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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)
FEBRUARY 11, 2000 (JANUARY 27, 2000)
SYNAGRO TECHNOLOGIES, INC.
(Exact name of registrant as
specified in its charter)
DELAWARE 0-21054 76-0511324
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
1800 BERING, SUITE 1000
HOUSTON, TEXAS 77057
(Address of principal executive offices and zip code)
(713) 369-1700
(Registrant's telephone number,
including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 27, 2000, Synagro Technologies, Inc., a Delaware corporation
(the "Company"), (i) through its wholly-owned subsidiary, RESTEC Acquisition
Corp. ("Merger Sub"), acquired New England Treatment Company, Inc. ("NETCO"),
pursuant to an Agreement and Plan of Merger, as amended (the "Merger
Agreement"), by and among the Company, Merger Sub, NETCO, Paul A. Toretta,
Frances A. Guerrera, Frances A. Guerrera, as executrix of the Estate of Richard
J. Guerrera (the "Estate"), and Frances A. Guerrera and Robert Dionne, as
Co-Trustees of the Richard J. Guerrera Revocable Trust under Agreement dated
November 2, 1998 (the "Trust"), dated October 20, 1999, and (ii) acquired
Residual Technologies, Limited Partnership, Fairhaven Residuals, Limited
Partnership, NETCO-Waterbury Limited Partnership, NETCO-Residual Management,
Limited Partnership, New Haven Residuals, Limited Partnership, Providence Soils,
LLC, Fairhaven Residual Systems, Inc., NETCO-Connecticut, Inc., NETCO-Residuals
Management Systems, Inc., NETCO-Waterbury Systems, Inc., New Haven Residual
Systems, Inc., and Residual Technologies Systems, Inc. (collectively, with
NETCO, the "RESTEC Entities"), pursuant to a Purchase and Sale Agreement, as
amended (the "Purchase Agreement"), by and among the Company, Mr. Toretta,
Eileen Toretta, as Trustee of the Paul A. Toretta 1998 Grat (the "Grat"), Mrs.
Guerrera, the Estate and the Trust, also dated October 20, 1999.
The RESTEC Entities are engaged in the business of sewage sludge
disposal in the northeastern United States, including the hauling, treatment and
disposal of sewage sludge; the providing of non-hazardous biosolids
transportation, treatment and disposal services to municipal wastewater
treatment plants and commercial customers; and the operation, maintenance,
repair and management of sewage sludge treatment and incineration facilities.
Pursuant to the Merger Agreement, Mr. Toretta, the Estate and certain key
employees of NETCO, received an aggregate of 1,325,000 shares of the Company's
common stock, par value $.002 per share ("Common Stock"), as consideration for
NETCO. Pursuant to the Purchase Agreement, Mr. Toretta, the Grat and the Estate
received an aggregate of $30,426,300 in cash, and the Company assumed
$13,949,500 of RESTEC's indebtedness, as the purchase price for RESTEC (other
than NETCO). Additionally, pursuant to the Purchase Agreement, Mr. Toretta, the
Grat and the Estate can earn up to an additional $12,000,000 over the next eight
years if certain performance targets are met. The Company intends to record the
acquisition using the purchase method of accounting. The purchase price was
determined based upon an evaluation of the business of the RESTEC Entities and
the results of negotiations between the parties.
In order to fund the acquisition of the RESTEC Entities, to repay and
to refinance certain indebtedness, and to pay related transaction expenses, the
Company (i) sold 17,358.824 shares of Series C Convertible Preferred Stock, par
value $.002 per share ("Series C Preferred Stock"), and 2,641.176 shares of
Series D Convertible Preferred Stock, par value $.002 per share ("Series D
Preferred Stock"), to GTCR Fund VII, L.P., a Delaware limited partnership ("GTCR
Fund"), for an aggregate purchase price of $20,000,000 pursuant to a Purchase
Agreement between the Company and GTCR Fund dated as of January 27, 2000, (ii)
borrowed $20,000,000 of subordinated indebtedness from GTCR Capital Partners,
L.P., a Delaware limited partnership ("GTCR Partners"), pursuant to a
Subordinated Loan Agreement between the Company and GTCR Partners, dated January
27, 2000 (the "Loan
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Agreement"), and (iii) borrowed funds under the Amended and Restated Senior
Credit Agreement by and among the Company, Bank of America, N.A. and certain
other lenders dated as of January 27, 2000. In connection with the Loan
Agreement, the Company also issued to GTCR Partners a warrant (the "Warrant")
to purchase 2,857.143 shares of Series D Preferred Stock, which Warrant was
immediately exercisable at a price of $.01 per share. The shares of Series C
Preferred Stock are convertible into shares of Series D Preferred Stock on a one
for one basis, and the shares of Series D Preferred Stock are convertible into
shares of Common Stock at a conversion price of $2.50 per share. As a result,
assuming all of the shares of Series C Preferred Stock are converted into shares
of Series D Preferred Stock and the Warrant is exercised, the shares of Series D
Preferred Stock will be convertible into an aggregate of 9,142,857 shares of
Common Stock.
The foregoing discussion is only a summary and is qualified in its
entirety by reference to the attached press release, the Merger Agreement and
the Purchase Agreement filed as exhibits hereto and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
As of the filing date of this Form 8-K, the Company has found
it impracticable to file the required financial statements of
the acquired businesses. The Company intends to file the
required financial statements 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.
B. PRO FORMA FINANCIAL INFORMATION.
As of the filing date of this Form 8-K, the Company has found
it impracticable to file the required pro forma financial
information for the acquisitions. The Company 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.
C. EXHIBITS
Exhibit 2.1: Agreement and Plan of Merger, dated October
20, 1999, by and among Synagro Technologies,
Inc., RESTEC Acquisition Corp., New England
Treatment Company, Inc., Paul A. Toretta,
Frances A. Guerrera, Frances A. Guerrera, as
executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert
Dionne, as Co-Trustees of the Richard J.
Guerrera Revocable Trust under Agreement
dated November 2, 1998.
Exhibit 2.2: Purchase and Sale Agreement, dated October
20, 1999, by and among Synagro Technologies,
Inc., Paul A. Toretta, Eileen Toretta, as
Trustee of the Paul A. Toretta 1998 Grat,
Frances A. Guerrera, Frances A. Guerrera, as
executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert
Dionne, as Co-Trustees of the Richard J.
Guerrera Revocable Trust under Agreement
dated November 2, 1998.
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Exhibit 2.3: Letter Amendment dated January 7, 2000,
amending both the Agreement and Plan of
Merger and the Purchase and Sale Agreements,
attached hereto as Exhibits 2.1 and 2.2,
respectively.
Exhibit 2.4: Second Amendment to Agreement and Plan of
Merger dated January 26, 2000, amending the
Agreement and Plan of Merger attached hereto
as Exhibit 2.1.
Exhibit 2.5: Second Amendment to Purchase and Sale
Agreement dated January 26, 2000, amending
the Purchase and Sale Agreement attached
hereto as Exhibit 2.2.
Exhibit 99: Press Release dated January 27, 2000,
relating to the acquisition of New England
Treatment Company, Inc., Residual
Technologies, Limited Partnership, Fairhaven
Residuals, Limited Partnership,
NETCO-Waterbury Limited Partnership,
NETCO-Residual Management, Limited
Partnership, New Haven Residuals, Limited
Partnership, Providence Soils, LLC,
Fairhaven Residual Systems, Inc.,
NETCO-Connecticut, Inc., NETCO-Residuals
Management Systems, Inc., NETCO-Waterbury
Systems, Inc., New Haven Residual Systems,
Inc., and Residual Technologies Systems,
Inc.
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: February 11, 2000 By: /s/ J. Paul Withrow
-----------------------------------------
J. Paul Withrow, Executive Vice President
and Chief Financial Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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2.1: Agreement and Plan of Merger, dated October 20, 1999,
by and among Synagro Technologies, Inc., RESTEC
Acquisition Corp., New England Treatment Company,
Inc., Paul A. Toretta, Frances A. Guerrera, Frances
A. Guerrera, as executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert Dionne,
as Co-Trustees of the Richard J. Guerrera Revocable
Trust under Agreement dated November 2, 1998.
2.2: Purchase and Sale Agreement, dated October 20, 1999,
by and among Synagro Technologies, Inc., Paul A.
Toretta, Eileen Toretta, as Trustee of the Paul A.
Toretta 1998 Grat, Frances A. Guerrera, Frances A.
Guerrera, as executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert Dionne,
as Co-Trustees of the Richard J. Guerrera Revocable
Trust under Agreement dated November 2, 1998.
2.3: Letter Amendment dated January 7, 2000, amending both
the Agreement and Plan of Merger and the Purchase and
Sale Agreements, attached hereto as Exhibits 2.1 and
2.2, respectively.
2.4: Second Amendment to Agreement and Plan of Merger
dated January 26, 2000, amending the Agreement and
Plan of Merger attached hereto as Exhibit 2.1.
2.5: Second Amendment to Purchase and Sale Agreement dated
January 26, 2000, amending the Purchase and Sale
Agreement attached hereto as Exhibit 2.2.
99: Press Release dated January 27, 2000, relating to the
acquisition of New England Treatment Company, Inc.,
Residual Technologies, Limited Partnership, Fairhaven
Residuals, Limited Partnership, NETCO-Waterbury
Limited Partnership, NETCO-Residual Management,
Limited Partnership, New Haven Residuals, Limited
Partnership, Providence Soils, LLC, Fairhaven
Residual Systems, Inc., NETCO-Connecticut, Inc.,
NETCO-Residuals Management Systems, Inc.,
NETCO-Waterbury Systems, Inc., New Haven Residual
Systems, Inc., and Residual Technologies Systems,
Inc.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
RESTEC ACQUISITION CORP.,
NEW ENGLAND TREATMENT COMPANY, INC.,
PAUL A. TORETTA,
FRANCES A. GUERRERA,
FRANCES A. GUERRERA,
AS EXECUTRIX OF THE ESTATE OF
RICHARD J. GUERRERA
AND
FRANCES A. GUERRERA AND ROBERT DIONNE,
AS CO-TRUSTEES OF THE
RICHARD J. GUERRERA REVOCABLE TRUST
UNDER AGREEMENT DATED NOVEMBER 2, 1998
OCTOBER 20, 1999
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER...............................................................................................2
Section 1.1. The Merger..................................................................2
Section 1.2. Effective Time of the Merger................................................2
ARTICLE II
THE SURVIVING CORPORATION................................................................................2
Section 2.1. Certificate of Incorporation................................................2
Section 2.2. Bylaws......................................................................2
Section 2.3. Directors...................................................................2
Section 2.4. Officers....................................................................2
ARTICLE III
CONVERSION OF SHARES.....................................................................................3
Section 3.1. Effect on Capital Stock.....................................................3
Section 3.2. Exchange of Certificates....................................................4
Section 3.3. Purchase Price Adjustment...................................................4
Section 3.4. Stock Transfer Books........................................................6
Section 3.5. No Further Ownership Rights in Company Common Stock.........................6
Section 3.6. Tax and Accounting Consequences.............................................6
Section 3.7. Taking of Necessary Action; Further Action..................................6
Section 3.8. Closing.....................................................................6
Section 3.9. Closing Deliveries..........................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER......................................................8
Section 4.1. Organization and Qualification..............................................8
Section 4.2. Capitalization..............................................................8
Section 4.3. Authority; Non-Contravention; Approvals.....................................9
Section 4.4. Registration Statements....................................................10
Section 4.5. Reports and Financial Statements...........................................10
Section 4.6. Brokers and Finders........................................................11
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS CONCERNING THE TRANSACTION...........................11
Section 4A.1. Ownership..................................................................11
Section 4A.2. Authority; Non-Contravention; Approvals....................................11
Section 4A.3. Brokers and Finders........................................................12
Section 4A.4. Registration Statements....................................................12
Section 4A.5. Investment Representations.................................................12
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS CONCERNING THE
COMPANY.................................................................................................14
Section 5.1. Organization and Qualification.............................................14
Section 5.2. Capitalization.............................................................14
Section 5.3. Authority; Non-Contravention; Approvals....................................15
Section 5.4. Subsidiaries...............................................................15
Section 5.5. Financial Statements.......................................................16
Section 5.6. Absence of Undisclosed Liabilities.........................................16
Section 5.7. Absence of Certain Changes or Events.......................................16
Section 5.8. Litigation.................................................................16
Section 5.9. Accounts Receivable........................................................17
Section 5.10. No Violation of Law; Compliance with Agreements............................17
Section 5.11. Insurance..................................................................17
Section 5.12. Taxes......................................................................17
Section 5.13. Employee Benefit Plans.....................................................19
Section 5.14. Employee and Labor Matters.................................................20
Section 5.15. Environmental Matters......................................................21
Section 5.16. Non-Competition Agreements.................................................22
Section 5.17. Title to Assets............................................................23
Section 5.18. Contracts, Agreements, Plans and Commitments...............................23
Section 5.19. Supplies...................................................................24
Section 5.20. Brokers and Finders........................................................24
Section 5.21. Intellectual Property......................................................24
Section 5.22. Relationships..............................................................25
Section 5.23. Year 2000..................................................................25
Section 5.24. Certain Payments...........................................................25
Section 5.25. Books and Records..........................................................26
Section 5.26. Condition and Sufficiency of Assets........................................26
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING.....................................................................26
Section 6.1. Conduct of Business by the Company Pending the Merger......................26
Section 6.2. Other Offers...............................................................28
Section 6.3. Access to Information......................................................28
Section 6.4. Commercially Reasonable Efforts............................................28
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ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES....................................................28
Section 7.1. Consents...................................................................28
Section 7.2. Further Assurances.........................................................29
Section 7.3. Expenses and Fees..........................................................29
Section 7.4. Agreement to Cooperate.....................................................29
Section 7.5. Notification of Certain Matters............................................29
Section 7.6. Registration Statements....................................................30
Section 7.7. Purchaser's Liquidity Program..............................................31
Section 7.8. Exchange Listing...........................................................31
Section 7.9. Public Statements..........................................................31
Section 7.10. Supplements to Disclosure Schedules........................................32
ARTICLE VIII
CONDITIONS TO CLOSING...................................................................................32
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger.................32
Section 8.2. Conditions to Obligation of the Company and the
Shareholders to Effect the Merger..........................................32
Section 8.3. Conditions to Obligations of Parent to Effect the Merger...................33
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.......................................................................34
Section 9.1. Termination................................................................34
Section 9.2. Effect of Termination......................................................35
Section 9.3. Extensions; Waiver.........................................................36
Section 9.4. Parent's Option to Extend..................................................36
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY.............................................................36
Section 10.1. The Shareholders' Indemnity Obligations....................................36
Section 10.2. Parent's Indemnity Obligations.............................................37
Section 10.3. Indemnification Procedures.................................................37
Section 10.4. Limitation of Shareholders' Liability......................................39
Section 10.5. Limitation of Parent's Liability...........................................39
ARTICLE XI
GENERAL PROVISIONS......................................................................................40
Section 11.1. Survival...................................................................40
Section 11.2. Notices....................................................................40
Section 11.3. Interpretation.............................................................43
Section 11.4. Miscellaneous..............................................................43
Section 11.5. Governing Law..............................................................43
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Section 11.6. Binding Arbitration........................................................43
Section 11.7. Amendment..................................................................45
Section 11.8. Counterparts...............................................................45
Section 11.9. Parties in Interest........................................................45
Section 11.10. Validity...................................................................45
Section 11.11. Guarantee..................................................................45
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EXHIBITS:
Exhibit A Glossary
Exhibit B Form of Estimated Adjustment Amount Worksheet
Exhibit C Form of Release of Claims Agreement
Exhibit D Form of Consulting Agreement
Exhibit E Form of Covenant Not to Compete Agreement
Exhibit F Form of Covenant Not to Compete Agreement
SCHEDULES:
Schedule 1 Ownership of the Company
Schedule 2.3 Directors of the Surviving Corporation
Schedule 2.4 Officers of the Surviving Corporation
Schedule 3.3(d) Projects
Schedule 3.9 Guarantees and Surety Obligations
Schedule 4A.3 Shareholders' Brokers and Finders
Schedule 5.2(b) Capitalization
Schedule 5.3 Authority; Non-Contravention; Approvals
Schedule 5.4 Subsidiaries
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 5.10 No Violation of Law; Compliance with Agreements
Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.14 Employee and Labor Matters
Schedule 5.15 Environmental Matters
Schedule 5.16 Non-Competition Agreements
Schedule 5.17 Title to Assets
Schedule 5.18 Contracts, Agreements, Plans and Commitments
Schedule 5.20 Company's Brokers and Finders
Schedule 5.21 Intellectual Property
Schedule 5.22 Relationships
Schedule 5.23 Year 2000 Compliance
Schedule 5.26 Condition and Sufficiency of Assets
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 20, 1999 (the
"Agreement"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("Parent"), RESTEC ACQUISITION CORP., a Rhode Island corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), NEW ENGLAND TREATMENT COMPANY,
INC., a Rhode Island corporation ("Company"), PAUL A. TORETTA, individually
("Mr. Toretta"), FRANCES A. GUERRERA, individually ("Mrs. Guerrera"), FRANCES A.
GUERRERA, as Executrix of the Estate of Richard J. Guerrera (the "Estate"), and
FRANCES A. GUERRERA and ROBERT DIONNE, as Co-Trustees of the Richard J. Guerrera
Revocable Trust under agreement dated November 2, 1998 (the "Trust"). Each of
Mr. Toretta and the Estate is a "Shareholder" and, collectively, they are
sometimes referred to as the "Shareholders". The Parent, Merger Sub, Company and
each of the other signatories to this Agreement is a "Party" and, collectively,
they are sometimes referred to as the "Parties." Mrs. Guerrera, individually and
in her capacity as Co-Trustee of the Trust, and Robert Dionne, in his capacity
as Co-Trustee of the Trust, join this Agreement for purposes of guaranteeing the
performance by the Estate and Trust, as the case may be, of their respective
joint and several obligations under this Agreement, as further set forth in
Section 11.11 of this Agreement.
W I T N E S S E T H:
WHEREAS, Parent, Merger Sub, the Company and the Shareholders desire
that Merger Sub merge with and into the Company (the "Merger");
WHEREAS, Parent, Merger Sub and the Company intend the Merger to
qualify as a tax-free reorganization under the provisions of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder;
WHEREAS, the Company, the Shareholders, Mrs. Guerrera and the Trust are
making certain representations, warranties, covenants, agreements and
indemnities herein, as inducement to Parent and Merger Sub to enter into this
Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the meanings ascribed to them in the Glossary attached as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements stated herein, the receipt
and sufficiency of which are hereby acknowledged, the Parties, intending to be
legally bound, covenant and agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2) in
accordance with the Rhode Island Business Corporation Act, the Merger Sub shall
be merged with and into the Company and the separate existence of the Merger Sub
shall thereupon cease. The Company shall be the surviving corporation in the
Merger and is hereinafter sometimes referred to as the "Surviving Corporation."
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at such time (the "Effective Time") as articles of merger are filed
with the Secretary of State of the State of Rhode Island in accordance with the
Rhode Island Business Corporation Act (the "Merger Filing"). The Merger Filing
shall be made simultaneously with or as soon as practicable after the Closing
(as defined in Section 3.8) in accordance with Article III. The Parties
acknowledge that it is their mutual desire and intent to consummate the Merger
as soon as practicable after the date hereof, and in any event within five (5)
business days after the satisfaction, or waiver, of all conditions to Closing
set forth in Article VIII hereof, subject to the terms and conditions hereof.
Accordingly, subject to the provisions hereof, the Parties shall use all
reasonable efforts to consummate, as soon as practicable, the transactions
contemplated by this Agreement in accordance with Article VIII.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. CERTIFICATE OF INCORPORATION. The Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation after the
Effective Time, as the same may thereafter be amended in accordance with its
terms and as provided under the Rhode Island Business Corporation Act.
SECTION 2.2. BYLAWS. The Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time, as the same may thereafter be amended in accordance
with their terms and as provided by the Articles of Incorporation of the
Surviving Corporation and the Rhode Island Business Corporation Act.
SECTION 2.3. DIRECTORS. The directors of the Surviving Corporation
shall be as designated in Schedule 2.3, and such directors shall serve in
accordance with the Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified.
SECTION 2.4. OFFICERS. The officers of the Surviving Corporation shall
be as designated in Schedule 2.4, and such officers shall serve in accordance
with the Bylaws of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified.
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ARTICLE III
CONVERSION OF SHARES
SECTION 3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Merger Sub, the
Company or the Shareholders:
(a) CONVERSION OF SECURITIES. All of the Company's common
stock, $1.00 par value per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (excluding any shares of the
Company Common Stock to be canceled pursuant to Section 3.1(b)) shall be
converted, subject to Section 3.1(e), into the right to receive at Closing, in
the aggregate, the sum of:
(i) the number of validly issued, fully paid and
nonassessable shares of common stock, par value $.002 per
share, of Parent ("Parent Common Stock"), determined by
dividing (x) $2,000,000 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 $260,000 by (y)
the Average Parent Common Stock Price; and
(ii) 1,000,000 shares of Parent Common Stock;
provided, however, for purposes of this Section 3.1(a)(ii) (1)
in the event the Average Parent Common Stock Price is less
than $3.00, Parent will issue to the Shareholders, in the
aggregate, the number of shares of Parent Common Stock
determined by dividing Three Million Dollars ($3,000,000) by
the Average Parent Common Stock Price, and (2) in the event
the Average Parent Common Stock Price is more than $7.50,
Parent will issue to the Shareholders, in the aggregate, the
number of shares of Parent Common Stock determined by dividing
Seven Million Five Hundred Thousand Dollars ($7,500,000) by
the Average Parent Common Stock Price.
(iii) Shares issued under Section 3.1(a)(i) and (ii)
to the Shareholders are referred to herein as the "Parent
Shares." Each Shareholder shall be entitled to receive
one-half of the aggregate consideration issuable pursuant to
this Section 3.1(a).
(b) CANCELLATION. Each share of Company Common Stock held in
the treasury of the Company and each share of Company Common Stock held by any
direct or indirect wholly-owned Subsidiary of the Company, if any, immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) CAPITAL STOCK OF MERGER SUB. Each share of common stock,
$.01 par value per share, of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
3
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(d) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger
Consideration (as defined in Section 3.2(a)) shall be appropriately adjusted to
reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend of securities convertible into Parent Common Stock),
reorganization, reclassification, recapitalization or other similar change with
respect to Parent Common Stock occurring (including the record date thereof)
after the date hereof and prior to the Effective Time. In no event shall the
number of shares of Parent Common Stock issued pursuant to Section 3.1(a) exceed
twenty percent (20%) of the total outstanding shares of Parent Common Stock at
the time of Closing.
(e) FRACTIONAL SHARES. No certificates or scrip representing
less than one share of Parent Common Stock shall be issued upon the surrender
for exchange of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates"). In lieu of any such fractional share, each holder of shares of
Company Common Stock who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for exchange shall
be paid upon such surrender cash (without interest) in an amount equal to such
fraction multiplied by the Average Parent Common Stock Price on the Closing
Date.
SECTION 3.2. EXCHANGE OF CERTIFICATES.
(a) Immediately after the Effective Time, Parent will deliver
to each Shareholder upon surrender of all such Certificates for cancellation
together with such other customary documents as may be required, and the
Shareholders shall be entitled to receive in exchange therefor, (A) certificates
evidencing that number of whole shares of Parent Common Stock in immediately
available funds which such holder has the right to receive in accordance with
Section 3.1 hereof in respect of the shares of Company Common Stock formerly
evidenced by such Certificate, and (B) cash in respect of fractional shares as
provided in Section 3.1(e) (the shares of Parent Common Stock and cash being,
collectively, the "Merger Consideration"), and the Certificates so surrendered
shall forthwith be canceled.
(b) Parent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to this Agreement to any holder
of Company Common Stock such amounts as Parent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent.
SECTION 3.3. PURCHASE PRICE ADJUSTMENT.
(a) Prior to the Closing Date, Mr. Toretta shall deliver to
the Parent a worksheet, in the form 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 Adjusted Amount"). The worksheet shall be prepared by Mr. Toretta,
with a copy provided to the Estate, and shall be reasonably acceptable to the
Parent. If the Estimated Adjustment Amount is a positive number, the Merger
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Consideration payable at Closing to the Shareholders shall be decreased in an
amount equal to the number of validly issued, fully paid and nonassessable
shares of Parent Common Stock determined by dividing the positive Estimated
Adjustment Amount by the Average Parent Common Stock Price. If the Estimated
Adjustment Amount is a negative number, the Merger Consideration payable at
Closing to the Shareholders shall be increased in an amount equal to the number
of validly issued, fully paid and nonassessable shares of Parent Common Stock
determined by dividing the negative Estimated Adjustment Amount by the Average
Parent Common Stock Price.
