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Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
APRIL 10, 2000 (MARCH 24, 2000)
SYNAGRO TECHNOLOGIES, INC.
(Exact name of registrant as
specified in its charter)
DELAWARE 0-21054 76-0511324
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification
of 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)
N/A
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 24, 2000, Synagro Technologies, Inc., a Delaware corporation
("Synagro"), acquired the biosolids operations of Whiteford Construction Co.,
Inc., a Maryland corporation ("Whiteford"), pursuant to an Asset Purchase
Agreement by and among Synagro and Whiteford, dated October 26, 1999, as amended
by Amendment No. 1 to the Asset Purchase Agreement, dated March 24, 2000 (as
amended, the "Asset Purchase Agreement"). Whiteford is a combination of a
regional land application company and special projects operation. Whiteford
operates in Pennsylvania and Maryland and offers a variety of services to
customers including pumping, dredging, digester and lagoon cleaning, dewatering
and land application of biosolids. Pursuant to the Asset Purchase Agreement,
Synagro paid to Whiteford an aggregate purchase price of $1,500,000 in cash. In
addition, Whiteford may be paid additional consideration under the Asset
Purchase Agreement as part of the purchase price if certain conditions provided
therein are satisfied. The purchase price was determined based upon an
evaluation of the business of Whiteford and the results of negotiations between
the parties. The acquisition will be recorded using the purchase method of
accounting.
On March 27, 2000, Synagro acquired all the outstanding capital stock
of Rehbein, Inc., a Minnesota corporation ("Rehbein"), pursuant to a Stock
Purchase Agreement by and among Synagro, Gerald L. Rehbein and Gordon W. Rehbein
(collectively, the "Shareholders"), dated October 26, 1999, as amended by the
Letter Agreement dated December 23, 1999, and Amendment No. 2 to the Stock
Purchase Agreement, dated March 27, 2000 (as amended, the "Stock Purchase
Agreement"). Rehbein is a regional land application company primarily servicing
sixteen medium to large municipalities and industrial customers in Minnesota,
Michigan and Wisconsin. Rehbein primarily performs biosolids land application,
reuse of lime treatment residuals, and the blending of ash byproducts with
biosolids for beneficial reuse. Pursuant to the Stock Purchase Agreement,
Synagro paid to the Shareholders an aggregate purchase price of $8,400,000 in
cash. The purchase price is subject to a working capital adjustment based on the
closing date balance sheet delivered ninety (90) days after the closing date. In
addition, pursuant to the terms of the Earnout Agreement, dated March 27, 2000,
by and among Synagro and the Shareholders, the Shareholders may be paid
additional earnout consideration as part of the purchase price if certain
financial thresholds provided therein are satisfied. The purchase price was
determined based upon an evaluation of the business of Rehbein and the results
of negotiations between the parties. The acquisition will be recorded using the
purchase method of accounting.
In order to fund the acquisitions of Whiteford and Rehbein, and to pay
the related transaction expenses, Synagro (i) sold 1,458 shares of Series C
Convertible Preferred Stock, par value $.002 per share ("Series C Preferred
Stock"), to GTCR Fund VII, L.P., a Delaware limited partnership ("GTCR Fund"),
for an aggregate purchase price of $1,458,000 pursuant to a Purchase Agreement
between Synagro and the GTCR Fund dated as of January 27, 2000, (ii) borrowed
$1,458,000 of subordinated indebtedness from GTCR Capital Partners, L.P., a
Delaware limited partnership ("GTCR Partners"), pursuant to a Subordinated Loan
Agreement between Synagro and GTCR Partners dated as of January 27, 2000 (the
"Loan Agreement"), and (iii) borrowed funds under the Amended and Restated
Senior Credit Agreement by and among Synagro, Bank of America, N.A. and certain
other lenders dated as of January 27, 2000. In
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connection with the Loan Agreement, Synagro also issued to GTCR Partners
warrants ("Warrants") to purchase 212.143 shares of Series C Preferred Stock.
The Warrants were immediately exercised by GTCR Partners at a price of $.01 per
share.
The foregoing discussion is only a summary and is qualified in its
entirety by reference to the attached Agreements filed as exhibits hereto and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The financial statements of Rehbein were previously reported
in the Company's definitive information statement filed on
March 9, 2000. The financial statements of Whiteford are not
required to be filed.
(b) Pro Forma Financial Information
As of the filing date of this Form 8-K, Synagro has found it
impracticable to file the required pro forma financial
information for Rehbein. Synagro intends to file the required
pro forma financial information at the earliest practicable
date but in any event no later than 60 days after the date the
initial report on Form 8-K was required to be filed. The pro
forma financial information for Whiteford is not required to
be filed.
(c) Exhibits
2.1 Asset Purchase Agreement, dated October 26, 1999, by
and between Synagro Technologies, Inc. and Whiteford
Construction Co., Inc.
2.2 Amendment No. 1 to the Asset Purchase Agreement,
dated March 24, 2000, by and between Synagro
Technologies, Inc. and Whiteford Construction Co.,
Inc.
2.3 Stock Purchase Agreement, dated October 26, 1999, by
and among Synagro Technologies, Inc., Gerald L.
Rehbein and Gordon W. Rehbein.
2.4 Letter Agreement, dated December 23, 1999, by and
among Synagro Technologies, Inc., Gerald L. Rehbein
and Gordon W. Rehbein.
2.5 Amendment No. 2 to the Stock Purchase Agreement,
dated March 27, 2000, by and among Synagro
Technologies, Inc., Gerald L. Rehbein and Gordon W.
Rehbein.
2.6 Earnout Agreement, dated March 27, 2000, by and among
Synagro Technologies, Inc., Gerald L. Rehbein and
Gordon W. Rehbein.
99 Press Release dated April 3, 2000, relating to the
acquisition of Rehbein and Whiteford.
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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: April 10, 2000 By: /s/ Mark A. Rome
--------------------------------------
Mark A. Rome, Executive Vice President
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C>
2.1 Asset Purchase Agreement, dated October 26, 1999, by and
between Synagro Technologies, Inc. and Whiteford Construction
Co., Inc.
2.2 Amendment No. 1 to the Asset Purchase Agreement, dated March
24, 2000, by and between Synagro Technologies, Inc. and
Whiteford Construction Co., Inc.
2.3 Stock Purchase Agreement, dated October 26, 1999, by and among
Synagro Technologies, Inc., Gerald L. Rehbein and Gordon W.
Rehbein.
2.4 Letter Agreement, dated December 23, 1999, by and among
Synagro Technologies, Inc., Gerald L. Rehbein and Gordon W.
Rehbein.
2.5 Amendment No. 2 to the Stock Purchase Agreement, dated March
27, 2000, by and among Synagro Technologies, Inc., Gerald L.
Rehbein and Gordon W. Rehbein.
2.6 Earnout Agreement, dated March 27, 2000, by and among Synagro
Technologies, Inc., Gerald L. Rehbein and Gordon W. Rehbein.
99 Press Release dated April 3, 2000, relating to the acquisition
of Rehbein and Whiteford.
</TABLE>
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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
SYNAGRO TECHNOLOGIES, INC.,
AND
WHITEFORD CONSTRUCTION CO., INC.
OCTOBER 26, 1999
EXHIBIT 2.1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
DEFINITIONS..............................................................................................1
Section 1.1. Accounting Terms.................................................................1
Section 1.2. Defined Terms....................................................................1
ARTICLE II
PURCHASE, SALE AND DELIVERY..............................................................................2
Section 2.1. Acquisition Assets...............................................................2
Section 2.2. Excluded Assets..................................................................3
Section 2.3. Purchase Price...................................................................3
Section 2.4. Allocation Reporting.............................................................4
Section 2.5. Closing..........................................................................4
Section 2.6. Closing Deliveries...............................................................4
Section 2.7. Prorations.......................................................................6
Section 2.8. Non-Assignment of Certain Contracts..............................................6
ARTICLE III
LIABILITIES AND OBLIGATIONS..............................................................................7
Section 3.1. Liabilities Not Assumed By Purchaser.............................................7
Section 3.2. Assumed Liabilities..............................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER..............................................................9
Section 4.1. Organization and Qualification...................................................9
Section 4.2. Authority; Binding Agreement.....................................................9
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER.................................................................9
Section 5.1. Organization and Qualification...................................................9
Section 5.2. Capitalization..................................................................10
Section 5.3. Authority; Non-Contravention; Approvals.........................................10
Section 5.4. Subsidiaries....................................................................11
Section 5.5. Financial Statements............................................................11
Section 5.6. Absence of Undisclosed Liabilities..............................................11
Section 5.7. Absence of Certain Changes or Events............................................11
Section 5.8. Litigation......................................................................12
Section 5.9. Accounts Receivable.............................................................12
Section 5.10. No Violation of Law; Compliance with Agreements.................................12
Section 5.11. Insurance.......................................................................12
Section 5.12. Taxes...........................................................................13
Section 5.13. Employee Benefit Plans..........................................................14
Section 5.14. Employee and Labor Matters......................................................15
Section 5.15. Environmental Matters...........................................................16
Section 5.16. Non-Competition Agreements......................................................18
Section 5.17. Title to Assets.................................................................18
Section 5.18. Contracts, Agreements, Plans and Commitments....................................19
Section 5.19. Supplies........................................................................20
</TABLE>
EXHIBIT 2.1
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<TABLE>
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Section 5.20. Brokers and Finders.............................................................20
Section 5.21. Intellectual Property...........................................................20
Section 5.22. Relationships...................................................................21
Section 5.23. Year 2000.......................................................................21
Section 5.24. Certain Payments................................................................21
Section 5.25. Books and Records...............................................................21
Section 5.26. Condition and Sufficiency of Assets.............................................21
ARTICLE VI
COVENANTS...............................................................................................22
Section 6.1. Conduct of Business by Seller Pending Closing...................................22
Section 6.2. Maintenance of Insurance........................................................22
Section 6.3. Other Offers....................................................................23
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
Section 7.1. Confidentiality.................................................................23
Section 7.2. Access to Information...........................................................23
Section 7.3. Employees.......................................................................24
Section 7.4. Taxes...........................................................................25
Section 7.5. Further Assurances..............................................................26
Section 7.6. Expenses and Fees...............................................................26
Section 7.7. Agreement to Cooperate..........................................................26
Section 7.8. Public Statements...............................................................26
Section 7.9. Notification of Certain Matters.................................................26
Section 7.10. Records.........................................................................27
Section 7.11. Accounts Receivable.............................................................27
Section 7.12. Open Contracts..................................................................27
ARTICLE VIII
CONDITIONS TO CLOSING...................................................................................28
Section 8.1. Conditions to Each Party's Obligation to Close..................................28
Section 8.2. Conditions to Obligation of the Seller..........................................28
Section 8.3. Conditions to Obligations of Purchaser..........................................28
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.......................................................................30
Section 9.1. Termination.....................................................................30
Section 9.2. Effect of Termination...........................................................31
Section 9.3. Extensions; Waiver..............................................................31
Section 9.4. Earnest Money...................................................................32
ARTICLE X
INDEMNIFICATION.........................................................................................32
Section 10.1. Seller and Shareholder's Indemnity Obligations..................................32
Section 10.2 Purchaser's Indemnity Obligations...............................................33
Section 10.3. Indemnification Procedures......................................................33
Section 10.4. Limitation of Liability.........................................................35
Section 10.5 Limitation of Purchaser's Liability.............................................35
</TABLE>
EXHIBIT 2.1
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<TABLE>
<S> <C>
ARTICLE XI
GENERAL PROVISIONS......................................................................................35
Section 11.1. Survival.......................................................................35
Section 11.2. Notices........................................................................36
Section 11.3. Interpretation.................................................................36
Section 11.4. Miscellaneous..................................................................37
Section 11.5. Governing Law..................................................................37
Section 11.6. Binding Arbitration............................................................37
Section 11.7. Amendment......................................................................39
Section 11.8. Counterparts...................................................................39
Section 11.9. Parties in Interest............................................................39
Section 11.10. Validity.......................................................................39
Section 11.11. Vehicle Transfers..............................................................39
</TABLE>
Exhibits
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<TABLE>
<S> <C>
Exhibit A Glossary
Exhibit B Intentionally Deleted
Exhibit C Documents Relating to Conveyance of Assets
Exhibit D Consulting Agreement
Exhibit E Leases
Exhibit F Transition Agreement
Exhibit G Covenant Not to Compete Agreement
</TABLE>
Schedules
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<TABLE>
<S> <C>
Schedule 2.1(i) Equipment
Schedule 2.1(ii) Motor Vehicles
Schedule 2.1(iv) Contracts
Schedule 2.1(vi) Permits
Schedule 2.1(xi) Books and Records
Schedule 2.3 Assumed Indebtedness
Schedule 2.4 Allocations
Schedule 3.1(g) Excluded Liabilities
Schedule 5.3 Authority; Non-Contravention; Approvals
Schedule 5.5 Financial Statements
Schedule 5.6 Absence of Undisclosed Liabilities
Schedule 5.7 Absence of Certain Changes or Events
Schedule 5.8 Litigation
Schedule 5.9 Accounts Receivable
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 5.22 Relationships
</TABLE>
EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of October 26, 1999 (this
"Agreement"), is by and between SYNAGRO TECHNOLOGIES, INC., a Delaware
corporation ("Purchaser"), and WHITEFORD CONSTRUCTION CO., INC., a Maryland
corporation ("Seller"). Purchaser and Seller are each referred to as a "Party"
and, collectively, they are sometimes referred to as the "Parties." FARRELL D.
WHITEFORD ("Shareholder") has joined this Agreement as a guarantor of Seller's
obligations under Article X of this Agreement as further set forth on the
signature page to this Agreement.
W I T N E S S E T H:
WHEREAS, Shareholder owns 1,600 shares of the issued and outstanding
shares of common stock, no par value per share, of Seller ("Seller Common
Stock"), which constitutes all of the issued and outstanding capital stock of
Seller; and
WHEREAS, Purchaser wishes to purchase from Seller and Seller wishes to
sell, transfer, assign and deliver to Purchaser substantially all of the assets
and contract rights (to the extent such contract rights are assignable) used by
Seller in connection with the operation of its biosolids management and division
(the "Business") on the terms and subject to the conditions set forth herein;
and
WHEREAS, Seller is making certain representations, warranties and
indemnities herein, and Shareholder has guaranteed the performance of such
indemnity obligations, as an inducement to Purchaser to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements stated herein, the receipt
and sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles ("GAAP") and on a basis not inconsistent with those
applied in the preparation of the financial statements referred to in Section
5.5 hereof.
SECTION 1.2. DEFINED TERMS. As used in this Agreement, certain words
and terms have the meanings ascribed to them in the Glossary attached hereto as
Exhibit A. Other capitalized terms have the meanings ascribed to them elsewhere
in this Agreement.
EXHIBIT 2.1
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ARTICLE II
PURCHASE, SALE AND DELIVERY
SECTION 2.1. ACQUISITION ASSETS. Subject to the terms and conditions of
this Agreement, and on the basis of the representations and warranties
hereinafter set forth, at the Closing (as hereinafter defined), Seller shall
sell, transfer, convey, assign and deliver to Purchaser, and Purchaser shall
acquire and purchase from Seller, all of Seller's right, title and interest in
and to the following:
(i) all of the machinery, equipment, trade fixtures, tools,
furniture, computers, appliances, implements, spare parts, supplies, leasehold
improvements, construction in progress and all other tangible personal property
listed on Schedule 2.1(i) hereto (collectively, the "Equipment");
(ii) all motor vehicles and rolling stock listed on Schedule
2.1(ii) hereto (collectively, the "Motor Vehicles");
(iii) all supplies, inventory, spare parts, safety equipment,
maintenance supplies, other supplies used or consumed in the Business and other
similar items which exist on the Closing Date (collectively, the "Supplies");
(iv) all right, title and interest in, to and under all
contracts (including, without limitation, all of the fee-for-service, operating
and other contracts of Seller), leases (other than the lease with respect to the
real property owned by Shareholder and Donna Whiteford), agreements, equipment
or other lease licenses, government contract awards, management agreements and
building service agreements applicable to the Business and to which Seller is a
party on the Closing Date or by which any of the Acquisition Assets (as
hereinafter defined) are then bound including, without limitation, those listed
on Schedule 2.1(iv) hereto (collectively, the "Contracts");
(v) all goodwill and going concern value applicable to the
Business;
(vi) to the extent assignable, all right, title and interest
in all licenses, permits, applications, registrations, exemptions, notices of
intent, franchises, consents, waivers, variances, authorizations, approvals and
orders issued by any federal, state, municipal or other Governmental Authority
(collectively, the "Permits") relating to the Acquisition Assets or the
Business, and as listed on Schedule 2.1(vi) hereto;
(vii) all cash and receivables of Seller which have been
received as payment or billed in advance for services to be performed under the
Contracts or otherwise by Purchaser on or after Closing;
(viii) all software, patents, patent applications, processes,
shop rights, formulas, brand names, trade secrets, servicemarks, tradenames,
trademarks, copyrights, intellectual
EXHIBIT 2.1
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property, drawings, and any similar items and related rights owned by or
licensed to Seller to the extent assignable and applicable to the Business,
together with any goodwill associated therewith and all rights of action on
account of past, present and future unauthorized use or infringement thereof;
(ix) the right to use the name "Whiteford Environmental
Services" and all derivations thereof in connection with Purchaser's future
operation of the Business;
(x) all rights under express or implied warranties from the
suppliers of Seller with respect to the Acquisition Assets, to the extent they
are assignable;
(xi) all books, records, papers and instruments of Seller that
are listed on Schedule 2.1(xi) hereto and confidential information, if any,
relating to the Business;
(xii) all personnel files and other materials relating to
employees of Seller who are to be offered employment by Purchaser as
contemplated by Section 6.1 hereof;
(xiii) all records of compliance and noncompliance with the
laws, regulations, ordinances and orders applicable to the Acquisition Assets or
the Business;
(xiv) all right, title and interest in, to and under all
rights, privileges, claims, causes of action, and options relating or pertaining
to the Acquisition Assets or the Business;
(xv) subject to the specific listings of Equipment and Motor
Vehicles set forth in this Section 2.1 and the exclusions set forth in Section
2.2 hereof, all other or additional privileges, rights, interests, properties
and assets of every kind and description and wherever located that are used or
intended for use in connection with, or that are necessary to the continued
conduct of, the Business as presently conducted.
Subject to Section 2.2 hereof, all of the assets referenced in this
Section 2.1 are collectively referred to as the "Acquisition Assets".
SECTION 2.2. EXCLUDED ASSETS. Notwithstanding Section 2.1 hereof,
Seller is not selling and Purchaser is not purchasing pursuant to this Agreement
any of the following, all of which shall be retained by Seller (collectively,
the "Excluded Assets"):
(a) All employee benefit plans (as defined in ERISA) and all
other similar benefit plans, programs, arrangements or commitments (whether
written or oral) of Seller.
(b) all other assets of Seller not specifically described in
Section 2.1 above.
SECTION 2.3. PURCHASE PRICE. (a) The aggregate purchase price (the
"Purchase Price") for the purchase of the Acquisition Assets and the
representations, warranties, covenants and agreements referenced herein shall be
cash equal to FOUR MILLION SIX HUNDRED
EXHIBIT 2.1
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THOUSAND DOLLARS ($4,600,000) less (1) Seller's Indebtedness as of Closing paid
by Purchaser and (2) a working capital allowance of Two Hundred Fifty-Nine
Thousand One Hundred Ninety-Three Dollars ($259,193.00). For purposes of this
Agreement, "Indebtedness" means the indebtedness and other long-term liabilities
of Seller (determined in accordance with GAAP) listed on Schedule 2.3.
(b) Upon execution of this Agreement, Purchaser has delivered
to Seller the sum of $100,000, which amount serves as earnest money (together
with any interest thereon, the "Earnest Money"). The Earnest Money shall be
applied against the Purchase Price at Closing. The refundability of the Earnest
Money shall be governed by the provisions of Section 9.4 of this Agreement.
SECTION 2.4. ALLOCATION REPORTING. Unless otherwise agreed in writing
by Purchaser and Seller, (i) Schedule 2.4 hereto sets forth the allocations
established by Purchaser and Seller of the Purchase Price (and any other items
constituting consideration paid by Purchaser or received by Seller in connection
with the disposition of the Acquisition Assets) among the Acquisition Assets;
(ii) the allocations set forth on Schedule 2.4 hereto will be used by Purchaser
and Seller as the basis for reporting asset values and other items for purposes
of all required Tax Returns (including any Tax Returns required to be filed
under Section 1060(b) of the Code and the Treasury regulations thereunder); and
(iii) Purchaser and Seller shall not assert, in connection with any audit or
other proceeding with respect to Taxes, any asset values or other items
inconsistent with the allocations set forth on Schedule 2.4 hereto.
SECTION 2.5. CLOSING. Subject to the terms and provisions of Articles
VIII and IX, and subject to Purchaser's right to extend the date of Closing as
provided herein, the closing of the purchase and sale (the "Closing") provided
for in this Agreement shall take place on October 29, 1999, or at such other
time and place as the Parties shall agree, at the law offices of Greg N. Reamer;
provided, that Closing may take place prior to October 29, 1999 if at least two
days prior to the Closing Purchaser notifies the Seller of its desire to close;
provided, further, that if the Closing has not occurred on or before October 31,
1999, Purchaser may extend the date on which the Closing shall take place to be
any day on or before November 30, 1999, as selected by Purchaser upon three days
advance written notice (however, the Closing shall not take place during the
dates of November 4, 1999 through November 8, 1999), by providing written notice
of such extension to Seller by October 31, 1999 (the "Extension"). The date on
which the Closing occurs is referred to in this Agreement as the "Closing Date."
