the board of directors of NRR;
(b) ROSENDALL has been convicted of, or has pleaded guilty or nolo
contendere to a charge that he committed a felony;
(c) ROSENDALL has perpetrated a fraud against, or theft of
property of, NRR or any affiliate of NRR;
(d) As a result of his negligence or willful misconduct, ROSENDALL
has violated any applicable federal or state law or regulation and, as a
result of such violation, has become, or has caused NRR to become, the
subject of any legal action or administrative proceeding or a suspension
of any right or privilege, which action, proceeding or suspension could
have a material adverse effect on the reputation, prospects, condition or
operations of NRR;
(e) As a result of his negligence or willful misconduct, ROSENDALL
has committed any act that causes, or shall knowingly or recklessly fail
to take reasonable and appropriate action to prevent, any material adverse
effect to the reputation, prospects, condition or operations of NRR;
(f) ROSENDALL has violated any of the provisions of this
Agreement; or
(g) ROSENDALL dies or becomes physically or mentally unable to
perform his duties hereunder at any time.
AT ANY TIME AFTER THE INITIAL TERM, ROSENDALL OR NRR MAY VOLUNTARILY TERMINATE
ROSENDALL'S EMPLOYMENT UPON 30 DAYS PRIOR WRITTEN NOTICE BY EITHER PARTY TO THE
OTHER, WITHOUT THE PAYMENT OF SEVERANCE PAY OF ANY KIND.
4. DUTIES AND EXTENT OF SERVICES
ROSENDALL will be engaged as NRR's Regional Vice President-Market
Development. NRR agrees to employ ROSENDALL primarily in the states of Michigan,
Illinois and Wisconsin during the term of this Agreement. The precise services
of ROSENDALL may be extended or curtailed, from time to time, at the direction
of NRR. ROSENDALL shall devote ROSENDALL's entire working time, attention, and
energies to the business of NRR except for a reasonable amount of time that may
be spent on Alliance Leasing & Rental or other real estate matters. ROSENDALL
shall receive time off for holidays and any other days as specified by NRR, and
shall assume and
Exhibit D to
Exhibit 1 - Page 2
<PAGE>
perform further reasonable responsibilities and duties that may be assigned to
him from time to time by NRR.
5. VACATION
ROSENDALL is granted three (3) weeks paid vacation during the Initial
Term.
6. AUTO ALLOWANCE
ROSENDALL shall receive an auto allowance of $500 per month from NRR. The
auto allowance may be considered ordinary income for withholding tax purposes.
This auto allowance is intended to reimburse ROSENDALL for the business use of
his personal automobile.
7. BUSINESS EXPENSES
ROSENDALL shall be reimbursed by NRR for the reasonable and customary
business expenses incurred by him in the performance of ROSENDALL's duties as a
NRR employee. Business expenses include reimbursement for business miles driven
at the rate of $0.09 per mile. Such expenses will be reimbursed through
ROSENDALL's timely submission of a properly prepared expense report supported by
receipts in accordance with the NRR's standard expense reporting procedures.
8. BENEFITS
ROSENDALL will be entitled to participate in the standard NRR employee
benefit plans made available by NRR in accordance with the eligibility
requirements and terms and conditions of the individual programs. The individual
plans and summary plan descriptions govern the specific terms and conditions.
9. OWNERSHIP
ROSENDALL agrees that all developments made and works created by ROSENDALL
or under his direction in connection with employment shall be the sole and
complete property of NRR and that any and all copyrights and other proprietary
interests to such works shall belong to NRR.
10. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
(a) NONDISCLOSURE. During the term of employment and for three years
thereafter, ROSENDALL agrees to keep Confidential all information provided by
NRR, excepting only such information as is already known to the public, and
including any such information and material relating to any customer, vendor,
licensor, licensee, or other party transacting business with NRR, and not to
release, use, or disclose the same except with the prior written permission of
NRR, or as otherwise ordered by a court of competent jurisdiction.
Exhibit D to
Exhibit 1 - Page 3
<PAGE>
All records, files, memorandums, reports, price lists, customer lists,
drawings, plans, sketches, documents, equipment, and the like, relating to the
business of NRR, which ROSENDALL shall use or prepare or come into contact with,
shall remain the sole property of NRR.
(b) POSSESSION. ROSENDALL agrees that, upon request by NRR, and in
any event upon termination of employment, ROSENDALL shall turn over to NRR all
documents, papers, or other material in his possession or under his control
which may contain or be derived from confidential information, together with all
documents, notes, or other work product which is connected with or derived from
ROSENDALL's services to NRR whether or not such material is at the date hereof
in ROSENDALL's possession. ROSENDALL agrees that he shall have no proprietary
interest in any work product developed or used by ROSENDALL and arising out of
his employment by NRR. ROSENDALL shall, from time to time as may be requested by
NRR, do all things that may be necessary to establish or document NRR's
ownership of any such work product, including, but not limited to, execution of
appropriate copyright applications or assignments.
(c) SURVIVAL OF COVENANT. The undertakings of this section of this
Agreement shall survive the termination or cancellation of the Agreement or of
ROSENDALL's employment.
11. COVENANT NOT TO COMPETE
For a period of thirty-six (36) months from the date of any termination of
ROSENDALL's employment with NRR, ROSENDALL shall not, directly or indirectly,
accept employment with or render any services to any other residuals, manure or
biosolids management business or form an association with or employ or offer to
employ in professional employment in a business competitive with NRR, anyone who
is or has been a director, officer, shareholder, or employee of NRR. This
restriction shall apply only in the states of Michigan, Illinois and Wisconsin.