(b) Within 90 days after the Closing, Parent 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 Companies 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 do object in writing to the computation within such 15-day
period, then the Parent 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 Parent and the
Shareholders (the "Neutral Auditors"). If the Parent 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 Parent and the
Shareholders. The Neutral Auditors will deliver to the Parent 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
Parent 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 Parent 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, Parent
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. Any payments due from or to the Shareholders
pursuant to this Section 3.3(c) shall be payable or paid fifty percent (50%) by
or to each Shareholder.
(d) For purposes of determining the Net Working Capital
pursuant to this Section 3.3, any cash payments made or current liabilities
incurred on or after August 1, 1999, and prior to Closing with respect to the
projects described on Schedule 3.3(d) hereto, up to an
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aggregate amount of cash and current liabilities of $260,000, shall not be
deducted in the Net Working Capital computation.
SECTION 3.4. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 3.5. NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. The
Merger Consideration delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers on
the records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled.
SECTION 3.6. TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
Parties that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. The Parties hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
SECTION 3.7. TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of
Parent, Merger Sub, each of the Shareholders and the Company will take all such
reasonable and lawful action as may be necessary or appropriate in order to
effectuate the Merger in accordance with this Agreement as promptly as possible.
If, at any time after the Effective Time, any such further action is necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Company and Merger Sub in office
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
SECTION 3.8. CLOSING. Subject to the terms and provisions of Article
IX, the closing of the transactions provided for herein (the "Closing") shall
take place at the offices of RICHARDS & O'NEIL, LLP, 43 Arch Street, Greenwich,
Connecticut as promptly as practicable (but in any event within five (5)
business days) following the date on which the last of the conditions set forth
in Article VIII is fulfilled or waived, or at such other time and place as the
Parties shall agree. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date."
SECTION 3.9. CLOSING DELIVERIES.
(a) At the Closing, the Shareholders shall deliver to the
Parent:
(i) certificates representing the Company Common
Stock, duly endorsed for transfer to the Parent or accompanied by duly
executed assignment
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documents, which shall transfer to the Parent good and valid title to the
Company Common Stock, free and clear of all Liens;
(ii) Release of Claims Agreements executed by the
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;
(iii) all corporate, accounting, business and tax
records of the Company;
(iv) a legal opinion from Richards & O'Neil, LLP,
counsel to Mr. Toretta and the Company, in a form reasonably
satisfactory to Parent;
(v) a legal opinion from Palmeri, Rock & Talbot,
P.C., counsel to Frances Guerrera, individually, the Estate and the
Trust, in a form reasonably satisfactory to Parent;
(vi) a Consulting Agreement between the Parent and
Mr. Toretta, individually, in the form attached as Exhibit D hereto; -
(vii) a Covenant Not to Compete Agreement between the
Parent and Mr. Toretta, individually, in the form attached as Exhibit E
hereto;
(viii) Covenant Not to Compete Agreements between the
Parent and each of Mrs. Guerrera, individually, the Estate, the Trust
and R. J. Guerrera Trucking Company, Inc. (the "Trucking Company"), in
the form attached as Exhibit F hereto; and
(ix) such other documents, including certificates of
the Shareholders, as may be required by this Agreement or reasonably
requested by the Parent.
(b) At the Closing, the Parent shall deliver to:
(i) the Shareholders, the Merger Consideration
determined in accordance with Section 3.2;
(ii) Mr. Toretta, individually, a Consulting
Agreement, in the form attached as Exhibit D;
(iii) Mr. Toretta, individually, a Covenant Not to
Compete Agreement, in the form attached as Exhibit E;
(iv) each of the Estate, Mrs. Guerrera, individually,
the Trust and the Trucking Company, a Covenant Not to Compete
Agreement, in the form attached as Exhibit F; and
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(v) documents relating to the removal of the
Shareholders from any and all personal guarantees and/or surety
obligations in connection with the Company's debts or operations listed
on Schedule 3.9; and
(vi) legal opinions from in-house legal counsel to
the Parent, dated the Closing Date, in a form reasonably satisfactory
to the Sellers.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER
Parent and Merger Sub each represent and warrant to the Shareholders as
follows, except as set forth in the Parent's Form 10-K for the fiscal year ended
December 31, 1998, all quarterly reports on Form 10-Q filed with the SEC since
January 1, 1999, and all amendments to any of the foregoing.
SECTION 4.1. ORGANIZATION AND QUALIFICATION. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. Parent is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the properties owned, leased, or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect (as defined in Exhibit A).
SECTION 4.2. CAPITALIZATION.
(a) As of June 30, 1999, the authorized capital stock of
Parent consisted of 100,000,000 shares of Parent Common Stock, of which
17,392,790 shares were issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.002 per share, of which 500,000 shares have been
designated as "Preferred Stock-Junior Participating Series A" and reserved for
issuance upon exercise of rights evidenced by the certificates representing all
outstanding shares of Parent Common Stock, but no such shares are issued and
outstanding. All of the issued and outstanding shares of Parent Common Stock
were validly issued and are fully paid, nonassessable and free of preemptive
rights.
(b) As of June 30, 1999, except for 4,020,393 options granted
pursuant to Parent incentive or option plans (or to current or former employees
of Parent), warrants to acquire 770,000 shares of Parent Common Stock and shares
issuable in connection with proposed acquisitions, if any, there are no
outstanding (i) securities of Parent convertible into or exchangeable for shares
of capital stock or voting securities of Parent or (ii) options or other rights
to acquire from Parent or other obligations of Parent to issue, any capital
stock, voting
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securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent.
(c) All of the shares of capital stock of Merger Sub are owned
beneficially and of record by Parent.
(d) The shares of Parent Common Stock to be issued as part of
the Merger Consideration have been duly authorized and when issued and delivered
in accordance with the terms of this Agreement, will have been validly issued
and will be fully paid and non-assessable, and the issuance thereof is not
subject to any preemptive or other similar right.
SECTION 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent and Merger Sub each have full corporate power and
authority to execute and deliver this Agreement and, subject to the Parent
Required Statutory Approvals (as defined in Section 4.3(c)), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of the Parent and no other corporate proceedings on the part of
Parent are necessary to authorize the execution and delivery of this Agreement
or the consummation by Parent of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub,
and, assuming the due authorization, execution and delivery hereof by the other
Parties, constitutes a valid and legally binding agreement of each of Parent and
Merger Sub enforceable against each of them in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
(b) The execution and delivery of this Agreement by each of
Parent and Merger Sub and the consummation by them 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, upon,
any of the properties or assets of Parent or any of its Subsidiaries under any
of the terms, conditions or provisions of (i) the respective charters or bylaws
of Parent or any of its Subsidiaries, (ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court or Governmental Authority applicable to Parent or any of its Subsidiaries
or any of their respective properties or assets (assuming compliance with the
matters referred to in Section 4.3(c)) or (iii) any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Parent
or any of its Subsidiaries is now a party or by which Parent or any of its
Subsidiaries or any of their respective properties or assets may be bound or
affected, except, in the case of clauses (ii) and (iii), for matters as would
not have, or could not reasonably be anticipated to have, individually or in the
aggregate, a Material Adverse Effect or materially impair the ability of Parent
to consummate the transactions contemplated by this Agreement.
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(c) Except for (i) the filing of the Registration Statements
(as defined in Section 4.4) with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, and (ii) the making of the Merger
Filing with the Secretary of State of Rhode Island in connection with the Merger
(the filings and approvals referred to in clauses (i) and (ii) are collectively
referred to as the "Parent Required Statutory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or approval
of, any governmental or regulatory body or authority is necessary for the
execution and delivery of this Agreement by Parent or Merger Sub or the
consummation by Parent or Merger Sub of the transactions contemplated hereby,
other than such declarations, filings, registrations, notices, authorizations,
consents or approvals which, if not made or obtained, as the case may be, would
not, have, or could not reasonably be anticipated to have, individually or in
the aggregate, a Material Adverse Effect or materially impair the ability of
Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
SECTION 4.4. REGISTRATION STATEMENTS. None of the information to be
supplied by Parent or its Subsidiaries for inclusion in the Registration
Statements on Form S-3 to be filed under the Securities Act with the SEC by
Parent pursuant to Section 7.6 of this Agreement for the purpose of registering
the Parent Shares (as amended or supplemented, the "Registration Statements")
will, at the time they become effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Since January 1, 1999, Parent has filed with the SEC all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Securities Exchange Act of 1934, as amended, and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate acts and
the rules and regulations thereunder.
(b) Parent has previously made available or delivered to the
Company or the Shareholders copies of Parent's (a) Annual Reports on Form 10-K
for the fiscal year ended December 31, 1998, and for the immediately preceding
fiscal year, as filed with the SEC, (b) proxy and information statements
relating to (i) all meetings of its shareholders (whether annual or special) and
(ii) any actions by written consent in lieu of a shareholders' meeting from
January 1, 1999, until the date hereof, and (c) all other reports, including
quarterly reports, or registration statements filed by Parent with the SEC since
January 1, 1999 (other than Registration Statements filed on Form S-8) (the
documents referred to in clauses (a), (b) and (c), including the exhibits
thereto, are collectively referred to as the "Parent SEC Reports").
(c) As of their respective dates, the Parent SEC Reports did
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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(d) The audited consolidated financial statements and
unaudited interim consolidated financial statements of Parent included in such
reports (collectively, the "Parent Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the consolidated financial
position of Parent and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
SECTION 4.6. BROKERS AND FINDERS. Parent has not entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of Parent 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 Parent 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.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
Each Shareholder and the Company, severally but not jointly, represent
and warrant to the Parent and Merger Sub as follows:
SECTION 4A.1 OWNERSHIP.
(a) The Shareholder holds of record and beneficially all of
the capital stock of the Company shown as owned by the Shareholder on Schedule 1
free and clear of any Liens (except for Liens arising under Federal and state
securities laws and restrictions arising under the Company's organizational
documents which have been waived).
(b) There are no outstanding 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 Shareholder to
deliver or sell, or cause to be delivered or sold, any capital stock in the
Company, or obligating the Shareholder to grant, extend or enter into any such
agreement or commitment. There are no voting trusts, proxies or other agreements
or understandings to which the Shareholder is a party or is bound with respect
to the voting of any ownership interest of the Company.
SECTION 4A.2 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Shareholder 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 and shareholders of the Company, and
no other proceedings on the part of the Shareholder are necessary to authorize
the execution and delivery of this
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Agreement by the Shareholder or the consummation by the Shareholder of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Shareholder, and, assuming the due authorization, execution and
delivery hereof by the other Parties, constitutes a valid and legally binding
agreement of the Shareholder, enforceable against the Shareholder in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally, and (ii) general
equitable principles.
(b) The execution and delivery of this Agreement by the Shareholder and
the consummation by the 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 upon any of the
properties or assets of the Shareholder under any of the terms, conditions or
provisions of (i) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or Governmental
Authority applicable to the Shareholder, or any of its properties or assets, or
(ii) 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 Shareholder is now a party or by which the Shareholder
or any of the Shareholder's 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
Shareholder or the consummation by the Shareholder of the transactions
contemplated hereby.
SECTION 4A.3 BROKERS AND FINDERS. Except as disclosed on Schedule 4A.3,
the Shareholder has not 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.
SECTION 4A.4 REGISTRATION STATEMENTS. None of the information to be
supplied by the Shareholder for inclusion in the Registration Statements will
contain any untrue statement of any material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
SECTION 4A.5 INVESTMENT REPRESENTATIONS. The Shareholder acknowledges,
represents and agrees that:
(a) (i) Parent has made available to the Shareholder the
information and documents described in Section 4.5 hereof, (ii) the Shareholder
understands the risks associated with ownership of Parent Common Stock, and
(iii) the Shareholder is capable of bearing the financial risks associated with
such ownership;
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(b) The Parent Shares included within the Merger Consideration
have not been registered under the Securities Act or registered or qualified
under any applicable state securities laws;
(c) The Parent Shares are being issued to the Shareholder in
reliance upon exemptions from such registration or qualification requirements,
and the availability of such exemptions depends in part upon the Shareholder's
bona fide investment intent with respect to the Parent Shares;
(d) The Shareholder's acquisition of the Parent Shares is
solely for the Shareholder's own account for investment, and the Shareholder is
not acquiring such Parent Shares for the account of any other Person or with a
view toward resale, assignment, fractionalization, or distribution thereof;
(e) The Shareholder shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Parent Shares except in
accordance with this Agreement and (A) the registration requirements of the
Securities Act and applicable state securities laws or (B) upon delivery to
Parent of an opinion of legal counsel reasonably satisfactory to Parent that an
exemption from registration is available or pursuant to an effective
registration statement covering the Parent Shares to be sold;
(f) The Shareholder has such knowledge and experience in
financial and business matters that the Shareholder is capable of evaluating the
merits and risks of an investment in the Parent Shares, and to make an informed
investment decision with respect thereto;
(g) The Shareholder has had the opportunity to ask questions
of, and receive answers from, Parent's officers and directors concerning the
Shareholder's acquisition of the Parent Shares and to obtain such other
information concerning Parent and the Parent Shares, to the extent Parent's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as the Shareholder deemed necessary in
connection with making an informed investment decision; and
(h) In addition to any other legends required by law or the
other agreements entered into in connection herewith, each certificate
evidencing the Parent Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE
SECURITIES LAWS, AND THEY CANNOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION
REQUIREMENTS OF THE ACT
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AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS CONCERNING THE COMPANY.
The Company and the Shareholders, jointly and severally, represent and
warrant to Parent and Merger Sub as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of 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, except where the
failure to be so qualified and in good standing would not have, or could not
reasonably be anticipated to have, individually or in the aggregate, a Material
Adverse Effect. True, accurate and complete copies of the Company's articles or
certificates of incorporation, as amended, and the Company's bylaws, in each
case as in effect on the date hereof, including all amendments thereto, have
heretofore been delivered to Parent.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
8,000 shares of Company Common Stock. As of the date of this Agreement there
are, and as of Closing there will be, 250 shares of Company Common Stock issued
and outstanding and no other shares of capital stock of the Company issued and
outstanding. All of such issued and outstanding shares of Company Common Stock
are validly issued and are fully paid, nonassessable and free of preemptive
rights and are owned beneficially and of record as set forth on Schedule 1, free
and clear of all Liens. No Subsidiary of the Company, other than as described on
Schedule 1, holds any shares of the capital stock of the Company.
(b) Except as set forth on Schedule 5.2(b), there are no
outstanding (i) subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, debenture,
instrument or other agreement obligating the Company 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 to grant, extend or enter into any
such agreement or commitment or (ii) obligations of the Company to repurchase,
redeem or otherwise acquire any
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securities referred to in clause (i) above. There are no voting trusts, proxies
or other agreements or understandings to which the Company is a party or is
bound with respect to the voting of any shares of capital stock of the
Companies.
SECTION 5.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to the Company Required
Statutory Approvals (as defined in Section 5.3(c), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors and Shareholders of the Company, 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 Company and the Shareholders of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, and, assuming the due authorization, execution and
delivery hereof by the other Parties, constitutes a valid and legally binding
agreement of the Company enforceable against the Company in accordance with its
terms.
(b) Except as disclosed on Schedule 5.3 hereto, the execution
and delivery of this Agreement by the Company and the consummation by the
Company 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 upon any of the properties or assets of the Company under
any of the terms, conditions or provisions of (i) charters 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 any of its 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 is now a party or by which any of
the Company or any of its respective properties or assets may be bound or
affected.
(c) Except for the Merger Filing with the Secretary of State
of the State of Rhode Island in connection with the Merger (the "Company
Required Statutory Approval") or as disclosed on Schedule 5.3 hereto, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by the Company or the
Shareholders or the consummation by the Company or the Shareholders of the
transactions contemplated hereby.
SECTION 5.4. SUBSIDIARIES. Except as set forth on Schedule 5.4, 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.
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SECTION 5.5. FINANCIAL STATEMENTS. The audited financial statements of
the Company for the fiscal year ended December 31, 1998, attached as part of
Schedule 5.5, have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto) and fairly present in all material
respects the financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then ended. The
unaudited interim financial statements of the Company for the seven (7) months
ended July 31, 1999, also attached as part of Schedule 5.5 (and together with
the audited financial statements described in the preceding sentence, the
"Company's Financial Statements"), have been prepared in accordance with the
accrual method 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 seven (7) month period then ended, subject to
normal year-end adjustments and any other adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 5.6, the Company has not incurred any liabilities or contingencies
(whether absolute, accrued, contingent or otherwise) of any nature, except
liabilities (i) which are accrued or reserved against the Company's Financial
Statements or reflected in the notes thereto or (ii) which were incurred after
December 31, 1998, and were incurred in the ordinary course of business and
consistent with past practices.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 31, 1999,
and except as described on Schedule 5.7, (i) the Company has not declared or set
aside or paid any dividend or made any other distribution with respect to any
outstanding securities or ownership interests, or, directly or indirectly,
purchased, redeemed or otherwise acquired any of its securities or ownership
interests and (ii) the Company has not granted any general increase in the
compensation of any 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. Since December 31, 1998, and except as described on Schedule 5.7, (i)
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; (ii) the Company has not made
any amendment to any of the articles of incorporation, certificates of
partnership, regulations, bylaws, partnership agreements, operating agreements
or other similar documents or changed the character of any of its businesses in
any manner; (iii) the businesses of the Company have been conducted in the
ordinary course of business consistent with past practices; and (iv) 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 on Schedule 5.8, there are
no claims, suits, actions, Environmental Claims, inspections, investigations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting the Company before any court, governmental department,
commission, agency, instrumentality, authority, or any
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mediator or arbitrator. Except as described on 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's Financial Statements represent sales actually made in the ordinary
course of business and are collectible in the ordinary course of business.
SECTION 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) Except as disclosed on Schedule 5.10, the Company is not
in violation of and has 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. To the knowledge of the Shareholders, 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. Except as disclosed on Schedule
5.10, 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 the Company Permits.
(b) Except as disclosed on Schedule 5.10, the Company is 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, (i) the charter,
bylaws or similar organizational instruments of the Company or (ii) 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. The Shareholders have heretofore delivered to
the Parent true and correct copies 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 Company's policies.
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's 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)
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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
been made since January 1, 1997 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's 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
December 31, 1998; (viii) the Company has not received a ruling from any taxing
authority or signed an agreement with any taxing authority; (ix) the Company has
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code, as amended
or similar provisions under any foreign laws) and has, within the time and the
manner prescribed by law, withheld and paid over to the appropriate taxing
authority all amounts required to be so withheld and paid over under all
applicable laws in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, partner, member 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
partner, stockholder, member, director or officer (or employee responsible for
Tax matters) of the Company expects any authority to assess any additional Taxes
with respect to the Company for any period for which Tax Returns have been
filed; (xii) the federal income Tax Returns of the Company have been examined by
the Internal Revenue Service ("IRS") (which examination has been completed) or
the statute of limitations for the assessment of federal income Taxes of the
Company has expired, for all periods through and including December 31, 1994,
and no deficiencies were asserted as a result of such examinations which have
not been resolved and fully paid; (xiii) no adjustments or deficiencies relating
to Tax Returns of the Company have been proposed, asserted or assessed by any
taxing authority, except for such adjustments or deficiencies which have been
fully paid or finally settled; and (xiv) the Company has delivered to the Parent
true, correct and complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to by the
Company since December 31, 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 agreement
providing for the allocation or sharing of Taxes with an entity that is not
directly or indirectly a wholly-owned Subsidiary of the Company. 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
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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. No Plan or Benefit Program is
or has been (i) covered by Title IV of the Employer Retirement Income Security
Act of 1974, as amended ("ERISA"), (ii) subject to the minimum funding
requirements of Section 412 of the Code or (iii) a "multi-employer plan" as
defined in Section 3(37) of ERISA, nor has the Company contributed to, or ever
had any obligation to contribute to, any multi-employer plan. Each Plan and
Benefit Program intended to be qualified under Section 401(a) of the Code is
designated as a tax-qualified plan on Schedule 5.13 and is so qualified. No Plan
or Benefit Program provides for any retiree health benefits for any employees or
dependents of the Company other than as required by the Consolidated Budget
Reconciliation Act of 1985, as amended ("COBRA"). 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 Companies, threatened, with respect to any such Plans or
Benefit Programs.
(b) The Shareholders have heretofore delivered to Parent true
and correct copies of the following, if any:
(i) each Plan and each Benefit Program listed on
Schedule 5.13, all amendments thereto as of the date hereof and all
current summary plan descriptions provided to employees regarding the
Plans and Benefit Programs;
(ii) each trust agreement and annuity contract (or
any other funding instruments) pertaining to any of the Plans or
Benefit Programs, including all amendments to such documents to the
date hereof;
(iii) each management or employment contract or
contract for personal services and a complete description of any
understanding or commitment between the Company and any officer,
consultant, director, employee or independent contractor of the
Company; and
(iv) a complete description of each other plan,
policy, contract, program, commitment or arrangement providing for
bonuses, deferred compensation, retirement payments, profit sharing,
incentive pay, commissions, hospitalization or medical expenses or
insurance (including, without limitation, health, dental, life and
disability 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
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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) Except as disclosed on Schedule 5.13, to the best
knowledge of the Shareholders, each Plan and Benefit Program has been maintained
and administered in compliance with its terms and in accordance with all
applicable laws, rules and regulations. The Company has no commitment or
obligation to establish or adopt any new or additional Plans or Benefit Programs
or to increase the benefits under any existing Plan or Benefit Program.
(d) Except as set forth on 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.
SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Schedule 5.14 hereto includes a true and complete list,
dated as of August 19, 1999, of all employees of the Company, listing the title
or position held, base salary or wage rate and, for the period since July 31,
1999, any bonuses, commissions or profit sharing payable to such employees.
(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 are not engaged in any
unfair labor practice. To the best knowledge of the Shareholders, all employees
of the Company who work in the United States are lawfully authorized to work in
the United States according to federal immigration laws. There is no labor
strike or labor disturbance pending or, to the knowledge of the Company or 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 any of the Companies, (ii)
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neither the Company nor either of the Shareholders is aware of any union
organizing activities or proceedings involving, or any pending petitions for
recognition of, a labor union or association as the exclusive bargaining agent
for, or where the purpose is to organize, any group or groups of employees of
the Company, or (iii) there is not currently pending, with regard to any of its
facilities, any proceeding before the National Labor Relations Board, wherein
any labor organization is seeking representation of any employees of the
Company.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth on Schedule
5.15 to this Agreement:
(a) Neither the Company nor any of its Business Facilities (as
defined in Exhibit A) is in violation of, or has violated, or has been or is in
non-compliance with, any Environmental Law, 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.
(b) Except in compliance with Environmental Laws (including,
without limitation, by obtaining necessary Environmental Permits), (i) 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 or transferred or transported
by the Company to or from any Business Facility, and (ii) to the knowledge of
the Shareholders 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) by the Company, on, under, about or from any
property adjacent to any current Business Facility;
(c) There are no Environmental Claims known, pending or, to
the knowledge of the Shareholders, threatened against the Company or any of its
Business Facilities, and, to the knowledge of the Shareholders, there is no
basis for same;
(d) The Company and all of its Business Facilities have
obtained all Environmental Permits applicable to the operation of the business
of the Company as presently conducted, and the Company and its Business
Facilities are in compliance with all terms and conditions of such Environmental
Permits. The Company and all of its Business Facilities have timely filed
applications for renewal of all such Environmental Permits. 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;
(e) The Company has all environmental and pollution control
equipment necessary to comply with all Environmental Laws (including, without
limitation, to comply with all applicable Environmental Permits applicable to
the operation of the business of the Company as presently conducted);
(f) To the knowledge of the Shareholders, 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
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would require reporting to any Governmental Authority or Remediation to comply
with the Requirements of Environmental Laws (as defined in Exhibit A);
(g) To the knowledge of the Shareholders, none of the off-site
locations where Materials of Environmental Concern generated from any Business
Facility of the Company, or for which the Company has arranged for their
disposal, treatment or application, has been nominated or identified as a
facility which is subject to an existing or potential claim under Environmental
Laws;
(h) The Company has not been named as a potentially
responsible party under, and no Business Facility of the Company has been
nominated or identified as a facility which is subject to, an existing or
potential claim under CERCLA or comparable Environmental Laws, and, to the
knowledge of the Shareholders, no Business Facility of the Company is subject to
any Lien arising under Environmental Laws;
(i) The Company has not received any notice of any release or
threatened release of Materials of Environmental Concern, or remedial obligation
under, Environmental Laws or Permits, relating to the ownership, use,
maintenance, operation of any Business Facility of the Company or in connection
with the business of the Company, nor, to the knowledge of the Shareholders, is
there any basis for any of the foregoing, nor has the Company voluntarily
undertaken Remediation or other decontamination or cleanup of any facility or
site or entered into any agreement for the payment of costs associated with such
activity;
(j) To the knowledge of the Shareholders, 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 One Hundred Thousand
Dollars ($100,000) above costs currently expended in the ordinary course of
business;
(k) The Company has filed all notices, notifications,
financial security, waste managements plans, or applications which are required
to be filed by the Company for the operation of its business or the use or
operation of any Business Facility of the Company; and (l) Except for sludge and
processed by-products, no current Business Facility (or equipment thereon) of
the Company contains any lead containing materials, asbestos containing
materials or polychlorinated biphenyls in any form.