SECTION 2.6. CLOSING DELIVERIES.
(a) At the Closing, Shareholder or Seller, as appropriate,
shall deliver to Purchaser:
(i) the Acquisition Assets;
EXHIBIT 2.1
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(ii) such bills of sale and other instruments of sale,
transfer, conveyance, assignment and delivery covering the Acquisition Assets or
any part thereof, each attached hereto as Exhibit C, executed by Seller or other
appropriate parties, as Purchaser may reasonably require to assure the full and
effective sale, transfer, conveyance, assignment and delivery to Purchaser of
the Acquisition Assets free and clear of any rights and claims of third parties
including, but not limited to, the following:
(1) a bill of sale, general assignment and conveyance
by Seller transferring to Purchaser good and
marketable title to all of the Acquisition
Assets, in the form attached hereto as Exhibit C;
(2) all documents in the form attached hereto as
Exhibit C, required for the assignment of
Seller's rights under all registrations, Permits
and licenses (to the extent permitted by law),
equipment or motor vehicle leasing agreements,
motor vehicle and rolling stock titles, rights
under sales and/or purchase orders and of
Seller's rights under all other Contracts
(including the operating contracts of Seller
listed on Schedule 2.1(iv) hereto) constituting a
part of the Acquisition Assets; and
(3) originals of all of the Assumed Leases,
contracts, agreements, commitments, books,
records, files and other data that are included
in the Acquisition Assets.
(iii) a legal opinion from Greg N. Reamer, P.A., in form
satisfactory to Purchaser;
(iv) the Consulting Agreement between Purchaser and
Shareholder, attached as Exhibit D hereto;
(v) certified copies of resolutions duly adopted by the
board of directors of Seller and its shareholders, authorizing and approving the
execution and delivery of this Agreement, including the exhibits and schedules
hereto, and the consummation of the transactions contemplated herein;
(vi) new real property leases with respect to properties
owned by Shareholder, or any affiliates of Shareholder, in the form attached
hereto as Exhibit E;
(vii) a Transition Agreement in the form attached hereto
as Exhibit F; and
(viii) a Covenant Not to Compete Agreement between
Purchaser and Seller, in the form attached hereto as Exhibit G.
EXHIBIT 2.1
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(b) At the Closing, Purchaser shall deliver to Seller or
Shareholder, as appropriate:
(i) the Purchase Price set forth in Section 2.3;
(ii) the Consulting Agreement between Purchaser and
Shareholder, attached as Exhibit D hereto;
(iii) a Transition Agreement in the form attached hereto
as Exhibit F; and
(iv) documents relating to the removal of Shareholder from
any and all personal guaranties and/or surety obligations in connection with
Seller's debts or obligations listed on Schedule 2.3.
SECTION 2.7. PRORATIONS. The operation of Seller's business and related
revenue and expenses up to the close of business on the day before the Closing
Date shall be for the account of Seller and thereafter for the account of
Purchaser, which shall be determined on the accrual basis of accounting.
Expenses, including, but not limited to, utilities, personal property taxes,
rents, real property taxes, and, as appropriate, wages, payroll taxes, and
fringe benefits of employees of Seller hired by Purchaser, shall be prorated
between Seller and Purchaser as of the close of business on the day before the
Closing Date, the proration to be made and paid, insofar as reasonably possible,
on the Closing Date, with settlement of any remaining items to be made within
sixty (60) days following the Closing Date.
SECTION 2.8. NON-ASSIGNMENT OF CERTAIN CONTRACTS. Notwithstanding
anything to the contrary in this Agreement, to the extent that the assignment
hereunder of any Contract shall require the consent of any third party which has
not been obtained at the time of Closing, neither this Agreement nor any action
taken pursuant to its provisions shall constitute an assignment if such
assignment or attempted assignment would constitute a breach thereof or result
in the loss or diminution thereof; provided, however, that in each such case,
Seller shall use commercially reasonable efforts to obtain the consent with
respect to such Contracts of such other party to such assignment to Purchaser.
If any Contract is not assigned, Seller shall hire Purchaser as a subcontractor
to perform the obligations under such Contracts. Pursuant to the sub-contractor
relationship, Purchaser shall be entitled to receive all payments due under such
Contracts with respect to work performed after Closing, and Purchaser shall bear
all expenses incurred after Closing. In the event that a Contract does not
permit a sub-contractor relationship, Purchaser and Seller shall execute such
documents as may be necessary to accomplish performance of the Contract while
retaining for Purchaser's account the financial, accounting and economic results
associated with such Contract.
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ARTICLE III
LIABILITIES AND OBLIGATIONS
SECTION 3.1. LIABILITIES NOT ASSUMED BY PURCHASER. Subject to Section
3.2 hereof, Purchaser does not assume or agree to pay, perform or discharge, and
shall not be responsible for, any commitments, contracts, agreements or
obligations or claims against, or liabilities of, Seller or Shareholder
whatsoever (and Seller and Shareholder will at all times indemnify and hold
Purchaser harmless from and against any claim therefore or liability arising
therefrom), including without limitation, the following (collectively, the
"Excluded Liabilities"):
(a) except as set forth in Section 7.4(d), any income,
franchise or other similar tax or charge, if any, which may become payable by
reason of the sale and transfer of the Acquisition Assets under federal law or
under the laws of any state, or may be imposed upon Seller or Shareholder by
reason of receipt of the Purchase Price or relief from any liability pursuant to
this Agreement;
(b) any of the costs and expenses incurred in connection with
the future operations of Seller, and the costs and expenses of Seller and
Shareholder incurred in negotiating, entering into and carrying out their
obligations pursuant to this Agreement;
(c) any Indebtedness of Seller (except as listed on Schedule
2.3) incurred in the course of Seller's operations as of the Closing Date;
(d) any commitments and obligations required to have been
performed or complied with prior to the Closing Date pursuant to the Contracts,
except to the extent that such liability arises due to the defective (but not
delayed) performance after Closing by Purchaser (provided that nothing in this
provision or in this Agreement shall be interpreted to suggest that Purchaser
has agreed to assume any commitments or obligations under the Contracts required
to have been performed or complied with prior to the Closing Date);
(e) any Taxes for which Seller is liable;
(f) any prepayment penalties or other liabilities related to
retiring or extinguishing any Indebtedness of Seller;
(g) any liabilities arising out of or in connection with
periods or activity prior to the Closing Date related to OSHA, EEOC, EPA or any
other Governmental Authority, or any violation of law, and any unrecorded
liabilities or contingencies that are not expressly identified on Schedule
3.1(g);
(h) any liability or obligation (contingent or otherwise) of
Seller arising out of any claim, litigation, or proceeding threatened or pending
on or before the Closing Date or any claim, litigation, or proceeding threatened
or initiated after the Closing Date to the extent based on an act or omission of
Seller or any current or former officer, director, employee, agent or
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representative of Seller, or the operation of the Business and/or Acquisition
Assets occurring before the Closing Date, whether or not set forth on Schedule
5.8;
(i) any Environmental Claim and any claims, violations or
alleged violations of Environmental Law, or conditions that could give rise to
or relate to liability under Environmental Laws or similar legal requirements
attributable or relating to the Acquisition Assets (including, without
limitation, the operation thereof), the Business, Sellers or Shareholder,
including any liability (including without limitation strict liability) or
obligation arising under or relating to Environmental Laws with respect to the
Business Facility arising after the Closing Date resulting from, caused by or
related to any act or omission of third party or Sellers or any current or
former officer, director, employee, agent, representative, tenant or invitee of
Sellers which occurred on or prior to the Closing Date, or the continuation of
practices or operations with respect to the Acquisition Assets or the Business
Facility, that were occurring or in effect on or prior to the Closing Date;
(j) any liability arising out of or in connection with
Seller's defective performance of any Contract or any express or implied
warranty with respect to performance of any Contract prior to the Closing Date;
(k) any liability or obligation arising out of any employee
benefit plan (as defined in ERISA) and all other similar benefit plans,
programs, arrangements or commitments (whether written or oral) of Seller;
(l) any contingent or unknown liability of Seller and/or
Shareholder; and
(m) any liability or obligation under or in connection with or
related to the Excluded Assets.
SECTION 3.2. ASSUMED LIABILITIES. Purchaser assumes and agrees to pay,
perform and discharge when due solely the following debts, liabilities,
obligations and contracts of Seller (collectively, the "Assumed Liabilities");
(a) the Indebtedness to the extent listed on Schedule 2.3 and
deducted from the Purchase Price at Closing; and
(b) all commitments and obligations first required to be
performed or complied with pursuant to the Contracts after Closing and any
liability directly caused by Purchaser after Closing as a result of Purchaser's
defective performance or compliance with such commitments and obligations,
regardless of whether the work had been required to be performed by Seller prior
to the Closing; provided that nothing in this provision or in this Agreement
shall be interpreted to suggest that Purchaser has agreed to assume any
commitments or obligations under the Contracts required to have been performed
or complied with prior to the Closing Date.
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ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
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. Purchaser 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 on Purchaser and its
Subsidiaries, taken as a whole.
SECTION 4.2. AUTHORITY; BINDING AGREEMENT. Purchaser has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser and, assuming the due authorization, execution and
delivery hereof by Shareholder, constitutes a valid and legally binding
agreement of Purchaser and is enforceable against Purchaser 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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. Seller 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 the Acquisition Assets and to carry on the Business as
it is now being conducted. Seller 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. True, accurate and complete copies of
Seller's Articles of Incorporation and Bylaws, in each case as in effect on the
date hereof, including all amendments thereto, have heretofore been delivered to
Purchaser.
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SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of Seller consists of 5,000
shares of Seller Common Stock, of which 1,600 shares are issued and outstanding,
and no other shares of capital stock of Seller are issued and outstanding. All
of such issued and outstanding shares of Seller Common Stock were validly issued
and are fully paid, nonassessable and free of preemptive rights and are owned
beneficially and of record by Shareholder, free and clear of all restrictions,
liens, claims and encumbrances. No Subsidiary of Seller holds any shares of the
capital stock of Seller.
(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 Seller
or Shareholder to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock of Seller or obligating Seller or
Shareholder to grant, extend or enter into any such agreement or commitment or
(ii) obligations of Seller or 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 Seller or
Shareholder is a party or is bound with respect to the voting of any shares of
capital stock of Seller.
SECTION 5.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Seller has full power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been approved by the Board of Directors of Seller and by
Shareholder, and no other corporate proceedings on the part of Seller or
Shareholder are necessary to authorize the execution and delivery of this
Agreement or the consummation by Seller and Shareholder of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and Shareholder, and, assuming the due authorization, execution and
delivery hereof by Purchaser, constitutes a valid and legally binding agreement
of Seller and Shareholder, enforceable against Seller and Shareholder in
accordance with its terms.
(b) The execution and delivery of this Agreement by Seller and
Shareholder and the consummation by Seller and Shareholder 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
Seller or Shareholder under any of the terms, conditions or provisions of (i)
the articles of incorporation or bylaws of Seller, (ii) any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any court or governmental authority applicable to Seller or
Shareholder, or any of the Acquisition Assets, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
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contract, lease or other instrument, obligation or agreement of any kind to
which Seller or Shareholder is now a party or by which Seller or Shareholder or
any of the Acquisition Assets may be bound or affected.
(c) Except as set forth on Schedule 5.3, 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 Seller and Shareholder or the
consummation by Seller and Shareholder of the transactions contemplated hereby.
SECTION 5.4. SUBSIDIARIES. Seller does not have any Subsidiaries, nor
does Seller 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 5.5. FINANCIAL STATEMENTS. The financial statements of Seller
attached as Schedule 5.5 (the "Seller 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
Seller with respect to the Acquisition Assets and the Business 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 adjustments and any other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 5.6, Seller has not incurred any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature with respect
to the Acquisition Assets and the Business, except liabilities, obligations or
contingencies (i) which are accrued or reserved against Seller 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. Except as set forth
on Schedule 5.7, since June 30, 1999 and with respect to the Acquisition Assets
or the Business, (i) Seller has not declared or set aside or paid any noncash
dividend or made any other noncash distribution with respect to its outstanding
securities, or, directly or indirectly, purchased, redeemed or otherwise
acquired any of its securities; (ii) Seller 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) Seller 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) Seller has not
made any amendment to its Articles of Incorporation or Bylaws or changed the
character of its business in any manner; (v) the Business has been
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conducted in the ordinary course of business consistent with past practices; and
(vi) 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 Seller, threatened against, relating
to or affecting Seller 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, Seller 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 relating to
the Business reflected on Seller Financial Statements (net of related reserves)
represent sales actually made in the ordinary course of business from customers
who have not been more than 75 days in arrears in paying for prior bills, except
as set forth in Schedule 5.9.
SECTION 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) With respect to the Acquisition Assets and the Business,
(i) Seller is not in violation of and, to Seller's knowledge, 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; (ii) to
Seller's knowledge, 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; (iii)
Seller 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 "Seller Permits"); and (iv)
Seller is not in violation of the terms of any Seller Permit.
(b) Seller and Shareholder 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 Seller or (b) any contract, commitment, agreement,
indenture, mortgage, loan agreement, note, lease, bond, license, approval or
other instrument to which Seller 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 Seller that relate in any manner to the Business or
by which Seller or any of the Acquisition Assets are covered against present
losses, all of which are now in full force and effect.
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SECTION 5.12. TAXES.
(a) Except as set forth on Schedule 5.12, (i) Seller 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 Seller 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 Seller are true,
correct and complete in all material respects; (iii) Seller 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 Seller 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 Seller 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 upon any property
or assets of Seller, except for liens for Taxes not yet due; (vii) Seller has
not made any change in accounting methods since December 31, 1998; (viii) Seller
has not received a ruling from any taxing authority or signed an agreement with
any taxing authority; (ix) Seller 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 Seller, and as of the date of this
Agreement Seller 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 Seller 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 Seller 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 Seller 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 Seller 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) Seller has delivered or made available to Purchaser true, correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by Seller since
December 31, 1993.
(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 Seller, and no power of attorney granted by Seller
with respect to any Taxes is currently in force.
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Seller 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. Seller is not a party to any
agreement providing for the allocation or sharing of Taxes with an entity that
is not directly or indirectly a wholly-owned Subsidiary of Seller. Seller 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
Seller. Seller (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 Seller) and (ii) has no liability for Taxes of any Person (other than
any of Seller 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.
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 Seller 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 Seller 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 Seller, threatened, with respect to any such
Plans or Benefit Programs.
(b) Seller has heretofore delivered to Purchaser 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; and
(ii) each management or employment contract or contract
for personal services and a complete description of any understanding or
commitment between Seller and any officer, consultant, director, employee or
independent contractor of Seller.
(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. Seller 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
Seller, including, without limitation, severance, unemployment compensation,
golden parachute (defined in Section 280G of the Code) or otherwise, becoming
due to any employee of Seller, or (ii) increase any benefits otherwise payable
under any Plan or any Benefit Program.
(e) As of the date hereof, Seller does not sponsor any
simplified employee pension plans as described in Section 408(k) of the Code and
there are no claims against Seller for benefits relating to any such plans.
SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Seller has provided Purchaser with a true and complete
list dated as of June 30, 1999 (the "Employee Schedule ") of all employees of
Seller employed in the Business listing the title or position held, base salary
or wage rate and any bonuses, commissions, profit sharing, Seller'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 Seller. As of the date of this Agreement, the combined projected
annual payroll for the calendar year ending December 31, 1998 of Seller required
to operate the Business is not materially different from that as listed on the
Employee Schedule, and Seller has not entered into any agreement or agreements
pursuant to which the combined annual payroll of Seller relating to the
Business, 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.
(b) Except as set forth on Schedule 5.14, Seller is not a
party to or bound by any written employment agreements or commitments relating
to the Business, other than on an at-will basis. Seller 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. To the knowledge of Seller, all employees
of Seller who work in the Business 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 Seller, threatened against Seller
with respect to the Business and, during the past five years, Seller has not
experienced a work stoppage relating to the Business.
(c) Except as set forth on Schedule 5.14, with respect to the
Business (i) Seller is not a party to or bound by the terms of any collective
bargaining agreement or other union contract applicable to any employee of
Seller and no such agreement or contract has been requested by any employee or
group of employees of Seller, nor has there been any discussion with respect
thereto by management of Seller with any employees of Seller, (ii) Seller 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 Seller, or (iii) there is not currently
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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 Seller.
SECTION 5.15. ENVIRONMENTAL MATTERS. Without in any manner limiting any
other representations and warranties set forth in this Agreement and except as
disclosed on Schedule 5.15, with respect to the Business or the Acquisition
Assets.
(a) Neither Seller nor, to the knowledge of Shareholder, any
of its Business Facilities, is in violation of, or has violated, or has been or
is in non-compliance with, any Environmental Laws in connection with the
Business or the operation of the Acquisition Assets, including but not limited
to, the conduct of the Business or the ownership, use, maintenance or operation
of, or conduct of any of the Business Facilities by Seller.
(b) With respect to the Business and the operation of the
Acquisition Assets (and 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) Seller is not now, and (assuming the Environmental
Laws are not changed from those applicable on the date of Closing) will not be
in the future, as a result of the operation or condition of the business of
Seller on or prior to the date hereof, and as of 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) To the knowledge of Seller, there are no
Environmental Claims known, pending or threatened against Seller or any of its
Business Facilities, and there is no basis for same;
(iv) Seller and all of its Business Facilities have timely
filed applications for renewal of all Environmental Permits, Seller has all
environmental and pollution control equipment necessary to comply with all
Environmental Laws (including, without limitation, to comply with all applicable
Environmental Permits) applicable to the operation of
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the business of Seller as presently conducted, and Seller 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) Seller 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 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 Seller, and, to the knowledge of Seller and Shareholder, there are no
Materials of Environmental Concern on any Business Facility of Seller 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 Seller and Shareholder, none of
the off-site locations where Materials of Environmental Concern generated from
any Business Facility of Seller or for which Seller 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) Seller has not been named as a potentially
responsible party under, and no Business Facility of Seller 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
Seller is subject to any lien arising under Environmental Laws;
(x) Seller 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 of Seller or in connection with the business of Seller, nor is there
any basis for any of the foregoing, nor has Seller 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 Environmental Law that will require
future compliance costs on the part of Seller in excess of $50,000 above costs
currently expended in the ordinary course of business;
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(xii) There are no present or past events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
interfere with or prevent continued compliance by Seller with 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 Seller
relating to the ownership, use, maintenance or operation of any Business
Facility by Seller or in connection with the conduct of the business of Seller;
(xiii) There are no obligations, undertakings or
liabilities arising out of or relating to Environmental Laws which Seller has
agreed to, assumed or retained, by contract or otherwise;
(xiv) Seller has filed all notices, notifications,
financial security, waste management plans, or applications which are required
to be obtained or filed by Seller for the operation of its business or the use
or operation of any Business Facility of Seller;
(xv) Seller 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 Seller 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 "Seller" shall include any entity which is, in
whole or in part, a predecessor of Seller and all of its present and former
Subsidiaries and their predecessors.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Neither Seller 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 Seller. None of the Seller's shareholders, officers, directors, or
key employees is a party to any agreement which, by virtue of such person's
relationship with Seller, restricts Seller or any Subsidiary of Seller from,
directly or indirectly, engaging in any of the businesses as described above.
SECTION 5.17. TITLE TO ASSETS. Seller has good and marketable title to
all its assets relating to the Business and valid leasehold interests in its
leased assets and properties (other than any defect or encumbrances affecting
the landlord's or lessor's right, title and interest), as reflected in the most
recent balance sheet included in Seller Financial Statements, except for
properties and assets relating to the Business 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
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subject thereto or affected thereby, or otherwise impair Seller's business
operations (in the manner presently carried on by Seller), 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 Seller leases any real
property relating to the Business have been delivered to Purchaser 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
Seller 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 relating to the Business to which Seller is a party or by
which any of the Acquisition Assets are bound as of the date hereof:
(a) any contract, commitment or agreement that involves
aggregate expenditures by Seller of more than $10,000 per year;
(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
Seller of more than $10,000;
(c) any indenture, loan agreement or note under which Seller
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 Seller 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 Seller;
(g) any partnership, joint venture or construction and
operation agreement;
(h) any agreement of surety, guarantee or indemnification with
respect to which Seller is the obligor, outside of the ordinary course of
business;
(i) any contract that requires Seller 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 Seller to take any actions or incur expenses to remedy
non-compliance with any Environmental Law; and
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(k) any other contract material to Seller 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
Purchaser. All such contracts, agreements, plans and commitments (i) were duly
and validly executed and delivered by Seller and the other parties thereto and
(ii) are valid and in full force and effect. Seller has fulfilled all material
obligations required of Seller 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
assignment of the Contracts will vest in Purchaser all rights and benefits under
the Contracts and the right to operate the Business and Acquisition Assets under
the terms of the Contracts and to use the Acquisition Assets in the manner
currently operated and used by Seller.
SECTION 5.19. SUPPLIES. The Supplies of Seller are of a quantity and
quality that have been normal for Seller in the ordinary course of business of
Seller and are owned by Seller free and clear of any Liens.
SECTION 5.20. BROKERS AND FINDERS. Neither Seller nor Shareholder have
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of Seller to pay any finder's fees, brokerage
or agent commissions or other like payments in connection with the transactions
contemplated hereby, except for an agreement with The Summit Advisory which all
fees and commissions with respect thereto will be paid by Seller. Except for
such agreement with The Summit Advisory, there is no claim for payment by Seller
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. Seller 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 the Business or Acquisition Assets
(collectively the "Intellectual Property Rights"). Seller does not own any
patents. Seller has no knowledge of any infringement by any other person of any
of the Intellectual Property Rights. With respect to the Acquisition Assets or
its operation of the Business, Seller has not and does not violate or infringe
any intellectual property right of any other person, and Seller has not received
any communication alleging that it violates or infringes the intellectual
property right of any other person. With respect to the Acquisition Assets or
its operation of the Business, Seller has not been sued for infringing any
intellectual property right of another person. To the knowledge of Seller, there
is no claim or demand of any person pertaining to, or any proceeding which is
pending or threatened, that challenges the rights of Seller in respect of any
Intellectual Property Rights, or that claims that any default exists under any
Intellectual Property Rights. To the knowledge of Seller, 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.