Twenty percent of ROSENDALL'S Base Salary during the Initial Term is granted in
exchange for this covenant not to compete.
ROSENDALL acknowledges that the restrictions imposed by this Agreement are
reasonable and are fully understood by him and will not preclude ROSENDALL from
becoming gainfully employed following a termination of employment with NRR.
12. REMEDIES
ROSENDALL agrees that this Agreement is intended to protect and preserve
legitimate business interests of NRR. It is further agreed that any breach of
this Agreement may render irreparable harm to NRR. In the event of a breach by
ROSENDALL, NRR shall have available to it all remedies provided by law,
including, but not limited to, permanent injunctive relief to restrain ROSENDALL
from violating this Agreement. NRR shall also be entitled to commence legal
action against ROSENDALL for any breach of any confidentiality agreement and/or
confidentiality programs in effect at any time between ROSENDALL and NRR.
Notwithstanding any legal remedies available to NRR as a result of a breach of
this Agreement, in the event of a breach by
Exhibit D to
Exhibit 1 - Page 4
<PAGE>
ROSENDALL, NRR shall immediately be entitled to withhold and avoid payment of
any sums of money or other benefits then due or to become due under this or any
other Agreement between ROSENDALL and NRR.
13. GENERAL PROVISIONS
(a) NO WAIVER. The failure of NRR to terminate this Agreement for
the breach of any condition or covenant herein by ROSENDALL shall not affect
NRR's right to terminate for subsequent breaches of the same or other conditions
or covenants. The failure of either party to enforce at any time or for any
period of time any of the provisions of this Agreement shall not be construed as
a waiver of such provisions or of the right of the party thereafter to enforce
each and every such provision.
(b) NOTICES. Any notice hereby required or permitted to be given
shall be sufficiently given if in writing and mailed by registered or certified
mail, postage prepaid, to either party at the address of such party or at such
other address as shall have been designated by written notice by such party to
the other party.
(c ) ENTIRE CONTRACT. This Agreement shall constitute the entire
contract between the parties and supersedes all existing agreements between
them, whether oral or written, with respect to the subject matter hereof. No
change, modification or amendment of this Agreement shall be of any effect
unless in writing signed by ROSENDALL and by the President of NRR.
(d) GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Michigan.
(e) SEVERABILITY. Should any provision of this Agreement not be
enforceable in any jurisdiction, the remainder of the Agreement shall not be
affected thereby.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement on this
1st day of March, 1999.
/s/ JAMES R. ROSENDALL, JR.
JAMES R. ROSENDALL, Jr.
NATIONAL RESOURCE RECOVERY, INC.
By: /s/ MARK A. ROME
Mark A. Rome, Vice President
Exhibit D to
Exhibit 1 - Page 5
EXHIBIT 2
PRESS RELEASE
CONTACT:Ross M. Patten
CEO, Chairman
(713) 369-1700
FOR IMMEDIATE RELEASE: MARCH 3, 1999
SYNAGRO ANNOUNCES MICHIGAN ACQUISITION
HOUSTON, TEXAS, MARCH 3, 1999 --- SYNAGRO TECHNOLOGIES, INC. (NASDAQ
SMALLCAP: SYGR), the leading consolidator of the organic residuals
management industry, today announced the closing of the acquisition of
National Resource Recovery, Inc. (NRR). NRR is a leading biosolids
management company in the state of Michigan, transporting and land
applying approximately 140 million gallons of liquid biosolids annually.
James Rosendall, Jr., a former owner of NRR, will serve as Synagro's
Regional Vice President of Market Development. Mr. Rosendall noted that
"Synagro brings both the expertise and capital to expand NRR's regional
presence. The synergies of the merger will enhance NRR's ability to
provide both municipal and private-sector clients with complete and
cost-effective biosolids management solutions."
"We are very excited about this new addition to our existing Michigan
presence. NRR and Michigan Organic Resources will serve as a very strong
platform for growth in the region," said Ross M. Patten, Synagro's
Chairman and Chief Executive Officer.
The merger will be accounted for as a pooling of interests. Other terms of
the transaction were not disclosed. NRR is expected to add approximately
$4 million to Synagro's current annualized revenue run rate of $44 million
and is expected to be accretive to Synagro's 1999 earnings.
Synagro is the largest publicly traded company focused exclusively on
organic residuals management services, and has operations located
throughout the country. In addition to pursuing acquisitions in key
markets, the company plans to expand its internal growth and profitability
through increasing its bid contract business in established markets and by
pursuing new, emerging markets that complement its existing biosolids
infrastructure.
THIS PRESS RELEASE CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS, WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES OR OTHER FACTORS NOT UNDER
THE COMPANY'S CONTROL WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENT OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM THE RESULTS,
PERFORMANCE OR OTHER EXPECTATIONS IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS. THESE FACTORS INCLUDE, BUT ARE NOT LIMITED TO, (1) THE ABILITY
TO FIND, TIMELY CLOSE, AND INTEGRATE ACQUISITIONS, (2) CHANGES IN
ACCOUNTING PRACTICES AND TREATMENT FOR ACQUISITIONS, (3) UNSEASONABLE
WEATHER, (4) CHANGES IN GOVERNMENT REGULATIONS, AND (5) THE ABILITY TO
ACCESS DEBT AND EQUITY FINANCING WHEN NEEDED. OTHER FACTORS ARE DISCUSSED
IN THE COMPANY'S PERIODIC FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Exhibit 2 - Page 1