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 successors of predecessors.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Except as disclosed on
Schedule 5.16 hereto, neither the Company nor either of the Shareholders 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 Shareholders is a party to any agreement which, by virtue
of such person's relationship with the Company, restricts the Company or any
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Subsidiary of the Company from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 5.17. TITLE TO ASSETS. Except as disclosed on Schedule 5.17,
the Company has good and indefeasible title to its assets and valid leasehold
interests in its leased assets and properties, as reflected in the most recent
balance sheet included in the Company's Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of the
conduct of the Business since the date of the latest balance sheet included
therein, free and clear of all Liens, 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 interfere with the present use of the property subject
thereto or affected thereby, or otherwise impair the Company's business
operations (in the manner presently carried on by the Company), or (iii) any
Lien securing any debt or obligation described on Schedule 5.17 which is
expressly referenced as being secured. All leases under which the Company leases
any real property have been delivered to Parent and are in good standing, valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or event which, with notice or lapse of
time or both, would become a default by or on behalf of the Company or its
Subsidiaries, or by or on behalf of any third party.
SECTION 5.18. CONTRACTS, AGREEMENTS, PLANS AND COMMITMENTS. Schedule
5.18 hereto sets forth a complete list of the following contracts, agreements,
plans and commitments (collectively, the "Contracts") to which the Company is a
party or by which the Company or any of its assets is bound as of the date
hereof:
(a) any contract, commitment or agreement that involves
aggregate expenditures by the Company of more than Fifty Thousand Dollars
($50,000) 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 Fifty Thousand Dollars ($50,000);
(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 non-competition agreement described in Section 5.16;
(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 any expenses to remedy
non-compliance with any Environmental Law; and
(k) any other contract material to the Company or its
business.
True, correct and complete copies of each of such contracts, agreements, plans
and commitments have been delivered to or made available for inspection by
Parent. All such contracts, agreements, plans and commitments (i) were duly and
validly executed and delivered by the Company and (ii) to the knowledge of the
Shareholders, 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 Merger will vest in the Surviving Corporation
all rights and benefits under the Contracts and the right to operate the
Company's business and assets under the terms of the Contracts and the manner
currently operated and used by the Company.
SECTION 5.19. SUPPLIES. To the knowledge of the Shareholders, 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.
SECTION 5.20. BROKERS AND FINDERS. Except as disclosed on Schedule
5.20, the Company has not 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. To the knowledge of the
Shareholders, except as disclosed on Schedule 5.21 hereto, the Company has
rights to use, whether through ownership, licensing or otherwise, all patents,
trademarks, service marks, trade names, copyrights, software, trade secrets and
other proprietary rights and processes that are material to its business as now
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conducted (collectively, the "Company Intellectual Property Rights"). Except as
set forth on Schedule 5.21, the Company does not own any patents. The Company
has no knowledge of any infringement by any other Person of any of the Company
Intellectual Property Rights, and, other than within the ordinary course of
business, 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. To the knowledge of the Shareholders, 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 they
violated or infringed the intellectual property right of any other person. The
Companies have 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 January 1, 1999, the Company has not received notice from any customer,
supplier or any party to any Contract involving more than Fifty Thousand Dollars
($50,000) annually with the Company (each a "Contract Party") that such Contract
Party intends to discontinue doing business with the Company, and, since such
date, no Contract Party has indicated any intention (a) to terminate its
existing business relationship with any of the Companies 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 year.
SECTION 5.23. YEAR 2000. To the knowledge of the Shareholders, after
reasonable investigation by the Shareholders and except as disclosed on Schedule
5.23 hereto, all emissions monitors and computers controlling the operation of
incinerators used by the Company are Year 2000 Compliant. "Year 2000 Compliant"
means as to any device (including, without limitation, all software, firmware,
microprocessing chips and/or other data processing devices related to such
device) utilized by and material to the business operations of the Company, that
such device 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.
SECTION 5.24. CERTAIN PAYMENTS. To the best knowledge of the
Shareholders, neither the Company nor any stockholder, officer, director or
employee of the Company has paid or received or caused to be paid or received,
directly or indirectly, in connection with any of 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 stockholder, officer, director or employee not reimbursed
by the Company or as permitted by applicable law).
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SECTION 5.25. BOOKS AND RECORDS. To the knowledge of the Shareholders,
the corporate minute books and other organizational 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. To the knowledge of the Shareholders, 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. All
such books and records are located in the offices of the Company.
SECTION 5.26. CONDITION AND SUFFICIENCY OF ASSETS. To the knowledge of
the Shareholders and the Company, except as disclosed on Schedule 5.26 hereto,
all buildings, improvements and equipment owned or leased by the Company is
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 not in excess of $100,000 per repair.
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING
SECTION 6.1. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
After the date hereof and prior to the Closing Date, unless Parent shall
otherwise agree in writing, the Company shall, and the Shareholders shall cause
the Company to:
(a) conduct its businesses in the ordinary and usual course of
business and consistent with past practice;
(b) not (i) amend or propose to amend its charter or bylaw,
(ii) split, combine, reorganize, reclassify, recapitalize or take any similar
action with respect to its 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 described on Schedule 3.3(d) hereto or in the ordinary course of
business not exceeding $100,000 in any instance or $200,000 in the aggregate,
(iv) sell, pledge, dispose of or encumber
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any assets or businesses other than sales in the ordinary course of business or
(v) enter into any contract, agreement, commitment or arrangement with respect
to any of the foregoing;
(e) use all reasonable efforts to preserve intact its business
organization and goodwill, keep available the services of its 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 Parent of the commencement
of any Environmental Claim, or non-routine inspection by any Governmental
Authority with responsibility for enforcing or implementing any applicable
Environmental Laws, and provide to Parent such information as Parent may
reasonably request regarding any such Environmental Claim, any developments in
connection therewith, and, as applicable, any anticipated or actual response
thereto;
(l) not enter into or assume any contracts or agreements
having a value or imposing an obligation upon the Company in excess of $100,000
annually and all contracts or agreements having a value to or imposing an
obligation on the Company that have remaining obligations of $200,000 or more,
regardless of the annual payment;
(m) maintain its books of account and records in the usual,
regular and ordinary manner consistent with past policies and practice;
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(n) 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
(o) 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 Shareholders and the Company shall not,
and shall not permit 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 Parent, or afford access to the properties, books or records
of the Company, to any Person. The Company shall promptly notify and provide
copies to Parent of any offer, proposal, solicitation or indication of interest,
or communication with respect thereto, delivered to or received from any third
party.
SECTION 6.3. ACCESS TO INFORMATION. The Shareholders and the Company
shall give the Parent and Merger Sub, and their respective accountants, counsel,
financial advisors, and other representatives (the "Parent 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 the Company's 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 Parent, Merger Sub and/or Parent
Representatives to make such inspections (including without limitation
environmental inspections, sampling, and analysis) as they may require and
furnish to the Parent, Merger Sub and/or Parent Representatives during such
period all such information concerning the Company and its affairs as the Parent
may reasonably request.
SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS. The Shareholders and
Company will use all reasonable commercial efforts to cause the representations
and warranties contained in Articles IV-A and 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 8.1 and 8.3 hereof.
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1. CONSENTS. Subsequent to the Closing Date, the Shareholders
will use all reasonable commercial efforts, at the request of the Parent or
Merger Sub provided that the
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Parent reimburses the Shareholders for all out of-pocket costs and expenses, to
assist the Parent or Merger Sub in obtaining all necessary, proper, appropriate
or advisable consents, novations, approvals or waivers which the Parent or
Merger Sub may reasonably seek from time to time in order to effect, confirm or
document the transactions contemplated by this Agreement, including using their
reasonable commercial efforts to obtain all necessary, proper, appropriate or
advisable consents, novations, approvals or waivers of third parties required in
order to preserve material contractual relationships of the Company.
SECTION 7.2. FURTHER ASSURANCES. The Parties shall execute and deliver
to the others, after the Closing Date, any other instrument which may be
requested by another Party 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 to operate the
Business in the manner operated by the Company prior to the date hereof.
SECTION 7.3. EXPENSES AND FEES. The Company shall pay all costs and
expenses incurred by the Company 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' attorneys and accountants. The Company will make all necessary
arrangements so that Parent or Merger Sub will not be charged with any such
costs or expenses, and all such costs and expenses shall be accrued on the
financial books and records of the Company prior to Closing and shall be
included in the calculation of Net Working Capital. Each Shareholder shall be
responsible for all costs and expenses incurred by such Shareholder in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, the fees and expenses of the Shareholder's
attorneys. Parent shall pay all costs and expenses incurred by Parent and Merger
Sub in connection with this Agreement and the transactions contemplated hereby,
including without limitation, the fees and expenses of their attorneys and
accountants.
SECTION 7.4. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, the Parties shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary, proper or
advisable waivers, consents and approvals under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to
preserve material contractual relationships of the Company.
SECTION 7.5. NOTIFICATION OF CERTAIN MATTERS. Each of the Parties
agrees to give prompt notice to each other Party of, and to use their respective
reasonable best efforts to prevent or promptly remedy, (i) the occurrence or
failure to occur or the impending or threatened occurrence or failure to occur,
of any event which occurrence or failure to occur would be likely to cause any
of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect (or in all respects in the case of any
representation or warranty containing any materiality qualification) at any time
from the date hereof to the Closing and (ii) any material failure (or any
failure in the case of any covenant, condition or agreement containing any
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materiality qualification) on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
Shareholders shall give prompt written notice to Parent 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 Parent such information as Parent may reasonably request
regarding such Environmental Claim, any developments in connection therewith,
and, as applicable, the Company' anticipated or actual response thereto.
Notwithstanding the other provisions of this Section 7.5 and except for those
supplements to the Disclosure Schedules permitted in Section 7.10 hereof, 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 7.6. REGISTRATION STATEMENTS.
(a) Parent shall use reasonable efforts to file with the SEC
promptly upon receipt of a written request from all of the Shareholders as a
group (provided that such request may be made or delivered no earlier than
August 31, 2000), the Registration Statement registering all of the Parent
Shares and shall use reasonable efforts to have the Registration Statement
declared effective by the SEC as promptly as reasonably practicable. Parent
shall also take any action required to be taken under applicable state blue sky
or securities laws in connection with the issuance and registration of Parent
Shares pursuant hereto. Parent and the Shareholders shall promptly furnish to
each other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with this
Section. Except as otherwise provided in this Section 7.6, no Parent Shares may
be transferred or sold during the twelve (12) months following Closing. The
Registration Statement shall cover the resale of the Parent Shares on Form S-3,
if available, and the Parent may combine registrations of Parent Shares under
this Section 7.6 with registrations of Parent Common Stock required under the
Purchase and Sale Agreement. The Parent shall use its commercially reasonable
efforts to cause such shelf Registration Statement to become effective as soon
as practical after such filing, and to cause the Parent Shares to be qualified
in such state jurisdictions as the Shareholders may reasonably request. The
Parent shall use commercially reasonable efforts to keep the shelf Registration
Statement current and effective for one year after it is first declared
effective.
(b) If Parent proposes to register for its own account any of
its securities under the Securities Act for sale (other than a registration
statement on Form S-4 or S-8, a registration statement filed in connection with
an exchange offer or an offering of securities solely to Parent's existing
shareholders, or a registration statement filed in connection with an exchange
offer or an offering of securities by any of the Parent's shareholders), Parent
shall give written notice to the Shareholders of the Parent's intention to
effect such a registration not later than 15 days prior to the anticipated date
of filing with the SEC of a Registration Statement, which notice shall offer the
Shareholders the opportunity to include in such Registration Statement any of
the Parent Shares held by the Shareholders that the Shareholders may request be
included therein (a "Piggyback Registration"). Notwithstanding the preceding
sentence, Parent's obligation under this Section 7.6(b) shall be limited to
registrations as to which a Registration Statement is to be filed (i) during the
period beginning on the first anniversary of the Closing Date and ending on the
fifth anniversary of the Closing Date, and (ii) only if the
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Shareholders are subject to the volume restrictions set forth in Rule 144 of the
Securities Act. Subject to the provisions of this Agreement, Parent will use its
reasonable efforts to cause all the Parent Shares for which the Shareholders
have requested registration to be registered under the Securities Act to the
extent required to permit the sale by the Shareholders of such Parent Shares;
provided, that if a Piggyback Registration relates to an underwritten public
offering and the managing underwriter or underwriters believe that the inclusion
of all shares requested to be included in the proposed registration would
adversely affect the marketing of such shares, Parent may first include in such
registration all securities Parent proposes to sell, and The Shareholders shall
accept a reduction (including a total elimination) in the number of shares to be
included in such registration, pro rata with the other holders of Parent Common
Stock making requests for registration, on the basis of the number of shares of
Parent Common Stock so requested to be included by the Shareholders and the
other selling shareholders. Nothing in this Section 7.6(b) shall limit Parent's
ability to withdraw a Registration Statement it has filed either before or after
effectiveness.
(c) Parent shall pay the expenses incurred in connection with
any proposed registration of securities by Parent under this Section 7.6,
whether or not effected or consummated, including, without limitation, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for Parent.
SECTION 7.7. PURCHASER'S LIQUIDITY PROGRAM. Notwithstanding any other
provision set forth herein, with respect to all sales by the Shareholders of
Parent Shares through the NASDAQ or any such other exchange, the Shareholders
may only sell such shares on any day after the first sale of Parent Common Stock
has occurred through the NASDAQ or such other exchange and on such day, the
Shareholders may only sell 1,000 Parent Shares in the aggregate for each 1,000
shares of Parent Common Stock sold by unrelated third parties through the NASDAQ
or such other exchange on such day. In no event shall the plan of distribution
of Parent Shares include the use of a contractual underwriter, nor shall Parent
have any obligation to enter into an underwriting agreement with any investment
banking firm participating as a broker in the execution of any such resales.
Parent agrees that it will furnish to the Shareholders such number of
prospectuses, prospectus supplements, or other documents incident to any
registration, qualification or compliance referred to herein as the Shareholders
from time to time may reasonably request.
SECTION 7.8. EXCHANGE LISTING. Parent shall use its reasonable efforts
to effect, at or before the effective date of a Registration Statement,
authorization for listing on NASDAQ, upon official notice of issuance, of the
shares of Parent Common Stock to be issued pursuant to the transactions
contemplated by this Agreement.
SECTION 7.9. PUBLIC STATEMENTS. Except as required by law or the
National Association of Securities Dealers ("NASD"), the Parties shall obtain
the written consent of the other Parties 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.
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SECTION 7.10. SUPPLEMENTS TO DISCLOSURE SCHEDULES. From time to time
prior to the date ten (10) days prior to Closing, the Shareholders may update
the Disclosure Schedules to this Agreement in order to make the information set
forth therein complete and accurate, so long as such an update does not disclose
an event, fact or condition which could have a Material Adverse Effect on the
Company. In the event such an update discloses an event or condition which could
have a Material Adverse Effect on the Company, then Parent may terminate this
Agreement if (i) the Parent notified the Shareholders that Parent believed, in
its reasonable business judgment, that the updated information disclosed an
event, fact or condition which could have a Material Adverse Effect on the
Company, (ii) the Parent negotiated in good faith with the Shareholders with
respect to adjustments, if any, to the terms of this Agreement as a result of
the updated information, and (iii) the Parties failed to agree on any such
adjustments.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the fulfillment or waiver, if permissible, of the following
conditions on or prior to the Effective Time:
(a) no preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
Merger shall have been issued and remain in effect (each Party agreeing to use
its reasonable efforts to have any such injunction, order or decree lifted); and
(b) no action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any state or federal government or
governmental agency in the United States which would prevent the consummation of
the Merger or make the consummation of the Merger illegal; and
(c) the transactions contemplated by the Purchase and Sale
Agreement dated the same date as this Agreement by and among Parent, Mr.
Toretta, Mrs. Guerrera, the Estate, the Trust and Eileen Toretta, as Trustee of
the Paul A. Toretta 1998 Grat (the "Purchase and Sale Agreement"), shall have
been consummated.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE COMPANY AND THE
SHAREHOLDERS TO EFFECT THE MERGER. Unless waived by the Company and the
Shareholders, the obligations of the Company and the Shareholders to effect the
Merger shall be subject to the fulfillment of the following additional
conditions on or prior to the Closing Date:
(a) Parent and Merger Sub shall have performed in all material
respects (or in all respects in the case of any agreement containing any
materiality qualification) their agreements contained in this Agreement required
to be performed on or prior to the Effective Time;
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(b) the representations and warranties of Parent and Merger
Sub contained in this Agreement shall be true and correct in all material
respects (or in all respects in the case of any representation or warranty
containing any materiality qualification) on and as of the date made and on and
as of the Closing Date as if made at and as of such date;
(c) the Shareholders shall have received certificates executed
on behalf of Parent and Merger Sub by the President or a Vice President of the
Parent and Merger Sub with respect to (a) and (b) above;
(d) the Shareholders shall have received legal opinions from
in-house legal counsel to the Parent, dated the Closing Date, in a form
reasonably satisfactory to the Sellers; and
(e) the Parent shall have entered into a Consulting Agreement
with Mr. Toretta, in the form attached hereto as Exhibit D.
SECTION 8.3. CONDITIONS TO OBLIGATIONS OF PARENT TO EFFECT THE MERGER.
Unless waived by Parent and Merger Sub, the obligations of Parent and Merger Sub
to effect the Merger shall be subject to the fulfillment of the following
additional conditions on or prior to the Effective Time:
(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) their agreements contained in this
Agreement required to be performed on or prior to the Closing Date;
(b) the representations and warranties of the Shareholders and
the Company contained in this Agreement shall be true and correct in all
material respects (or in all respects in the case of any representation or
warranty containing any materiality qualification) on and as of the date made
and on and as of the Closing Date as if made at and as of such date;
(c) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have resulted
in or constitute, a Material Adverse Effect;
(d) Parent shall have received legal opinions from legal
counsel to the Shareholders and the Company, dated the Closing Date, in a form
reasonable satisfactory to Parent, and as described in Section 3.8(a);
(e) the Shareholders shall have executed Release of Claims
Agreements, in the form attached hereto as Exhibit C;
(f) Mr. Toretta, individually, shall have entered into a
Consulting Agreement, in the form attached hereto as Exhibit D;
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(g) Mr. Toretta, individually, shall have entered into a
Covenant Not to Compete Agreement, in the form attached hereto as Exhibit E;
(h) the Estate, Mrs. Guerrera, individually, the Trust and the
Trucking Company shall have entered into Covenant Not to Compete Agreements, in
the form attached hereto as Exhibit F;
(i) Parent shall have received certificates representing the
Company Common Stock duly endorsed for transfer as described in Section
3.8(a)(i);
(j) Parent shall have received a certificate executed by each
of the Shareholders with respect to (a) and (b) above; and
(k) Parent shall have entered into employment agreements with
Mark McCormick and Terry Szczesiul.
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 Effective
Time in the following manner:
(a) Any Shareholder shall have the right to terminate this
Agreement:
(i) if the representations and warranties of Parent
and Merger Sub 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 15 days after written notice of such
failure is given to Parent by the Shareholders;
(ii) if the Merger is not completed by November 1,
1999 (provided that (a) the right to terminate this Agreement under
this Section 9.1(a)(ii) shall not be available to the Shareholder if
the failure of the Shareholder to fulfill any obligation to Parent or
Merger Sub under or in connection with this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date and (b) Parent has not exercised its option to extend under
Section 9.4);
(iii) if the Merger is enjoined by a final,
unappealable court order; or
(iv) if Parent or Merger Sub (A) fails to perform in
any material respect (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
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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 Parent by the Shareholder.
(b) Parent shall have the right to terminate this Agreement;
(i) if the representations and warranties of the
Company or 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 15 days after written notice of such
failure is given to the Shareholders by Parent;
(ii) if the Merger is not completed by November 1,
1999, as such date may be extended pursuant to Section 9.4 below
(provided that the right to terminate this Agreement under this Section
9.1(b)(ii) shall not be available to Parent if the failure of Parent to
fulfill any obligation to the Shareholders under or in connection with
this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);
(iii) if the Shareholders or the Company (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 Parent; or
(iv) pursuant to Section 7.10.
(c) The Shareholders and Parent 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 Parent 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, Parent, Company or Merger Sub, or their respective
stockholders, directors, officers, employees, agents or representatives.
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, including, without limitation, any breach of the
prohibition in Section 7.10 against updating the Disclosure Schedules with
information which could have a Material Adverse Effect on the Company.
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(b) The Parties acknowledge and agree that Parent, as a result
of the actual damages Parent would sustain by reason of such negligent or
willful failure of the Company or the Shareholders to perform their obligations
hereunder, could not be made whole by monetary damages, and it is accordingly
agreed that Parent shall have the right to elect, in addition to any and all
other remedies at law or in equity, to enforce specific performance under this
Agreement and the Company or the Shareholders waive 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 Effective
Time, 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.
SECTION 9.4. PARENT'S OPTION TO EXTEND. At Parent's option (exercised
by providing written notice to the Shareholders prior to November 1, 1999), the
deadline of November 1, 1999 set forth in Sections 9.1(a)(ii) and 9.1(b)(ii),
above, may be extended to December 31, 1999; provided, however, that if the
transactions contemplated hereby fail to close by the expiration of such
extended period, Parent shall pay the reimbursement payment set forth in Section
9.4 of the Purchase and Sale Agreement as reimbursement for the costs and
expenses incurred by the Company in connection with the negotiation and
execution of this Agreement, as well as the Purchase and Sale Agreement, unless
the Shareholders have breached this Agreement or the failure of any Shareholder
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 close before the expiration of such extended period.
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY
SECTION 10.1. THE SHAREHOLDERS' INDEMNITY OBLIGATIONS.
(a) Each Shareholder shall, severally but not jointly,
indemnify and hold harmless the Company (after the Closing), Parent and the
Company's (after the Closing) and the Parent's respective officers, directors,
stockholders, employees, agents, representatives and Affiliates (each a "Parent
Indemnified Party") from and against any and all claims, actions, causes of
action, arbitrations, proceedings, losses, damages, remediations, liabilities,
strict liabilities, judgments, fines, penalties and expenses (including, without
limitation, reasonable attorneys' fees) (collectively, the "Indemnified
Amounts") paid, imposed on or incurred by a Parent Indemnified Party, directly
or indirectly, (i) relating to, resulting from or arising out of (x) any breach
or misrepresentation in any of the representations and warranties made by such
Shareholder in Article IV-A of this Agreement, or any certificate or instrument
delivered by such Shareholder in connection with this Agreement, or (y) any
violation or breach by such Shareholder of, or default by such Shareholder
under, the terms of this Agreement or any certificate or instrument delivered by
such Shareholder in connection with this Agreement, or (ii)
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relating to, resulting from or arising out of any allegation of a third party of
the events described in Sections 10.1(a)(i), above.
(b) The Shareholders shall, jointly and severally, indemnify
and hold harmless the Parent and the Company (after the Closing) and the other
Parent Indemnified Parties from and against any and all Indemnified Amounts
paid, imposed on or incurred by a Parent Indemnified Party, directly or
indirectly, (i) relating to, resulting from or arising out of (x) any breach or
misrepresentation in any of the representations and warranties made by the
Company or the Shareholders in Article V of this Agreement, including without
limitation with respect to environmental matters, or any certificate or
instrument delivered in connection with this Agreement, or (y) any violation or
breach by the Company of, or default by the Company under, the terms of this
Agreement or any certificate or instrument delivered by the Company in
connection with 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(b)(i), above.