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SECTION 5.22. RELATIONSHIPS. Except as set forth on Schedule 5.22,
since December 31, 1998, Seller has not received notice from any customer or
supplier relating to the Business or any party to any Contract involving more
than $20,000 annually with Seller (each a "Contract Party") that such customer,
supplier or Contract Party intends to discontinue doing business with Seller,
and, since such date, no customer, supplier or Contract Party has indicated any
intention (a) to terminate its existing business relationship with Seller or (b)
not to continue its business relationship with Seller, whether as a result of
the transactions contemplated hereby or otherwise. Seller has not entered into
or participated in any related party transaction relating to the Business or the
Acquisition Assets during the past three years.
SECTION 5.23. YEAR 2000. "Year 2000 Compliant" means as to any person
or entity that all software, firmware, microprocessing chips and other data
processing devices utilized by, and material to the business operations of, that
person or entity will be able to accurately process date data from, into and
between the twentieth and twenty-first centuries when used in accordance with
the applicable documentation setting forth the requirements for the use of the
specific item. Seller is scheduled to be Year 2000 Compliant with respect to the
Business and Acquisition Assets no later than December 1, 1999 (the "Compliance
Date"). Seller knows of no matter which would prevent Seller from becoming Y2K
Compliant on or about the Compliance Date.
SECTION 5.24. CERTAIN PAYMENTS. Neither Seller nor, to Seller's
knowledge, any shareholder, officer, director or employee of Seller has paid or
received or caused to be paid or received, directly or indirectly, in connection
with the Business or the Acquisition Assets (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 Seller or as permitted by applicable
law).
SECTION 5.25. BOOKS AND RECORDS. To the extent that they exist, all
personnel files, reports, accounting records, operational and maintenance
records, and all other records of every type and description that relate to the
Business and the Acquisition Assets have been prepared and maintained in
accordance with good business practices and, where applicable, in conformity
with applicable laws and regulations.
SECTION 5.26. CONDITION AND SUFFICIENCY OF ASSETS. To the knowledge of
Seller, all buildings, improvements and equipment included within the
Acquisition Assets have been maintained in the normal course of business. The
Acquisition Assets are sufficient for the continued conduct of the Business of
Seller after the Closing in substantially the same manner as conducted prior to
the Closing. Except as provided in Article V of this Agreement, (i) Seller makes
no representation or warranty with respect to the physical condition of the
improvements and equipment included in the Acquisition Assets, and (ii) should
the Closing occur, Purchaser will be accepting the improvements and equipment
included in the Acquisition Assets "AS IS WHERE IS".
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ARTICLE VI
COVENANTS
SECTION 6.1. CONDUCT OF BUSINESS BY SELLER PENDING CLOSING. After the
date hereof and prior to the Closing Date, unless Purchaser shall otherwise
agree in writing, Seller shall:
(a) conduct the Business in the usual and ordinary course
thereof;
(b) shall keep Purchaser closely advised of any material
developments relating to the Business as determined in the reasonable judgment
of Seller;
(c) permit Purchaser to have access at reasonable times to the
Acquisition Assets and to review and copy the books and records of the Business;
(d) maintain and preserve the Acquisition Assets in customary
repair, order and condition (ordinary wear and tear excepted);
(e) use all commercially reasonable efforts to preserve the
Business intact, to retain the services of Seller's officers and employees and
to preserve Seller's relationships with its suppliers, customers, and others
having business dealings with it with respect to the Business, including but not
limited to, by paying suppliers and vendors and other third parties in
accordance with its usual business in a timely fashion, and all Governmental
Authorities with which Seller has engaged in business related to the Business;
(f) use its best efforts to cause all of the representations
and warranties in Article V hereof to continue to be true and correct;
(g) continue to purchase supplies and similar items in the
ordinary course through the Closing Date;
(h) not make any new commitments (excluding bids for new
business) with respect to the Business in an amount greater than $50,000;
(i) not issue any shares, warranties or convertible
securities, grant any options, repurchase or redeem any of its shares of capital
stock, reclassify any of its outstanding stock, make any distribution of or sell
or dispose of Acquisition Assets outside the ordinary course; or
(j) enter into any transaction with respect to the Business or
the Acquisition Assets not in the usual and ordinary course of business.
SECTION 6.2. MAINTENANCE OF INSURANCE. Seller will maintain or cause to
be maintained the insurance policies or risk retention programs (or policies or
programs of substantially the
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same nature) relating to the Business or the Acquisition Assets in full force
and effect at all times until the Closing Date.
SECTION 6.3. OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, and continuing
through the earlier of Closing or the termination of this Agreement in
accordance with the terms hereof, Seller and Shareholder shall not, and shall
not permit any of Seller'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 Seller or the acquisition of an
equity interest in, or any portion of the Acquisition Assets of, Seller or (ii)
engage in negotiations with or disclose any nonpublic information relating to
the Business or Acquisition Assets or Purchaser, or afford access to the
Acquisition Assets, to any Person. Seller shall promptly notify and provide
copies to Purchaser of any offer, proposal or indication of interest, or
communication with respect thereto, delivered to or received from any third
party.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1. CONFIDENTIALITY. Without the express written consent of
all of the Parties, each of the Parties agrees to maintain in confidence and not
disclose to any other Person the terms of the transactions contemplated hereby
or the information delivered in connection with the proposed due diligence
investigation, other than disclosures required to obtain the approvals for the
transactions contemplated hereby, disclosures to those professionals and
advisors who have a need to know, disclosures of information already available
to the public or any other disclosures required by applicable law. In the event
that Purchaser, Seller or Shareholder is at any time requested or required (by
oral questions, interrogatories, request for information or documents, subpoena
or other similar process) to disclose any information supplied to it in
connection with this transaction, such Party agrees to provide the other Parties
prompt notice of such request so that an appropriate protective order may be
sought and/or such other Party may waive the first Party's compliance with the
terms of this Section 7.1.
SECTION 7.2. ACCESS TO INFORMATION. Shareholder shall, and shall cause
Seller to, give Purchaser, its accountants, counsel, financial advisors, and
other representatives (the "Purchaser Representatives") full access (and shall
otherwise fully cooperate, including by making available copies of all of the
following documents if reasonably requested by Purchaser which are susceptible
to photostatic reproduction) during normal business hours throughout the period
prior to Closing to all of the Acquisition Assets and all books 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 Seller can facilitate or
control), Contracts, premises, permits, Environmental Permits, licenses,
Governmental Authorizations, commitments of any nature (whether written or oral)
and records relating thereto, and shall permit Purchaser and Purchaser
Representatives to make such inspections (including without limitation
environmental inspections, sampling, and analysis) as
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they may require and furnish to Purchaser and Purchaser Representatives during
such period all such information concerning the Acquisition Assets and the
Business as they may reasonably request.
SECTION 7.3. EMPLOYEES.
(a) Purchaser may, but shall not be obligated to, offer
employment to any of the employees of Seller. Seller will not solicit, or
endeavor to solicit, after the Closing Date any employee or discourage any such
person from accepting such employment with Purchaser. Seller has not made any
representations or promises, oral or written, to employees of Seller concerning
employment by Purchaser.
(b) Purchaser shall not be responsible for any costs,
obligations or liabilities which may result from the termination of employment
by Seller of any employee of the Business not hired by Purchaser as of the first
payroll date after the Closing; provided, however, Purchaser shall be
responsible for and shall assume any and all costs, obligations or liabilities
directly related to the termination by Purchaser of any employee of the Business
who is hired by Purchaser on or after the Closing Date solely to the extent that
such costs, obligations or liabilities relate directly to the period beginning
with the hiring of such employee by Purchaser and ending with such termination
by Purchaser. Purchaser makes no representation with respect to the
comparability of Purchaser's employee benefits to those offered by Seller.
Purchaser specifically disclaims any obligation to remunerate employees of
Seller who, following the Closing Date, will be employed by Purchaser, at levels
comparable to the aggregate remuneration provided to such employees while
employed by Seller. Prior to the Closing Date, Seller shall have taken all
necessary actions to comply with the Worker Adjustment and Retraining
Notification Act (the "WARN Act") to the extent it is subject to the WARN Act,
and Purchaser shall not have any disclosure or announcement obligations or any
other responsibilities under the WARN Act as a result of the transactions
contemplated by this Agreement.
(c) Seller shall take such actions as it deems appropriate to
terminate, modify, alter or amend the existing Plans or Benefit Programs with
respect to employees of the Business due to the transactions contemplated by
this Agreement. Purchaser does not and shall not assume any of such Plans or
Benefit Programs, including, without limitation, any severance plans of Seller.
(d) Seller shall be solely responsible for and shall pay in
full to all of Seller's employees all compensation, bonuses and other payments,
and all sick pay, vacation pay, and any other benefits otherwise payable under
the Benefit Programs, accrued to the Closing for which Seller is obligated
thereunder, and Seller shall satisfy all such obligations to such employees.
(e) Seller will retain responsibility for, and continue to
pay, all hospital, medical, life insurance, disability, supplemental
unemployment and all other welfare plan expenses and benefits for each Seller
employee hired by Purchaser (and covered dependents) with respect to claims
incurred by such employee or their covered dependents prior to the
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Closing. Seller will retain responsibility for, and continue to pay, any life,
health or other welfare benefits payable to each former employee of Seller who
terminated employment with Seller (and their dependents) on or prior to the
Closing in respect of claims incurred on their behalf prior to the Closing. For
purposes of this paragraph, a claim is deemed incurred when the event that first
gave rise to the claim occurred, notwithstanding the fact that such benefits may
be paid at a subsequent date.
(f) Seller is responsible for any liabilities that may arise
with respect to application of Section 4980B of the Internal Revenue Code of
1986 or Part 6 of Subtitle B of Title I of ERISA ("COBRA") with respect to any
of its employees or covered dependents as a result of the transactions
contemplated by this Agreement, as well as for any prior COBRA violations which
occurred prior to Closing. Purchaser is not a successor employer for COBRA
purposes.
(g) Purchaser is not, and shall not be deemed to be, a
successor employer to Seller with respect to any Plans or Benefit Programs; and
no plan or other program adopted or maintained by Purchaser after the Closing is
or shall be deemed to be a "successor plan", as such term is defined in ERISA or
the Code, of any such Plan or Benefit Program.
SECTION 7.4. TAXES.
(a) LIABILITY FOR TAXES. Seller shall be liable for, and shall
indemnify and hold Purchaser and its Affiliates harmless from, (i) all Taxes
that are imposed on or incurred by Seller, (ii) all Taxes that are imposed on or
incurred with respect to the Acquisition Assets or the Business for any taxable
period ending on or before the Closing Date, (iii) a portion, determined as
described below, of any Taxes that are imposed on or incurred with respect to
the Acquisition Assets or the Business for any taxable period beginning prior to
and ending after the Closing Date ("Straddle Period") which is allocable to the
period ending on or before the Closing Date, (iv) any Taxes payable as a result
of a breach by Seller of any of the representations set forth in Section 5.12
hereof, and (v) any attorneys' fees or other costs incurred by Purchaser or its
Affiliates in connection with any payment from Seller under this Section 7.4(a).
The determination of the portion of any Taxes imposed on or incurred with
respect to the Acquisition Assets or the Business for a Straddle Period which is
allocable to the period ending on or before the Closing Date shall be made, in
the case of ad valorem, property or similar Taxes, if any, which are not
measured by or based upon production, or franchise or capital Taxes which are
not measured by or based upon net income, by allocating such Taxes on a per diem
basis, and, in the case of all other Taxes, by assuming that the period ending
on or before the Closing Date constitutes a separate taxable period and by
taking into account the actual taxable events occurring during such period.
(b) TAX RETURNS. Seller shall be responsible for the
preparation and filing of any Tax Return relating to the Acquisition Assets or
the Business that is originally due on or before the Closing Date. Purchaser
shall be liable for the preparation and filing of all other Tax Returns that
relate to the Acquisition Assets or the Business.
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(c) RIGHT TO REFUNDS. If Seller, on the one hand, or
Purchaser, on the other hand, receives a refund of any Taxes for which the other
is liable, then the Party receiving such refund shall, within 10 days after its
receipt, remit it to the other Party.
(d) TRANSFER AND SALES TAXES. Purchaser shall be liable for
and pay all transfer, sales, or similar Taxes imposed on or relating to the sale
or transfer of the Acquisition Assets. To the extent the Seller collects such
transfer, sales, or similar Taxes at or prior to the Closing Date, Seller shall
remit all such taxes to the appropriate taxing authorities.
SECTION 7.5. FURTHER ASSURANCES. Seller, Shareholder and Purchaser
shall execute and deliver to the other, at the Closing or thereafter, any other
instrument which may be requested by the other and which is reasonably
appropriate to perfect or evidence any of the sales, assignments, transfers or
conveyances contemplated by this Agreement or to transfer any Acquisition Assets
identified after the Closing or to obtain any consents or licenses necessary for
Purchaser to operate the Business in the manner operated by Seller prior to
Closing.
SECTION 7.6. EXPENSES AND FEES. Sellers shall pay all costs and
expenses incurred by Seller and Shareholder in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, any and
all broker's commissions, employee bonuses and the fees and expenses of Seller's
and Shareholder's attorneys and accountants, and will make all necessary
arrangements so that Purchaser will not be charged with any such cost or
expense. Purchaser shall pay all costs and expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby,
including without limitation, the fees and expenses of their attorneys and
accountants.
SECTION 7.7. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, 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 Seller.
SECTION 7.8. PUBLIC STATEMENTS. Except as required by law or the NASD,
the Parties shall obtain the written consent of the 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 consent, which will not be
unreasonably withheld.
SECTION 7.9. NOTIFICATION OF CERTAIN MATTERS. Shareholder, Seller and
Purchaser agree to give prompt notice to each other of, and to use their
respective reasonable best efforts to
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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 or another's
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 Closing and (ii) any material failure (or any failure in the case
of any covenant, condition or agreement containing any materiality
qualification) on its or another's 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.
SECTION 7.10. RECORDS. Purchaser agrees to provide reasonable access to
Seller after Closing to the books and records relating to the Acquisition Assets
acquired pursuant to this Agreement to the extent required in connection with
any proceeding, inquiry or investigation relating to the period prior to
Closing, provided that Seller agrees to maintain the confidentiality of such
books and records. Seller agrees to provide reasonable access to Purchaser after
Closing to the tax, financial and other books and records relating to the
Business and Acquisition Assets and retained by Seller, in connection with
Purchaser's operation of the Business after Closing. Nothing in this Agreement
shall impose any duty on the Parties to maintain such books and records for more
than three (3) years after the Closing. In the event that Purchaser or Seller
desire to discard the books and records after such three (3) year period, then
it shall provide written notice to the other party. If the other party desires
to take possession of such books and records it shall do so at its sole cost and
expense within 30 days of receiving notice. The Parties agree to coordinate the
transfer of possession of such books and records.
SECTION 7.11. ACCOUNTS RECEIVABLE. From and after the Closing Date,
Seller and Purchaser each agree to transfer or deliver, promptly after the
receipt thereof, any cash received as payment of accounts receivable due to the
other party for services rendered and sales occurring prior to the Closing, in
the case of Seller, and subsequent to the Closing, in the case of Purchaser.
SECTION 7.12. OPEN CONTRACTS. The Seller has represented that it is not
in breach or violation of or in default in the performance or observance of any
term or provision of any Contract as further set forth in Section 5.10. If,
however, at the time of Closing the Seller is unable to perform under any term
or provision of any Contract because of weather or other events over which the
Seller has no control and the Closing still occurs, Purchaser shall use
commercially reasonable efforts to complete performance under such Contracts,
including the portion, if any, that should have been completed prior to Closing.
In no event shall Purchaser be required to complete performance under any
Contracts in which the Seller is in default for reasons other then as set forth
in the preceding sentence. Purchaser shall be entitled to receive all payments
due under such Contracts with respect to work performed after Closing, including
payments for the portion, if any, that was to have been completed prior to
Closing, and Purchaser shall bear the reasonable expenses incurred after Closing
in completing such performance, except for damages, penalties and other losses
incurred as a result of the Seller's inability to perform
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under such Contracts. Nothing contained in this Section 7.12 shall be construed
as a waiver of Purchaser's conditions to close under Section 8.3 of the
Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE. The
respective obligations of each Party to close the transactions contemplated
hereby shall be subject to the fulfillment or waiver, if permissible, of the
following conditions on or prior to the Closing Date:
(a) no preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
transactions contemplated hereby 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 transactions contemplated by this Agreement or make the consummation of the
transaction contemplated by this Agreement illegal.
SECTION 8.2. CONDITIONS TO OBLIGATION OF SELLER. Unless waived by
Seller, the obligation of Seller to close the transactions contemplated herein
shall be subject to the fulfillment of the following additional conditions on or
prior to the Closing Date:
(a) Purchaser 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 Purchaser 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) Purchaser shall have removed Shareholder from any and all
personal guaranties and/or surety obligations in connection with Seller's debts
or obligations listed on Schedule 2.3; and
(d) Seller shall have received a certificate executed on
behalf of Purchaser by the President or a Vice President of Purchaser with
respect to (a) and (b) above.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PURCHASER. Unless waived by
Purchaser, the obligation of Purchaser to close the transactions contemplated
herein shall be subject to the fulfillment of the following additional
conditions on or prior to the Closing Date:
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(a) Seller 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 Seller 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 directly caused by Seller's
affirmative act or omission;
(d) Purchaser shall have received from Seller a bill of sale,
general assignment and conveyance by Seller transferring to Purchaser good and
marketable title to all of the Acquisition Assets in the form attached hereto as
Exhibit C;
(e) Purchaser shall have received from Seller all documents,
in the form attached hereto as Exhibit C, required for the assignment of
Seller's rights under all registrations, Permits and licenses (to the extent
permitted by law), equipment or motor vehicle leasing agreements, motor vehicle
and rolling stock titles, rights under sales and/or purchase orders and of
Seller's rights under all other Contracts (including the operating contracts of
Seller listed on Schedule 2.1(iv) hereto) constituting a part of the Acquisition
Assets;
(f) Purchaser shall have received from Seller originals of all
of the Assumed Leases, contracts, agreements, commitments, books, records, files
and other data that are included in the Acquisition Assets;
(g) Purchaser shall have received from Seller all consents and
approvals set forth on Schedule required in connection with (i) the execution,
delivery and performance of this Agreement and (ii) the assignment of the
Contracts and all other agreements necessary for Purchaser to conduct the
Business as it is currently being conducted by Seller, including, without
limitation, those consents listed on Schedule 5.3 in form satisfactory to
Purchaser;
(h) Purchaser shall have obtained financing in the amount of
$4,200,000 and pursuant to terms satisfactory to Purchaser to consummate the
transactions contemplated in this Agreement or Purchaser using commercially
reasonable efforts could reasonably be expected to have obtained financing in an
amount not less than $4,200,000 on commercially reasonable terms;
(i) Purchaser shall have received a legal opinion from legal
counsel to Seller, dated the Closing Date, in a form reasonable satisfactory to
Purchaser;
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(j) Shareholder shall have entered into a Consulting
Agreement, in the form attached hereto as Exhibit D;
(k) The Parties shall have entered into real property leases,
in the form attached hereto as Exhibit E; and
(l) Purchaser shall have received a certificate executed by
Seller with respect to (a) through (c) above.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) Seller shall have the right to terminate this Agreement:
(i) if the representations and warranties of Purchaser
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 thirty (30) days after written notice of such failure is given to
Purchaser by Seller;
(ii) if the transactions completed hereby are not
completed by October 31, 1999, (provided that (a) the right to terminate this
Agreement under this Section 9.1(a)(ii) shall not be available to Seller if a
breach by Seller or the failure of Seller to fulfill any obligation to Purchaser
under or in connection with this Agreement has been the cause of or resulted in
the failure of the transactions contemplated hereby to occur on or before such
date and (b) Purchaser has not exercised the Extension pursuant to Section 2.6);
(iii) if the transactions contemplated hereby are enjoined
by a final, unappealable court order; or
(iv) if Purchaser (A) fails 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) 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 Purchaser by Seller.
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(b) Purchaser shall have the right to terminate this
Agreement;
(i) if the representations and warranties of Seller 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 Seller by Purchaser;
(ii) if the transactions contemplated hereby are not
completed by October 31, 1999, as such date may be extended pursuant to Section
2.6 (provided that the right to terminate this Agreement under this Section
9.1(b)(ii) shall not be available to Purchaser if a breach by Purchaser or the
failure of Purchaser to fulfill any obligation to Seller under or in connection
with this Agreement has been the cause of or resulted in the failure of the
transactions contemplated hereby to occur on or before such date); or
(iii) if Seller (A) fails 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) does
not cure such default in all material respects (or in all respects in the case
of any covenant containing any materiality qualification) within thirty (30)
days after notice of such default is given to Seller by Purchaser.
(c) Seller and Purchaser mutually agree in writing.
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 Purchaser or
Seller 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 Seller, or
Purchaser or its stockholders, directors, officers, employees, agents or
representatives (except as set forth in Sections 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 Purchaser,
as a result of the actual damages Purchaser would sustain by reason of such
negligent or willful failure of Seller or Shareholder to perform their
obligations hereunder, could not be made whole by monetary damages, and it is
accordingly agreed that Purchaser 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 the Seller waives the defense in any such action for
specific performance that a remedy at law would be adequate.
SECTION 9.3. EXTENSIONS; WAIVER. At any time prior to the Closing Date,
the Parties may (a) extend the time for the performance of any of the
obligations or other acts of the other Parties,
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(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 to any such extension or waiver shall be valid
if set forth in an instrument in writing signed on behalf of such Party.
SECTION 9.4. EARNEST MONEY. If the transactions contemplated hereby
fail to close on or prior to October 31, 1999 due to a material breach by
Purchaser of its obligations under this Agreement, Seller shall retain the
Earnest Money as reimbursement for the costs and expenses incurred by Seller in
connection with the negotiation and execution of this Agreement. If the
transactions contemplated hereby fail to close for any reason other than due to
a material breach by Purchaser of its obligations under this Agreement, then
Seller shall promptly refund the Earnest Money to Purchaser. Notwithstanding
anything to contrary in this Agreement, if Purchaser exercises its right to the
Extension pursuant to Section 2.5 of this Agreement, Seller shall retain the
Earnest Money as an extension fee and as reimbursement for the costs and
expenses incurred by Seller in connection with the negotiation and execution of
this Agreement, unless a material breach by Seller or the failure of Seller to
fulfill any obligation under or in connection with this Agreement was the cause
of the Extension in which case the Earnest Money shall be reimbursed to
Purchaser or, if the Closing occurs, deducted from the Purchase Price.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. SELLER AND SHAREHOLDER'S INDEMNITY OBLIGATIONS. Seller
and Shareholder shall, jointly and severally, indemnify and hold harmless
Purchaser and its respective officers, directors, stockholders, employees,
agents, representatives and Affiliates (each a "Purchaser 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
Purchaser Indemnified Party, (i) relating to, resulting from or arising out of
(a) any breach or misrepresentation in any of the representations and warranties
made by or on behalf of Seller 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
Seller and Shareholder of or default by Seller and Shareholder under the terms
of this Agreement or any certificate or instrument delivered in connection with
this Agreement, (c) any liability of Seller or Shareholder not assumed by
Purchaser, including without limitation the Excluded Liabilities; or (ii)
relating to, resulting from or arising out of any allegation of a third party of
the events described in Sections 10.1(a), (b) or (c) above. 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) OF ANY
PARTY, INCLUDING ANY PURCHASER INDEMNIFIED PARTY.
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SECTION 10.2. PURCHASER'S INDEMNITY OBLIGATIONS. Purchaser shall
indemnify and hold harmless Shareholder and Shareholder's agents,
representatives and Affiliates (each a "Shareholder's Indemnified Party") from
and against any and all Indemnified Amounts incurred by a Shareholder's
Indemnified Party (i) as a result of (a) any breach or misrepresentation in any
of the representations and warranties made by or on behalf of Purchaser in this
Agreement or any certificate or instrument delivered in connection with this
Agreement, (b) any violation or breach by Purchaser of or default by Purchaser
under the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement, or (c) any liability of Purchaser, including
without limitation the Assumed Liabilities, or (ii) as a result of any
allegation of a third party of the events described in Section 10.2(a), (b) or
(c) above..
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) Any of the Parties 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.
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
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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. In such a situation, the
Indemnified Party shall have full control of such defense and proceedings and
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 liability 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.
(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.
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SECTION 10.4. LIMITATION OF LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of Seller for any event or occurrence giving
rise to Seller being required to indemnify Purchaser Indemnified Parties
pursuant to Section 10.1 of this Agreement shall be limited to $2,000,000.
(b) Purchaser 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 $50,000 and
then to the full amount of such Indemnified Amount not to exceed the limitations
described in Section 10.4(a).
SECTION 10.5. LIMITATION OF PURCHASER'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of Purchaser for any event or occurrence
giving rise to Purchaser being required to indemnify Shareholder's Indemnified
Parties pursuant to Section 10.2 shall be limited to $1,000,000.
(b) Seller 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 $50,000 and then to the full
amount of such Indemnified Amount, not to exceed the limitations described in
Section 10.5(a).
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 two (2) years following the Closing Date; provided, however, that in
the case of all representations, warranties, covenants and agreements
(including, but not limited to, indemnification obligations), 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 prior to the expiration of the survival period;
provided, further, that (i) the representations and warranties set forth in
Sections 5.2, 5.6 and 5.24 hereof shall survive the Closing indefinitely, (ii)
Sections 5.8, 5.10, 5.12 and 5.13 shall survive the Closing for the greater of
two (2) years or the statutory survival period, (iii) the indemnification
obligations of Seller set forth in Section 10.1(a) shall survive the Closing
with respect to the particular representations and warranties referenced in
provisos (i) and (ii) in this sentence for the periods set forth in provisos (i)
and (ii) as applicable, and (iv) the indemnification obligations of Seller and
Shareholder set forth in Sections 10.1(c) shall survive the Closing
indefinitely.
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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 Purchaser 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
600 Travis, Suite 3200
Houston, Texas 77002
Attention: Michael T. Peters
Telecopy: 713/223-3717
(b) if to Seller (prior to Closing) or Shareholder, to:
Whiteford Construction Co., Inc.
1605 Dooley Road
P.O. Box 428
Whiteford, Maryland 21160
Telecopy: 410/836-5604
Attention: Farrell D. Whiteford
with a copy to:
Greg N. Reamer, P.A.
Suite 311 Foxleigh Building
2330 West Joppa Road
Lutherville, Maryland 21093
Telecopy: 410/823-8860
SECTION 11.3. INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
interpretation of this Agreement. In this Agreement, unless a contrary intention
is specifically set forth, (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
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interpreted or construed against any Party 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 and the Schedules and Exhibits attached
hereto) (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 Purchaser may assign this
Agreement to any other wholly-owned Subsidiary of Purchaser, but no such
assignment shall relieve Purchaser 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 may bring an action 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 Baltimore, Maryland. Notwithstanding Section 11.6, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. Sections 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 any 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).
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(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 Parties 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. 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 with no right of appeal. 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 (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)
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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. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the Parties.
SECTION 11.8. 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 11.9. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each Party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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.
SECTION 11.11. VEHICLE TRANSFERS. Seller shall retain the legal title
to the Motor Vehicles until the Motor Vehicles have passed inspection and can be
titled in the name of Purchaser, but such period shall not exceed 120 days from
the Closing Date. Seller and Purchaser shall use commercially reasonable efforts
(at no cost and expense to Seller) in cooperation to transfer title to the Motor
Vehicles to the Purchaser within 60 days from the Closing Date. During such
period that Seller retains title (up to a maximum of 120 days) (i) Seller shall
maintain insurance on such Motor Vehicles (and the premium amounts of such
insurance shall be reimbursed by Purchaser), and (ii) Purchaser shall maintain
insurance on such Motor Vehicles which will provide primary coverage for
liability in an amount consistent with Synagro's current coverages (but not less
than $1,000,000 per occurrence). Seller, if requested by Purchaser, shall
deliver the title certificates to Purchaser or Purchaser's counsel to be held in
escrow. After title to the Motor Vehicles has been transferred to Purchaser (but
in any event at the end of the 120 day period set forth above) Purchaser shall
immediately return to Seller all Seller's license plates on any such Motor
Vehicles. At such time as any license plate for any Motor Vehicle is returned by
Purchaser to Seller, Seller shall have no obligation to continue to insure such
Motor Vehicle.
[SIGNATURE PAGE FOLLOWS]
EXHIBIT 2.1
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IN WITNESS WHEREOF, Purchaser, Seller and Shareholder have executed and
delivered this Agreement effective as of the date first written above.
PURCHASER:
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
-----------------------------------------
Mark A. Rome, Executive Vice President
SELLER:
WHITEFORD CONSTRUCTION CO., INC.
By: /s/ Farrell D. Whiteford
-----------------------------------------
Name: Farrell D. Whiteford
---------------------------------------
Title: President
--------------------------------------
Farrell D. Whiteford hereby executes this Asset Purchase Agreement
solely to evidence his agreement to guarantee the performance of all of Seller's
obligations under Article X of this Asset Purchase Agreement.
/s/ Farrell D. Whiteford
-----------------------------------------
FARRELL D. WHITEFORD
EXHIBIT 2.1
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<PAGE> 45
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.
"Affiliate(s)" with respect to any Person, means any Person directly or
indirectly controlling, controlled by or under common control with such Person,
and any natural Person who is an officer, director or partner of such Person and
any members of their immediate families living within the same household. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Benefit Program" means each 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 Seller
involved in the Business.
"Business Facility" or "Business Facilities" includes any property
(whether real or personal) which Seller or any of their Subsidiaries currently
lease, operate, or own or manage in any manner or which Seller or any of their
Subsidiaries or any of their respective organizational predecessors formerly
leased, operated, owned or managed in any manner.
"Code" means the Internal Revenue Code of 1986, as amended, or any
amending or superseding tax laws of the United States of America.
"Environmental Claim(s)" 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,
EXHIBIT 2.1
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Exhibit A - Page 1
<PAGE> 46
disposal or transportation; (vii) exposure of persons or property to Materials
or 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, transfer, transportation, treatment, storage, disposal of
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; (xii) 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(s)" 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 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 Permit(s)" 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 Seller's
business as currently conducted in compliance with Requirements of Environmental
Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
EXHIBIT 2.1
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<PAGE> 47
"GAAP" means generally accepted accounting principals applied on a
consistent basis.
"Governmental Authority" or "Governmental Authorities" means any nation
or government, any state or political subdivision thereof and any agency or
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government.
"Knowledge" means, when applicable to Seller, the actual current
knowledge of Farrell D. Whiteford, Gary Barlow and Donna Whiteford.
"Lien(s)" means any mortgage, pledge, hypothecation, security interest,
encumbrance, right of first refusal, option, lien, charge, condition,
restriction or burden of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction).
"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, the Acquisition Assets, or the liabilities,
financial condition, results of operations, (including intangible properties) or
business prospects of Seller and all of its Subsidiaries with respect thereto,
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," "medical waste," "special waste," "hazardous waste,"
"extremely hazardous substance," "regulated substance," "solid waste,"
"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.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.
"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 Seller or by any trade or business, whether or not
incorporated, which, together with Seller, is under common control, as described
in Section 414(b) or (c) of the Code.
EXHIBIT 2.1
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<PAGE> 48
"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 Seller or
any of its Subsidiaries or of any property affected by the business, operations,
acts omissions, or Materials of Environmental Concern of Seller 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 Seller or any of its Subsidiaries or the assets, Business Facilities
and/or the business of Seller 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(s)" 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 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 2.1
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Exhibit A - Page 4
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO THE
ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT (this "Amendment")
is entered into this 24th day of March, 2000 between Synagro Technologies, Inc.,
a Delaware corporation (the "Purchaser"), and Whiteford Construction Co., Inc.,
a Maryland corporation (the "Seller"). The Purchaser and the Seller are each a
"Party" and, collectively, they are sometimes referred to as the "Parties."
WHEREAS, the Parties hereto entered into an Asset Purchase Agreement
dated as of October 26, 1999 (the "Agreement"), whereby Seller agreed to sell to
Purchaser substantially all of the assets and contract rights (to the extent
such contract rights are assignable) used by Seller in connection with the
operation of its biosolids division (the "Business");
WHEREAS, the Parties hereby agree to amend the Agreement and the
Schedules attached thereto in certain respects as set forth below; and
WHEREAS, capitalized terms not defined herein shall have the meanings
given to them in the Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and intending to be legally bound
hereby, the Parties hereto agree as follows:
1. AMENDMENTS, ADDITIONS AND DELETIONS TO THE AGREEMENT.
(a) The Parties agree that Farrell D. Whiteford should not be
a Party and signatory to the Agreement and the Parties agree to amend
the Agreement by deleting the following sentence in the first paragraph
of the Agreement:
"FARRELL D. WHITEFORD ("Shareholder") has joined this
Agreement as guarantor of Seller's obligations under
Article X of this Agreement as further set forth on
the signature page of this Agreement."
(b) The Parties agree that the word "Shareholder" in the first
WHEREAS paragraph of the Agreement should be deleted and the following
words should be inserted in lieu thereof: "Farrell D. Whiteford
("Shareholder")".
(c) The Parties agree to amend Section 2.3(a) of the Agreement
in its entirety to read as follows:
EXHIBIT 2.2
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1
<PAGE> 2
"(a) The aggregate purchase price (the
"Purchase Price") for the purchase of the Acquisition
Assets and the representations, warranties, covenants
and agreements referenced herein shall be an amount
paid in cash at Closing equal to One Million Five
Hundred Thousand Dollars ($1,500,000), plus the
additional consideration referenced in Section 2.9,
and less the Indebtedness. For purposes of this
Agreement, "Indebtedness" means the indebtedness and
other long-term liabilities of Seller (determined in
accordance with GAAP) listed on Schedule 2.3."
(d) The Parties agree to amend Section 2.5 of the Agreement in
its entirety to read as follows:
"SECTION 2.5. CLOSING. Subject to the terms
and provisions of Article VIII and IX, the closing of
the purchase and sale (the "Closing") provided for in
this Agreement shall take place at the law offices of
Greg N. Reamer, as promptly as practicable (but in
any event on or before March 27, 2000), or at such
other time and place as the Parties shall agree. The
date on which the Closing occurs is referred to in
this Agreement as the "Closing Date."
(e) The Parties agree to delete Section 2.6(b)(iv) of the
Agreement in its entirety.
(f) The Parties hereby agree to add a new Section 2.9 to read
in its entirety as follows:
"SECTION 2.9. ADDITIONAL CONSIDERATION. (a)
The capitalized terms used in this Section shall have
the following meanings:
1. "Covenant Period" means the period
commencing on the Closing Date and ending on
the date three (3) years after the Closing
Date.
2. "New Business" means any new event work,
contracts, purchase orders, jobs,
commitments or other agreements arising
during the Covenant Period that are
performed by Synagro Mid-Atlantic, Inc., a
Delaware corporation and an affiliate of the
Purchaser ("SMA"). New Business shall not
include any work performed during the
Covenant Period on existing contracts, event
work,
EXHIBIT 2.2
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2
<PAGE> 3
purchase orders, jobs, commitments or other
agreements of SMA in effect as of the
Closing Date (including, but not limited to,
the Contracts transferred as part of the
Acquisition Assets).
3. "New Acquisition Asset Revenues" means
revenues collected by SMA that are directly
attributable to the Acquisition Assets, or
their replacements, utilized in the New
Business.
(b) Subject to clause (d) below, as additional
consideration for the Acquisition Assets (and shall
be allocated to goodwill and intangibles), the
Purchaser shall pay to Seller (i) four percent (4%)
of the New Acquisition Asset Revenues resulting from
any New Business (the "New SMA Consideration") and
(ii) thirty percent (30%) of the revenues collected
by SMA (or its designee) that are directly
attributable to contract number S 319 between the
Seller and the Massachusetts Water Resources
Authority ("MWRA Consideration"), including, but not
limited to, revenues that may be collected by SMA (or
its designee) if such contract is assigned to SMA (or
its designee). The New SMA Consideration and the MWRA
Consideration are collectively referred to herein as
the "Additional Consideration". In the event the New
Business arises during the Covenant Period but is not
completed until after the end of the Covenant Period,
the four percent (4%) payment will survive and
continue to accrue to the benefit of the Seller until
completion of the New Business.
For example, if SMA obtains New Business
during the Covenant Period worth $100,000, and the
Acquisition Assets are the only assets utilized for
the entire project (i.e., no assets of the Purchaser
or any of its affiliates were used with respect to
the New Business), the Seller shall receive 4% of the
revenues collected by SMA. Therefore, if SMA collects
the entire $100,000, Seller shall be entitled to
receive $4,000. Similarly, if SMA obtains New
Business during the Covenant Period worth $100,000
and the Acquisition Assets utilized for the project
accounted for only one-half of the revenues, the
Seller shall be entitled to receive 4% of one-half of
the revenues collected by SMA with respect to the
project. Therefore, if SMA collects the entire
$100,000, Seller shall be entitled to receive $2,000.
(c) During the Covenant Period, SMA shall utilize the
Acquisition Assets in the following order: (i) first,
to any existing
EXHIBIT 2.2
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3
<PAGE> 4
contracts, event work, purchase orders, jobs,
commitments or other agreements purchased by
Purchaser as part of the Acquisition Assets
(including, but not limited to, the Contracts
transferred as part of the Acquisition Assets); and
(ii) second, for any New Business, provided that such
Acquisition Assets are appropriate to substantially
and efficiently perform the New Business in full
compliance with SMA's obligations. If the Acquisition
Assets are not being utilized by SMA for any reason
(including, but not limited to the fact that there is
no New Business), Purchaser and/or its affiliates may
utilize the Acquisition Assets on other projects not
involving SMA, and Purchaser shall not be required to
make any payments to Seller with respect to revenues
collected on such projects; provided, however, if any
New Business is generated and SMA cannot use the
Acquisition Assets because of the diversion, Seller
shall be paid the New SMA Consideration it would have
received had the Acquisition Assets been used for the
New Business. SMA shall continue to solicit job
opportunities in the states that the Seller and SMA
have worked in the past (the "New Business Area"). If
a project or lead arises in an area outside of the
New Business Area and no other affiliate of Purchaser
has indicated to Purchaser's corporate or regional
office a desire to bid on such project or lead, SMA
will be free to pursue such project or lead. If
nationwide leads for event jobs that cannot be
performed or are not of interest to any of
Purchaser's affiliates become known to Purchaser's
corporate office, Purchaser shall use its best
efforts to refer the lead to SMA, but SMA shall be
under no duty or obligation to pursue such lead.
(d) SMA shall determine the New SMA Consideration
within thirty (30) days after April 1, 2001, April 1,
2002 and April 1, 2003 of each year. SMA's
methodology for the determination of the New SMA
Consideration and the results thereof shall be
forwarded to the Seller. SMA shall provide Seller
with access to the data it used to determine the New
SMA Consideration upon request. The Seller shall
review the calculation of the New SMA Consideration
within fifteen (15) business days after delivery
thereof and notify SMA in writing of any disagreement
with such calculation. If within such fifteen (15)
business days following delivery Seller does not
object in writing thereto, then SMA's determination
of the New SMA Consideration shall be conclusive. If
Seller objects in writing to SMA's computation, then
SMA and Seller shall negotiate in good faith and
attempt to resolve their disagreement. Should such
negotiation not result in an agreement within twenty
(20) business days of receipt by SMA of Seller's
objection, then
EXHIBIT 2.2
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<PAGE> 5
the matter shall be submitted to an independent
accounting firm of national reputation mutually
acceptable to the Seller and SMA (the "Neutral
Auditor"). If the Seller and SMA are unable to agree
on the Neutral Auditor, then they shall request the
American Arbitration Association to appoint the
Neutral Auditor. All fees and expenses relating to
appointment of the Neutral Auditor and the work, if
any, to be performed by the Neutral Auditor will be
borne equally by the Seller and SMA. The Neutral
Auditor will deliver to the Seller and SMA a written
determination (such determination to include a
worksheet setting forth all material calculations
used in arriving at such determination and to be
based solely on information provided to the Neutral
Auditor by the Seller and SMA, or their respective
affiliates) of the disputed items within 30 days of
receipt of the disputed items, which determination
will be final, binding and conclusive on the parties.
Purchaser shall pay the New SMA Consideration to the
Seller within five (5) business days following
agreement on or delivery of the final, binding and
conclusive calculation of the New SMA Consideration.
Purchaser shall pay the MWRA Consideration
within 30 days following the date the MWRA
Consideration is collected by Purchaser. Any disputes
involving the Amount of MWRA Consideration due to
Seller shall be resolved in the manner set forth
above in this clause (d)."
(g) The Parties agree to delete the words "and Shareholder" in
the parenthetical in the first paragraph of Section 3.1 of the
Agreement.
(h) The Parties agree to amend Section 5.3(a) by deleting the
words "and Shareholder" in the final two (2) places such words appear.
(i) The Parties agree to amend Section 5.3(b) by deleting the
words "and Shareholder" in each of the two (2) places such words
appear, and by deleting the words "or Shareholder" in each of the four
(4) places such words appear.
(j) The Parties agree to amend Section 5.3(c) by deleting the
words "and Shareholder" in each of the two (2) places such words
appear.
(k) The Parties agree to amend Section 7.2 by deleting the
words "Shareholder shall, and shall cause Seller to," and the words
"Seller shall" shall be inserted in lieu thereof.
(l) The Parties agree to amend Section 7.5 by deleting ",
Shareholder".
EXHIBIT 2.2
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<PAGE> 6
(m) The Parties agree to amend Section 7.9 by deleting
"Shareholder,".
(n) The Parties agree to amend Section 8.3(g) by deleting the
words "set forth on Schedule" and inserting the words "Subject to
Section 2.8," in the beginning of the sentence.
(o) The Parties agree to amend Section 8.3(h) by deleting such
provision in its entirety.
(p) The Parties hereby agree to amend clause (ii) of Section
9.1(a) to read in its entirety as follows:
"(ii) if the transactions contemplated hereby are not
completed by March 27, 2000;"
(q) The Parties hereby agree to amend clause (ii) of Section
9.1(b) to read in its entirety as follows:
"(ii) if the transactions contemplated hereby are not
completed by March 27, 2000; or"
(r) The Parties agree to amend Section 9.2(a) by deleting the
last sentence in Section 9.2(a).
(s) The Parties agree to amend Section 9.2(b) by deleting "or
Shareholder".