(c) For purposes of Section 10.1(a) and (b), 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 OF THE PARTIES, INCLUDING
ANY PARENT INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE.
SECTION 10.2. PARENT'S INDEMNITY OBLIGATIONS. Parent shall indemnify
and hold harmless the Shareholders and the Shareholders' agents, representatives
and Affiliates (each a "Shareholders Indemnified Party") from and against any
and all Indemnified Amounts incurred by a Shareholders Indemnified Party as a
result of (a) any breach or misrepresentation in any of the representations and
warranties made by or on behalf of Parent in this Agreement or any certificate
or instrument delivered in connection with this Agreement, or (b) any violation
or breach by Parent or Merger Sub of or default by Parent or Merger Sub under
the terms of this Agreement or any certificate or instrument delivered in
connection with this Agreement.
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
(a) Promptly after receipt by an indemnified party under
Section 10.1 or 10.2 of notice of the commencement of any third party claim or
claims asserted against it ("Third-Party Claim"), such indemnified party will,
if a claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Third-Party Claim referred to in Section 10.3(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Third-Party Claim, the indemnifying party
will, unless the claim involves Taxes, be entitled to
37
<PAGE> 44
participate in such Third-Party Claim and, to the extent that it wishes (unless
(i) the indemnifying party is also a party to such Third-Party Claim and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Third-Party Claim and provide indemnification with respect to such Third-Party
Claim), to assume the defense of such Third-Party Claim with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Third-Party Claim, the indemnifying party will not, as long as it diligently
conducts such defense, be liable to the indemnified party under this Article X
for any fees of other counsel or any other expenses with respect to the defense
of such Third-Party Claim, in each case subsequently incurred by the indemnified
party in connection with the defense of such Third-Party Claim, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Third-Party Claim, (i) it will be conclusively established for purposes of
this Agreement that the claims made in that Third-Party Claim are within the
scope of and subject to indemnification; (ii) no compromise or settlement of
such claims may be effected by the indemnifying party without the indemnified
party's consent unless (A) there is no finding or admission of any violation of
law, rule, regulation or other legal requirement or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, (B) 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, and (C) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Third-Party
Claim and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Third-Party Claim, the indemnifying party will be
bound by any determination made in such Third-Party Claim or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Third-Party Claim may adversely affect it or its Affiliates other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
Third-Party Claim, but the indemnifying party will not be bound by any
determination of a Third-Party Claim so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Shareholders hereby consent to the non-exclusive
jurisdiction of any court in which a Third-Party Claim is brought against any
indemnified party for purposes of any claim that an indemnified party may have
under this Agreement with respect to such Third-Party Claim or the matters
alleged therein, and agree that process may be served on Shareholders with
respect to such a claim anywhere in the world.
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<PAGE> 45
(e) 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.
(f) The Shareholders may satisfy any claim for indemnification
hereunder by the delivery of Parent Shares to the Parent which Parent Shares
shall be valued at the average of the Daily Per Share Prices for the twenty (20)
consecutive trading days beginning on the twenty-first (21st) trading day prior
to delivery by the Shareholders to the Parent pursuant to this Article X.
SECTION 10.4. LIMITATION OF SHAREHOLDERS' LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of the Estate for any event or occurrence
giving rise to the Estate being required to indemnify Parent Indemnified Parties
pursuant to Section 10.1 of this Agreement shall be limited to $3,500,000.
(b) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of Mr. Toretta for any event or occurrence
giving rise to Mr. Toretta being required to indemnify Parent Indemnified
Parties pursuant to Section 10.1 of this Agreement shall be limited to
$3,500,000.
(c) Parent Indemnified Parties are entitled to indemnification
pursuant to Section 10.1 as follows:
(i) until and including the first anniversary of the
Closing Date, only if the amount of any Indemnified Amount,
individually or in the aggregate with all other Indemnified Amounts
hereunder and under the terms of the Purchase and Sale Agreement,
exceeds Two Hundred Fifty Thousand Dollars ($250,000), and then only to
the extent of such excess; and
(ii) after the first anniversary of the Closing Date,
only if the amount of any Indemnified Amount, individually or in the
aggregate with all other Indemnified Amounts hereunder and under the
terms of the Purchase and Sale Agreement since the Closing Date,
exceeds Five Hundred Thousand Dollars ($500,000), and then only to the
extent of such excess.
SECTION 10.5. LIMITATION OF PARENT'S LIABILITY. Shareholders
Indemnified Parties are entitled to indemnification pursuant to Section 10.2 as
follows:
(i) until and including the first anniversary of the
Closing Date, only if the amount of any Indemnified Amount,
individually or in the aggregate with all other Indemnified Amounts
hereunder and under the terms of the Purchase and Sale Agreement,
39
<PAGE> 46
exceeds Two Hundred Fifty Thousand Dollars ($250,000), and then only to the
extent of such excess; and
(ii) after the first anniversary of the Closing Date, only if
the amount of any Indemnified Amount, individually or in the aggregate with all
other Indemnified Amounts hereunder and under the terms of the Purchase and Sale
Agreement since the Closing Date, exceeds Five Hundred Thousand Dollars
($500,000), and then only to the extent of such excess.
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 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 warranties set forth in
Sections 4A.1 (Ownership), 4A.2 (Authority; Non-Contravention; Approvals) and
5.2 (Capitalization) hereof shall survive the Closing indefinitely, (ii) Section
5.12 (Taxes) shall survive the Closing for the greater of two years or the
statutory survival period applicable to Taxes, (iii) the covenants contained in
this Agreement to be performed after the Closing shall survive until fully
performed; and (iv) the indemnification obligations of the Shareholders set
forth in Section 10.1(a) and Section 10.1(b) shall survive the Closing until the
termination of the respective representations and warranties.
SECTION 11.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by a
nationally recognized overnight delivery service, mailed by registered or
certified mail (return receipt requested) or sent via facsimile to the Parties
at the following addresses (or at such other address for a Party as shall be
specified by like notice):
(a) If to Parent, Merger Sub or the Company (on or after
Closing), to:
Synagro Technologies, Inc.
1800 Bering Drive, Suite 1000
Houston, Texas 77057
Attention: Mark A. Rome
Telecopy: 713/369-1760
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<PAGE> 47
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 Mr. Toretta or the Company (prior to Closing),
to:
Paul A. Toretta
30 Lakewood Circle
Greenwich, Connecticut 06830
Telecopy: 203/622-9064
with a copy to:
Edward M. Kane, Esq.
Richards & O'Neil, LLP
43 Arch Street
Greenwich, Connecticut 06830
Telecopy: 203/869-6565
(c) If to Frances A. Guerrera, as
Executrix of the Estate of Richard J. Guerrera
or as Co-Trustee of the Richard J. Guerrera
Revocable Trust, to:
Frances A. Guerrera
31 Munson Road
Middlebury, Connecticut 06762
with a copy to:
John J. Palmeri, Esq.
Palmeri, Rock & Talbot, P.C.
100 Hinman Street
P.O. Box 277
Cheshire, Connecticut 06410
Telecopy: 203/250-1795
and
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<PAGE> 48
Donald F. Dwyer
c/o Astra Zeneca
725 Chesterbrook Blvd.
Wayne, Pennsylvania 19087
Telecopy: 610/695-4491
(d) If to Frances A. Guerrera, individually, to:
Frances A. Guerrera
31 Munson Road
Middlebury, Connecticut 06762
with a copy to:
Shipman & Goodwin, LLP
One Landmark Square
Stamford, Connecticut 06901
Attention: Steven M. Gold, Esq.
Telecopy: 203/324-8191
and
Donald F. Dwyer
c/o Astra Zeneca
725 Chesterbrook Blvd.
Wayne, Pennsylvania 19087
Telecopy: 610/695-4491
(e) If to Robert Dionne, as Co-Trustee of the Richard J.
Guerrera Revocable Trust, to:
Robert Dionne (Personal and Confidential)
c/o R. J. Guerrera, Inc.
P.O. Box 700
Naugatuck, Connecticut 06770
Telecopy: 203/723-5640
with a copy to:
John J. Palmeri, Esq.
Palmeri, Rock & Talbot, P.C.
100 Hinman Street
P.O. Box 277
Cheshire, Connecticut 06410
Telecopy: 203/250-1795
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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) 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. Neither this Agreement nor
the rights, interests and obligations arising pursuant to this Agreement
(including the documents and instruments referred to herein and the Schedules
and Exhibits attached hereto) shall not be assigned by operation of law or
otherwise except that Merger Sub or Parent may assign this Agreement to any
other wholly-owned Subsidiary of Parent, but no such assignment shall relieve
the Parent or the Merger Sub, as the case may be, of its obligations hereunder.
SECTION 11.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED IN ALL
RESPECTS, INCLUDING VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY
WITHIN SUCH STATE.
SECTION 11.6. BINDING ARBITRATION.
(a) General. Notwithstanding any provision of this Agreement
to the contrary, upon the request of any Party (defined for the purpose of this
provision to include Affiliates, principals 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 New York, New York. Notwithstanding Section 11.6, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. Section 1 et seq.
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<PAGE> 50
(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 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 the
State of Delaware, 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 30 days after
receipt of the Request and shall notify the Claimant of such
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<PAGE> 51
appointment in writing. If the Respondent fails to appoint an arbitrator within
such 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 30 days
after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the third (3rd) arbitrator has accepted the
appointment, the two (2) Party-appointed arbitrators shall promptly notify the
Parties of the appointment. If the two (2) arbitrators appointed by the Parties
fail to appoint a third (3rd) arbitrator or so to notify the Parties within the
time period prescribed above, then the appointment of the third (3rd) arbitrator
shall be made by the American Arbitration Association, which shall promptly
notify the Parties of the appointment. The third (3rd) arbitrator shall act as
Chair of the panel.
(f) Other Matters. This arbitration provision constitutes the entire
agreement of the Parties with respect to its subject matter and supersedes all
prior discussions, arrangements, negotiations and other communications on
dispute resolution. This arbitration provision shall survive any termination,
amendment, renewal, extension or expiration of this Agreement or any agreement
executed in connection herewith or contemplated hereby unless the Parties
otherwise expressly agree in writing. The obligation to arbitrate any dispute
shall be binding upon the successors and assigns of each of the Parties.
SECTION 11.7. 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. GUARANTEE. Frances Guerrera, individually and as
Co-Trustee of the Trust, and Robert Dionne, as Co-Trustee of the Trust, jointly
and severally, unconditionally and irrevocably guarantee the full, prompt and
complete performance of all obligations of the Estate and Trust, as the case may
be, under this Agreement and the documents executed and delivered by the Estate
and Trust in connection with the transactions contemplated in this Agreement.
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IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement effective as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Ross M. Patten
---------------------------------------
Ross M. Patten, Chairman and Chief
Executive Officer
RESTEC ACQUISITION CORP.
By: /s/ Ross M. Patten
---------------------------------------
Ross M. Patten, Chairman and Chief
Executive Officer
NEW ENGLAND TREATMENT COMPANY,
INC.
By: /s/ Paul A. Toretta
---------------------------------------
Paul A. Toretta, President
/s/ Frances A. Guerrera
---------------------------------------
Frances A. Guerrera, individually
THE RICHARD J. GUERRERA
REVOCABLE TRUST
By: /s/ Frances A. Guerrera
---------------------------------------
Frances A. Guerrera, Co-Trustee
By: /s/ Robert Dionne
---------------------------------------
Robert Dionne, Co-Trustee
THE SHAREHOLDERS:
/s/ Paul A. Toretta
---------------------------------------
Paul A. Toretta, individually
THE ESTATE OF RICHARD J. GUERRERA
By: /s/ Frances A. Guerrera
---------------------------------------
Frances A. Guerrera, Executrix
46
<PAGE> 53
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.
"Average Parent Common Stock Price" means the average of the Daily Per
Share Prices for the twenty (20) consecutive trading days beginning on the
twenty-first (21st) trading day prior to the date of this Agreement.
"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.
"Daily Per Share Price" means the per share closing price on the NASDAQ
Small Cap Exchange (the "NASDAQ") of Parent Common Stock (as reported by The
Wall Street Journal for that day).
"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;
Exhibit A - Page 1
<PAGE> 54
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,
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; (xiii)
community right-to-know and other disclosure laws; or (xiii) maintaining,
disclosing or reporting information to Governmental Authorities of any other
third person under any Environmental Law. The term, "Environmental Claim," also
includes, without limitation, any losses, damages, costs, expenses and/or
liabilities incurred in testing, 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
Exhibit A - Page 2
<PAGE> 55
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 the Company'
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 U.S. 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.
"Indebtedness" means the aggregate long-term indebtedness, net of
sinking fund and other cash reserves, if any, that are not included in Net
Working Capital, and other long-term liabilities of the Companies determined in
accordance with GAAP.
"Lien(s)" means any mortgage, pledge, hypothecation, security interest,
encumbrance, claim, 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).
Exhibit A - Page 3
<PAGE> 56
When used in this Agreement in connection with the Company and their
Subsidiaries, or the Parent and its Subsidiaries, as the case may be, "Material
Adverse Effect" means any event, occurrence, fact, condition, change,
development or effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including intangible assets),
liabilities, financial condition, results of operations, properties (including
intangible properties) or business prospects of the Company and all of their
Subsidiaries or the Parent and all of its Subsidiaries, as applicable, taken as
a whole.
"Materials of Environmental Concern" means: (i) those substances
included within the statutory and/or regulatory definitions or listings of
"hazardous substance," "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.
"Net Working Capital" means the aggregate current assets of the Company
less the aggregate current liabilities of the Company determined in accordance
with GAAP.
"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.
"Parent Common Stock" means validly issued, fully paid and
nonassessable shares of common stock, par value $.002 per share, of Parent.
"Parent Shares" means the shares of Parent Common Stock issuable to the
Shareholders as determined pursuant to Section 3.1 of the Agreement.
"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 their Subsidiaries or of any
Exhibit A - Page 4
<PAGE> 57
property affected by the business, operations, acts omissions, or Materials of
Environmental Concern of the Company or any of their Subsidiaries.
"Requirement(s) of Environmental Law(s)"means all requirements,
conditions, restrictions or stipulations of Environmental Laws imposed upon or
related to the Company or any of their Subsidiaries or the assets, Business
Facilities and/or the business of the Company or any of their 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 A - Page 5
<PAGE> 1
EXHIBIT 2.2
PURCHASE AND SALE AGREEMENT
BY AND AMONG
SYNAGRO TECHNOLOGIES, INC.,
PAUL A. TORETTA,
EILEEN TORETTA,
AS TRUSTEE OF THE
PAUL A. TORETTA 1998 GRAT,
FRANCES A. GUERRERA,
FRANCES A. GUERRERA,
AS EXECUTRIX OF THE ESTATE OF
RICHARD J. GUERRERA
AND
FRANCES A. GUERRERA AND ROBERT DIONNE,
AS CO-TRUSTEES OF THE
RICHARD J. GUERRERA REVOCABLE TRUST
UNDER AGREEMENT DATED NOVEMBER 2, 1998
OCTOBER 20, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I
DEFINITIONS.....................................................................................2
Section 1.1. Accounting Terms............................................................2
Section 1.2. Defined Terms...............................................................2
ARTICLE II
CLOSING.........................................................................................2
Section 2.1. Closing.....................................................................2
ARTICLE III
SALE OF OWNERSHIP INTERESTS.....................................................................2
Section 3.1. Ownership Interests.........................................................2
Section 3.2. Purchase Price..............................................................2
Section 3.3. Purchase Price Adjustment...................................................3
Section 3.4. Earn Out Payment............................................................4
Section 3.5. Closing Deliveries..........................................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER....................................................10
Section 4.1. Organization and Qualification.............................................10
Section 4.2. Capitalization.............................................................10
Section 4.3. Authority; Non-Contravention; Approvals....................................11
Section 4.4. Registration Statements....................................................12
Section 4.5. Reports and Financial Statements...........................................12
Section 4.6. Brokers and Finders........................................................13
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
CONCERNING THE TRANSACTION................................................................13
Section 4A.1. Ownership..................................................................13
Section 4A.2. Authority..................................................................14
Section 4A.3. Brokers and Finders........................................................14
Section 4A.4. Registration Statements....................................................14
Section 4A.5. Investment Representations.................................................15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS CONCERNING THE COMPANIES.........................16
Section 5.1. Organization and Qualification.............................................16
Section 5.2. Capitalization.............................................................16
Section 5.3. Authority; Non-Contravention; Approvals....................................17
Section 5.4. Subsidiaries...............................................................18
</TABLE>
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<TABLE>
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Section 5.5. Financial Statements.......................................................18
Section 5.6. Absence of Undisclosed Liabilities.........................................18
Section 5.7. Absence of Certain Changes or Events.......................................18
Section 5.8. Litigation.................................................................19
Section 5.9. Accounts Receivable........................................................19
Section 5.10. No Violation of Law; Compliance with Agreements............................19
Section 5.11. Insurance..................................................................19
Section 5.12. Taxes......................................................................20
Section 5.13. Employee Benefit Plans.....................................................21
Section 5.14. Employee and Labor Matters.................................................23
Section 5.15. Environmental Matters......................................................23
Section 5.16. Non-Competition Agreements.................................................25
Section 5.17. Title to Assets............................................................25
Section 5.18. Contracts, Agreements, Plans and Commitments...............................26
Section 5.19. Supplies...................................................................27
Section 5.20. Brokers and Finders........................................................27
Section 5.21. Intellectual Property......................................................27
Section 5.22. Relationships..............................................................27
Section 5.23. Year 2000..................................................................28
Section 5.24. Certain Payments...........................................................28
Section 5.25. Books and Records..........................................................28
Section 5.26. Condition and Sufficiency of Assets........................................28
ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING............................................................29
Section 6.1. Conduct of Business by the Sellers Pending Closing.........................29
Section 6.2. Other Offers...............................................................30
Section 6.3. Access to Information......................................................31
Section 6.4. Commercially Reasonable Efforts............................................31
ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES...........................................32
Section 7.1. Consents...................................................................32
Section 7.2. Further Assurances.........................................................32
Section 7.3. Expenses and Fees..........................................................32
Section 7.4. Agreement to Cooperate.....................................................32
Section 7.5. Notification of Certain Matters............................................32
Section 7.6. Registration Statements....................................................33
Section 7.7. Purchaser's Liquidity Program..............................................34
Section 7.8. Exchange Listing...........................................................34
Section 7.9. Public Statements..........................................................35
Section 7.10. Section 338(h)(10) Election................................................35
Section 7.11. Allocation of Purchase Price...............................................35
Section 7.12. Code Section 754 Adjustments...............................................35
</TABLE>
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<TABLE>
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Section 7.13. Control of Tax Returns.....................................................35
Section 7.14. Supplements to Disclosure Schedules........................................36
ARTICLE VIII
CONDITIONS TO CLOSING..........................................................................36
Section 8.1. Conditions to Each Party's Obligation to Close.............................36
Section 8.2. Conditions to Obligation of the Sellers....................................36
Section 8.3. Conditions to Obligations of Purchaser.....................................37
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER..............................................................38
Section 9.1. Termination................................................................38
Section 9.2. Effect of Termination......................................................39
Section 9.3. Extensions; Waiver.........................................................40
Section 9.4. Purchaser's Option to Extend...............................................40
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY....................................................40
Section 10.1. The Sellers' Indemnity Obligations.........................................40
Section 10.2. Purchaser's Indemnity Obligations..........................................41
Section 10.3. Indemnification Procedures.................................................41
Section 10.4. Limitation of Sellers' Liability...........................................43
Section 10.5. Limitation of Purchaser's Liability........................................44
ARTICLE XI
GENERAL PROVISIONS.............................................................................44
Section 11.1. Survival...................................................................44
Section 11.2. Notices....................................................................45
Section 11.3. Interpretation.............................................................47
Section 11.4. Miscellaneous..............................................................47
Section 11.5. Governing Law..............................................................48
Section 11.6. Binding Arbitration........................................................48
Section 11.7. Amendment..................................................................50
Section 11.8. Counterparts...............................................................50
Section 11.9. Parties in Interest........................................................50
Section 11.10. Validity...................................................................50
Section 11.11. Guarantee..................................................................50
</TABLE>
iii
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Exhibits
Exhibit A Glossary
Exhibit B Form of Estimated Adjustment Amount Worksheet
Exhibit C Form of Release of Claims Agreement
Exhibit D Form of Consulting Agreement
Exhibit E Form of Covenant Not to Compete Agreement
Exhibit F Form of Covenant Not to Compete Agreement
Schedules
Schedule 1 The Companies
Schedule 3.3(d) Projects
Schedule 3.4(i) Operating Practices
Schedule 3.4(j) Capital Budget
Schedule 3.4(k) Projects Excepted from Earn Out
Schedule 3.5 Guarantees or Surety Obligations
Schedule 4A.3 Sellers' Brokers and Finders
Schedule 5.3 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 5.10 No Violation of Law; Compliance with Agreements
Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.14 Employee and Labor Matters
Schedule 5.15 Environmental Matters
Schedule 5.16 Non-Competition Agreements
Schedule 5.17 Title to Assets
Schedule 5.18 Contracts, Agreements, Plans and Commitments
Schedule 5.20 Companies' Brokers and Finders
Schedule 5.21 Intellectual Property
Schedule 5.22 Relationships
Schedule 5.23 Year 2000 Compliance
Schedule 5.26 Condition and Sufficiency of Assets
iv
<PAGE> 6
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT, dated as of October 20, 1999 (the
"Agreement"), is by and among SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
(the "Purchaser"), and PAUL A. TORETTA, individually ("Mr. Toretta"), EILEEN
TORETTA, as Trustee of the Paul A. Toretta 1998 Grat (the "Grat"), FRANCES A.
GUERRERA, individually ("Mrs. Guerrera"), FRANCES A. GUERRERA, as Executrix of
the Estate of Richard J. Guerrera (the "Estate"), and FRANCES A. GUERRERA and
ROBERT DIONNE, as Co-Trustees of the Richard J. Guerrera Revocable Trust under
Agreement dated November 2, 1998 (the "Trust"). Each of Mr. Toretta, the Grat
and the Estate is a "Seller" and, collectively, they are sometimes referred to
as the "Sellers". The Purchaser and each of the other signatories to this
Agreement are a "Party" and, collectively, they are sometimes referred to as the
"Parties." Mrs. Guerrera, individually and in her capacity as Co-Trustee of the
Trust, and Robert Dionne, in his capacity as Co-Trustee of the Trust, join this
Agreement for purposes of guaranteeing the performance by the Estate and the
Trust, as the case may be, of their respective joint and several obligations
under this Agreement, as further set forth in Section 11.11 of this Agreement.
W I T N E S S E T H:
WHEREAS, the Sellers own, directly or indirectly, all of the
outstanding capital stock, limited partnership interests and membership
interests (the "Ownership Interests") of those corporations, limited
partnerships and limited liability companies set forth on Schedule 1 (each of
which is a "Company" and which, collectively, are sometimes referred to as the
"Companies"), as of the date hereof;
WHEREAS, the Companies are engaged in the business of sewage sludge
disposal in the northeastern United States, including the hauling, treatment and
disposal of sewage sludge; the providing of non-hazardous biosolids
transportation, treatment and disposal services to municipal wastewater
treatment plants and commercial customers; and the operation, maintenance,
repair and management of sewage sludge treatment and incineration facilities
(the "Business");
WHEREAS, Purchaser desires to purchase from the Sellers, and the
Sellers desire to sell to the Purchaser, the Ownership Interests upon the terms
and conditions set forth herein; and
WHEREAS, the Sellers, Mrs. Guerrera and the Trust are making certain
representations, warranties, covenants, agreements 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:
<PAGE> 7
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 Sections
4.5(d) and 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.
ARTICLE II
CLOSING
SECTION 2.1. CLOSING. Subject to the terms and provisions of Article
IX, the closing of the purchase and sale provided for herein (the "Closing")
shall take place at the offices of RICHARDS & O'NEIL, LLP, 43 Arch Street,
Greenwich, Connecticut as promptly as practicable (but in any event within five
(5) business days) following the date on which the last of the conditions set
forth in Article VIII is fulfilled or waived, or at such other time and place as
the Purchaser and Sellers shall agree. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."
ARTICLE III
SALE OF OWNERSHIP INTERESTS
SECTION 3.1. OWNERSHIP INTERESTS. Subject to the terms and conditions
of this Agreement, the Sellers will sell, transfer and deliver to the Purchaser,
and the Purchaser will purchase, the Ownership Interests directly owned by the
Sellers as set forth on Schedule 1 (the "Direct Ownership Interests") on the
Closing Date.
SECTION 3.2. PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") for the Direct Ownership Interests and the representations,
warranties, covenants and agreements referenced herein shall be:
(i) cash equal to Forty-Four Million Dollars
($44,000,000) minus (1) the Companies' Indebtedness as of Closing, plus or minus
(2) the amount, if any, by which the Companies' Net Working Capital as of
Closing is greater than or less than One Million One Hundred Forty Thousand
Dollars ($1,140,000). The amount, if any, by which the cash portion of the
Purchase Price is adjusted pursuant to this Section 3.2(i) (i.e., the sum of (1)
and (2) above) is referred to herein as the "Adjustment Amount"; and
2
<PAGE> 8
(ii) the Earn Out Payments, if any, as defined and
further described in Section 3.4 below.
The portion of the Purchase Price payable in cash at Closing (as determined in
accordance with Section 3.2 and Section 3.3) (the "Cash Portion") shall be
allocated as follows: (i) the Estate shall receive fifty percent (50%) of the
Cash Portion less $2,250,000, and (ii) the Grat shall receive ninety-nine
percent (99%) and Mr. Toretta shall receive one percent (1%) of the remaining
Cash Portion. The Earn Out Payments (as determined in accordance with Section
3.4), if any, shall be paid sixteen percent (16%) to the Estate and eighty-four
percent (84%) to the Earn Out Representative (for the benefit, and in
satisfaction of Purchaser's payment obligations regarding the Earn Out Payments
to, the Grat and Mr. Toretta).
SECTION 3.3. PURCHASE PRICE ADJUSTMENT.
(a) Prior to the Closing Date, Mr. Toretta shall deliver to
the Purchaser a worksheet, in the form 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 Adjusted Amount"). The worksheet shall be prepared by Mr.
Toretta and reasonably acceptable to the Purchaser. If the Estimated Adjustment
Amount is a positive number, the Cash Portion as allocated to (i) Mr. Toretta
shall be decreased in an amount equal to one-half percent (0.5%) of the positive
Estimated Adjustment Amount; (ii) the Grat shall be decreased in an amount equal
to forty-nine and one-half percent (49.5%) of the positive Estimated Adjustment
Amount and (iii) the Estate shall be decreased in an amount equal to fifty
percent (50%) of 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 Cash Portion as allocated to (i) Mr. Toretta
shall be increased in an amount equal to one-half percent (0.5%) of the negative
Estimated Adjustment Amount; (ii) the Grat shall be increased in an amount equal
to forty-nine and one-half percent (49.5%) of the negative Estimated Adjustment
Amount and (iii) the Estate shall be increased in an amount equal to fifty
percent (50%) of the negative Estimated Adjustment Amount.
(b) Within 90 days after the Closing, Purchaser shall cause
the Companies to prepare a consolidated balance sheet of the Companies as of the
Closing Date (the "Closing Date Balance Sheet"), including a computation of the
actual Adjustment Amount of the Companies as of the Closing Date (the "Actual
Adjustment Amount"). If within 15 days following delivery of the Closing Date
Balance Sheet to Mr. Toretta, Mr. Toretta does not object in writing thereto,
then the Actual Adjustment Amount shall be as computed on such Closing Date
Balance Sheet. If Mr. Toretta does object in writing to the computation within
such 15-day period, then the Purchaser and Mr. Toretta 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 Mr. Toretta (the "Neutral Auditors"). If the Purchaser and Mr.
Toretta 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
3
<PAGE> 9
the Purchaser and Mr. Toretta. The Neutral Auditors will deliver to the
Purchaser and Mr. Toretta 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 Mr. Toretta, 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, the Estate, the Grat and Mr. Toretta 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
Estate, the Grat and Mr. Toretta shall have a right to receive aggregate cash
payments from Purchaser equal to such excess. If the Estimated Adjustment Amount
less the Actual Adjustment Amount is a negative number, Purchaser shall be
entitled to receive aggregate cash payments from each of the Estate, the Grat
and Mr. Toretta 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. Any payments due from or to
the Estate, the Grat and Mr. Toretta pursuant to this Section 3.3(c) shall be
payable or paid (i) fifty percent (50%) by or to the Estate, (ii) forty-nine and
one-half percent (49.5%) by or to the Grat, and (iii) one-half percent (0.5%) by
or to Mr. Toretta.
(d) For purposes of determining the Net Working Capital
pursuant to this Section 3.3, any cash payments made or current liabilities
incurred on or after August 1, 1999, and prior to Closing with respect to the
projects described on Schedule 3.3(d) hereto, up to an aggregate amount of cash
and current liabilities of $1,050,000, shall not be deducted in the Net Working
Capital computation.
SECTION 3.4. EARN OUT PAYMENT.
(a) As soon as practicable after December 31, 2000, and after
the last day of each succeeding calendar year through and including December 31,
2007 (the "Earn Out Period"), the Purchaser's independent auditor (the
"Auditor") shall audit the financial statements of the Companies as of the last
day of the calendar year then ended and the Purchaser's calculation of the
Earnings of the Companies during such calendar year in the manner specified in
this Section 3.4. No later than April 30th of each year from 2001 through 2008,
the Purchaser shall deliver notice of the Earnings of the Companies for the
preceding calendar year to the Earn Out Representative and the Estate, as
audited by the Auditor, together with the Auditor's audit report on the
Companies' financial statements and on Purchaser's calculation of Earnings
during the calendar year then ended.
(b) The Companies' Earnings shall be calculated in accordance
with this Section 3.4 and the definition of Earnings and in a manner consistent
with that used to compute the Earn Out Baseline referenced in Section 3.4(c)
below. For purposes of calculating the Earnings pursuant to this Section 3.4
only, the term "Companies" shall also include (i) New England Treatment Company,
Inc. and (ii) any newly-organized Affiliate of the Companies
4
<PAGE> 10
formed by the Purchaser during the Earn Out Period to conduct any new biosolids
incineration or lime stabilization business of the Companies in New England.
During the Earn Out Period and thereafter until the last Earn Out Payment, if
any, is actually made pursuant to this Section 3.4, the Companies and the
Purchaser shall give the Sellers and their respective accountants, counsel and
other representatives, reasonable and prompt access during normal business hours
to (x) all of the properties, books, contracts, commitments and records related
to the Companies, and (y) all other information concerning the Companies that
the Sellers may reasonably request and that is necessary to evaluate and propose
changes to the computation of the Companies' Earnings.
(c) In the event that the Earnings of the Companies are less
than or equal to Four Million Seventy-One Thousand Five Hundred Forty-Nine
Dollars ($4,071,549) (as adjusted from time to time pursuant to this Section
3.4, the "Earn Out Baseline") during any calendar year during the Earn Out
Period, then no additional amounts shall be payable to the Sellers with respect
to such calendar year. In the event that the Companies' Earnings exceed Four
Million Seventy-One Thousand Five Hundred Forty-Nine Dollars ($4,071,549) during
any calendar year during the Earn Out Period, an additional amount (an "Earn Out
Payment") shall be calculated and paid by the Purchaser to the Sellers in
accordance with this Section 3.4(c) (and pro rata in accordance with the
percentages set forth in Section 3.2) with respect to such calendar year and
shall equal fifty percent (50%) of such excess. In no event shall the aggregate
Earn Out Payments payable to the Sellers (together with any Accelerated Amounts
(as defined below)) under this Section 3.4 exceed Twelve Million Dollars
($12,000,000). At the Purchaser's option each Earn Out Payment shall be paid
either (i) in all cash or other immediately available funds or (ii) fifty
percent (50%) in cash or other immediately available funds and fifty percent
(50%) in Purchaser Common Stock. The number of shares of Purchaser Common Stock
shall be calculated using the Average Purchaser Common Stock Price.
(d) Each Earn Out Payment shall be paid by the Purchaser to
the Earn Out Representative and the Estate (pro rata in accordance with the
percentages set forth in Section 3.2) on or before the date that the Purchaser
is required to deliver the annual report of the Auditor to the Earn Out
Representative and the Estate.
(e) Upon receipt of an annual report of the Auditor regarding
the Companies' Earnings, the Earn Out Representative shall have 30 days in which
to object in writing to the Purchaser with respect to the Purchaser's
calculation of the Companies' Earnings (an "Earnings Dispute Notice"). In the
event the Earn Out Representative does not object to the Purchaser's calculation
of the Companies' Earnings within such 30-day period, the Purchaser's
calculation of the Companies' Earnings, as notified to the Earn Out
Representative, shall be deemed final, conclusive and binding on all Parties. In
the event the Earn Out Representative gives a timely Earnings Dispute Notice,
then the Earn Out Representative and Purchaser shall work together in good faith
to reach an agreement on an appropriate adjustment to the Earn Out Payment. If
within 15 days after Purchaser's receipt of an Earnings Dispute Notice, the Earn
Out Representative and Purchaser have not reached an agreement, the Earn Out
Representative and Purchaser shall engage the Accounting Arbitrator to calculate
the amount of an appropriate adjustment to Purchaser's calculation of the
Companies' Earnings, if any, except as otherwise provided in Section 3.4(f)
hereof. The decision of the Accounting Arbitrator shall be final,
5
<PAGE> 11
conclusive and binding on all Parties. The Accounting Arbitrator shall make its
determinations using the accounting and other principles set forth in Section
3.4(b) hereof. The Accounting Arbitrator shall be directed to make its
determination within 45 days of its engagement. Payment of any adjustment to the
Earn Out Payment from the Purchaser to the Earn Out Representative and the
Estate, if any, shall be due within ten (10) days after the resolution of any
such dispute.
(f) In the event that the Earn Out Representative alleges in
an Earnings Dispute Notice an entitlement to a higher Earn Out Payment because
of breaches of the Purchaser's covenants set forth in Section 3.4(i) or (j)
hereof, and the Earn Out Representative and Purchaser are unable to resolve the
dispute within the 15-day resolution period provided for in Section 3.4(e)
hereof, then the Accounting Arbitrator shall not be engaged and the dispute
shall be resolved in accordance with Section 11.6 hereof.
(g) Purchaser will not issue any certificates for any
fractional shares of Purchaser Common Stock otherwise issuable pursuant to
either Section 3.2 or Section 3.4. In lieu of issuing such fractional shares,
Purchaser shall pay cash to the Earn Out Representative and the Estate (pro rata
in accordance with the percentages set forth in Section 3.2), such cash payments
to be based on the value of such fractional shares using the Average Purchaser
Common Stock Price.
(h) As soon as practicable after the completion of the first
two years of operations of the Rhode Island Project (as defined in Schedule 5.6)
(such two (2) year period beginning the first day of the calendar month
following the Purchaser's receipt of notice from the Earn Out Representative
that the Rhode Island Project has commenced operation for purposes of this
Section 3.4), the Auditor shall audit the Purchaser's calculation of the
Earnings attributable to the Rhode Island Project over such two years of
operations (the "Rhode Island Earnings"). No later than 120 days after the end
of such two years of operations of the Rhode Island Project, the Purchaser shall
deliver (i) notice of the Purchaser's calculation of the Rhode Island Earnings
to the Earn Out Representative and the Estate, as audited by the Auditor,
together with the Auditor's audit report on the Purchaser's calculation of the
Rhode Island Earnings (the "Rhode Island Notice") and (ii) an accelerated Earn
Out Payment to the Estate and the Earn Out Representative (pro rata in
accordance with the percentages set forth in Section 3.2) equal to twenty-five
percent (25%) of the Rhode Island Earnings multiplied by the number of years
then remaining in the Earn Out Period (the "Accelerated Amount"). The Earn Out
Baseline shall be adjusted to reflect the payment of the Accelerated Amount by
the addition of one-half of the Rhode Island Earnings (i.e., the one-year
average of the Earnings attributable to the Rhode Island Project over such two
years of operations) to the Earn Out Baseline set forth in Section 3.4(c). Upon
receipt of the Rhode Island Notice, the Earn Out Representative shall have 30
days in which to object in writing to the Purchaser with respect to the
Purchaser's calculation of the Rhode Island Earnings (a "Rhode Island Earnings
Dispute Notice"). In the event the Earn Out Representative does not object to
the Purchaser's calculation of the Rhode Island Earnings within such 30-day
period, the Purchaser's calculation of the Rhode Island Earnings, as set forth
in the Rhode Island Notice, shall be deemed final, conclusive and binding on all
Parties. In the event the Earn Out Representative gives a timely Rhode Island
Earnings Dispute Notice, then the Earn Out Representative and Purchaser shall
work together in good faith to reach an agreement
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on an appropriate adjustment to the calculation of the Rhode Island Earnings, if
any. If within 15 days after the Purchaser's receipt of a Rhode Island Earnings
Dispute Notice, the Earn Out Representative and Purchaser have not reached an
agreement, the Earn Out Representative and the Purchaser shall engage the
Accounting Arbitrator to calculate the amount of an appropriate adjustment to
the calculation of the Rhode Island Earnings, if any. The decision of the
Accounting Arbitrator shall be final, conclusive and binding on all Parties. The
Accounting Arbitrator shall make its determinations consistent with the terms
hereof. The Accounting Arbitrator shall be directed to make its determination
within 45 days of its engagement.
Within ten (10) days after determination of a final, conclusive and
binding calculation of the Rhode Island Earnings, the Purchaser shall pay any
adjustment amount to the Estate and the Earn Out Representative in accordance
with the foregoing formula and the Earn Out Baseline shall be further adjusted
to reflect the payment of such adjustment amount.
(i) Until the earlier of the end of the Earn Out Period or the
satisfaction of all of the Purchaser's payment obligations under this Section
3.4, the Purchaser shall use commercially reasonable efforts to operate or cause
the Companies to be operated as stand-alone entities in New England in
conformity with past operating practices, as illustrated generally by the
adjusted income statement for the trailing twelve (12) month period ended July
31, 1999, attached hereto as Schedule 3.4(i). Without limiting the generality of
the foregoing, until the earlier of the end of the Earn Out Period or the
satisfaction of all of the Purchaser's payment obligations under this Section
3.4, the Purchaser agrees with respect to business in New England that without
the prior consent of the Earn Out Representative, Purchaser: (1) shall not alter
in any material respect the pricing formulas in any customer contract of any of
the Companies; (2) shall not, and shall not permit any of its other Affiliates
to, solicit any present customer of any of the Companies; (3) shall not, and
shall not permit any of its other Affiliates to, bid for or otherwise solicit
any Governmental Authority for the construction or operation of any biosolids
incineration or lime stabilization facility in New England and (4) will not sell
or transfer control of any of the Companies or any of their respective operating
facilities, except (i) to another Company or (ii) a sale or transfer of control
of any of the Companies which is incidental to either a sale, transfer of
control or internal reorganization of Purchaser.
(j) Until the earlier of the end of the Earn Out Period or the
satisfaction of all of the Purchaser's payment obligations under this Section
3.4, the Purchaser shall use its commercially reasonable efforts to provide
capital to the Companies in such amounts (at market rates) and at such times as
set forth on Schedule 3.4(j).
(k) At any time until the earlier of the end of the Earn Out
Period or the satisfaction of all of the Purchaser's payment obligations under
this Section 3.4, in the event that the Purchaser or any of its Affiliates
(other than a Company) either (i) with the consent of the Earn Out
Representative, engages in any of the activities described in Section 3.4(i)(2)
or (3) hereof, or (ii) enters into any business or solicits any contract (except
existing contracts with customers of Purchaser or its Affiliates or renewals
thereof) that competes with any of the Companies in New England through the use
of a biosolids management technology other than incineration or lime
stabilization, the Companies' Earnings shall be deemed to include twenty
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(20%) of the Purchaser's (or its Affiliate's) earnings attributable to such
activity, such earnings to be calculated in a manner reasonably consistent with
that used to compute the Companies' Earnings and shall otherwise be subject to
all of the procedural requirements of this Section 3.4. Notwithstanding the
foregoing sentence, the Companies' Earnings shall not be deemed to include any
of the Purchaser's (or its Affiliate's) earnings attributable to any of the
projects identified on Schedule 3.4(k), hereto.
(l) The Purchaser acknowledges that it is the intention of the
Earn Out Representative to retain certain employees of the Companies to act as
independent contractors for the Earn Out Representative and certain of the
Sellers with respect to monitoring and assisting the Earn Out Representative in
earning the Earn Out Payments.
(m) Until the earlier of the end of the Earn Out Period or the
satisfaction of all of the Purchaser's payment obligations under this Section
3.4, the Purchaser shall cause the Companies to (i) provide the Earn Out
Representative with monthly financial reports of the operations of the Companies
within 14 days following the close of each calendar month, accompanied by a
management report disclosing all material developments during such period with
respect to the Companies, and (ii) upon reasonable prior notice from the
Sellers, provide the Sellers with access to the management employees of the
Companies.
(n) Any Purchaser Common Stock issued by Purchaser to the
Sellers pursuant to Section 3.4 shall be allocated first to Earnings
attributable to the New England Treatment Company, Inc. ("NETCO"), if any.
Notwithstanding any other provision set forth herein, the aggregate of Earn Out
Payments paid in cash attributable to the Earnings of NETCO shall not exceed an
amount determined, in the sole judgment of the Earn Out Representative, to be
the maximum amount of cash payable in order for the transactions contemplated by
the Merger Agreement to comply with Section 368(a)(2)(E) of the Code (assuming
the portion of the Earn Out Baseline attributable to NETCO being equal to
$500,000), unless the Earn Out Representative elects to waive this limitation.
(o) A copy of any and all correspondence and/or notices sent
pursuant to this Section 3.4 between (i) Purchaser and (ii) the Earn Out
Representative and/or Mr. Toretta, shall simultaneously be sent to Donald F.
Dwyer, c/o Astra Zeneca, 725 Chesterbrook Blvd., Wayne, PA 19087.
SECTION 3.5. CLOSING DELIVERIES.
(a) At the Closing, the Sellers shall deliver to the
Purchaser:
(i) certificates representing all of the certificated
Ownership Interests, either registered in the name of one of the Companies or,
with respect to the Direct Ownership Interests, 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 all of the certificated Direct
Ownership Interests, free and clear of all Liens, and, with respect to
uncertificated Direct Ownership Interests, if any, duly executed assignment
documents, which
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shall transfer to Purchaser good and valid title to any uncertificated Direct
Ownership Interests, free and clear of all Liens;
(ii) Release of Claims Agreements executed by the
officers, directors, stockholders, partners and members of the Companies
releasing the Companies from any and all prior claims of such officers,
directors, stockholders, partners and members, in the form attached hereto as
Exhibit C;
(iii) all corporate, accounting, business and tax
records of the Companies;
(iv) a legal opinion from Richards & O'Neil, LLP,
counsel to Mr. Toretta and the Companies, in a form reasonably satisfactory to
Purchaser;
(v) a legal opinion from Carter, Ledyard & Milburn,
counsel to the Grat, in a form reasonably satisfactory to Purchaser;
(vi) a legal opinion from Palmeri, Rock & Talbot,
P.C., counsel to Frances Guerrera, individually, the Estate and the Trust, in a
form reasonably satisfactory to Purchaser;
(vii) a Consulting Agreement between the Purchaser
and Mr. Toretta, individually, in the form attached as Exhibit D hereto;
(viii) Covenant Not to Compete Agreements between the
Purchaser and each of Mr. Toretta, individually, and the Grat, in the form
attached as Exhibit E hereto;
(ix) Covenant Not to Compete Agreements between the
Purchaser and each of Mrs. Guerrera, individually, the Estate, the Trust and R.
J. Guerrera Trucking Company, Inc. (the "Trucking Company"), in the form
attached as Exhibit F hereto; and
(x) such other documents, including certificates of
the Sellers, as may be required by this Agreement or reasonably requested by the
Purchaser.
(b) At the Closing, the Purchaser shall deliver to:
(i) the Sellers, the cash portion of the Purchase
Price determined in accordance with and allocated as set forth in Section 3.2,
in immediately available funds;
(ii) Mr. Toretta, individually, a Consulting
Agreement, in the form attached as Exhibit D;
(iii) Mr. Toretta, individually, and the Grat, a
Covenant Not to Compete Agreement, in the form attached as Exhibit E;
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(iv) each of the Estate, Mrs. Guerrera, individually,
the Trust and the Trucking Company, a Covenant Not to Compete Agreement, in the
form attached as Exhibit F; and
(v) documents relating to the removal of the Sellers
from any and all personal guarantees and/or surety obligations in connection
with the Companies' debts or operations listed on Schedule 3.5; and,
(vi) legal opinions from in-house legal counsel to
the Purchaser, dated the Closing Date, in a form reasonably satisfactory to the
Sellers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers as follows, except as
set forth in the Purchaser's Form 10-K for the fiscal year ended December 31,
1998, all quarterly reports on Form 10-Q filed with the SEC since January 1,
1999, and all amendments to any of the foregoing:
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. CAPITALIZATION.
(a) As of June 30, 1999, the authorized capital stock of
Purchaser consisted of 100,000,000 shares of Purchaser Common Stock, of which
17,392,790 shares were issued and outstanding, and 10,000,000 shares of
preferred stock, par value $.002 per share, of which 500,000 shares have been
designated as "Preferred Stock-Junior Participating Series A" and reserved for
issuance upon exercise of rights evidenced by the certificates representing all
outstanding shares of Purchaser Common Stock, but no such shares are issued and
outstanding. All of the issued and outstanding shares of Purchaser Common Stock
were validly issued and are fully paid, nonassessable and free of preemptive
rights.
(b) As of June 30, 1999, except for 4,020,393 options granted
pursuant to Purchaser incentive or option plans (or to current or former
employees of Purchaser), warrants to acquire 770,000 shares of Purchaser Common
Stock and shares issuable in connection with proposed acquisitions, if any,
there are no outstanding (i) securities of Purchaser convertible into
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or exchangeable for shares of capital stock or voting securities of Purchaser or
(ii) options or other rights to acquire from Purchaser or other obligations of
Purchaser to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
Purchaser.
(c) The shares of Purchaser Common Stock to be issued as part
of the Purchase Price have been duly authorized and when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and non-assessable, and the issuance thereof is not subject
to any preemptive or other similar right.
SECTION 4.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Purchaser has full corporate power and authority to
execute and deliver this Agreement and, subject to the Purchaser Required
Statutory Approvals (as defined in Section 4.3(c)), to consummate the
transactions contemplated hereby. This Agreement has been approved by the Board
of Directors of the Purchaser and no other corporate proceedings on the part of
Purchaser are necessary to authorize the execution and delivery of this
Agreement or the consummation by Purchaser of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by Purchaser, and,
assuming the due authorization, execution and delivery hereof by the other
Parties, constitutes a valid and legally binding agreement of Purchaser
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.
(b) The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser 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, upon, any of the properties or
assets of Purchaser or any of its Subsidiaries under any of the terms,
conditions or provisions of (i) the respective charters or bylaws of Purchaser
or any of its Subsidiaries, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
Governmental Authority applicable to Purchaser or any of its Subsidiaries or any
of their respective properties or assets (assuming compliance with the matters
referred to in Section 4.3(c)) or (iii) any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Purchaser or any of its
Subsidiaries is now a party or by which Purchaser or any of its Subsidiaries or
any of their respective properties or assets may be bound or affected, except,
in the case of clauses (ii) and (iii), for matters as would not have, or could
not reasonably be anticipated to have, individually or in the aggregate, a
Material Adverse Effect or materially impair the ability of Purchaser to
consummate the transactions contemplated by this Agreement.
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(c) Except for the filing of the Registration Statements (as
defined in Section 4.4) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
the declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities (the "Purchaser Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Purchaser or the
consummation by Purchaser of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, have,
or could not reasonably be anticipated to have, individually or in the
aggregate, a Material Adverse Effect or materially impair the ability of
Purchaser to consummate the transactions contemplated by this Agreement.
SECTION 4.4. REGISTRATION STATEMENTS. None of the information to be
supplied by Purchaser or its Subsidiaries for inclusion in the Registration
Statements on Form S-3 to be filed under the Securities Act with the SEC by
Purchaser pursuant to Section 7.6 of this Agreement for the purpose of
registering the Purchaser Shares (as amended or supplemented, the "Registration
Statements") will, at the time they become effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading.
SECTION 4.5. REPORTS AND FINANCIAL STATEMENTS.