(t) The Parties agree to amend Section 10.1 of the Agreement
in its entirety to read as follows:
"SECTION 10.1 SELLER'S INDEMNITY
OBLIGATIONS. Seller shall indemnify and hold harmless
Purchaser and its respective officers, directors,
stockholders, employees, agents, representatives and
Affiliates (each a "Purchaser 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 Purchaser Indemnified
Party, (i) relating to, resulting from or arising out
of (a) any breach or misrepresentation in any of the
representations and warranties made by or on behalf
of Seller in this Agreement, including without
limitation with respect to
EXHIBIT 2.2
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<PAGE> 7
environmental matters, or any certificate or
instrument delivered in connection with this
Agreement, (b) any violation or breach by Seller and
Shareholder of or default by Seller and Shareholder
under the terms of this Agreement or any certificate
or instrument delivered in connection with this
Agreement, (c) any liability of Seller or Shareholder
not assumed by Purchaser, including without
limitation the Excluded Liabilities; or (ii) relating
to, resulting from or arising out of any allegation
of a third party of the events described in Sections
10.1(a), (b) or (c) above. 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) OF ANY PARTY, INCLUDING ANY
PURCHASER INDEMNIFIED PARTY."
(u) The Parties agree to amend clause (a) of Section 10.4 of
the Agreement in its entirety to read as follows:
"(a) Notwithstanding anything to the
contrary contained in Article X, the aggregate
liability of Seller for any event or occurrence
giving rise to Seller being required to indemnify
Purchaser Indemnified Parties pursuant to Section
10.1 of this Agreement shall be limited to
$1,500,000."
(v) The Parties agree to amend Section 11.1 by deleting "and
Shareholder".
(w) The Parties agree to amend Section 11.2(b) by deleting
"P.A., Suite 311" and insert in lieu thereof "LLC, Suite 205".
(x) The Parties agree to amend Section 11.11 by adding the
following sentence at the end of Section 11.11:
"Purchaser shall reimburse to Seller the
cost of renewing any tags and title registration on
any Motor Vehicle whose tags are not registered in
the name of Purchaser prior to April 25, 2000 (such
costs to be reimbursed by Purchaser to Seller include
but are not limited to costs to purchase tags,
registration, etc. and the costs incurred by Seller
to transfer the Motor Vehicle from the particular job
site in which the Motor Vehicle is being utilized to
the place of registration, and the costs to deliver a
replacement Motor Vehicle to such job site)."
EXHIBIT 2.2
-----------
7
<PAGE> 8
(y) The Parties agree to amend the Signature Page by deleting
"and Shareholder", and also deleting the following:
"Farrell D. Whiteford hereby executes this
Asset Purchase Agreement solely to evidence his
agreement to guarantee the performance of all of
Seller's obligations under Article X of this Asset
Purchase Agreement."
-----------------------------------------
FARRELL D. WHITEFORD"
(z) The Parties agree to amend SCHEDULE 2.1(i) (EQUIPMENT) of
the Agreement by deleting the following:
"317 DRED'G SPECIAL MODEL 800 SPREADER 20,
100 Sep. 96".
(aa) The Parties agree to amend SCHEDULE 2.1(ii) (MOTOR
VEHICLES) of the Agreement by deleting the following:
"210 1973 TRAILMOBILE, TRLR BOX, 850 , May -91".
(bb) The Parties agree to amend SCHEDULE 2.1(iv) (CONTRACTS)
of the Agreement by deleting the following:
<TABLE>
<CAPTION>
"Name Contract # or Date Assignability
--------------------------------------------------------------------------
<S> <C> <C> <C>
City of Baltimore MD BP-16699 Assignable
MUN. Auth. of
Westmoreland Co. R052-00 Assignable
Dept. of the Navy
Indian Head, MD N62477-99-M3508 Novation
Agreement"
and inserting the following Contracts in lieu thereof
"Massachusetts Water
Resources Authority S 319 Assignable
only with
written
consent
</TABLE>
EXHIBIT 2.2
-----------
8
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Bradford City
Water Authority 99-2 Assignable
only with
written
consent"
</TABLE>
(cc) The Parties agree to amend SCHEDULE 2.1(vi) (PERMITS) of
the Agreement by adding the following:
"S--99--12--4603--A
S--99--12--4620--A"
(dd) The Parties agree to amend SCHEDULE 2.4. (ALLOCATIONS) of
the Agreement in its entirety to read as follows:
"SCHEDULE 2.4.
ALLOCATIONS
<TABLE>
<S> <C>
Vehicles and Equipment $ 165,000
Goodwill and Intangibles $1,315,000*
Covenant Not To Compete $ 20,000
---------
PURCHASE PRICE $1,500,000*
</TABLE>
* plus any amounts to be paid for Additional
Consideration"
(ee) The Parties agree to amend SCHEDULE 5.5 (FINANCIAL
STATEMENTS) of the Agreement by deleting the current Schedule and
inserting the financial statements attached as Exhibit A hereto.
(ff) The Parties agree to amend SCHEDULE 5.7. (ABSENCE OF
CERTAIN CHANGES OR EVENTS) of the Agreement by deleting the word "None"
and adding the following: "Scott Reilly was no longer an employee of
Whiteford Construction Co., Inc. as of January 2000. Ted Eyler's weekly
salary was increased from $600 to $673.08. A bonus for calendar year
1999 was paid in full on March 23, 2000 to the following employees:
Gary W. Barlow $49,565.50; Michael Myers $49,565.50; and Scott Reilly
$49,565.50, and the net income of the Business for calendar year 1999
was approximately $281,000."
EXHIBIT 2.2
-----------
9
<PAGE> 10
(gg) The Parties agree to amend SCHEDULE 5.13. (EMPLOYEE
BENEFIT PLANS) of the Agreement by adding the following: "Scott Reilly
was no longer an employee of Whiteford Construction Co., Inc. as of
January 2000".
(hh) The Parties agree to amend SCHEDULE 5.18. (CONTRACTS,
AGREEMENTS, PLANS AND COMMITMENTS) of the Agreement by adding the
following:
"Rain For Rent - Rental of Storage Tank for $30.00 a
day.
Goodwin Pumps -- Rental of following equipment
a. Control Panel for $99.00 per month
b. Electric Pump for $945.00 per month
c. 100KW Generator for $1,890.00 per month
d. 40KW Generator for $1,485.00 per month
Hazco Total Safety - Rental of Air Meter for $325.00
per month"
2. EARNEST MONEY. The Parties agree that the earnest money has been
retained by Seller pursuant to Section 9.4. of the Agreement as an extension fee
and as reimbursement for costs and expenses incurred by Seller in connection
with the negotiation and execution of the Agreement. The Parties agree that
there was not any material breach by Seller or Purchaser or failure of Seller or
Purchaser to fulfill any obligation under or in connection with the Agreement
being the cause of the extension. The Parties agree that the earnest money shall
not be applied against the Purchase Price at Closing.
3. RATIFICATION. Except as expressly amended by this Amendment, the
Agreement and the exhibits and schedules thereto shall remain in full force and
effect. None of the rights, interests and obligations existing and to exist
under the Agreement are hereby released, diminished or impaired, and the parties
hereby reaffirm all covenants, representations and warranties in the Agreement.
4. EXECUTION IN COUNTERPARTS. For the convenience of the parties, 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.
5. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware.
[SIGNATURE PAGE FOLLOWS]
EXHIBIT 2.2
-----------
10
<PAGE> 11
IN WITNESS WHEREOF, this Amendment is hereby duly executed by each
Party hereto as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
--------------------------------------
Mark A. Rome, Executive Vice President
WHITEFORD CONSTRUCTION CO., INC.
By: /s/ Farrell D. Whiteford
--------------------------------------
Farrell D. Whiteford, President
EXHIBIT 2.2
-----------
11
<PAGE> 1
EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
GERALD L. REHBEIN
AND
GORDON W. REHBEIN
OCTOBER 26, 1999
EXHIBIT 2.3
-----------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS..............................................................................................1
Section 1.1. Accounting Terms.................................................................1
Section 1.2. Defined Terms....................................................................1
ARTICLE II
CLOSING..................................................................................................2
Section 2.1. Closing..........................................................................2
ARTICLE III
SALE OF STOCK............................................................................................2
Section 3.1. Company Common Stock.............................................................2
Section 3.2. Purchase Price...................................................................2
Section 3.3. Purchase Price Adjustment........................................................3
Section 3.4. Closing Deliveries...............................................................4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER..............................................................5
Section 4.1. Organization and Qualification...................................................5
Section 4.2. Authority; Binding Agreement.....................................................5
ARTICLE V
REPRESENTATIONS AND WARRANTIES...........................................................................6
Section 5.1. Organization and Qualification...................................................6
Section 5.2. Capitalization. .................................................................6
Section 5.3. Authority; Non-Contravention; Approvals..........................................7
Section 5.4. Subsidiaries.....................................................................7
Section 5.5. Financial Statements.............................................................7
Section 5.6. Absence of Undisclosed Liabilities...............................................8
Section 5.7. Absence of Certain Changes or Events.............................................8
Section 5.8. Litigation.......................................................................8
Section 5.9. Accounts Receivable..............................................................8
Section 5.10. No Violation of Law; Compliance with Agreements..................................8
Section 5.11. Insurance........................................................................9
Section 5.12. Taxes............................................................................9
Section 5.13. Employee Benefit Plans..........................................................10
Section 5.14. Employee and Labor Matters......................................................12
Section 5.15. Environmental Matters...........................................................13
Section 5.16. Non-Competition Agreements......................................................15
Section 5.17. Title to Assets.................................................................16
Section 5.18. Contracts, Agreements, Plans and Commitments....................................16
Section 5.19. Supplies........................................................................17
Section 5.20. Brokers and Finders.............................................................17
Section 5.21. Intellectual Property...........................................................17
Section 5.22. Relationships...................................................................18
Section 5.23. Certain Payments................................................................18
Section 5.24. Books and Records...............................................................18
Section 5.25. Condition and Sufficiency of Assets.............................................19
Section 5.26. Disclosure......................................................................19
</TABLE>
EXHIBIT 2.3
-----------
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING......................................................................19
Section 6.1. Conduct of Business by the Shareholders Pending Closing..........................19
Section 6.2. Other Offers.....................................................................21
Section 6.3. Access to Information; Environmental Due Diligence...............................21
Section 6.4. Best Efforts.....................................................................22
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES.....................................................22
Section 7.1. Confidentiality..................................................................22
Section 7.2. Further Assurances...............................................................22
Section 7.3. Expenses and Fees................................................................22
Section 7.4. Agreement to Cooperate...........................................................23
Section 7.5. Public Statements................................................................23
Section 7.6. Notification of Certain Matters..................................................23
Section 7.7. Notice of Environmental Claims...................................................23
Section 7.8. Tax Matters......................................................................24
ARTICLE VIII
CONDITIONS TO CLOSING....................................................................................25
Section 8.1. Conditions to Each Party's Obligation to Close...................................25
Section 8.2. Conditions to Obligation of the Shareholders.....................................26
Section 8.3. Conditions to Obligations of Purchaser...........................................26
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER........................................................................28
Section 9.1. Termination......................................................................28
Section 9.2. Effect of Termination............................................................29
Section 9.3. Extensions; Waiver...............................................................30
ARTICLE X
INDEMNIFICATION..........................................................................................30
Section 10.1. The Shareholders' Indemnity Obligations..........................................30
Section 10.2. Purchaser's Indemnity Obligations................................................31
Section 10.3. Indemnification Procedures.......................................................31
Section 10.4. Limitation of Shareholders' Liability............................................33
Section 10.5. Limitation of Purchaser's Liability..............................................33
Section 10.6. Limitation on Indemnified Amounts................................................33
ARTICLE XI
GENERAL PROVISIONS.......................................................................................33
Section 11.1. Survival.........................................................................33
Section 11.2. Notices..........................................................................34
Section 11.3. Interpretation...................................................................35
Section 11.4. Miscellaneous....................................................................35
Section 11.5. Governing Law....................................................................35
Section 11.6. Amendment........................................................................35
Section 11.7. Counterparts.....................................................................35
Section 11.8. Parties in Interest..............................................................35
Section 11.9. Validity.........................................................................36
</TABLE>
EXHIBIT 2.3
-----------
ii
<PAGE> 4
Exhibits
- ---------
<TABLE>
<S> <C>
Exhibit A Glossary
Exhibit B Estimated Adjustment Amount
Exhibit C Release of Claims Agreement
Exhibit D Employment and Covenant Not to Compete Agreement
Exhibit E Covenant Not to Compete Agreement
Exhibit F Leases
Exhibit G Termination of Buy-Sell Agreement
</TABLE>
Schedules
- ---------
<TABLE>
<S> <C>
Schedule 3.2 Shareholder Consideration
Schedule 3.4(b)(iv) Guarantees or Surety Obligations
Schedule 5.2 Capitalization
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
</TABLE>
EXHIBIT 2.3
-----------
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of October 26, 1999 (the
"Agreement"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
(the "Purchaser"), and GERALD L. REHBEIN and GORDON W. REHBEIN (collectively,
the "Shareholders"). The Purchaser and each of the Shareholders are a "Party"
and, collectively, they are sometimes referred to as the "Parties."
W I T N E S S E T H:
WHEREAS, the Shareholders own 10,000 shares of the issued and outstanding
shares of common stock, $.01 par value per share, of Rehbein, Inc., a Minnesota
corporation (the "Company"), which constitutes all of the issued and outstanding
capital stock of the Company ("Company Common Stock") as of the date hereof;
WHEREAS, the Company is in the business of municipal and commercial
residuals management and recycling (the "Business");
WHEREAS, Purchaser desires to purchase from the Shareholders, and the
Shareholders desire to sell to the Purchaser, the Company Common Stock upon the
terms and conditions set forth herein; and
WHEREAS, the Shareholders are making certain representations, warranties
and indemnities herein, as an inducement to Purchaser to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements stated herein, the receipt and sufficiency
of which are hereby acknowledged, the Parties, intending to be legally bound,
covenant and agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles ("GAAP") and on a basis consistent with those applied in
the preparation of the financial statements referred to in Section 5.5 hereof.
SECTION 1.2. DEFINED TERMS. As used in this Agreement, certain words and
terms have the meanings ascribed to them in the Glossary attached hereto as
Exhibit A. Other capitalized terms have the meanings ascribed to them elsewhere
in this Agreement.
EXHIBIT 2.3
-----------
<PAGE> 6
ARTICLE II
CLOSING
SECTION 2.1. CLOSING. Subject to the terms and provisions of Article IX,
the purchase and sale of the Company Common Stock (the "Closing") provided for
in this Agreement shall take place at a location mutually agreeable to the
parties hereto in Houston, Texas, as promptly as practicable (but in any event
within (5) five 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 the Parties shall agree. The date on which the Closing occurs
is referred to in this Agreement as the "Closing Date."
ARTICLE III
SALE OF STOCK
SECTION 3.1. COMPANY COMMON STOCK. Subject to the terms and conditions of
this Agreement, the Shareholders will sell, transfer and deliver to the
Purchaser, and the Purchaser will purchase, the Company Common Stock on the
Closing Date.
SECTION 3.2. PURCHASE PRICE.
(a) The aggregate purchase price (the "Purchase Price") for the Company
Common Stock and the representations, warranties, covenants and agreements
referenced herein shall be an amount paid in cash at Closing equal to Ten
Million Dollars ($10,000,000) less (1) the Company's Indebtedness as of Closing
and (2) the amount, if any, by which the Company's Net Working Capital as of
Closing is less than Five Hundred Seventy-Seven Thousand and Ninety Dollars
($577,090), of which a minimum of $62,610 shall be in cash. The amount, if any,
by which the cash portion of the Purchase Price is reduced pursuant to this
Section 3.2(a) (i.e., the sum of (1) and (2) above) is referred to herein as the
"Adjustment Amount." The aggregate consideration payable to each Shareholder is
set forth opposite each Shareholder's name on Schedule 3.2.
(b) The capitalized terms used in this Section shall have the following
meanings:
"Indebtedness" means the aggregate long-term indebtedness and other
long-term liabilities of the Company determined in accordance with GAAP.
"Net Working Capital" means the aggregate current assets of the Company
less the aggregate current liabilities of the Company determined in accordance
with GAAP.
EXHIBIT 2.3
-----------
2
<PAGE> 7
SECTION 3.3. PURCHASE PRICE ADJUSTMENT.
(a) Prior to the Closing Date, the Shareholders shall deliver to the
Purchaser a worksheet, which shall be attached as Exhibit B hereto, setting
forth a reasonable estimate of the Indebtedness and Net Working Capital as of
the Closing Date as well as a computation of the estimated Adjustment Amount
(the "Estimated Adjustment Amount"). The worksheet shall be prepared by the
Shareholders and accepted by the Purchaser in its reasonable discretion. If the
Estimated Adjustment Amount is a positive number, the Purchase Price payable at
Closing shall be decreased in an amount equal to the positive Estimated
Adjustment Amount. If the Estimated Adjustment Amount is a negative number
(i.e., the excess Net Working Capital exceeds the Indebtedness), the Purchase
Price payable at Closing shall be increased in an amount equal to the negative
Estimated Adjustment Amount.
(b) Within 90 days after the Closing, Purchaser shall cause the Company
to prepare a consolidated balance sheet of the Company as of the Closing Date
(the "Closing Date Balance Sheet"), including a computation of the actual
Adjustment Amount of the Company as of the Closing Date (the "Actual Adjustment
Amount"). If within 15 days following delivery of the Closing Date Balance Sheet
the Shareholders do not object in writing thereto, then the Actual Adjustment
Amount shall be as computed on such Closing Date Balance Sheet. If the
Shareholders object in writing to the computation, then the Purchaser and the
Shareholders shall negotiate in good faith and attempt to resolve their
disagreement. Should such negotiations not result in an agreement within 20
days, then the matter shall be submitted to an independent accounting firm of
national reputation mutually acceptable to the Purchaser and the Shareholders
(the "Neutral Auditors"). If the Purchaser and the Shareholders are unable to
agree on the Neutral Auditors, then they shall request the American Arbitration
Association to appoint the Neutral Auditors. All fees and expenses relating to
appointment of the Neutral Auditors and the work, if any, to be performed by the
Neutral Auditors will be borne equally by the Purchaser and the Shareholders.
The Neutral Auditors will deliver to the Purchaser and the Shareholders a
written determination (such determination to include a worksheet setting forth
all material calculations used in arriving at such determination and to be based
solely on information provided to the Neutral Auditors by the Purchaser and the
Shareholders, or their respective affiliates) of the disputed items within 30
days of receipt of the disputed items, which determination will be final,
binding and conclusive on the Parties.
(c) Promptly following agreement on or delivery of the final, binding
and conclusive Closing Date Balance Sheet setting forth the Actual Adjustment
Amount, the Purchaser and the Shareholders shall account to each other as
provided for in this Section 3.3(c). If the Estimated Adjustment Amount less the
Actual Adjustment Amount is a positive number, the Shareholders shall have a
right to receive a cash payment equal to such excess. If the Estimated
Adjustment Amount less the Actual Adjustment Amount is a negative number,
Purchaser shall be entitled to receive a cash payment from the Shareholders
equal to such deficit. Any such excess or deficit payment shall be due and
payable within three (3) business days after the Actual Adjustment Amount is
determined pursuant to this Section 3.3.
EXHIBIT 2.3
-----------
3
<PAGE> 8
SECTION 3.4. CLOSING DELIVERIES.
(a) At the Closing, the Shareholders shall deliver to the Purchaser:
(i) certificates representing the Company Common Stock, duly
endorsed for transfer to the Purchaser or accompanied by duly executed
assignment documents, which shall transfer to the Purchaser good and valid title
to the Company Common Stock, free and clear of all liens, claims, restrictions
and encumbrances of any nature whatsoever;
(ii) evidence of consents as shall be required to enable
Purchaser to continue to enjoy the benefit of any governmental authorization,
lease, license, permit, contract or other agreement or instrument to or of which
the Company is a party or a beneficiary and which can, by its terms (with
consent) and consistent with applicable law, be so enjoyed after the transfer of
the Company Common Stock to Purchaser. If there is in existence any lease,
license, permit or other governmental authorization that by its terms or
applicable law expires, terminates or is otherwise rendered invalid upon the
transfer of the Company Common Stock to Purchaser and is required in order for
any of the business of the Company to continue to be conducted following the
transfer of the Company Common Stock in the same manner as conducted previously,
the Shareholders shall have delivered to Purchaser an equivalent of that lease,
license, permit or other governmental authorization, effective as of and after
the Closing Date;
(iii) Release of Claims Agreements executed by the Shareholders,
officers, directors and stockholders of the Company releasing the Company from
any and all prior claims of such officers, directors and stockholders in the
form attached hereto as Exhibit C;
(iv) all corporate, accounting, business and tax records of the
Company;
(v) a legal opinion from Rooney & Neilson, Ltd., counsel to the
Shareholders, in a form satisfactory to Purchaser;
(vi) Employment and Covenant Not to Compete Agreements between
the Purchaser and each of Gerald Rehbein and Paul Montain, attached as Exhibit D
hereto;
(vii) Covenant Not to Compete Agreement between the Purchaser and
Gordon Rehbein, attached as Exhibit E hereto;
(viii) new real property leases with respect to properties owned
by the Shareholders, or affiliates of the Shareholders, in the form attached
hereto as Exhibit F; provided, however, in no event shall lease payments under
any such leases exceed the aggregate amount paid for such properties under any
current lease(s); and
(ix) such other documents, including certificates of the
Shareholders, as may be required by this Agreement or reasonably requested by
the Purchaser.
EXHIBIT 2.3
-----------
4
<PAGE> 9
(b) At the Closing Date, the Purchaser shall deliver the following to
the Shareholders:
(i) the Purchase Price set forth in Section 3.2;
(ii) Employment and Covenant Not to Compete Agreements between
the Purchaser and each of Gerald Rehbein and Paul Montain, attached as Exhibit
D;
(iii) Covenant Not to Compete Agreement between the Purchaser and
Gordon Rehbein, attached as Exhibit E; and
(iv) documents relating to the removal of the Shareholders from
any and all personal guaranties and/or surety obligations in connection with the
Company's debts or operations listed on Schedule 3.4(b)(iv).