(a) Since January 1, 1999, Purchaser has filed with the SEC
all material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by it under each of the
Securities Act, the Securities Exchange Act of 1934, as amended, and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate acts and
the rules and regulations thereunder.
(b) Purchaser has previously made available or delivered to
the Companies or the Sellers copies of Purchaser's (a) Annual Reports on Form
10-K for the fiscal year ended December 31, 1998, and for the immediately
preceding fiscal year, as filed with the SEC, (b) proxy and information
statements relating to (i) all meetings of its shareholders (whether annual or
special) and (ii) any actions by written consent in lieu of a shareholders'
meeting from January 1, 1999, until the date hereof, and (c) all other reports,
including quarterly reports, or registration statements filed by Purchaser with
the SEC since January 1, 1999 (other than Registration Statements filed on Form
S-8) (the documents referred to in clauses (a), (b) and (c), including the
exhibits thereto, are collectively referred to as the "Purchaser SEC Reports").
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(c) As of their respective dates, the Purchaser SEC Reports
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) The audited consolidated financial statements and
unaudited interim consolidated financial statements of Purchaser included in
such reports (collectively, the "Purchaser Financial Statements") have been
prepared in accordance with GAAP (except as may be indicated therein or in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Purchaser and its Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended, subject, in the case of the unaudited interim financial statements, to
normal year-end and audit adjustments and any other adjustments described
therein.
SECTION 4.6. BROKERS AND FINDERS. Purchaser has not entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of Purchaser 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 Purchaser 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.
ARTICLE IV-A
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
CONCERNING THE TRANSACTION
Each Seller, severally but not jointly, represents and warrants to the
Purchaser as follows:
SECTION 4A.1 OWNERSHIP.
(a) The Seller holds of record and beneficially all of the
equity securities of the Companies shown as owned by the Seller on Schedule 1
free and clear of any Liens (except for Liens arising under Federal and state
securities laws and restrictions arising under the Companies' organizational
documents which have been waived).
(b) There are no outstanding 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 Seller to
deliver or sell, or cause to be delivered or sold, any Ownership Interests in
any of the Companies, or obligating the Seller to grant, extend or enter into
any such agreement or commitment. There are no voting trusts, proxies or other
agreements or understandings to which the Seller is a party or is bound with
respect to the voting of any ownership interest of any of the Companies.
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SECTION 4A.2 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The 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 respective boards of directors, partners
and/or members of the Companies, and no other proceedings on the part of the
Seller are necessary to authorize the execution and delivery of this Agreement
by the Seller or the consummation by the Seller of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Seller, and,
assuming the due authorization, execution and delivery hereof by the other
Parties, constitutes a valid and legally binding agreement of the Seller,
enforceable against the Seller in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally, and (ii) general equitable principles.
(b) The execution and delivery of this Agreement by the Seller
and the consummation by the Seller 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 upon any of the
properties or assets of the Seller under any of the terms, conditions or
provisions of (i) any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any court or Governmental
Authority applicable to the Seller, or any of its properties or assets, or (ii)
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 Seller is now a party or by which the Seller or any of the
Seller's 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
Seller or the consummation by the Seller of the transactions contemplated
hereby.
SECTION 4A.3 BROKERS AND FINDERS. Except as disclosed on Schedule 4A.3,
the Seller has not entered into any contract, arrangement or understanding with
any Person or firm which may result in the obligation of any of the Companies to
pay any finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby.
SECTION 4A.4 REGISTRATION STATEMENTS. None of the information to be
supplied by the Seller for inclusion in the Registration Statements will contain
any untrue statement of any material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
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SECTION 4A.5 INVESTMENT REPRESENTATIONS. Each Seller acknowledges,
represents and agrees that:
(a) (i) Purchaser has made available to Seller the
information and documents described in Section 4.5 hereof, (ii) Seller
understands the risks associated with ownership of Purchaser Common Stock, and
(iii) Seller is capable of bearing the financial risks associated with such
ownership;
(b) The Purchaser Shares included within the Purchase
Price have not been registered under the Securities Act or registered or
qualified under any applicable state securities laws;
(c) The Purchaser Shares are being issued to Seller in
reliance upon exemptions from such registration or qualification requirements,
and the availability of such exemptions depends in part upon Seller's bona fide
investment intent with respect to the Purchaser Shares;
(d) Seller's acquisition of the Purchaser Shares is
solely for his own account for investment, and Seller is not acquiring such
Purchaser Shares for the account of any other Person or with a view toward
resale, assignment, fractionalization, or distribution thereof;
(e) Seller shall not offer for sale, sell, transfer,
pledge, hypothecate or otherwise dispose of any of the Purchaser Shares except
in accordance with this Agreement and (i) the registration requirements of the
Securities Act and applicable state securities laws or (ii) upon delivery to
Purchaser of an opinion of legal counsel reasonably satisfactory to Purchaser
that an exemption from registration is available or pursuant to an effective
registration statement covering the Purchaser Shares to be sold;
(f) Seller has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of an
investment in the Purchaser Shares, and to make an informed investment decision
with respect thereto;
(g) Seller has had the opportunity to ask questions of,
and receive answers from, Purchaser's officers and directors concerning Seller's
acquisition of the Purchaser Shares and to obtain such other information
concerning Purchaser and the Purchaser Shares, to the extent Purchaser's
officers and directors possessed the same or could acquire it without
unreasonable effort or expense, as Seller deemed necessary in connection with
making an informed investment decision; and
(h) In addition to any other legends required by law or
the other agreements entered into in connection herewith, each certificate
evidencing the Purchaser Shares will bear a conspicuous restrictive legend
substantially as follows:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY
APPLICABLE STATE SECURITIES LAWS, AND THEY CANNOT BE OFFERED
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FOR SALE, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE HYPOTHECATED
EXCEPT IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF THE
ACT AND SUCH OTHER STATE LAWS OR UPON DELIVERY TO THIS
CORPORATION OF AN OPINION OF LEGAL COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS CONCERNING THE COMPANIES
The Sellers, jointly and severally, represent and warrant to the
Purchaser as follows:
SECTION 5.1. ORGAnIZATION AND QUALIFICATION. Each of the Companies is a
corporation, limited partnership or limited liability company duly organized,
validly existing and in good standing under the laws of the state of its
organization and has the requisite organizational power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Each of the Companies is duly qualified to do business
as a foreign entity and is in good standing in each jurisdiction in which the
properties owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing would not have, or could not reasonably be
anticipated to have, individually or in the aggregate, a Material Adverse
Effect. True, accurate and complete copies of each of the Companies' articles of
incorporation, certificate of partnership, certificate of formation, or other
organizational documents, as amended, and each of the Companies' bylaws,
partnership agreement, regulations, or other similar documents, 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) One or more of the Companies holds of record and
beneficially all of the equity securities of the Companies, excluding the Direct
Ownership Interests, as set forth on Schedule 1. Schedule 1 also sets forth for
each Company (i) its name, jurisdiction of organization and form of
organization, (ii) the classes and number of shares of its authorized capital
stock or other equity securities, (iii) the number of issued and outstanding
shares of each class of its capital stock or other equity securities, and (iv)
the number of shares of its capital stock or other equity securities held in
treasury. All of the Sellers' ownership interests in the Companies were validly
issued and are fully paid, and nonassessable. No Subsidiary of any of the
Companies, other than as described on Schedule 1, holds any ownership interests
in any of the Companies.
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(b) Except as disclosed on Schedule 5.2(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 any of the Companies to issue, deliver
or sell, or cause to be issued, delivered or sold, additional ownership
interests in any of the Companies, or obligating any of the Companies to grant,
extend or enter into any such agreement or commitment or (ii) obligations of any
of the Companies 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 any of the Companies is a party or is
bound with respect to the voting of any ownership interests of any of the
Companies.
SECTION 5.3. AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) This Agreement has been approved by the respective boards
of directors, partners and/or members of the Companies, and no other proceedings
on the part of the Companies are necessary to authorize the execution and
delivery of this Agreement or the consummation by the Companies and the Sellers
of the transactions contemplated hereby.
(b) Except as disclosed on Schedule 5.3 hereto, the execution
and delivery of this Agreement by the Sellers and the consummation by the
Sellers 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 upon any of the properties or assets of any of the
Companies under any of the terms, conditions or provisions of (i) the respective
charters, bylaws, partnership agreements, regulations or other similar documents
of any of the Companies, (ii) any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court or
Governmental Authority applicable to any of the Companies, 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 any of the Companies is
now a party or by which any of the Companies or any of their respective
properties or assets may be bound or affected.
(c) Except as disclosed on Schedule 5.3 hereto, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary on the part of the Companies for the execution and delivery of this
Agreement by the Sellers or the consummation by the Sellers of the transactions
contemplated hereby.
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SECTION 5.4. SUBSIDIARIES. Except as set forth on Schedule 1, none of
the Companies has any Subsidiaries, nor do any of the Companies 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 audited financial statements of
the Companies (excluding NETCO-Waterbury, Limited Partnership, NETCO-Waterbury
Systems, Inc. and NETCO-Residuals Management Systems, Inc.) for the fiscal year
ended December 31, 1998, attached as part of Schedule 5.5, have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes
thereto) and fairly present in all material respects the financial position of
the Companies as of the dates thereof and the results of their operations and
cash flows for the periods then ended. The unaudited financial statements for
NETCO-Waterbury, Limited Partnership, NETCO-Waterbury Systems, Inc. and
NETCO-Residuals Management Systems, Inc. for the fiscal year ended December 31,
1998, and the unaudited interim financial statements of the Companies for the
seven (7) months ended July 31, 1999, also attached as part of Schedule 5.5 (and
together with the audited financial statements described in the preceding
sentence, the "Companies' Financial Statements"), have been prepared in
accordance with the accrual method of accounting and fairly present in all
material respects the financial position of the Companies as of the dates
thereof and the results of their operations and cash flows for the seven (7)
month period then ended, subject to normal year-end adjustments and any other
adjustments described therein.
SECTION 5.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
Schedule 5.6, the Companies have not incurred any liabilities or contingencies
(whether absolute, accrued, contingent or otherwise) of any nature, except
liabilities (i) which are accrued or reserved against the Companies' Financial
Statements or reflected in the notes thereto or (ii) which were incurred after
December 31, 1998, and were incurred in the ordinary course of business and
consistent with past practices.
SECTION 5.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 31, 1999,
and except as described on Schedule 5.7, (i) the Companies have not declared or
set aside or paid any dividend or made any other distribution with respect to
any outstanding securities or ownership interests, or, directly or indirectly,
purchased, redeemed or otherwise acquired any of their securities or ownership
interests and (ii) the Companies have not granted any general increase in the
compensation of any of their officers, directors or employees (including any
increase pursuant to any bonus, pension, profit-sharing or other plan or
commitment) and have not paid any bonuses to any officers, directors or
employees. Since December 31, 1998, and except as described on Schedule 5.7, (i)
the Companies have 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; (ii) the Companies have not
made any amendment to any of their articles of incorporation, certificates of
partnership, regulations, bylaws, partnership agreements, operating agreements
or other similar documents or changed the character of any of their businesses
in any
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manner; (iii) the businesses of the Companies have been conducted in the
ordinary course of business consistent with past practices; and (iv) 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 on Schedule 5.8, there are
no claims, suits, actions, Environmental Claims, inspections, investigations or
proceedings pending or, to the knowledge of any of the Companies or Sellers,
threatened against, relating to or affecting any of the Companies before any
court, governmental department, commission, agency, instrumentality, authority,
or any mediator or arbitrator. Except as described on Schedule 5.8, none of the
Companies is 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 Companies' Financial Statements represent sales actually made in the
ordinary course of business and are collectible in the ordinary course of
business.
SECTION 5.10. NO VIOLATION OF LAW; COMPLIANCE WITH AGREEMENTS.
(a) Except as disclosed on Schedule 5.10, none of the
Companies is in violation of, and none of the Companies has 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. To the
knowledge of the Sellers, 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.
Except as disclosed on Schedule 5.10, the Companies have all permits (including
without limitation Environmental Permits), licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
required or necessary to conduct their business as presently conducted
(collectively, the "Company Permits"). The Companies are not in violation of the
terms of any of the Company Permits.
(b) Except as disclosed on Schedule 5.10, none of the
Companies nor any of the Sellers is 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, (i) the charter, bylaws, partnership agreement, regulations or
similar organizational instruments of any of the Companies or (ii) any contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which any of the Companies is a party
or by which any of the Companies is bound or to which any of their property is
subject.
SECTION 5.11. INSURANCE. The Sellers have heretofore delivered to the
Purchaser true and correct copies of all insurance policies owned by the
Companies or by which any of the Companies or any of their properties or assets
is covered against present losses, all of which are
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now in full force and effect. No insurance has been refused with respect to any
operations, properties or assets of any of the Companies 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 Companies'
policies.
SECTION 5.12. TAXES.
(a) Except as set forth on Schedule 5.12, (i) the Companies
have (x) duly filed (or there have been filed on their behalf) with the
appropriate taxing authorities all Tax Returns (as hereinafter defined) required
to be filed by the Companies on or prior to the date hereof, and (y) duly paid
in full or made adequate provision therefor on the Companies' Financial
Statements in accordance with GAAP (or there have been paid or adequate
provision has been made on their behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof; (ii) all
such Tax Returns filed by or on behalf of the Companies are true, correct and
complete in all material respects; (iii) the Companies are not the beneficiary
of any extension of time within which to file any Tax Return; (iv) no claim has
been made since January 1, 1997 by any authority in a jurisdiction where the
Companies do not file Tax Returns that they are 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 Companies' 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 Companies, except for Liens for Taxes not yet
due; (vii) the Companies have not made any change in accounting methods since
December 31, 1998; (viii) the Companies have not received a ruling from any
taxing authority or signed an agreement with any taxing authority; (ix) the
Companies have 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 have, 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, partner, member 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 Companies, and as of the date of this Agreement the
Companies have not received a written notice of any pending audits or
proceedings; (xi) no partner, stockholder, member, director or officer (or
employee responsible for Tax matters) of the Companies expects any authority to
assess any additional Taxes with respect to the Companies for any period for
which Tax Returns have been filed; (xii) the federal income Tax Returns of the
Companies 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 Companies has expired, for all periods through
and including December 31, 1994, and no deficiencies were asserted as a result
of such examinations which have not been resolved and fully paid; (xiii) no
adjustments or deficiencies relating to Tax Returns of the Companies have been
proposed, asserted or assessed by any taxing
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authority, except for such adjustments or deficiencies which have been fully
paid or finally settled; and (xiv) the Companies have 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
Companies 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 the Companies, and no power of attorney granted by
any of the Companies with respect to any Taxes is currently in force. The
Companies have disclosed on their 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 Companies are 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 one of
the Companies. The Companies have 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 Companies. None of the Companies (i)
has been a member of an affiliate group filing a consolidated federal income Tax
Return (other than a group the common parent of which was one of the Companies)
and (ii) has liability for Taxes of any Person (other than any of the Companies
and their 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 have any of the Companies 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 any of the Companies other than as required by the Consolidated
Budget Reconciliation Act of 1985, as amended ("COBRA"). 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 any of the Companies, threatened, with respect to any such
Plans or Benefit Programs.
(b) The Sellers have heretofore delivered to Purchaser true
and correct copies of the following, if any:
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(i) each Plan and each Benefit Program listed on
Schedule 5.13, all amendments thereto as of the date hereof and all current
summary plan descriptions provided to employees regarding the Plans and Benefit
Programs;
(ii) each trust agreement and annuity contract (or
any other funding instruments) pertaining to any of the Plans or Benefit
Programs, including all amendments to such documents to the date hereof;
(iii) each management or employment contract or
contract for personal services and a complete description of any understanding
or commitment between any of the Companies and any officer, consultant,
director, employee or independent contractor of any of the Companies; 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 (including,
without limitation, health, dental, life and disability insurance) or any other
benefits for any officer, consultant, director, annuitant, employee or
independent contractor of any of the Companies 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 any of the Companies or by any trade or business, whether or not
incorporated, which, together with any of the Companies, is under common
control, as described in Section 414(b) or (c) of the Code.
(c) Except as disclosed on Schedule 5.13, to the best
knowledge of the Sellers, each Plan and Benefit Program has been maintained and
administered in compliance with its terms and in accordance with all applicable
laws, rules and regulations. The Companies have 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.
(d) Except as set forth on 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
any of the Companies, including, without limitation, severance, unemployment
compensation, golden parachute (defined in Section 280G of the Code) or
otherwise, becoming due to any employee of any of the Companies, or (ii)
increase any benefits otherwise payable under any Plan or any Benefit Program.
(e) As of the date hereof, the Companies do not sponsor any
simplified employee pension plans as described in Section 408(k) of the Code and
there are no claims against any of the Companies for benefits relating to any
such plans.
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SECTION 5.14. EMPLOYEE AND LABOR MATTERS.
(a) Schedule 5.14 hereto includes a true and complete list,
dated as of August 19, 1999, of all employees of the Companies, listing the
title or position held, base salary or wage rate and, for the period since July
31, 1999, any bonuses, commissions or profit sharing payable to such employees.
(b) Except as set forth on Schedule 5.14, none of the
Companies is a party to or bound by any written employment agreements or
commitments, other than on an at-will basis. The Companies are in compliance
with all applicable laws respecting the employment and employment practices,
terms and conditions of employment and wages and hours of their employees and
are not engaged in any unfair labor practice. To the best knowledge of the
Sellers, all employees of the Companies 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 Sellers, threatened against any of the Companies with
respect to the Business and, during the past five years, the Companies have not
experienced a work stoppage.
(c) Except as set forth on Schedule 5.14, (i) none of the
Companies is a party to or bound by the terms of any collective bargaining
agreement or other union contract applicable to any employee of any of the
Companies and no such agreement or contract has been requested by any employee
or group of employees of any of the Companies, nor has there been any discussion
with respect thereto by management of any of the Companies with any employees of
any of the Companies, (ii) the Sellers are 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 any of the
Companies, 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 any of the
Companies.
SECTION 5.15. ENVIRONMENTAL MATTERS. Except as set forth on Schedule
5.15 to this Agreement:
(a) None of the Companies nor any of their Business Facilities
(as defined in Exhibit A), is in violation of, or has violated, or has been or
is in non-compliance with, any Environmental Law, including, but not limited to,
the conduct of the business of the Companies or the ownership, use, maintenance
or operation of any of the Business Facilities by the Companies.
(b) Except in compliance with Environmental Laws (including,
without limitation, by obtaining necessary Environmental Permits), (i) 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 any
of the Companies, on, under or about any Business Facility or transferred or
transported by any of the Companies to or from any Business Facility, and (ii)
to the knowledge of the Sellers 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) by any of the
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Companies, on, under, about or from any property adjacent to any current
Business Facility;
(c) There are no Environmental Claims known, pending or, to
the knowledge of the Sellers, threatened against any of the Companies or any of
their Business Facilities, and, to the knowledge of the Sellers, there is no
basis for same;
(d) The Companies and all of their Business Facilities have
obtained all Environmental Permits applicable to the operation of the business
of the Companies as presently conducted, and the Companies and their Business
Facilities are in compliance with all terms and conditions of such Environmental
Permits. The Company and all of their Business Facilities have timely filed
applications for renewal of all such Environmental Permits. 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;
(e) The Companies 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 Companies as presently conducted;
(f) To the knowledge of the Sellers, there are no Materials of
Environmental Concern on any Business Facility of any of the Companies 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);
(g) To the knowledge of the Sellers, none of the off-site
locations where Materials of Environmental Concern generated from any Business
Facility of any of the Companies, or for which any of the Companies 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;
(h) None of the Companies have been named as a potentially
responsible party under, and no Business Facility of the Companies have been
nominated or identified as a facility which is subject to, an existing or
potential claim under CERCLA or comparable Environmental Laws, and, to the
knowledge of the Sellers, no Business Facility of the Companies is subject to
any Lien arising under Environmental Laws;
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(i) The Companies have not received any notice of any release
or threatened release of Materials of Environmental Concern, or remedial
obligation under, Environmental Laws or Permits, relating to the ownership, use,
maintenance, operation of any Business Facility of the Companies or in
connection with the business of the Companies, nor, to the knowledge of the
Sellers, is there any basis for any of the foregoing, nor have the Companies
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;
(j) To the knowledge of the Sellers, there is no Environmental
Law or Requirement of Environmental Laws that will require future compliance
costs on the part of the Companies in excess of One Hundred Thousand Dollars
($100,000) above costs currently expended in the ordinary course of business;
(k) The Companies have filed all notices, notifications,
financial security, waste managements plans, or applications which are required
to be filed by the Companies for the operation of its business or the use or
operation of any Business Facility of any of the Companies; and
(l) Except for sludge and processed by-products, no current
Business Facility (or equipment thereon) of the Companies contains any lead
containing materials, asbestos containing materials or polychlorinated biphenyls
in any form.
For purposes of this Section, the "Companies" shall include any entity which is,
in whole or in part, a predecessor of any of the Companies and all of their
present and former Subsidiaries and their successors of predecessors.
SECTION 5.16. NON-COMPETITION AGREEMENTS. Except as disclosed on
Schedule 5.16 hereto, none of the Companies or the Sellers 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 Companies. None
of the Sellers' is a party to any agreement which, by virtue of such person's
relationship with one or more of the Companies, restricts the Companies or any
Subsidiary of any of the Companies from, directly or indirectly, engaging in any
of the businesses described above.
SECTION 5.17. TITLE TO ASSETS. Except as disclosed on Schedule 5.17,
the Companies have good and indefeasible title to their assets and valid
leasehold interests in their leased assets and properties, as reflected in the
most recent balance sheet included in the Companies' Financial Statements,
except for properties and assets that have been disposed of in the ordinary
course of the conduct of the Business since the date of the latest balance sheet
included therein, free and clear of all Liens, 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 interfere with the present use of the
property subject thereto or affected thereby, or otherwise impair the Companies'
business operations (in the manner presently carried on by the Companies), or
(iii) any Lien securing any debt or obligation described on Schedule 5.17 which
is expressly referenced as being secured.
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All leases under which the Companies lease 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 Companies or their 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 any of the
Companies is a party or by which any of the Companies or any of their assets is
bound as of the date hereof:
(a) any contract, commitment or agreement that involves
aggregate expenditures by one or more of the Companies of more than Fifty
Thousand Dollars ($50,000) 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
one or more of the Companies of more than Fifty Thousand Dollars ($50,000);
(c) any indenture, loan agreement or note under which any of
the Companies has outstanding indebtedness, obligations or liabilities for
borrowed money;
(d) any lease or sublease for the use or occupancy of real
property;
(e) any non-competition agreement described in Section 5.16;
(f) any guarantee, direct or indirect, by any Person of any
contract, lease or agreement entered into by any of the Companies;
(g) any partnership, joint venture or construction and
operation agreement;
(h) any agreement of surety, guarantee or indemnification with
respect to which any of the Companies is the obligor, outside of the ordinary
course of business;
(i) any contract that requires any of the Companies 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 any of the Companies to take any actions or incur any expenses to
remedy non-compliance with any Environmental Law; and
(k) any other contract material to any of the Companies or
their business.
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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 one or more of the Companies and (ii) to
the knowledge of the Sellers, are valid and in full force and effect. Except as
set forth on Schedule 5.18, the Companies have fulfilled all material
obligations required of the Companies under each such contract, agreement, plan
or commitment to have been performed by them 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.
SECTION 5.19. SUPPLIES. To the knowledge of the Sellers, the Supplies
of the Companies are of a quantity and quality that have been normal for the
Companies in the ordinary course of business of the Companies.
SECTION 5.20. BROKERS AND FINDERS. Except as disclosed on Schedule
5.20, none of the Companies has entered into any contract, arrangement or
understanding with any Person or firm which may result in the obligation of any
of the Companies 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 any of the Companies 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. To the knowledge of the Sellers,
except as disclosed on Schedule 5.21 hereto, the Companies have rights to use,
whether through ownership, licensing or otherwise, all patents, trademarks,
service marks, trade names, copyrights, software, trade secrets and other
proprietary rights and processes that are material to its business as now
conducted (collectively, the "Company Intellectual Property Rights"). Except as
set forth on Schedule 5.21, the Companies do not own any patents. The Companies
have no knowledge of any infringement by any other Person of any of the Company
Intellectual Property Rights, and, other than within the ordinary course of
business, the Companies have not entered into any agreement to indemnify any
other party against any charge of infringement of any of the Company
Intellectual Property Rights. To the knowledge of the Sellers, the Companies
have not and do not violate or infringe any intellectual property right of any
other Person, and the Companies have not received any communication alleging
that they violated or infringed the intellectual property right of any other
person. The Companies have 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 any of
the Companies, threatened, that challenges the rights of the Companies 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 January 1,
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1999, the Companies have not received notice from any customer, supplier or any
party to any Contract involving more than Fifty Thousand Dollars ($50,000)
annually with one or more of the Companies (each a "Contract Party") that such
Contract Party intends to discontinue doing business with the Companies, and,
since such date, no Contract Party has indicated any intention (a) to terminate
its existing business relationship with any of the Companies or (b) not to
continue its business relationship with any of the Companies, whether as a
result of the transactions contemplated hereby or otherwise. Except as set forth
on Schedule 5.22, the Companies have not entered into or participated in any
related party transaction during the past year.