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
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. Purchaser 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. AUTHORITY; BINDING AGREEMENT. Purchaser has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and, assuming the due authorization, execution and
delivery hereof by the Shareholders, constitutes a valid and legally binding
agreement of Purchaser and is enforceable against Purchaser 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.
EXHIBIT 2.3
-----------
5
<PAGE> 10
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
The Shareholders, jointly and severally, represent and warrant to Purchaser
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 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. 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. True, accurate and complete
copies of the Company's articles of incorporation and bylaws, in each case as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Purchaser.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 25,000
shares of Company Common Stock, of which 10,000 shares are issued and
outstanding, and no other shares of capital stock of the Company are issued and
outstanding. All of the issued and outstanding shares of Company Common Stock
were 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) Except as set forth on Schedule 5.2, 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.
EXHIBIT 2.3
-----------
6
<PAGE> 11
SECTION 5.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Shareholders have full power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been approved by the Board of Directors and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or the consummation by the Shareholders
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Shareholders, and, assuming the due authorization,
execution and delivery hereof by Purchaser, constitutes a valid and legally
binding agreement of the Shareholders, enforceable against the Shareholders in
accordance with its terms.
(b) The execution and delivery of this Agreement by the Shareholders
and the consummation by 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
articles of incorporation 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, 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) 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
Shareholders or the consummation by the Shareholders of the transactions
contemplated hereby.
SECTION 5.4. SUBSIDIARIES. The 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 5.5. FINANCIAL STATEMENTS. The financial statements of the Company
attached as Schedule 5.5 (the "Company Financial Statements") have been prepared
in accordance with the accrual basis of accounting 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 adjustments and any other adjustments described therein.
EXHIBIT 2.3
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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 June 30, 1999, 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 Company has not made any amendment to its
articles of incorporation or bylaws or changed the character of its business in
any manner; (v) the business of the Company has been conducted in the ordinary
course of business consistent with past practices; and (vi) 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 Shareholders, 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 an average of 60 days after the
applicable billing date.
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
EXHIBIT 2.3
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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 of the Company Permits.
(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 the Company 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 (whether or not shown on any Tax Return); (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 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 May 31, 1997; (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,
EXHIBIT 2.3
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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 May 31, 1995, 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 Purchaser 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 May 31, 1993.
(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 tax
allocation or sharing agreement. The Company has not made any payments, is not
obligated to make any payments and is not a party to any agreements that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. 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.
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. Except for those multiemployer plans
as described on Schedule
EXHIBIT 2.3
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5.13, 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"), or (ii)
subject to the minimum funding requirements of Section 412 of the Code. Each
Plan and Benefit Program, other than the multiemployer plans listed on Schedule
5.13, 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 other than the multiemployer plans listed on Schedule 5.13 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 Shareholders have heretofore delivered to Purchaser true and
correct copies of the following, if any:
(i) each Plan and each Benefit Program listed on Schedule 5.13,
except for the multiemployer plans 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, other
than the multiemployer plans listed on Schedule 5.13, 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 other 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.
EXHIBIT 2.3
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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.
(e) As of the date hereof, the Company does not sponsor any simplified
employee pension plans as described in Section 408(k) of the Code and there are
no claims against the Company for benefits relating to any such plans.
(f) The Company contributes to several multiemployer pension plans and
multiemployer welfare plans (collectively referred to as "multiemployer plans")
as more particularly disclosed on Schedule 5.13. None of these multiemployer
plans are in reorganization or insolvent (as defined in ERISA Section 4241 and
Section 4245). The Company is not liable for any withdrawal liability from any
multiemployer plan as of the Closing Date, and would not be subject to such
liability if, as of the Closing Date, the Company were to engage in a complete
withdrawal (as defined in ERISA Section 4203) or partial withdrawal (as defined
in ERISA Section 4205) from any such multiemployer plan. In addition, the
Company has, or will have as of the Closing, made all required contributions to
the multiemployer plans. The Company further warrants that prior to and as of
the Closing Date, it has done nothing to incur withdrawal liability or liability
under ERISA Section 4212(c), either now or in the future for any of the
multiemployer plans to which it contributes.
SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Shareholders have provided Purchaser with a true and complete list
dated as of October 15, 1999 (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, the combined projected annual payroll
for the calendar year ending December 31, 1999 of the Company required to
operate its business is not materially different from that as listed on the
Employee Schedule, and 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.
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(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 Shareholders, 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 Shareholders are not
aware at the present time 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.
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, to the knowledge of the Shareholders, any
of its Business Facilities, is in violation of, has violated, or has been or is
in non-compliance with, any Environmental Laws, including, but not limited to,
the conduct of the business of the Company or the ownership, use, maintenance or
operation of any of the Business Facilities by the Company. To the best
knowledge of the Shareholders, there are no pending or currently proposed
changes to any Environmental Laws and regulations which, when implemented or
effective may affect the operations of the Business.
(b) Without in any manner limiting the generality of (a) above, to the
best knowledge of the Shareholders:
(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) by the Company, on,
under or about any Business Facility (as defined in Exhibit A) or transferred or
transported by the Company to or from any Business Facility, and no Materials of
Environmental Concern have been generated, manufactured, stored or treated or
EXHIBIT 2.3
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disposed of, or in any other way released (and no release is threatened) by the
Company, 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 conduct, operation or condition of the business of the Company on
or prior to the date hereof, and as of 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, nor have there ever been any, storage tanks
or solid waste management units located on or under any Business Facility of the
Company 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 the
Requirements of Environmental Laws (as defined in Exhibit A);
(iv) 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;
(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) There is no Environmental Law or 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;
(vii) 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 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 relating to the ownership, use,
maintenance or operation of any Business Facility by the Company or in
connection with the conduct of the business of the Company; and
(viii) 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.
EXHIBIT 2.3
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(c) The following representations and warranties as to environmental
matters are made without in any manner limiting the generality of Section
5.15(a) above;
(i) There are no Environmental Claims known, pending or
threatened against the Company or, to the knowledge of the Shareholders, any of
its Business Facilities, and to the knowledge of the Shareholders there is no
basis for same;
(ii) 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;
(iii) 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;
(iv) The Company and all its Business Facilities are in
compliance with all 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
(v) The Company has, and all of its Business Facilities have, all
Environmental Permits necessary to comply with all Environmental Laws applicable
to the operations 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. The Company has timely filed
applications for renewal of all Environmental Permits. The Company further
represents and warrants that it and all of its Business Facilities have all
environmental and pollution control equipment necessary to comply with all
Environmental Laws (including, without limitation, to comply with all applicable
Environmental Permits) applicable to the operation of the business of the
Company as presently conducted. Exhibit 5.15 lists each such permit, license or
other authorization in the possession of the Business. There are no other such
permits, licenses or other authorizations which are required by any
Environmental Laws and regulations to be obtained after the Closing.
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 present and
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.
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SECTION 5.17. TITLE TO ASSETS. The Company has good and marketable title to
all its assets and valid leasehold interests in their leased assets and
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 Purchaser 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 their assets 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;
(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;
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(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
Purchaser. 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. Except as set forth on Schedule
5.18, 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 transactions contemplated herein will vest in the
Purchaser 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. SUPPLIES. The Supplies of the Company are of a quantity and
quality that have been normal for the Company in the ordinary course of business
of the Company and are owned by the Company free and clear of any Liens.
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
EXHIBIT 2.3
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its business as now conducted (collectively the "Company Intellectual Property
Rights"). Except as set forth on Schedule 5.21, the Company does not own any
patents. Except as set forth on Schedule 5.21, the Company has no knowledge of
any infringement by any other person of any of the Company 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 Company
Intellectual Property Rights. Except as set forth on Schedule 5.21, 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 Company Intellectual
Property Rights, or that claims that any default exists under any Company
Intellectual Property Rights. None of the Company 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
December 31, 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. Except as set forth on Schedule
5.22, the Company has not entered into or participated in any related party
transaction during the past three years.
SECTION 5.23. 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 5.24. 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.
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SECTION 5.25. CONDITION AND SUFFICIENCY OF ASSETS. All buildings,
improvements and equipment owned or leased by the Company are structurally
sound, in good operating condition and repair (subject to normal wear and tear)
and adequate for the uses to which they are being put, and none of the
buildings, improvements and equipment owned or leased by the Company is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
SECTION 5.26. DISCLOSURE. To the best knowledge of the Shareholders, there
is no fact known to the Company or the Shareholders (other than general economic
conditions) that would have a Material Adverse Effect that has not been set
forth in this Agreement or in the schedules attached hereto or to be delivered
in connection with this Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING
SECTION 6.1. CONDUCT OF BUSINESS BY THE SHAREHOLDERS PENDING CLOSING. After
the date hereof and prior to the Closing Date, unless Purchaser shall otherwise
agree in writing, the Shareholders 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;
(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;
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(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 or as contemplated hereunder;
(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;
(k) give prompt written notice to Purchaser 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 Purchaser such information as Purchaser 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 Purchaser as may be necessary under applicable
Environmental Laws in connection with the consummation of the transactions under
this Agreement to allow Purchaser 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;
EXHIBIT 2.3
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(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; and
(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.
SECTION 6.2. OTHER OFFERS. Except in connection with the transactions
contemplated by this Agreement, from and after the date hereof, and continuing
through the earlier of Closing or the termination of this Agreement in
accordance with the terms 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 negotiations with or disclose any nonpublic
information relating to the Company or Purchaser, or afford access to the
properties, books or records of the Company, to any Person. The Company shall
promptly notify and provide copies to Purchaser of any offer, proposal or
indication of interest, or communication with respect thereto, delivered to or
received from any third party.
SECTION 6.3. ACCESS TO INFORMATION; ENVIRONMENTAL DUE DILIGENCE. The
Shareholders shall, and shall cause the Company to, give the Purchaser, its
accountants, counsel, financial advisors, and other representatives (the
"Purchaser Representatives") full access (and shall otherwise fully cooperate,
including by making available copies of all of the following documents which are
susceptible to photostatic reproduction) during normal business hours throughout
the period prior to Closing to all of its respective properties, books, 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), Contracts, premises, permits, Environmental Permits, licenses,
Governmental Authorizations, commitments of any nature (whether written or oral)
and records, and shall permit the Purchaser and Purchaser Representatives to
make such inspections (including without limitation environmental inspections,
sampling, and analysis) as they may require and furnish to the Purchaser and
Purchaser Representatives during such period all such information concerning the
Company and its affairs as they may reasonably request. If the Closing under
this Agreement does not occur, the Shareholders shall cause, at their expense,
(a) any investigation-derived waste generated or created in connection with
performance of the environmental due diligence (including without limitation,
drill cuttings, purged or developed water, or sample remnants) to be disposed in
compliance with applicable Environmental Laws, and (b) any wells or borings
installed during the environmental due diligence to be plugged and abandoned.
The Shareholders shall be responsible for executing on their own behalf any and
all manifests, shipping documents,
EXHIBIT 2.3
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plugging and abandoning reports and similar documents in connection with its
obligations hereunder, and the Shareholders, jointly and severally, agree to
indemnify and hold Purchaser harmless from and against any and all claims,
liabilities, damages and causes of action arising out of its failure to fulfill
such obligations hereunder. The Shareholders shall provide to Purchaser copies
of all (aa) Permits, (bb) reports or results of all inspections, audits,
assessments, and analytical data and (cc) such other information as Purchaser
may reasonably request in the possession or control of the Shareholders
regarding any of Company's current or prior Business Facilities or operations
and relating to (i) compliance with applicable requirements of Environmental
Laws or (ii) the exposure to, presence, release, or any aspect of management,
handling, or use of Materials of Environmental Concern.
SECTION 6.4. BEST EFFORTS. The Shareholders will use their best efforts to
cause the representations and warranties contained in Article V hereof to
continue to be true and correct through the Closing Date and to obtain the
satisfaction of the conditions to Closing set forth in Section 8.3 hereof.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1. CONFIDENTIALITY. Without the express written consent of the
Parties, each of the Parties agrees to maintain in confidence and not disclose
to any other Person the terms of the transactions contemplated hereby or the
information delivered in connection with the proposed due diligence
investigation, other than disclosures required to obtain the approvals for the
transactions contemplated hereby, disclosures to those professionals and
advisors who have a need to know, disclosures of information already available
to the public or any other disclosures required by applicable law or the rules
of the NASD. In the event that the Purchaser, the Company or the Shareholders is
at any time requested or required (by oral questions, interrogatories, request
for information or documents, subpoena or other similar process) to disclose any
information supplied to it in connection with this transaction, such Party
agrees to provide the other Parties prompt notice of such request so that an
appropriate protective order may be sought and/or such other party may waive the
first Party's compliance with the terms of this Section 7.1.
SECTION 7.2. FURTHER ASSURANCES. The Shareholders and Purchaser shall
execute and deliver to the other, after the Closing Date, any other instrument
which may be requested by the other and which is reasonably appropriate to
perfect or evidence any of the sales, assignments, transfers or conveyances
contemplated by this Agreement or to obtain any consents or licenses necessary
for Purchaser to operate the Business in the manner operated by the Company
prior to the Closing Date.
SECTION 7.3. EXPENSES AND FEES. The Shareholders shall pay all 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, employee bonuses and the fees and
expenses of the Company's and the
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<PAGE> 27
Shareholders' attorneys and accountants, and will make all necessary
arrangements so that the Purchaser will not be charged with any such cost or
expense. Purchaser shall pay all costs and expenses incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby,
including without limitation, the fees and expenses of their attorneys and
accountants.
SECTION 7.4. AGREEMENT TO COOPERATE. Subject to the terms and conditions
herein provided, 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 all 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 all 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 7.5. PUBLIC STATEMENTS. Except as required by law or the NASD, the
Parties shall obtain the written consent of the 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 consent, which will not be unreasonably
withheld.
SECTION 7.6. NOTIFICATION OF CERTAIN MATTERS. Each of the Shareholders, the
Company and the Purchaser agree 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 or another's 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 Closing and (ii) any
material failure (or any failure in the case of any covenant, condition or
agreement containing any materiality qualification) on its or another's 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.
SECTION 7.7. NOTICE OF ENVIRONMENTAL CLAIMS. The Shareholders shall give
prompt written notice to Purchaser of the commencement of any Environmental
Claim, or inspection by any Governmental Authority with responsibility for
enforcing or implementing any applicable Environmental Laws, and provide to
Purchaser such information as Purchaser may reasonably request regarding such
Environmental Claim, any developments in connection therewith, and, as
applicable, the Shareholders' anticipated or actual response thereto.
EXHIBIT 2.3
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SECTION 7.8. TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between Purchaser and the Shareholders for
certain tax matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Shareholders
shall prepare or cause to be prepared and file or cause to be filed all Tax
Returns for the Company for all periods ending on or prior to the Closing Date
which are filed on or after the Closing Date. Shareholders shall permit the
Purchaser to review and comment on each such Tax Return described in the
preceding sentence at least 72 hours prior to Closing.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
Purchaser shall prepare or cause to be prepared and file or cause to be filed
any Tax Returns of the Company for Tax periods which begin before the Closing
Date and end after the Closing Date. The Shareholders shall pay to Purchaser
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such Taxable period ending on the Closing Date to the extent such
Taxes are not reflected in the reserve for Taxes (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the latest Company Financial Statements as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of the Company. For purposes of this section, in the
case of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period which includes (but does not end on) the Closing Date, the
portion of such Tax which relates to the portion of such Taxable period ending
on the Closing Date shall (i) in the case of any Taxes other than Taxes based
upon or related to income or receipts, be deemed to be the amount of such Tax
for the entire Taxable period multiplied by a fraction, the numerator of which
is the number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period, and
(ii) in the case of any Tax based upon or related to income or receipts be
deemed equal to the amount which would be payable if the relevant Taxable period
ended on the Closing Date. Any credits relating to a Taxable period which begins
before and ends after the Closing Date shall be taken into account as though the
relevant Taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocation shall be made in a manner consistent
with prior practice of the Company.
(c) Cooperation on Tax Matters. Purchaser, the Company and the
Shareholders shall cooperate fully, as and to the extent reasonably requested by
the other Party, in connection with the filing of Tax Returns pursuant to this
section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Shareholders agree (i)
to retain all books and records with respect to Tax matters pertinent to the
Company relating to any Taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent notified by
Purchaser or
EXHIBIT 2.3
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<PAGE> 29
the Shareholders, any extensions thereof) of the respective Taxable periods, and
to abide by all the record retention agreements entered into with any taxing
authority, and (ii) to give the other party reasonable written notice prior to
the transferring, destroying or discarding any such books and records and, if
the other party so requests, the Company or the Shareholders, as the case may
be, shall allow the other party to take possession of such books and records.
Purchaser and the Shareholders further agree, upon request, to use their best
efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including but not limited to with
respect to the transactions contemplated hereby). Purchaser and the Shareholders
further agree, upon request, to provide the other party with all information
that either party may be required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated thereunder.
(d) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by the
Shareholders when due, and the Shareholders will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Purchaser will, and will cause its affiliates to,
join in the execution of any such Tax Returns and other documentation.
(f) Tax Elections. Shareholders shall not be responsible for the
payment of any income taxes imposed on the Company by virtue of the sale made by
the stock purchase agreement or for the payment of any income taxes imposed on
the Company by virtue of any election made by the Purchaser, including without
limitation, any election made by the Purchaser under Section 338 of the Code.
Shareholders are not required to make provision and have not made provision in
the books of the Company for the income taxes described in this paragraph (f).
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO CLOSE. The respective
obligations of each party to close the transactions contemplated hereby shall be
subject to the fulfillment or waiver, if permissible, of the following
conditions on or prior to the Closing Date:
(a) no preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the transactions
contemplated hereby 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);
EXHIBIT 2.3
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<PAGE> 30
(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
transactions contemplated by this Agreement or make the consummation of the
transaction contemplated by this Agreement illegal; and
(c) all necessary governmental or regulatory consents and approvals
shall have been obtained.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE SHAREHOLDERS. Unless waived by
the Shareholders, the obligation of the Shareholders to close the transactions
contemplated herein shall be subject to the fulfillment of the following
additional conditions on or prior to the Closing Date:
(a) Purchaser 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 Purchaser 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) the Shareholders shall have received a certificate executed on
behalf of Purchaser by the President or a Vice President of the Purchaser with
respect to (a) and (b) above.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PURCHASER. Unless waived by
Purchaser, the obligation of Purchaser to close the transactions contemplated
herein shall be subject to the fulfillment of the following additional
conditions on or prior to the Closing Date:
(a) the Shareholders and 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 and Shareholders
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;
EXHIBIT 2.3
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(d) all governmental waivers, consents, orders, permit transfers
(including without limitation Environmental Permits) and approvals legally
required for the purchase and sale and the transactions contemplated hereby or
to permit Purchaser 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 Purchaser;
(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 transactions contemplated hereby, or
necessary for the consummation of the transactions contemplated hereby shall
have been obtained and be in effect at the Closing Date;
(f) the board of directors of the Purchaser shall approve this
Agreement and the closing of the transactions contemplated herein;
(g) Purchaser shall have completed, to its satisfaction, its due
diligence investigation regarding the Company and its business, finances,
operations, assets, liabilities, taxes, insurance, contracts, prospects and
environmental matters and such other matters as Purchaser deems relevant and
Purchaser shall be satisfied, in its sole discretion, with the results of such
review;
(h) Purchaser shall have received a legal opinion from legal counsel to
the Shareholders, dated the Closing Date, in a form reasonable satisfactory to
Purchaser;
(i) the Purchaser shall have obtained financing in an amount and
pursuant to terms satisfactorily to Purchaser to consummate the transactions
contemplated in this Agreement;
(j) the Shareholders, officers and directors of the Company shall have
executed a Release of Claims Agreement, in the form attached hereto as Exhibit
C;
(k) Gerald Rehbein shall have entered into an Employment and
Non-Competition Agreement, in the form attached hereto as Exhibit D;
(l) Gordon Rehbein shall have entered into a Non-Competition Agreement,
in the form attached hereto as Exhibit E;
(l) the Shareholders shall have filed all Tax Returns of the Company
for all years which are delinquent;
(m) The Parties shall have entered into real property leases, in the
form attached hereto as Exhibit F;
EXHIBIT 2.3
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<PAGE> 32
(n) The Company and the Shareholders shall have entered into a
Termination of Buy-Sell Agreement, in the form attached hereto as Exhibit G;
(o) Purchaser shall have received a certificate or certificates
representing the Company Common Stock purchased at the Closing, in definitive
form representing the Shareholders' shares, registered in the name of Purchaser
and duly executed by the Company; and
(p) Purchaser shall have received a certificate executed by each of the
Shareholders with respect to (a) through (f) above.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the Closing in
the following manner:
(a) The Shareholders shall have the right to terminate this Agreement:
(i) if the representations and warranties of Purchaser 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
thirty (30) days after written notice of such failure is given to Purchaser by
the Shareholders;
(ii) if the transactions completed hereby are not completed by
October 29, 1999, (provided that the right to terminate this Agreement under
this Section 9.1(a)(ii) shall not be available to the Shareholders if the
failure of the Shareholders to fulfill any obligation to Purchaser under or in
connection with this Agreement has been the cause of or resulted in the failure
of the transactions contemplated hereby to occur on or before such date);
(iii) if the transactions contemplated hereby are enjoined by a
final, unappealable court order; or
(iv) if Purchaser (A) fails 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) does not cure such
default in all material respects (or in all respects in the case of any covenant
containing any materiality qualification) within 15 days after notice of such
default is given to Purchaser by the Shareholders.
(b) Purchaser shall have the right to terminate this Agreement;
EXHIBIT 2.3
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<PAGE> 33
(i) if the representations and warranties of 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 Shareholders
by Purchaser;
(ii) if the transactions contemplated hereby are not completed by
October 29, 1999 (provided that the right to terminate this Agreement under this
Section 9.1(b)(ii) shall not be available to Purchaser if the failure of
Purchaser to fulfill any obligation to the Shareholders under or in connection
with this Agreement has been the cause of or resulted in the failure of the
transactions contemplated hereby to occur on or before such date); or
(iii) if 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 their 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 15 days after
notice of such default is given to the Shareholders by Purchaser.
(c) The Shareholders and Purchaser mutually agree in writing.
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 Purchaser or the
Shareholders 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 Shareholders, or Purchaser or its stockholders, directors, officers,
employees, agents or representatives (except as set forth in Sections 11.5 and
11.6, each of which shall survive termination in its entirety). Notwithstanding
the preceding sentence or 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 Purchaser, as a
result of the actual damages Purchaser would sustain by reason of such negligent
or willful failure of the Shareholders to perform their obligations hereunder,
could not be made whole by monetary damages, and it is accordingly agreed that
Purchaser 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 the Shareholders waive the defense in any such action for specific
performance that a remedy at law would be adequate.
EXHIBIT 2.3
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SECTION 9.3. EXTENSIONS; WAIVER. At any time prior to the Closing Date, the
Parties may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties, (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 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 AND LIMITATION ON LIABILITY
SECTION 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS. The Shareholders
shall, jointly and severally, indemnify and hold harmless the Company (after the
Closing), Purchaser and the Company's (after the Closing) and the Purchaser's
respective officers, directors, stockholders, employees, agents, representatives
and Affiliates (each a "Purchaser 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 Purchaser Indemnified
Party, directly or indirectly, (i) relating to, resulting from or arising out of
(a) any breach or misrepresentation in any of the representations and warranties
made by or on behalf of one or more of 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 one or more of the Shareholders of, or default by one or
more of the Shareholders under, the terms of this 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, the Shareholders or any
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 arose out of events occurring on or
prior to the Closing Date, or (e) any Taxes incurred by the Shareholders,
Company or Purchaser as a result of the consummation of the transactions
contemplated by this Agreement or (ii) relating to, resulting from or arising
out of any allegation of a third party of the events described in Sections
10.1(a), (b), (c), (d) or (e) above. 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 PURCHASER INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE,
JOINT OR CONCURRENT, ACTIVE OR PASSIVE.
EXHIBIT 2.3
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SECTION 10.2. PURCHASER'S INDEMNITY OBLIGATIONS. Purchaser 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 Purchaser in this Agreement or any
certificate or instrument delivered in connection with this Agreement, (b) any
violation or breach by Purchaser of or default by Purchaser under the terms of
this Agreement or any certificate or instrument delivered in connection with
this Agreement, or (c) any claims for events occurring after the Closing
relating to the Shareholders personal guaranties of the performance bonds posted
in regard to the surety obligations listed on Schedule 3.4(b)(iv).
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement shall be asserted and resolved as follows:
(a) Any of the Parties 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 45 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.
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
EXHIBIT 2.3
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<PAGE> 36
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. In such a situation, the
Indemnified Party shall have full control of such defense and proceedings and
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 liability 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.
(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.
EXHIBIT 2.3
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SECTION 10.4. 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 Purchaser Indemnified
Parties pursuant to Section 10.1 of this Agreement shall be limited to the
Purchase Price plus the amounts deducted from the cash portion of the Purchase
Price pursuant to Section 3.2(a)(1) and (2).
(b) Purchaser 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 $75,000 and then to the full
amount of such Indemnified Amount, not to exceed the limitations described in
Section 10.4(a).
SECTION 10.5. LIMITATION OF PURCHASER'S LIABILITY.
(a) Notwithstanding anything to the contrary contained in Article X,
the aggregate liability of Purchaser for any event or occurrence giving rise to
Purchaser 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 $75,000 and then to the full
amount of such Indemnified Amount, not to exceed the limitations described in
Section 10.5(a).
SECTION 10.6. 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 (net of reasonable expenses and tax and other costs incurred
in obtaining such recovery) an Indemnified Party shall have received or
otherwise enjoyed with respect thereto from any recovery under any insurance
policies. If such a mitigating recovery set forth in this Section 10.6 is
received 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 three (3) years following the date of Closing; provided, however, that
in the case of all such representations, warranties, covenants and agreements
(including, but not limited to, indemnification obligations) there shall be no
such termination with respect to any
EXHIBIT 2.3
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<PAGE> 38
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 prior to
the expiration of the survival period; provided, further, that (i) the
representations and warranties set forth in Sections 5.2, 5.6 and 5.24 hereof
shall survive the Closing indefinitely, (ii) Sections 5.5, 5.8, 5.10, 5.12, 5.13
and 5.15 shall survive the Closing for the greater of three years or the
statutory survival period, (iii) the indemnification obligations of the
Shareholders set forth in Section 10.1(a) shall survive the Closing until
termination of the applicable representations and warranties, and (iv) the
indemnification obligations of the Shareholders set forth in Sections 10.1(c),
(d) and (e) shall survive the Closing for the greater of three years or the
statutory survival period applicable to the underlying claims.
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 Purchaser, 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
600 Travis, Suite 3200
Houston, Texas 77002
Attention: Michael T. Peters
Telecopy: 713/223-3717
(b) If to Shareholders, to:
Gordon Rehbein
16480 N.W. Flintwood Street
Andover, MN 55304
Gerald Rehbein
6266 Otter Lake Road
Lino Lakes, MN 55110
EXHIBIT 2.3
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<PAGE> 39
with a copy to:
Rooney & Neilson, Ltd.
8 Pine Tree Drive, Suite 120
Arden Hills, MN 55112
Attention: Thomas J. Rooney
Telecopy: 651/481-7038
SECTION 11.3. INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the interpretation
of this Agreement. In this Agreement, unless a contrary intention is
specifically set forth, (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 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 and the Schedules and Exhibits attached hereto)
(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 Purchaser may assign this Agreement to
any other wholly-owned Subsidiary of Purchaser, but no such assignment shall
relieve the Purchaser 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 TEXAS APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE. BY AGREEING TO BE BOUND BY THE SUBSTANTIVE LAWS OF THE STATE
OF TEXAS, THE PARTIES DO NOT AGREE THAT VENUE SHALL BE EXCLUSIVELY IN THE STATE
OF TEXAS.
SECTION 11.6. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of all 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.
EXHIBIT 2.3
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<PAGE> 40
SECTION 11.9. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT 2.3
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<PAGE> 41
IN WITNESS WHEREOF, Purchaser and the Shareholders have executed and
delivered this Agreement effective as of the date first written above.
PURCHASER:
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
-----------------------------------------
Mark A. Rome, Executive Vice President
THE SHAREHOLDERS:
/s/ Gerald L. Rehbein
--------------------------------------------
Gerald L. Rehbein
/s/ Gordon W. Rehbein
--------------------------------------------
Gordon W. Rehbein
EXHIBIT 2.3
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<PAGE> 42
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.
"Affiliate(s)" with respect to any Person, means any Person directly or
indirectly controlling, controlled by or under common control with such Person,
and any natural Person who is an officer, director or partner of such Person and
any members of their immediate families living within the same household. A
Person shall be deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Business Facility" or "Business Facilities" includes any property (whether
real or personal) which the Company or any of their Subsidiaries currently
lease, operate, or own or manage in any manner or which the Company or any of
their Subsidiaries or any of their respective organizational predecessors
formerly leased, operated, owned or managed in any manner.
"Code" means the Internal Revenue Code of 1986, as amended, or any amending
or superseding tax laws of the United States of America.
"Environmental Claim(s)" 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 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 or 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, transfer, transportation, treatment, storage or
disposal of Remediation of Materials of Environmental Concern; (ix) injury to,
death of or threat to the health or safety of
EXHIBIT 2.3
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Exhibit A - Page 1
<PAGE> 43
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 of any property (whether real or personal);
(xi) the implementation of spill prevention and/or disaster plans relating to
Material of Environmental Concern; (xii) 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, if such testing
confirms the presence of Materials of Environmental Concern.
"Environmental Law(s)" 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 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,
the Federal Safe Drinking Water 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 Permit(s)" 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" means generally accepted accounting principals applied on a
consistent basis.
EXHIBIT 2.3
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<PAGE> 44
"Governmental Authority" or "Governmental Authorities" means any nation or
government, any state or political subdivision thereof and any agency or entity
exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government.
"Lien(s)" means any mortgage, pledge, hypothecation, security interest,
encumbrance, right of first refusal, option, lien, charge, condition,
restriction or burden of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any lease in
the nature thereof and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction).
"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 Purchaser 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," "medical waste," "special waste," "hazardous waste," "extremely
hazardous substance," "regulated substance," "solid waste," "hazardous
materials," "sludges," "sewage sludge" 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.
"Person" means any individual, partnership, joint venture, corporation,
limited liability company, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.
"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.
EXHIBIT 2.3
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Exhibit A - Page 3
<PAGE> 45
"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" or "Subsidiaries" 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.
"Supplies" means all office supplies, kitchen supplies, laundry supplies,
medical supplies, spare parts, safety equipment, maintenance supplies, other
supplies used or consumed in the Business and other similar items which exist on
the Closing Date.
"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(s)" 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 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 2.3
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<PAGE> 1
EXHIBIT 2.4
December 23, 1999
Gerald L. Rehbein
Rehbein, Inc.
P.O. Box 324
6805 20th Avenue South
Hugo, MN 55038
Subject: Stock Purchase Agreement (the "Agreement"), dated as of
October 1999, by and among Synagro Technologies, Inc. (the
"Purchaser") and Gerald L. Rehbein and Gordon W. Rehbein
(collectively, the "Shareholders")
Dear Gerald:
This letter (the "Letter Agreement") is intended to confirm and give
effect to the following agreements between the Purchaser and the Shareholders:
1. The dates set forth in Sections 9.1(a)(ii) and
9.1(b)(ii) of the Agreement are hereby extended to February 4, 2000.
2. The Purchaser and the Shareholders hereby agree that
if the transactions contemplated by the Agreement fail to close by the
end of the day on February 4, 2000, Purchaser shall reimburse the
Shareholders (upon acceptable verification) for the costs and expenses
incurred in connection with the negotiation and execution of the
Agreement and as liquidated damages for any breach or alleged breach by
Purchaser of the Agreement, unless any Shareholder has breached the
Agreement or any condition to Closing set forth in Sections 8.1 or 8.3
of the Agreement (other than Section 8.3(i)) has not been satisfied.
3. If the Purchaser and the Shareholders mutually agree
to further extend the Agreement beyond February 4, 2000, such
reimbursement shall be payable at the expiration of such later date if
the transactions contemplated by the Agreement fail to close by such
date, unless any Shareholder has breached the Agreement or any
condition to
EXHIBIT 2.4
-----------
<PAGE> 2
Closing set forth in Sections 8.1 or 8.3 of the Agreement (other than
Section 8.3(i)) has not been satisfied.
4. To the extent any provision in this Letter Agreement
is inconsistent with the Agreement, this Letter Agreement shall control
and shall constitute an amendment to the Agreement. As amended by this
Letter Agreement, the Agreement shall continue in full force and
effect. Capitalized terms used, but not defined, herein shall have the
meanings ascribed to them in the Agreement.
Please indicate your agreement with the foregoing by executing this
letter in the space provided below and returning it to me.
Synagro Technologies, Inc.
/s/ Mark A. Rome
-----------------------------------------
By: Mark A. Rome, Executive Vice President
ACCEPTED AND AGREED TO:
THE SHAREHOLDERS:
/s/ Gerald L. Rehbein
- -----------------------------------
Gerald L. Rehbein
/s/ Gordon W. Rehbein
- -----------------------------------
Gordon W. Rehbein
EXHIBIT 2.4
-----------
<PAGE> 1
EXHIBIT 2.5
AMENDMENT NO. 2 TO THE
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO THE STOCK PURCHASE AGREEMENT (this "Amendment")
is entered into this 27th day of March, 2000 among Synagro Technologies, Inc., a
Delaware corporation (the "Purchaser"), and Gerald L. Rehbein and Gordon W.
Rehbein (collectively, the "Shareholders"). The Purchaser and each of the
Shareholders are a "Party" and, collectively, they are sometimes referred to as
the "Parties."
WHEREAS, the Parties entered into a Stock Purchase Agreement dated as
of October 26, 1999 (the "Agreement"), whereby the Shareholders agreed to sell
and transfer to the Purchaser, and the Purchaser agreed to purchase, all the
outstanding stock of Rehbein, Inc., a Minnesota corporation (the "Company");
WHEREAS, the Parties amended the Agreement in certain respects by a
Letter Agreement dated December 23, 1999 (the "Letter Agreement");
WHEREAS, the Parties agree to further amend the Agreement in certain
respects as set forth below; and
WHEREAS, capitalized terms not defined herein shall have the meanings
given to them in the Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth herein, and intending to be legally bound
hereby, the Parties hereto agree as follows:
1. AMENDMENTS, ADDITIONS AND DELETIONS TO THE AGREEMENT.
(a) The Parties agree to amend Section 3.2 of the
Agreement in its entirety to read as follows:
"(a) The aggregate purchase price (the "Purchase
Price") for the Company Common Stock and the
representations, warranties, covenants and agreements
referenced herein shall be (i) Eight Million Four
Hundred Thousand Dollars ($8,400,000), less the
Adjustment Amount, payable to the order of and in the
amounts listed on Schedule 3.2 attached hereto; and
(ii) the earnout consideration, if any, due and
payable under the Earnout Agreement between the
Purchaser and the Shareholders attached hereto as
Exhibit H (the "Earnout Agreement").
EXHIBIT 2.5
-----------
<PAGE> 2
(b) The capitalized terms used in this Section
shall have the following meanings:
"Adjustment Amount" means the sum of (1) the
Company's Indebtedness as of Closing and (2) the
amount, if any, by which the Company's Net Working
Capital as of Closing is less than or exceeds Five
Hundred Seventy-Seven Thousand and Ninety Dollars
($577,090), of which a minimum of $62,610 shall be in
cash.
"Indebtedness" means the aggregate long-term
indebtedness and other long-term liabilities of the
Company determined in accordance with GAAP.
"Net Working Capital" means the aggregate
current assets of the Company less the aggregate
current liabilities of the Company in accordance with
GAAP."
(b) The Parties hereby agree to add a new clause (x) to
Section 3.4(a) of the Agreement to read in its entirety as follows:
"(x) the Earnout Agreement between the
Purchaser and the Shareholders in the form attached
as Exhibit H hereto."
(c) The Parties hereby agree to delete clause (iv) to
Section 3.4(b) of the Agreement in its entirety and add a new clause
(iv) to read in its entirety as follows:
"(iv) the Earnout Agreement between the
Purchaser and the Shareholders in the form attached
as Exhibit H hereto."
(d) The Parties hereby agree to add a new clause (d) to
Section 8.2 of the Agreement to read in its entirety as follows:
"(d) the Shareholders shall have received an
executed copy of the Earnout Agreement, in the form
attached as Exhibit H hereto."
EXHIBIT 2.5
-----------
2
<PAGE> 3
(e) The Parties hereby agree to amend clause (k) to
Section 8.2 of the Agreement to read in its entirety as follows:
"(k) Gerald Rehbein and Paul Montain shall
have entered into Employment and Non-Competition
Agreements in the form attached as Exhibit D hereto;"
(f) The Parties hereby agree to add a new clause (q) to
Section 8.3 of the Agreement to read in its entirety as follows:
"(q) the Purchaser shall have received an
executed copy of the Earnout Agreement, in the form
attached as Exhibit H hereto."
(g) The Parties hereby agree to amend clause (ii) of
Section 9.1(a) to read in its entirety as follows:
"(ii) if the transactions contemplated
hereby are not completed by March 27, 2000, (provided
that the right to terminate this Agreement under this
Section 9.1(a)(ii) shall not be available to the
Shareholders if the failure of the Shareholders to
fulfill any obligation to Purchaser under or in
connection with this Agreement has been the cause of
or resulted in the failure of the transactions
contemplated hereby to occur on or before such
date);"
(h) The Parties hereby agree to amend clause (ii) of
Section 9.1(b) to read in its entirety as follows:
"(ii) if the transactions contemplated
hereby are not completed by March 27, 2000 (provided
that the right to terminate this Agreement under this
Section 9.1(b)(ii) shall not be available to
Purchaser if the failure of Purchaser to fulfill any
obligation to the Shareholders under or in connection
with this Agreement has been the cause of or resulted
in the failure of the transactions contemplated
hereby to occur on or before such date); or"
(i) The Parties hereby agree to add a new Section 10.7 to
read in its entirety as follows:
"SECTION 10.7 RIGHT OF OFFSET. Upon written
notice to the Shareholders under the Earnout
Agreement specifying in reasonable detail its
justification therefore, the Purchaser may offset the
amount of any Indemnified Amount determined by
litigation, arbitration or settlement under Section
10.3 to be owed
EXHIBIT 2.5
-----------
3
<PAGE> 4
to Purchaser against any amount owed by the Purchaser
to the Shareholder under the Earnout Agreement."
(j) The Parties hereby agree to add a new Section 10.8 to
read in its entirety as follows:
"SECTION 10.8 ESCROW. If there exists a bona
fide dispute at the time of payment of the earnout
consideration under the Earnout Agreement regarding a
claim by a Purchaser Indemnified Party or with
respect to the right of the Purchaser to offset
against the Earnout Agreement, the Parties agree that
at such time, the Purchaser shall deposit a portion
of such earnout consideration due and payable equal
to the amount in dispute into an interest bearing
escrow account (`Escrow Account'), pending resolution
of such dispute. Interest on the Escrow Account shall
accrue for the benefit of the Party to whom the
Escrow Account proceeds are released upon resolution
of such dispute; provided, that if the Escrow Account
proceeds are released to more than one Party, the
interest shall be prorated among the Parties based on
the amounts released to the Parties. Upon resolution
of the dispute, the Purchaser shall be entitled to
exercise its right of set-off as and in the manner
provided in Section 10.7 of this Agreement against
the proceeds in the Escrow Account. Immediately after
resolution of the dispute, the Escrow Agent shall
immediately release and deliver to the payee under
the Earnout Agreement all of the remaining Escrow
Account proceeds."
(k) Section 11.1 of the Agreement is hereby amended in
its entirety to read as follows:
"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 three (3) years following the
date of Closing; provided, however, that in the case
of all such representations, warranties, covenants
and agreements (including, but not limited to,
indemnification obligations) 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
prior to the expiration of the survival period;
provided, further, that (i) the representations and
EXHIBIT 2.5
-----------
4
<PAGE> 5
warranties set forth in Sections 5.2, 5.6 and 5.24
hereof shall survive the Closing indefinitely, (ii)
Sections 5.5, 5.8, 5.10, 5.13 and 5.15 shall survive
the Closing for the greater of three years or the
statutory survival period, (iii) the representations
and warranties in Section 5.12 shall survive the
Closing for the greater of (a) three years or (b) the
statutory survival period applicable to the Company
or any entity that transferred any property or assets
to the Company in connection with the consummation of
the transactions contemplated hereby, (iv) the
indemnification obligations of the Shareholders set
forth in Section 10.1(a) shall survive the Closing
until termination of the applicable representations
and warranties, and (v) the indemnification
obligations of the Shareholders set forth in Sections
10.1(c), (d) and (e) shall survive the Closing for
the greater of three years or the statutory survival
period applicable to the underlying claims."
(l) The Parties agree to amend SCHEDULE 3.4(b)(iv)
(Guarantees or Surety Obligations) of the Agreement by adding the
following:
"Bond No. __________: City of Ely Waste Water
Treatment Plant"
(m) The Parties agree to amend SCHEDULE 5.5 (Financial
Statements) of the Agreement by inserting the financial statements
attached as Exhibit A hereto.
(n) The Parties agree to amend SCHEDULE 5.8 (Litigation)
of the Agreement by adding the following at the end of (2):
"The Company settled Jim Brazille's claim and a
similar claim made by Bill Brooks. Jim Brazille and Bill Brooks
each signed a Release of Claims Agreement."
(o) The Parties agree to amend SCHEDULE 5.14. (Employee
and Labor Matters) of the Agreement by deleting the current schedule
and replacing it with the schedule attached as Exhibit B hereto.
(p) The Parties agree to amend SCHEDULE 5.17 (Title to
Assets) of the Agreement by adding the language attached as Exhibit C
hereto to the end of the schedule.
(q) The Parties agree to amend SCHEDULE 5.18. (Contracts,
Agreements, Plans and Commitments) of the Agreement by by deleting the
current schedule and replacing it with the schedule attached as Exhibit
D hereto.
EXHIBIT 2.5
-----------
5
<PAGE> 6
2. RATIFICATION. Except as expressly amended by this Amendment,
the Agreement, the Letter Agreement and the exhibits and schedules thereto shall
remain in full force and effect. None of the rights, interests and obligations
existing and to exist under the Agreement or the Letter Agreement are hereby
released, diminished or impaired, and the parties hereby reaffirm all covenants,
representations and warranties in the Agreement and the Letter Agreement.
3. EXECUTION IN COUNTERPARTS. For the convenience of the parties,
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.
4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
[SIGNATURE PAGE FOLLOWS]
EXHIBIT 2.5
-----------
6
<PAGE> 7
IN WITNESS WHEREOF, this Amendment is hereby duly executed by each
Party hereto as of the date first written above.