SECTION 5.23. YEAR 2000. To the knowledge of the Sellers, after
reasonable investigation by the Sellers and except as disclosed on Schedule 5.23
hereto, all emissions monitors and computers controlling the operation of
incinerators used by the Companies are Year 2000 Compliant. "Year 2000
Compliant" means as to any device (including, without limitation, all software,
firmware, microprocessing chips and/or other data processing devices related to
such device) utilized by and material to the business operations of any of the
Companies, that such device 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.
SECTION 5.24. CERTAIN PAYMENTS. To the best knowledge of the Sellers,
none of the Companies nor any stockholder, member, partner, officer, director or
employee of the Companies have paid or received or caused to be paid or
received, directly or indirectly, in connection with any of the businesses of
the Companies (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 stockholder, member, partner, officer, director or
employee not reimbursed by the Companies or as permitted by applicable law).
SECTION 5.25. BOOKS AND RECORDS. To the knowledge of the Sellers, the
minute books and other organizational records of the Companies 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. To the knowledge of the Sellers, 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 any of the
Companies or any committee thereof has been held for which minutes have not been
prepared and are not contained in the minute books. All such books and records
are located in the offices of the Companies.
SECTION 5.26. CONDITION AND SUFFICIENCY OF ASSETS. To the knowledge of
the Sellers, except as disclosed on Schedule 5.26 hereto, all buildings,
improvements and equipment owned or leased by the Companies 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 Companies is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs not in excess of $100,000 per repair.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING CLOSING.
SECTION 6.1. CONDUCT OF BUSINESS BY THE SELLERS PENDING CLOSING. After
the date hereof and prior to the Closing Date, unless Purchaser shall otherwise
agree in writing, the Sellers shall, and the Sellers shall cause the Companies
to:
(a) conduct their businesses in the ordinary and usual course
of business and consistent with past practice;
(b) not (i) amend or propose to amend any of the Companies'
charters or bylaws or other similar documents, (ii) split, combine, reorganize,
reclassify, recapitalize or take any similar action with respect to any of the
Companies' outstanding capital stock or other equity securities 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, any of the Companies' capital stock
or other equity securities of any class or any debt or equity securities
convertible into or exchangeable for such capital stock or other equity
securities;
(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 any of the Companies' capital stock
or any options, warrants or rights to acquire any of the Companies' capital
stock or other equity securities or any security convertible into or
exchangeable for any of the Companies' capital stock or other equity securities,
(iii) make any acquisition of any assets or businesses other than expenditures
for fixed or capital assets described on Schedule 3.3(d) hereto or in the
ordinary course of business not exceeding $100,000 in any instance or $200,000
in the aggregate, (iv) sell, pledge, dispose of or encumber any assets or
businesses other than sales in the ordinary course of business or (v) enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use all reasonable efforts to preserve intact the
Companies' business organization and goodwill, keep available the services of
the Companies' 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;
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(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 the Companies' 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 Companies' 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 any such Environmental Claim, any
developments in connection therewith, and, as applicable, any anticipated or
actual response thereto;
(l) not enter into or assume any contracts or agreements
having a value or imposing an obligation upon any of the Companies in excess of
$100,000 annually and all contracts or agreements having a value to or imposing
an obligation on any of the Companies that have remaining obligations of
$200,000 or more, regardless of the annual payment;
(m) maintain the Companies' books of account and records in
the usual, regular and ordinary manner consistent with past policies and
practice;
(n) not compromise, settle, grant any waiver or release
relating to or otherwise adjust any litigation or claims of any nature
whatsoever pending against any of the Companies; and
(o) 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
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the termination of this Agreement in accordance with the terms hereof, the
Sellers shall not, and shall not permit any of the Companies or the Companies'
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 any of the Companies or the acquisition of an equity
interest in, or any substantial portion of the assets of, any of the Companies
or (ii) engage in negotiations with or disclose any nonpublic information
relating to any of the Companies or Purchaser, or afford access to the
properties, books or records of any the Companies, to any Person. The Companies
shall promptly notify and provide copies to Purchaser of any offer, proposal,
solicitation or indication of interest, or communication with respect thereto,
delivered to or received from any third party.
SECTION 6.3. ACCESS TO INFORMATION. The Sellers shall, and shall cause
the Companies 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 Companies and their
affairs as the Purchaser may reasonably request.
SECTION 6.4. COMMERCIALLY REASONABLE EFFORTS. The Sellers will use all
reasonable commercial efforts to cause the representations and warranties
contained in Articles IV-A and 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 8.1 and 8.3 hereof.
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ARTICLE VII
CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
SECTION 7.1. CONSENTS. Subsequent to the Closing Date, the Sellers will
use all reasonable commercial efforts, at the request of the Purchaser provided
that the Purchaser reimburses the Sellers for all out of-pocket costs and
expenses, to assist the Purchaser in obtaining all necessary, proper,
appropriate or advisable consents, novations, approvals or waivers which the
Purchaser may reasonably seek from time to time in order to effect, confirm or
document the transactions contemplated by this Agreement, including using their
reasonable commercial efforts to obtain all necessary, proper, appropriate or
advisable consents, novations, approvals or waivers of third parties required in
order to preserve material contractual relationships of the Companies.
SECTION 7.2. FURTHER ASSURANCES. The Parties shall execute and deliver
to the others, after the Closing Date, any other instrument which may be
requested by another Party 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 Companies prior to the date
hereof.
SECTION 7.3. EXPENSES AND FEES. The Companies shall pay all costs and
expenses incurred by the Companies 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
Companies' attorneys and accountants. The Companies will make all necessary
arrangements so that the Purchaser will not be charged with any such costs or
expenses, and all such costs and expenses shall be accrued on the financial
books and records of the Companies prior to Closing and shall be included in the
calculation of Net Working Capital. Each Seller shall be responsible for all
costs and expenses incurred by such Seller in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, the fees
and expenses of the Seller's attorneys. 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 its attorneys and accountants.
SECTION 7.4. AGREEMENT TO COOPERATE. Subject to the terms and
conditions herein provided, the Parties shall use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its reasonable efforts to obtain all necessary, proper or
advisable waivers, consents and approvals under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement, including using its reasonable efforts to obtain all necessary or
appropriate waivers, consents or approvals of third parties required in order to
preserve material contractual relationships of the Companies.
SECTION 7.5. NOTIFICATION OF CERTAIN MATTERS. Each of the Parties
agrees to give prompt notice to each other Party of, and to use their respective
reasonable efforts to prevent or promptly remedy, (i) the occurrence or failure
to occur or the impending or threatened occurrence or failure to occur, of any
event which occurrence or failure to occur would be likely to cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material
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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 part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The Sellers 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
Companies' anticipated or actual response thereto. Notwithstanding the other
provisions of this Section 7.5 and except for those supplements to the
Disclosure Schedules permitted in Section 7.14 hereof, 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 7.6. REGISTRATION STATEMENTS.
(a) The Sellers as a group shall be entitled to a maximum of
four demand registrations with respect to Purchaser Shares issued pursuant to
Section 3.4 to the Sellers as Earn Out Payments in accordance with this Section
7.6. Purchaser shall use reasonable efforts to file with the SEC promptly upon
receipt of a written request from all of the Sellers as a group (provided that
(i) the first request may not be made or delivered any earlier than the date
(eleven) 11 months after the first issuance of Purchaser Shares by the Purchaser
to Seller pursuant to Section 3.4, (ii) the Purchaser shall not be obligated to
effect more than one (1) demand registration in any two (2) year period and
(iii) no such requests may be made after December 31, 2009), a Registration
Statement registering all of the Purchaser Shares then held by the Sellers and
shall use reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as reasonably practicable. Purchaser shall also
take any action required to be taken under applicable state blue sky or
securities laws in connection with the issuance and registration of Purchaser
Shares pursuant hereto. Purchaser and the Sellers shall promptly furnish to each
other all information, and take such other actions, as may reasonably be
requested in connection with any action by any of them in connection with this
Section. Except as otherwise provided in this Section 7.6, no Purchaser Shares
may be transferred or sold during the twelve (12) months following issuance of
such Purchaser Shares. The Registration Statements shall cover the resale of the
Purchaser Shares on Form S-3, if available, and the Purchaser may combine
registrations of Purchaser Shares under this Section 7.6 with registrations of
Purchaser Common Stock required under the Merger Agreement. The Purchaser shall
use its commercially reasonable efforts to cause such shelf Registration
Statement to become effective as soon as practical after such filing, and to
cause the Purchaser Shares to be qualified in such state jurisdictions as the
Sellers may reasonably request. The Purchaser shall use commercially reasonable
efforts to keep the shelf Registration Statement current and effective for one
year after it is first declared effective.
(b) If Purchaser proposes to register for its own account any
of its securities under the Securities Act for sale (other than a registration
statement on Form S-4 or S-8, a registration statement filed in connection with
an exchange offer or an offering of securities
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solely to Purchaser's existing shareholders, or a registration statement filed
in connection with an exchange offer or an offering of securities by any of the
Purchaser's shareholders), Purchaser shall give written notice to the Sellers of
the Purchaser's intention to effect such a registration not later than 15 days
prior to the anticipated date of filing with the SEC of a Registration
Statement, which notice shall offer the Sellers the opportunity to include in
such Registration Statement any of the Purchaser Shares held by the Sellers that
the Sellers may request be included therein (a "Piggyback Registration").
Notwithstanding the preceding sentence, Purchaser's obligation under this
Section 7.6(b) shall be limited to registrations as to which a Registration
Statement is to be filed (i) during the period beginning on the second
anniversary of the Closing Date and ending on December 31, 2009, and (ii) only
if the Sellers are subject to the volume restrictions set forth in Rule 144 of
the Securities Act. Subject to the provisions of this Agreement, Purchaser will
use its reasonable efforts to cause all the Purchaser Shares for which the
Sellers have requested registration to be registered under the Securities Act to
the extent required to permit the sale by the Sellers of such Purchaser Shares;
provided, that if a Piggyback Registration relates to an underwritten public
offering and the managing underwriter or underwriters believe that the inclusion
of all shares requested to be included in the proposed registration would
adversely affect the marketing of such shares, Purchaser may first include in
such registration all securities Purchaser proposes to sell, and the Sellers
shall accept a reduction (including a total elimination) in the number of shares
to be included in such registration, pro rata (among the Sellers, in accordance
with the percentages set forth in Section 3.2) with the other holders of
Purchaser Common Stock making requests for registration, on the basis of the
number of shares of Purchaser Common Stock so requested to be included by the
Sellers and the other selling shareholders. Nothing in this Section 7.6(b) shall
limit Purchaser's ability to withdraw a Registration Statement it has filed
either before or after effectiveness.
(c) Purchaser shall pay the expenses incurred in connection
with any proposed registration of securities by Purchaser under this Section
7.6, whether or not effected or consummated, including, without limitation, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for Purchaser.
SECTION 7.7. PURCHASER'S LIQUIDITY PROGRAM. Notwithstanding any other
provision set forth herein, with respect to all sales by the Sellers of
Purchaser Shares through the NASDAQ or any such other exchange, each Seller may
only sell such shares on any day after the first sale of Purchaser Common Stock
has occurred through the NASDAQ or such other exchange and on such day, Sellers
may only sell 1,000 Purchaser Shares in the aggregate for each 1,000 shares of
Purchaser Common Stock sold by unrelated third parties through the NASDAQ or
such other exchange on such day. In no event shall the plan of distribution of
Purchaser Shares include the use of a contractual underwriter, nor shall
Purchaser have any obligation to enter into an underwriting agreement with any
investment banking firm participating as a broker in the execution of any such
resales. Purchaser agrees that it will furnish to the Sellers such number of
prospectuses, prospectus supplements, or other documents incident to any
registration, qualification or compliance referred to herein as the Sellers from
time to time may reasonably request.
SECTION 7.8. EXCHANGE LISTING. Purchaser shall use its reasonable
efforts to effect, at or
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before the effective date of a Registration Statement, authorization for listing
on NASDAQ, upon official notice of issuance, of the shares of Purchaser Common
Stock to be issued pursuant to the transactions contemplated by this Agreement.
SECTION 7.9. PUBLIC STATEMENTS. Except as required by law or the
National Association of Securities Dealers ("NASD"), the Parties shall obtain
the written consent of the other Party 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 7.10. SECTION 338(h)(10) ELECTION. At the Purchaser's election,
Sellers and Purchaser shall timely make a joint election under Section
338(h)(10) of the Code (and any corresponding elections under state, local or
foreign tax law) (collectively the "Section 338(h)(10) Election") with respect
to the purchase and sale of the stock of the Companies hereunder. Sellers will
pay any Tax imposed on them under the Tax laws as a direct result of the making
of the Section 338(h)(10) Election, and the Purchaser and the Companies will pay
any Tax imposed on them. The value of the assets is hereby agreed to be as
follows: all assets other than depreciable assets will be reflected at net book
value, depreciable assets at net tax basis, and all excess value will be
allocated to good will. Purchaser will prepare the election forms and provide
them to Sellers for Sellers' review at least 30 days before the date the Section
338(h)(10) Election is due. Sellers will execute and return the election forms
to Purchaser at least 15 days before the date the Section 338(h)(10) Election is
due, and Purchaser will file such election forms on or before the respective due
dates for each such election form.
SECTION 7.11. ALLOCATION OF PURCHASE PRICE. Within 60 days following
the Closing Date, Sellers, Purchaser and the Companies shall agree to an
allocation of the Purchase Price and the liabilities of the Companies (plus
other relevant items) among the Companies and (consistent with Section 7.10 and
Section 7.12 to the assets of the Companies for all purposes (including Tax and
financial accounting purposes). Sellers and Purchaser will file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
SECTION 7.12. CODE SECTION 754 ADJUSTMENTS. The Sellers agree to
cooperate with the Purchaser to elect under Code Section 754, to the extent
Purchaser deems such cooperation necessary or desirable, in order to elect to
adjust the tax basis of the assets of the Partnerships. The value of the assets
is hereby agreed to be as follows: all assets other than depreciable assets will
be reflected at net book value, depreciable assets at net tax basis, and all
excess value will be allocated to good will. "Partnership" means the Companies
identified as limited partnerships or limited liability companies on Schedule 1.
SECTION 7.13. CONTROL OF TAX RETURNS. Sellers shall be responsible for
preparing and filing all income Tax Returns of the Companies for periods ending
on or before the Closing Date (including short periods ending on the Closing
Date as a result of the application of Section 708, Section 338(h)(10) or
Section 1362 of the Code). The Parties agree to make the election under Section
1362(e)(3) to the extent applicable. Except as provided in the first sentence of
this
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Section, after the Closing, Purchaser and the Companies shall be responsible for
preparing and filing all Tax Returns of the Companies. The Parties shall provide
each other such information and assistance as may be necessary to prepare and
file the Tax Returns.
SECTION 7.14. SUPPLEMENTS TO DISCLOSURE SCHEDULES. From time to time
prior to the date ten (10) days prior to Closing, the Sellers may update the
Disclosure Schedules to this Agreement in order to make the information set
forth therein complete and accurate, so long as such an update does not disclose
an event, fact or condition which could have a Material Adverse Effect on one or
more of the Companies. In the event such an update discloses an event or
condition which could have a Material Adverse Effect on one or more of the
Companies, then Purchaser may terminate this Agreement if (i) the Purchaser
notified the Seller that Purchaser believed, in its reasonable business
judgment, that the updated information disclosed an event, fact or condition
which could have a Material Adverse Effect on one or more of the Companies, (ii)
the Purchaser negotiated in good faith with the Seller with respect to
adjustments, if any, to the terms of this Agreement as a result of the updated
information, and (iii) the Parties failed to agree on any such adjustments.
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; and
(c) the transactions contemplated by the Agreement and Plan of
Merger dated the same date as this Agreement by and among Purchaser, RESTEC
Acquisition Corp., Mr. Toretta, NETCO, Mrs. Guerrera, the Estate and the Trust
(the "Merger Agreement") shall have been consummated.
SECTION 8.2. CONDITIONS TO OBLIGATION OF THE SELLERS. Unless waived by
the Sellers, the obligation of the Sellers 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) 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) the Sellers 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;
(d) the Sellers shall have received legal opinions from
in-house legal counsel to the Purchaser, dated the Closing Date, in a form
reasonably satisfactory to the Sellers; and
(e) the Purchaser shall have entered into a Consulting
Agreement with Mr. Toretta, individually, in the form attached hereto as Exhibit
D.
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 Sellers and the Companies 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 the Sellers
contained in this Agreement shall be true and correct in all material respects
(or in all respects in the case of any representation or warranty containing any
materiality qualification) on and as of the date made and on and as of the
Closing Date as if made at and as of such date;
(c) since the date hereof, there shall have been no changes
that constitute, and no event or events shall have occurred which have resulted
in or constitute, a Material Adverse Effect;
(d) the Purchaser shall have obtained financing in an amount
and pursuant to terms satisfactory to Purchaser to consummate the transactions
contemplated in this Agreement;
(e) Purchaser shall have received legal opinions from legal
counsel to the Sellers, dated the Closing Date, in a form reasonable
satisfactory to Purchaser, and as described in Section 3.5(a);
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(f) the Sellers shall have executed Release of Claims
Agreements, in the form attached hereto as Exhibit C;
(g) Mr. Toretta, individually, shall have entered into a
Consulting Agreement, in the form attached hereto as Exhibit D;
(h) Mr. Toretta, individually, and the Grat shall have entered
into Covenant Not to Compete Agreements, in the form attached hereto as Exhibit
E;
(i) the Estate, Mrs. Guerrera, the Trust and the Trucking
Company shall have entered into Covenant Not to Compete Agreements, in the form
attached hereto as Exhibit F;
(j) Purchaser shall have received certificates representing
the certificated Ownership Interests duly endorsed for transfer as described in
Section 3.5(a)(i);
(k) Purchaser shall have received a certificate executed by
each of the Sellers with respect to (a) and (b) above; and
(l) Purchaser shall have entered into employment agreements
with Mark McCormick and Terry Szczesiul.
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) Any 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 15 days after written notice of such failure is given to
Purchaser by the Seller;
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(ii) if the transactions contemplated hereby are not
completed by November 1, 1999, (provided that (a) the right to terminate this
Agreement under this Section 9.1(a)(ii) shall not be available to the Seller if
the failure of the 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 its option to extend under Section 9.4);
(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 Seller.
(b) Purchaser shall have the right to terminate this
Agreement:
(i) if the representations and warranties of the
Sellers 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 15 days after written notice of such failure is given to
the Sellers by Purchaser;
(ii) if the transactions contemplated hereby are not
completed by November 1, 1999, as such date may be extended pursuant to Section
9.4 below (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 Sellers 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 Sellers (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 Sellers by Purchaser; or
(iv) pursuant to Section 7.14.
(c) The Sellers 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:
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(a) If this Agreement is terminated by either Purchaser or the
Sellers 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 Sellers or Purchaser or its stockholders, directors, officers, employees,
agents or representatives. 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, including, without limitation,
any breach of the prohibition in Section 7.14 against updating the Disclosure
Schedules with information which could have a Material Adverse Effect on one or
more of the Companies.
(b) The Parties 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 Sellers 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 Sellers waive 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, (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. PURCHASER'S OPTION TO EXTEND. At Purchaser's option
(exercised by providing written notice to the Sellers prior to November 1,
1999), the deadline of November 1, 1999 set forth in Sections 9.1(a)(ii) and
9.1(b)(ii), above, may be extended to December 31, 1999; provided, however, that
if the transactions contemplated hereby fail to close by the expiration of such
extended period, Purchaser shall pay to the Companies $300,000 in the aggregate
as reimbursement for the costs and expenses incurred by the Companies in
connection with the negotiation and execution of this Agreement, as well as the
Merger Agreement, unless the Sellers have breached this Agreement or the failure
of any 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 close before the expiration of such extended
period.
ARTICLE X
INDEMNIFICATION AND LIMITATION ON LIABILITY
SECTION 10.1. THE SELLERS' INDEMNITY OBLIGATIONS.
(a) Each Seller shall, severally but not jointly (except for
the obligations of
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Mr. Toretta and the Grat, which shall be joint and several obligations of Mr.
Toretta and the Grat), indemnify and hold harmless the Companies (after the
Closing), Purchaser and the Companies' (after the Closing) and the Purchaser's
respective officers, directors, stockholders, partners, members, employees,
agents, representatives and Affiliates (each a "Purchaser Indemnified Party")
from and against any and all 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 (x) any breach or
misrepresentation in any of the representations and warranties made by such
Seller in Article IV-A of this Agreement, or any certificate or instrument
delivered by such Seller in connection with this Agreement, or (y) any violation
or breach by such Seller of, or default by such Seller under, the terms of this
Agreement or any certificate or instrument delivered by such Seller in
connection with 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)(i), above.
(b) The Sellers shall, jointly and severally, indemnify and
hold harmless the Purchaser and the Companies (after the Closing) and the other
Purchaser Indemnified Parties from and against any and all Indemnified Amounts
paid, imposed on or incurred by a Purchaser Indemnified Party, directly or
indirectly, (i) relating to, resulting from or arising out of any breach or
misrepresentation in any of the representations and warranties made by the
Sellers in Article V of this Agreement, including without limitation with
respect to environmental matters, or any certificate or instrument delivered in
connection with 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(b)(i), above.
(c) For purposes of Section 10.1(a) and (b), 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 OF THE PARTIES, INCLUDING
ANY PURCHASER INDEMNIFIED PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, ACTIVE OR PASSIVE.
SECTION 10.2. PURCHASER'S INDEMNITY OBLIGATIONS. Purchaser shall
indemnify and hold harmless the Sellers and the Sellers' agents, representatives
and Affiliates (each a "Sellers Indemnified Party") from and against any and all
Indemnified Amounts incurred by a Sellers 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, or (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.
SECTION 10.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement shall be asserted and resolved as follows:
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(a) Promptly after receipt by an indemnified party under
Section 10.1 or 10.2 of notice of the commencement of any third-party claim or
claims asserted against it ("Third-Party Claim"), such indemnified party will,
if a claim is to be made against an indemnifying party under such Section, give
notice to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Third-Party Claim referred to in Section 10.3(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Third-Party Claim, the indemnifying party
will, unless the claim involves Taxes, be entitled to participate in such
Third-Party Claim and, to the extent that it wishes (unless (i) the indemnifying
party is also a party to such Third-Party Claim and the indemnified party
determines in good faith that joint representation would be inappropriate, or
(ii) the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Third-Party Claim and
provide indemnification with respect to such Third-Party Claim), to assume the
defense of such Third-Party Claim with counsel satisfactory to the indemnified
party and, after notice from the indemnifying party to the indemnified party of
its election to assume the defense of such Third-Party Claim, the indemnifying
party will not, as long as it diligently conducts such defense, be liable to the
indemnified party under this Article X for any fees of other counsel or any
other expenses with respect to the defense of such Third-Party Claim, in each
case subsequently incurred by the indemnified party in connection with the
defense of such Third-Party Claim, other than reasonable costs of investigation.
If the indemnifying party assumes the defense of a Third-Party Claim, (i) it
will be conclusively established for purposes of this Agreement that the claims
made in that Third-Party Claim are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of law, rule, regulation or
other legal requirement or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified party, (B)
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, and (C) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Third-Party Claim and the indemnifying party does not,
within ten days after the indemnified party's notice is given, give notice to
the indemnified party of its election to assume the defense of such Third-Party
Claim, the indemnifying party will be bound by any determination made in such
Third-Party Claim or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good
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faith that there is a reasonable probability that a Third-Party Claim may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Third-Party Claim, but the
indemnifying party will not be bound by any determination of a Third-Party Claim
so defended or any compromise or settlement effected without its consent (which
may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction
of any court in which a Third-Party Claim is brought against any indemnified
party for purposes of any claim that an indemnified party may have under this
Agreement with respect to such Third-Party Claim or the matters alleged therein,
and agree that process may be served on Sellers with respect to such a claim
anywhere in the world.