PURCHASER:
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
------------------------------------------
Mark A. Rome, Executive Vice President
THE SHAREHOLDERS
/s/ Gerald L. Rehbein
----------------------------------------------
Gerald L. Rehbein
/s/ Gordon W. Rehbein
----------------------------------------------
Gordon W. Rehbein
EXHIBIT 2.5
-----------
7
<PAGE> 1
EXHIBIT 2.6
EARNOUT AGREEMENT
THIS EARNOUT AGREEMENT (this "Agreement"), is made and entered into
this 27th day of March, 2000 by and among SYNAGRO TECHNOLOGIES, INC., a Delaware
corporation ("Purchaser"), and Gerald L. Rehbein and Gordon W. Rehbein
(collectively, the "Shareholders"). Purchaser and the Shareholders are each
referred to as a "Party" and, collectively, they are sometimes referred to as
the "Parties."
WITNESSETH:
WHEREAS, the Parties hereto have entered into that certain Stock
Purchase Agreement dated as of October 26, 1999, as amended by that certain
Letter Agreement dated December 23, 1999 and by Amendment No. 2 to the Stock
Purchase Agreement dated as of the date hereof (as amended, the "Purchase
Agreement"), whereby the Shareholders agreed to sell and transfer to Purchaser,
and Purchaser agreed to purchase, all the outstanding stock of Rehbein, Inc., a
Minnesota corporation (the "Company");
WHEREAS, it is a condition to the Parties' obligations to close the
transactions contemplated in the Purchase Agreement that the Parties execute and
deliver this Agreement;
WHEREAS, this Agreement sets forth the terms and conditions upon which
Purchaser will, under certain circumstances, pay to the Shareholders the earnout
consideration referenced in Section 3.2(a) of the Purchase Agreement as part of
the Purchase Price to be paid to the Shareholders for the stock of the Company;
and
WHEREAS, capitalized terms not defined herein shall have the meanings
given to them in the Purchase Agreement.
NOW, THEREFORE, for and in consideration of the transactions
contemplated in the Purchase Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser and the Shareholders agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
(a) "Affiliates" shall have the meaning given such term in
Exhibit A to the Purchase Agreement.
(b) "Closing Date" shall have the meaning given such term in
Section 2.1 of the Purchase Agreement.
EXHIBIT 2.6
-----------
Page 1 of 10 Pages
<PAGE> 2
(c) "Disputed Amount" means the portion of the Earn Out
Amount, if any, which is in dispute as of May 15, 2003, pursuant to
Section 5 hereof.
(d) "Earn Out Advance" means, during the first two Earn Out
Years, an amount equal to $32,000 per quarter, and, in the third Earn
Out Year, an amount computed as provided in Section 4 of this
Agreement.
(e) "Earn Out Amount" means the amount, if any, owed by
Purchaser to the Shareholders on the Earn Out Payment Date, computed as
provided in Section 5 of this Agreement. The Earn Out Amount and the
Earn Out Advances shall be payable to the Shareholders in accordance
with the allocations listed on Schedule 3.2 of the Purchase Agreement.
(f) "Earn Out Payment Date" means, with respect to any
Undisputed Amount, May 15, 2003, and with respect to any Disputed
Amount, the date ten (10) business days following agreement on or
delivery of the final, binding and conclusive calculation by the
Neutral Auditor of the Three Year EBITDA.
(g) "Earn Out Representative" means Gary Bendickson, or, if
Gary Bendickson dies, resigns or for any reason refuses or is unable to
act, a substitute specified in a written notice of substitution
delivered to Purchaser and signed by the Shareholders.
(h) "Earn Out Year" means a period of twelve (12) consecutive
calendar months, the first Earn Out Year beginning on April 1, 2000 and
ending on March 31, 2001, and each succeeding Earn Out Year beginning
on each April 1 thereafter and ending on March 31 thereafter.
(i) "EBITDA" means the net income of the Company before
interest, federal, state and local income taxes, depreciation and
amortization, determined in accordance with GAAP, applied consistent
with past practices of the Company, provided, however, that there shall
be no deduction from earnings in such calculation for (i) any expenses
incurred in connection with the acquisition of the Company by the
Purchaser; or (ii) corporate overhead in excess of the lesser of (A)
the sum of the actual corporate overhead of the Company plus the actual
corporate overhead allocated to the Company by the Purchaser, or (B)
the sum of $360,018 plus any amount paid to Gerald L. Rehbein under the
Consulting Agreement, dated of even date herewith, by and between the
Purchaser and Gerald L. Rehbein.
(j) "Indemnified Amounts" has the meaning given such term in
Section 10.1 of the Purchase Agreement.
(k) "Neutral Auditor" means an independent accounting firm of
national reputation mutually acceptable to Purchaser and the
Shareholders or selected by the American Arbitration Association.
EXHIBIT 2.6
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Page 2 of 10 Pages
<PAGE> 3
(l) "Past Due Rate" means a rate per annum equal to ten
percent (10%).
(m) "Purchase Price" shall have the meaning given such term in
Section 3.2(a) of the Purchase Agreement.
(n) "Three Year Average EBITDA" means the EBITDA of the
Company for the thirty-six (36) month period beginning on April 1, 2000
(the "Three Year Period") divided by three (3); provided, however, that
notwithstanding any other provision set forth in this Agreement, in no
event shall the Three Year Average EBITDA exceed $1,700,000.
(o) "Two Year Average EBITDA" means EBITDA of the Company for
the twenty-four (24) month period beginning on April 1, 2000 (the "Two
Year Period") divided by two (2).
(p) "Undisputed Amount" means the portion of the Earn Out
Amount, if any, which is not in dispute as of May 15, 2003, pursuant to
Section 5 hereof.
2. Payment of Earn Out Amount. Purchaser shall pay the Earn Out
Amount to the Shareholders on the Earn Out Payment Date. The Earn Out Amount
shall be as computed as provided in Section 5 below. If any portion of the Earn
Out Amount is not paid to the Shareholders on May 15, 2003 because such portion
is a Disputed Amount, then such portion of the Disputed Amount, if any, that is
later determined to be due and payable shall bear interest from May 15, 2003
until paid at the rate of eight percent (8%) per annum.
3. Payment of Earn Out Advances. Purchaser shall pay an Earn Out
Advance to the Shareholders (i) on June 30, 2000 and (ii) on each September 30,
December 31, March 31 and June 30 thereafter until March 31, 2003. During the
first two Earn Out Years, the Earn Out Advance shall be $32,000 per quarter. In
the third Earn Out Year, the Earn Out Advances, if any, shall be as computed as
provided in Section 4 below.
4. Calculation of Earn Out Advances in the Third Earn Out Year.
Purchaser shall determine the Two Year Average EBITDA within thirty (30) days
after the expiration of the Two Year Period. Purchaser's methodology for
determination of the Two Year Average EBITDA and the results thereof shall be
forwarded to Earn Out Representative. Purchaser shall provide Earn Out
Representative with access upon request to the data it used to determine the Two
Year Average EBITDA. The Earn Out Representative shall review the calculation of
the Two Year Average EBITDA within fifteen (15) business days after delivery
thereof and notify Purchaser in writing of any disagreement with such
calculation. If within such fifteen (15) business days following delivery Earn
Out Representative does not object in writing thereto, then Purchaser's
determination of the Two Year Average EBITDA shall be conclusive for the purpose
of computing the amount of Earn Out Advances to be paid in the third Earn Out
Year, but for no other purpose. If Earn Out Representative objects in writing to
Purchaser's computation, then Purchaser and Earn Out Representative shall
negotiate in good faith and attempt to resolve their disagreement. Should such
negotiation not result in an agreement within twenty (20) business
EXHIBIT 2.6
-----------
Page 3 of 10 Pages
<PAGE> 4
days of receipt by Purchaser of Earn Out Representative's objection, then the
matter shall be reserved to be submitted to arbitration by a Neutral Auditor at
the end of the third Earn Out Year, concurrently with any dispute that may exist
as to the calculation of the Earn Out Amount. Such arbitration shall be governed
by the rules provided in Sections 7(a) through 7(e) of this Agreement. All fees
and expenses relating to appointment of a Neutral Auditor and the work, if any,
to be performed by such Neutral Auditor will be borne equally by Purchaser and
the Shareholders. If Purchaser and the Shareholders are unable to agree on the
Neutral Auditor, then either or both of them shall request the American
Arbitration Association to appoint the Neutral Auditor. Purchaser and the
Shareholders agree to execute a reasonable engagement letter if requested to do
so by the Neutral Auditor. The Neutral Auditor shall deliver to Purchaser, the
Shareholders and the Earn Out Representative a written determination (such
determination to include a worksheet setting forth all material calculations
used in arriving at such determination and to be based solely on information
provided to Neutral Auditor by Purchaser, the Shareholders and the Earn Out
Representative, or their respective Affiliates) of the disputed items within
thirty (30) days of receipt of the disputed items, which determination shall be
final, binding and conclusive on the Parties.
Promptly following the Purchaser's calculation of the Two Year Average
EBITDA, the Earn Out Advances for the third Earn Out Year shall be determined as
follows:
(a) Two Year Average EBITDA is Equal to or Greater Than Threshold.
If the Two Year Average EBITDA is equal to or greater than $1,700,000 (the
"Threshold"), the Earn Out Advance for each quarter in the third Earn Out Year
shall be $32,000.
(b) Two Year Average EBITDA is Between the Threshold and the
EBITDA Floor. If the Two Year Average EBITDA is less than the Threshold, but
greater than $1,428,000.22 (the "EBITDA Floor"), the Earn Out Advance for each
quarter in the third Earn Out Year shall be equal to the product of (i) (1) the
difference between the Two Year Average EBITDA and the EBITDA Floor divided by
(2) $271,999.80 multiplied by (ii) $32,000.
(c) Two Year Average EBITDA Equal to or Less Than EBITDA Floor. If
the Two Year Average EBITDA is equal to or less than the EBITDA Floor, there
shall be no Earn Out Advances payable by Purchaser in the third Earn Out Year.
5. Calculation of Earn Out Amount. Purchaser shall determine the
Three Year Average EBITDA within thirty (30) days after the expiration of the
Three Year Period. Purchaser's methodology for determination of the Three Year
Average EBITDA and the results thereof shall be forwarded to Earn Out
Representative. Purchaser shall provide Earn Out Representative with access to
the data it used to determine the Three Year Average EBITDA upon request. Earn
Out Representative shall review the calculation of the Three Year Average EBITDA
within thirty (30) days after delivery thereof and notify Purchaser in writing
of any disagreement with such calculation. If within such thirty (30) days
following delivery Earn Out Representative does not object in writing thereto,
then Purchaser's determination of the Three Year Average EBITDA shall be
conclusive. If Earn Out Representative objects in writing to
EXHIBIT 2.6
-----------
Page 4 of 10 Pages
<PAGE> 5
Purchaser's computation, then the discrepancy shall be resolved by Arbitration
as provided in Section 4 above.
Promptly following agreement on or determination of the final, binding
and conclusive calculation of the Three Year Average EBITDA, the Earn Out Amount
shall be determined as follows:
(a) Three Year Average EBITDA Equal to or Greater Than the
Threshold. If the Three Year Average EBITDA is equal to or greater than the
Threshold, then the Earn Out Amount shall be equal to $1,600,000, plus the
amount, if any, that the total Earn Out Advances paid by Purchaser in the third
Earn Out Year were less than $128,000; provided, however, that in no event shall
the sum of the Earn Out Amount and all Earn Out Advances exceed $1,984,000.
(b) Three Year Average EBITDA Greater than the EBITDA Floor but
less than the Threshold. If the Three Year Average EBITDA is greater than the
EBITDA Floor but less than the Threshold, then the Earn Out Amount shall be
equal to the sum of (i) 5.8823521 times the amount by which the Three Year
Average EBITDA exceeds $1,428,000.20, plus (ii) $128,000 times a fraction, the
numerator of which shall be the amount determined in (i) above, and the
denominator of which is $1,600,000, minus (iii) the total Earn Out Advances paid
by the Purchaser in the third Earn Out Year; provided, however, that (x) in no
event shall the sum of the Earn Out Amount and all Earn Out Advances exceed
$1,984,000, and (y) if the Earn Out Amount is negative, the Shareholders shall
refund an amount equal to such negative Earn Out Amount (i.e., the amount of the
excess Earn Out Advances) to Purchaser within ten (10) business days following
the Earn Out Payment Date.
(c) Three Year Average EBITDA Equal to or Less than the EBITDA
Floor. If the Three Year Average EBITDA is equal to or less than the EBITDA
Floor, then on the Earn Out Payment Date there shall be no Earn Out Amount
payable by Purchaser to the Shareholders. In addition, the Shareholders shall
refund to Purchaser an amount equal to the total Earn Out Advances paid by
Purchaser in the third Earn Out Year within ten (10) business days following the
Earn Out Payment Date.
6. Interest. To the extent that Purchaser does not make a payment
of any portion of the Earn Out Advances or Earn Out Amount (except as provided
otherwise with respect to any Disputed Amount in Section 2) on the required
payment date, such unpaid amount shall bear interest at the Past Due Rate from
and after the required payment date to the date on which such unpaid amount (or
a portion thereof) is paid.
7. Binding Arbitration.
(a) General. Notwithstanding any provision of this Agreement
to the contrary, upon the request of any 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 (excepting
matters decided by the Neutral Auditor), or the breach,
EXHIBIT 2.6
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Page 5 of 10 Pages
<PAGE> 6
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 may bring an action
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 arbitration and this
clause shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 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 any 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 Parties agree that irreparable damage would occur if 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. 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 depositions 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 with no right of appeal. 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
EXHIBIT 2.6
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<PAGE> 7
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 Texas, without regard to conflict of law
rules. The obligation to arbitrate any dispute shall be binding upon the
successors and assigns of each of the Parties.
(e) Appointment of Arbitrators. The arbitration shall be
conducted by three (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 and 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.
8. No Waiver by the Shareholders. No delay or omission of the
Shareholders to exercise any power, right or remedy accruing to the Shareholders
hereof shall impair any such power, right or remedy or shall be construed to be
a waiver of the right to exercise any such power, right or remedy.
9. Paragraph Headings. Paragraph headings appearing in this
Agreement are for convenient reference only and shall not be used to interpret
or limit the meaning of any provision of this Agreement.
10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF TEXAS APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE.
11. Successors and Assigns. This Agreement and all the agreements
contained herein shall be binding upon, and shall inure to the benefit of, the
respective legal representatives, heirs, successors and assigns of Purchaser and
the Shareholders; provided, that the Shareholders shall not assign or otherwise
transfer to any other Person or entity any interest in this Agreement unless the
Shareholders obtain Purchaser's prior written consent.
12. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of the
EXHIBIT 2.6
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<PAGE> 8
remaining provisions of this Agreement shall not be affected thereby, and this
Agreement shall be liberally construed so as to carry out the intent of the
parties to it. Each waiver in this Agreement is subject to the overriding and
controlling rule that it shall be effective only if and to the extent that (a)
it is not prohibited by applicable law and (b) applicable law neither provides
for nor allows any material sanctions to be imposed against The Shareholders for
having bargained for and obtained it.
13. Notices. Any notice, request or other communication required
or permitted to be given hereunder shall be given in writing by delivering it
against receipt for it, by depositing it with an overnight delivery service or
by depositing it in a receptacle maintained by the United States Postal Service,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the respective parties as follows (and if so given, shall be deemed
given when mailed), or by facsimile:
If to Purchaser:
Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, Texas 77057
Attention: Mark A. Rome
(713) 369-1760 (fax)
If to Earnout Representative:
Mr. Gary Bendickson
11425 Highway 55
Plymouth, MN 55441
(763) 545-3198 (fax)
If to the Shareholders:
Gerald L. Rehbein
11373 Hillcrest Drive
Grant City, MN 55082
(651) 426-4567 (fax)
and
Gordon W. Rehbein
16480 N.W. Flintwood Street
Andover, MN 55304
(763) 413-0347 (fax)
Any Party may change its address for notice at any time and from time
to time, but only after ten (10) days' advance written notice to the other
Parties. A Party's address for notice shall
EXHIBIT 2.6
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<PAGE> 9
be the most recent such address furnished in writing by such Party to the other
Parties. Actual notice, however and from whomever given or received, shall
always be effective when received.
14. Offset Rights. Purchaser shall have the right to offset
amounts owed to Purchaser under the Purchase Agreement, including, without
limitation, any and all Indemnified Amounts determined by litigation,
arbitration or settlement under Section 10.3 of the Purchase Agreement to be
owed to Purchaser, against any amounts due under this Agreement. Reference is
hereby made to the escrow provisions in Section 10.8 of the Purchase Agreement,
the terms and conditions of which are incorporated herein by this reference.
[SIGNATURE PAGE FOLLOWS]
EXHIBIT 2.6
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<PAGE> 10
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
PURCHASER:
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
------------------------------------
Mark A. Rome
Executive Vice President
SHAREHOLDERS:
By: /s/ Gerald L. Rehbein
------------------------------------
Gerald L. Rehbein
By: /s/ Gordon W. Rehbein
------------------------------------
Gordon W. Rehbein
EXHIBIT 2.6
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<PAGE> 1
EXHIBIT 99
MONDAY APRIL 3, 2:21 PM EASTERN TIME
COMPANY PRESS RELEASE
SYNAGRO ANNOUNCES THREE ACQUISITIONS ADDING
APPROXIMATELY $31 MILLION IN ANNUAL REVENUES
HOUSTON--(BUSINESS WIRE)--April 3, 2000--Synagro Technologies Inc. (Nasdaq:SYGR
- - news) one of the country's largest independent, full service providers of
residuals management services, announced today that it has closed the
acquisitions of Rehbein Inc. ("Rehbein") and the biosolids operations of
Whiteford Environmental Services ("Whiteford"). In addition, Synagro has entered
into a stock purchase agreement to purchase all of the shares of Environmental
Protection & Improvement Company Inc. ("EPIC"), a wholly owned subsidiary of
Compost America Holding Company Inc. ("Compost").
Rehbein is located in Hugo, Minn., near Minneapolis/St. Paul and has operations
in Minnesota, Michigan and Wisconsin. Rehbein has been performing biosolids land
application services for industrial and municipal generators since 1979. Rehbein
is the largest private residuals services provider in the Minnesota area.
Rehbein provides Synagro with a strategic geographic presence in the Midwest and
brings a strong management team that will continue to operate the business going
forward. This acquisition will add approximately $5 million in annual revenues
and is expected to be accretive to Synagro's calendar year 2000 earnings per
share. Other terms of this transaction were not disclosed.
The Whiteford operations are headquartered in Whiteford, Md., near Baltimore and
have provided specialty biosolids services for industrial and municipal
generators in many states, including Maryland, Pennsylvania, Ohio, Virginia,
Massachusetts, Florida and North Carolina. Whiteford presents Synagro with a
unique opportunity to expand into the growing field of specialty biosolids
services, including digester cleanings and dewatering. Having this expanded
capability will allow Synagro to leverage its existing customer base by offering
additional services. The Whiteford management team has remained with Synagro and
will manage this specialty group after the close. Whiteford has historically
generated between $2 million and $3 million in annual revenues and is expected
to be accretive to Synagro's calendar year 2000 earnings per share. Other terms
of this transaction were not disclosed.
EPIC is a waste transportation and management company headquartered in Denville,
N.J. EPIC specializes in transporting biosolids by rail for disposal or land
application for beneficial reuse. In addition, EPIC utilizes its rail fleet in
transporting a variety of other waste streams, including incinerator ash and
soils. EPIC's primary loading facility is located in Newark, N.J., and is
operated 7-days a week, 24-hours a day. EPIC currently operates a fleet of
approximately 150 high-capacity railcars and 1,300 containers. EPIC's intermodal
transportation systems provide a quick, safe, direct, reliable and cost
effective mode of transporting specialty waste streams. Since
1
<PAGE> 2
its inception in 1990, EPIC has successfully transported over two million tons
of material for industrial and municipal generators, including New York City,
Passaic Valley Sewage Commission, Bergen County, and Sevenson Environmental. A
majority of EPIC's work is under long-term contract and represents approximately
$170 million in contract work that has not been completed or billed. EPIC will
add approximately $23 million in annual revenues and is expected to be accretive
to Synagro's calendar year 2000 earnings per share.
The EPIC stock purchase agreement provides for a price at closing of
approximately $37,500,000, which includes debt payoff, plus an earn-out and
other adjustments. The closing of this transaction is contingent upon Synagro
obtaining a satisfactory financing commitment no later than April 14, 2000, and
other conditions, including notification to Compost's non-consenting
shareholders in the manner required by the New Jersey Business Corporation Act.
Directors and shareholders holding a majority of Compost's voting common shares
have already approved the sale. Other terms of this transaction were not
disclosed.
Synagro's chief executive officer, Ross M. Patten, stated that, "These recent
acquisitions provide Synagro with important strategic enhancements to our
current services. Rehbein allows Synagro to expand our Midwest regional
presence. Whiteford brings an important enhancement to Synagro's current service
offerings and EPIC adds a valuable transportation capability that few
competitors offer. These acquisitions move Synagro closer to its goal of
becoming a national full service provider of residuals management services.
Additionally, these acquisitions, along with those announced earlier in the
year, increase Synagro's pro forma annual revenue to approximately $117 million
with corresponding pro forma annual earnings before interest, taxes,
depreciation, and amortization ("EBITDA") of approximately $29 million, which
represents increases over reported year ended December 31, 1999 results of 109%
and 190%, respectively." Synagro is the fastest growing company focused on
organic residuals management services, and has operations located throughout the
country. In addition to pursuing acquisitions in key markets, the company is
positioning itself as the national provider of biosolids services to
municipalities and wastewater privatization projects throughout North America.
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.
===========================
Contact:
Synagro Technologies Inc., Houston
Ross M. Patten, 713/369-1700
2