(e) In the event any indemnified party should have a claim
against any indemnifying party hereunder that does not involve a Third-Party
Claim, the indemnified party shall transmit to the indemnifying party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to such claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of such claim) and the basis of the indemnified party's request for
indemnification under this Agreement.
SECTION 10.4. LIMITATION OF SELLERS' LIABILITY.
(a) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of the Estate for any event or occurrence
giving rise to the Estate being required to indemnify Purchaser Indemnified
Parties pursuant to Section 10.1 of this Agreement shall be limited to the cash
portion of the Purchase Price received by the Estate plus any amounts deducted
from such cash portion of the Purchase Price pursuant to Section 3.2(a)(ii)(1)
and (2).
(b) Notwithstanding anything to the contrary contained in
Article X, the aggregate liability of each of Mr. Toretta and the Grat for any
event or occurrence giving rise to such Seller being required to indemnify
Purchaser Indemnified Parties pursuant to Section 10.1 of this Agreement shall
be limited to the combined cash portions of the Purchase Price received by Mr.
Toretta and the Grat plus any amounts deducted from such cash portions of the
Purchase Price pursuant to Section 3.2(a)(ii)(1) and (2).
(c) Purchaser Indemnified Parties are entitled to
indemnification pursuant to Section 10.1 as follows:
(i) until and including the first anniversary of the
Closing Date, only if the amount of any Indemnified Amount, individually or in
the aggregate with all other Indemnified Amounts hereunder and under the terms
of the Merger Agreement, exceeds Two Hundred Fifty Thousand Dollars ($250,000),
and then only to the extent of such excess; and
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(ii) after the first anniversary of the Closing Date, only if
the amount of any Indemnified Amount, individually or in the aggregate with all
other Indemnified Amounts hereunder and under the terms of the Merger Agreement
since the Closing Date, exceeds Five Hundred Thousand Dollars ($500,000), and
then only to the extent of such excess.
SECTION 10.5. LIMITATION OF PURCHASER'S LIABILITY. Sellers Indemnified
Parties are entitled to indemnification pursuant to Section 10.2 as follows:
(i) until and including the first anniversary of the Closing
Date, only if the amount of any Indemnified Amount, individually or in the
aggregate with all other Indemnified Amounts hereunder and under the terms of
the Merger Agreement, exceeds Two Hundred Fifty Thousand Dollars ($250,000), and
then only to the extent of such excess; and
(ii) after the first anniversary of the Closing Date, only if
the amount of any Indemnified Amount, individually or in the aggregate, with all
other Indemnified Amounts hereunder and under the terms of the Merger Agreement
since the Closing Date, exceeds Five Hundred Thousand Dollars ($500,000), and
then only to the extent of such excess.
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 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 warranties set forth in
Sections 4A.1 (Ownership), 4A.2 (Authority; Non-Contravention; Approvals) and
5.2 (Capitalization) hereof shall survive the Closing indefinitely, (ii) Section
5.12 (Taxes) shall survive the Closing for the greater of two years or the
statutory survival period applicable to Taxes, (iii) the covenants contained in
this Agreement to be performed after the Closing shall survive until fully
performed; and (iv) the indemnification obligations of the Sellers set forth in
Section 10.1(a) and Section 10.1(b) shall survive the Closing until the
termination of the respective representations and warranties.
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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 or by a
nationally recognized overnight delivery service, 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 or the Companies (on or after
Closing), 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 Mr. Toretta or the Companies (prior to
Closing), to:
Paul A. Toretta
30 Lakewood Circle
Greenwich, Connecticut 06830
Telecopy: 203/633-9064
with a copy to:
Edward M. Kane, Esq.
Richards & O'Neil, LLP
43 Arch Street
Greenwich, Connecticut 06830
Telecopy: 203/869-6565
(c) If to Frances A. Guerrera, as
Executrix of the Estate of Richard J. Guerrera
or as Co-Trustee of the Richard J. Guerrera
Revocable Trust, to:
Frances A. Guerrera
31 Munson Road
Middlebury, Connecticut 06762
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with a copy to:
John J. Palmeri, Esq.
Palmeri, Rock & Talbot, P.C.
100 Hinman Street
P.O. Box 277
Cheshire, Connecticut 06410
Telecopy: 203/250-1795
and
Donald F. Dwyer
c/o Astra Zeneca
725 Chesterbrook Blvd.
Wayne, Pennsylvania 19087
Telecopy: 610/695-4491
(d) If to Frances A. Guerrera, individually, to:
Frances A. Guerrera
31 Munson Road
Middlebury, Connecticut 06762
with a copy to:
Shipman & Goodwin, LLP
One Landmark Square
Stamford, Connecticut 06901
Attention: Steven M. Gold, Esq.
Telecopy: 203/324-8191
and
Donald F. Dwyer
c/o Astra Zeneca
725 Chesterbrook Blvd.
Wayne, Pennsylvania 19087
Telecopy: 610/695-4491
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(e) If to Robert Dionne, as Co-Trustee of the Richard J.
Guerrera Revocable Trust, to:
Robert Dionne (Personal and Confidential)
c/o R. J. Guerrera, Inc.
P.O. Box 700
Naugatuck, Connecticut 06770
Telecopy: 203/723-5640
with a copy to:
John J. Palmeri, Esq.
Palmeri, Rock & Talbot, P.C.
100 Hinman Street
P.O. Box 277
Cheshire, Connecticut 06410
Telecopy: 203/250-1795
(f) If to Eileen Toretta, as Trustee of the Paul A.
Toretta 1998 Grat, to:
Eileen Toretta
30 Lakewood Circle
Greenwich, Connecticut 06830
Telecopy: 203/633-9064
with a copy to:
Jerome Caulfield, Esq.
Carter, Ledyard & Milburn
Two Wall Street
New York, New York 10005
Telecopy: 212/732-3232
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) constitutes the
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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. Neither this Agreement nor the rights, interests and
obligations arising pursuant to this Agreement (including the documents and
instruments referred to herein and the Schedules and Exhibits attached hereto)
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 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, principals 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 New York, New York. Notwithstanding Section 11.6, the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. ss.ss. 1 et seq. (the "Federal Arbitration Act"). The arbitrator shall
award all reasonable and necessary costs (including the reasonable fees and
expenses of counsel) incurred in conducting the arbitration to the prevailing
Party in any such Dispute. The Parties expressly waive all rights whatsoever to
file an appeal against or otherwise to challenge any award by the arbitrators
hereunder; provided, that the foregoing shall not limit the rights of 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
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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 the
State of Delaware, 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 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 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 30 days
after the Respondent has notified Claimant of the appointment of the
Respondent's arbitrator. When the third (3rd) arbitrator has accepted the
appointment, the two (2) Party-appointed arbitrators shall promptly notify the
Parties of the appointment. If the two (2) arbitrators appointed by the Parties
fail to appoint a third (3rd) arbitrator or so to notify the Parties within the
time period prescribed above, then the appointment of the third (3rd) arbitrator
shall be made by the American Arbitration Association, which shall promptly
notify the Parties of the appointment. The third (3rd) arbitrator shall act as
Chair of the panel.
(f) Other Matters. This arbitration provision constitutes the
entire agreement of the Parties with respect to its subject matter and
supersedes all prior discussions,
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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. GUARANTEE. Frances Guerrera, individually and as
Co-Trustee of the Trust, and Robert Dionne, as Co-Trustee of the Trust, jointly
and severally, unconditionally and irrevocably guarantee the full, prompt and
complete performance of all obligations of the Estate and Trust, as the case may
be, under this Agreement and the documents executed and delivered by the Estate
and Trust in connection with the transactions contemplated in this Agreement.
[REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement effective as of the date first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Ross M. Patten
-------------------------------------
Ross M. Patton, Chairman and Chief
Executive Officer
/s/ Frances A. Guerrera
----------------------------------------
Frances A. Guerrera, individually
THE RICHARD J. GUERRERA REVOCABLE
TRUST
By: /s/ Frances A. Guerrera
-------------------------------------
Frances A. Guerrera, Co-Trustee
By: /s/ Robert Dionne
-------------------------------------
Robert Dionne, Co-Trustee
THE SELLERS:
/s/ Paul A. Toretta
----------------------------------------
Paul A. Toretta, individually
THE ESTATE OF RICHARD J. GUERRERA
By: /s/ Frances A. Guerrera
-------------------------------------
Frances A. Guerrera, Executrix
THE PAUL A. TORETTA 1998 GRAT
By: /s/ Eileen Toretta
-------------------------------------
Eileen Toretta, Trustee
51
<PAGE> 57
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.
"Accounting Arbitrator" shall mean an independent accounting firm
selected by mutual agreement of the Auditor and the Earn Out Representative's
independent accounting firm.
"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.
"Auditor" shall have the meaning given in Section 3.4.
"Average Purchaser Common Stock Price" means the average of the Daily
Per Share Prices for the twenty(20) consecutive trading days beginning on the
twenty-first (21st) trading day prior to the last day of the applicable calendar
year for purposes of Section 3.4.
"Business Facility" or "Business Facilities" includes any property
(whether real or personal) which the Companies or any of their Subsidiaries
currently lease, operate, or own or manage in any manner or which the Companies
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.
"Daily Per Share Price" means the per share closing price on the NASDAQ
Small Cap Exchange (the "NASDAQ") of Purchaser Common Stock (as reported by The
Wall Street Journal for that day).
"Earn Out Payment" shall have the meaning given in Section 3.4.
"Earn Out Period" shall have the meaning given in Section 3.4.
"Earn Out Representative" means Paul A. Toretta, or, if Mr. Toretta
dies, resigns or for any reason refuses or is unable to act, a substitute
specified in a written notice of substitution
Exhibit A - Page 1
<PAGE> 58
delivered to the Purchaser and signed by the Grat and Mr. Toretta (or his legal
representative, heirs, successors or designees).
"Earnings" shall mean, with respect to any period, the total revenues
of the Companies during such period after deduction for direct operating
expenses, other expenses, interest expense, depreciation and amortization but
before deduction for income taxes; provided, however, that in determining
Earnings there shall be no deduction for (or inclusion as an expense in respect
of) (a) any expenses directed by the Purchaser or its Affiliates in excess of
those reasonably required to operate the Companies in accordance with past
practices (as illustrated generally by the adjusted income statement for the
trailing twelve (12) month period ended July 31, 1999, attached hereto as
Schedule 3.4(j) and subject to normal inflation increases), unless approved in
writing by the Earn Out Representative before being incurred; (b) any management
fees charged by the Purchaser or its Affiliates to the Companies; (c) any
allocation of corporate overhead of the Purchaser or its Affiliates, provided,
however, that the Purchaser may allocate a reasonable amount to the Companies,
consistent with the Companies' past expenditures, for accounting services
(including fifty percent (50%) of the cost of any special accounting services
rendered by the Auditor and Accounting Arbiter pursuant to Section 3.4 hereof);
(d) any expenses incurred in connection with the transactions contemplated by
this Agreement; (e) any amortization of goodwill recognized in connection with
the transactions contemplated by this Agreement or any purchase accounting
adjustments recorded by the Purchaser or its Affiliates in connection with the
transactions contemplated by this Agreement; and (f) any extraordinary or
non-recurring transition expenses resulting from the transactions contemplated
by this Agreement, including, without limitation, lease and insurance
cancellation penalties.
"Earnings Dispute Notice" shall have the meaning given in Section 3.4.
"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,
disposal of Remediation of Materials of Environmental Concern; (ix) injury to,
death of or threat to the
Exhibit A - Page 2
<PAGE> 59
health or safety of any person or persons caused directly or indirectly by
Materials of Environmental Concern; (x) destruction caused directly or
indirectly by Materials of Environmental Concern or the release or threatened
release of any Materials of Environmental Concern or any property (whether real
or personal); (xi) the implementation of spill prevention and/or disaster plans
relating to Material of Environmental Concern; (xiii) community right-to-know
and other disclosure laws; or (xiii) maintaining, disclosing or reporting
information to Governmental Authorities of any other third person under any
Environmental Law. The term, "Environmental Claim," also includes, without
limitation, any losses, damages, costs, expenses and/or liabilities incurred in
testing, 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,
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 Companies'
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 U.S. generally accepted accounting principals applied on a
consistent basis.
Exhibit A - Page 3
<PAGE> 60
"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.
"Indebtedness" means the aggregate long-term indebtedness, net of
sinking fund and other cash reserves described on Schedule 3.2 hereto that are
not included in Net Working Capital, and other long-term liabilities of the
Companies determined in accordance with GAAP.
"Lien(s)" means any mortgage, pledge, hypothecation, security interest,
encumbrance, claim, 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).
When used in this Agreement in connection with the Companies and their
Subsidiaries, or the Purchaser and its Subsidiaries, as the case may be,
"Material Adverse Effect" means any event, occurrence, fact, condition, change,
development or effect that is or could reasonably be anticipated to be
materially adverse to the business, assets (including intangible assets),
liabilities, financial condition, results of operations, properties (including
intangible properties) or business prospects of the Companies and all of their
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," 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.
"Net Working Capital" means the aggregate current assets of the
Companies less the aggregate current liabilities of the Companies determined in
accordance with GAAP.
"New England" means Connecticut, Maine, Massachusetts, New Hampshire,
Rhode Island and Vermont.
"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.
"Purchaser Common Stock" means validly issued, fully paid and
nonassessable shares of common stock, par value $.002 per share, of Purchaser.
Exhibit A - Page 4
<PAGE> 61
"Purchaser Shares" means the shares of Purchaser Common Stock issuable
to Mr. Toretta as determined pursuant to Section 3.4 of the Agreement.
"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
Companies or any of their Subsidiaries or of any property affected by the
business, operations, acts omissions, or Materials of Environmental Concern of
the Companies or any of their Subsidiaries.
"Requirement(s) of Environmental Law(s)" means all requirements,
conditions, restrictions or stipulations of Environmental Laws imposed upon or
related to the Companies or any of their Subsidiaries or the assets, Business
Facilities and/or the business of the Companies or any of their 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 A - Page 5
<PAGE> 1
EXHIBIT 2.3
Friday, January 07, 2000
Paul A. Toretta
Don F. Dwyer
Residual Technologies
55 Old Field Point Road
Greenwich, CT 06830
Subject: Termination Extensions
================================================================================
Dear Paul and Don:
This letter (the "Letter Agreement") is intended to amend the following
agreements:
o Purchase and Sale Agreement (the "Sale Agreement"), dated as of
October 20, 1999, by and among Synagro Technologies, Inc. (the
"Purchaser"), Paul A. Toretta, Eileen Toretta as Trustee of the
Paul A. Toretta 1998 GRAT (the "GRAT"), Frances A. Guerrera,
Frances A. Guerrera as Executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert Dionne as
Co-Trustees of the Richard J. Guerrera Revocable Trust Under
Agreement dated November 2, 1998 (collectively, the
"Shareholders"), and
o Agreement and Plan of Merger (the "Merger Agreement"), dated
October 20, 1999, by and among Synagro Technologies, Inc., ResTec
Acquisition Corp., New England Treatment Company, Inc. ("NETCO"),
Paul A. Toretta, Frances A. Guerrera, Frances A. Guerrera,
Frances A. Guerrera as Executrix of the Estate of Richard J.
Guerrera, and Frances A. Guerrera and Robert Dionne as
Co-Trustees of the Richard J. Guerrera Revocable Trust Under
Agreement dated November 2, 1998
This Letter Agreement is to confirm and give effect to the following
agreements between the Purchaser and the Shareholders:
<PAGE> 2
1. The optional extension date of December 31, 1999 set forth in
Section 9.4 of the Sale Agreement and Section 9.4 of the Merger Agreement,
including the obligation to pay the $300,000 breakup fee referred to
therein, is hereby extended to January 31, 2000. It is anticipated that the
actual closings of the Sale Agreement and the Merger Agreement will take
place during the week of January 10, 2000.
In consideration for this extension, the Purchaser and the
Shareholders agree to the following:
2. It is hereby agreed that the number of shares of Parent Common
Stock to be issued in accordance with Section 3.1(a)(i) of the Merger
Agreement shall be fixed at 325,000. However, this number shall be reduced
by the amount of any Indebtedness that NETCO has at closing and the amount,
if any, by which NETCO's Net Working Capital as of closing is less than
$910,000. The reduction in shares shall be calculated by dividing the sum
of NETCO's Indebtedness at closing and the shortfall in Net Working Capital
by 6.1538. It is also agreed that (i) the "amount of cash and liabilities"
in Section 3.3(d) of the Merger Agreement shall be changed to $910,000 from
$260,000, (ii) the "amount of cash and liabilities" in Section 3.3(d) of
the Sale Agreement shall be changed to $400,000 from $1,050,000, and (iii)
the "Net Working Capital" amount in Section 3.2(i) of the Sale Agreement
shall be changed to $490,000 from $1,140,000.
3. The Purchaser agrees to permit NETCO to issue shares of its
nonvoting common stock to Janet Cordano, Mark McCormick, and Terry
Szczesiul, in lieu of a portion of the bonus payments otherwise payable to
such employees in connection with the consummation of the transactions
contemplated by the Merger Agreement. These shares of nonvoting common
stock shall be subject to exchange pursuant to the terms of the Merger
Agreement on a pro rata basis.
4. Section 3.2(i) of the Sale Agreement shall be amended to increase
the initial cash amount to Forty-Four Million Six Hundred Thousand Dollars
($44,600,000) to reflect the parties' estimate of the difference in the tax
payable by the Shareholders as a result of closing the Sale Agreement and
the Merger Agreement in 2000 rather than in 1999 (the "Tax Payment"). If
the actual Tax Payment is less than $600,000, the Shareholders shall remit
such excess to the Purchaser.
<PAGE> 3
5. The Purchaser agrees, if requested by Mr. Toretta, to work with
GTCR Golder Rauner, LLC to provide a $3 million loan to Mr. Toretta and the
GRAT three days prior to the closing day for payment of bonuses to selected
ResTec employees. The loan shall be repaid prior to funding the Sale
Agreement or shall be netted against the cash consideration due under the
Sale Agreement.
6. Section 2(e) of the Covenant Not to Compete Agreement to be entered
into by Mr. Toretta and the Purchaser shall be amended to read, in its
entirety, as follows:
(e) "Business" means the management of municipal sewage sludge,
including, but not limited to, the collection, treatment,
transportation, land application, incineration, disposal, and/or
composting of such municipal sewage sludge.
7. Notwithstanding Section 7.14 of the Sale Agreement and Section 7.14
of the Merger Agreement, the Shareholders and NETCO may deliver updates to
the Disclosure Schedules to the Sale Agreement and Merger Agreement at
least through January 17, 2000.
8. The Purchaser hereby consents to ResTec's transfer of its recently
acquired centrifuges to NETCO.
9. The Purchaser hereby consents to Providence Soils, LLC's entry into
agreements with the Rhode Island Resource Recovery Corporation and the
Narragansett Bay Commission for the construction and operation of a
facility in Rhode Island.
10. To the extent any provision in this Letter Agreement is
inconsistent with the Sale Agreement or the Merger Agreement, this Letter
Agreement shall control and shall constitute an amendment to those
Agreements. As amended by this Letter Agreement, both the Sale Agreement
and the Merger Agreement shall continue in full force and effect.
Capitalized terms used, but not defined, herein shall have the meanings
ascribed to them in those Agreements.
<PAGE> 4
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
<PAGE> 5
ACCEPTED AND AGREED TO:
/s/ Paul A. Toretta
- -----------------------------------------------
Paul A. Toretta, Individually
THE PAUL A. TORETTA 1998 GRAT
/s/ Eileen Toretta
- -----------------------------------------------
Eileen Toretta, Trustee
THE RICHARD J. GUERRERA REVOCABLE TRUST
/s/ Donald F. Dwyer for Frances A. Guerrera
- -----------------------------------------------
Frances A. Guerrera, Co-Trustee
/s/ Donald F. Dwyer for Robert Dionne
- -----------------------------------------------
Robert Dionne, Co-Trustee
THE ESTATE OF RICHARD J. GUERRERA
/s/ Donald F. Dwyer for Frances A. Guerrera
- -----------------------------------------------
Frances A. Guerrera, Executrix
/s/ Donald F. Dwyer for Frances A. Guerrera
- -----------------------------------------------
Francis A. Guerrera, Individually
<PAGE> 1
EXHIBIT 2.4
SECOND AMENDMENT
TO AGREEMENT AND PLAN OF MERGER
THIS SECOND AMENDMENT ("Amendment") is entered into as of January 26,
2000, by and between SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("Parent"), RESTEC ACQUISITION CORP., a Rhode Island corporation and a
wholly-owned subsidiary of Parent ("Rhode Island Merger Sub"), NEW ENGLAND
TREATMENT COMPANY, INC., a Rhode Island corporation ("Company"), PAUL A.
TORETTA, individually ("Mr. Toretta"), FRANCES A. GUERRERA, individually ("Mrs.
Guerrera"), FRANCES A. GUERRERA, as Executrix of the Estate of Richard J.
Guerrera (the "Estate"), FRANCES A. GUERRERA and ROBERT DIONNE, as Co-Trustees
of the Richard J. Guerrera Revocable Trust under agreement dated November 2,
1998 (the "Trust") (collectively, the "Merger Parties") and RESTEC ACQUISITION
CORP., a Delaware corporation and a wholly-owned subsidiary of Parent ("Delaware
Merger Sub").
RECITALS
WHEREAS, the Merger Parties entered into that certain Agreement and
Plan of Merger dated October 20, 1999, as amended by a letter agreement dated
January 7, 2000 (as amended, the "Agreement"), under the terms of which Rhode
Island Merger Sub was, upon satisfaction or waiver of the conditions to Closing
set forth in the Agreement, and at the Effective Time, to merge with and into
the Company (the "Merger");
WHEREAS, the Merger Parties now desire to amend the Agreement to
provide, among other things, that Delaware Merger Sub, rather than Rhode Island
Merger Sub, will, upon satisfaction or waiver of the conditions to Closing set
forth in the Agreement, and at the Effective Time, merge with and into the
Company, and that the Company will issue shares of nonvoting stock prior to the
Merger, as more fully set forth herein; and
WHEREAS, capitalized terms used herein shall have the meanings ascribed
to them herein or in the Agreement, and references to Sections herein shall mean
the corresponding Sections of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable and consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Adoption of Letter Agreement. The parties hereto hereby consent to,
confirm, approve and adopt the letter agreement dated January 7, 2000,
among Parent, Mr. Toretta, the Grat, the Trust, the Estate, and Mrs.
Guerrera.
2. Amendments to Agreement.
a. Any and all references in the Agreement (including any
Exhibits or Schedules thereto, any documents required for the
consummation of the transactions contemplated by the
Agreement, and any amendments to the
<PAGE> 2
Agreements other than this Amendment) to RESTEC Acquisition
Corp., a Rhode Island corporation, are hereby amended to be
references to RESTEC Acquisition Corp., a Delaware
corporation, and, as a result of this Amendment, the defined
term "Merger Sub" as used in the Agreement (including any
Exhibits or Schedules thereto, any documents required for the
consummation of the transactions contemplated by the
Agreement, and any amendments to the Agreements other than
this Amendment) for RESTEC Acquisition Corp., a Rhode Island
corporation, is now a reference to RESTEC Acquisition Corp., a
Delaware corporation.
b. The first complete sentence of Section 1.1 of the Agreement
is hereby amended to read:
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in
Section 1.2) in accordance with the Rhode Island
Business Corporation Act and the General Corporation
Law of the State of Delaware, the Merger Sub shall be
merged with and into the Company and the separate
existence of the Merger Sub shall thereupon cease.
c. The first complete sentence of Section 1.2 of the Agreement
is hereby amended to read:
The Merger shall become effective at such time (the
"Effective Time") as (i) articles of merger are filed
with the Secretary of State of the State of Rhode
Island in accordance with the Rhode Island Business
Corporation Act and (ii) a certificate of merger is
filed with the Secretary of State of the State of
Delaware in accordance with the General Corporation
Law of the State of Delaware (collectively, the
"Merger Filing").
d. Section 2.1 of the Agreement is hereby amended to read in
its entirety:
SECTION 2.1. CERTIFICATE OF INCORPORATION. The
Articles of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving
Corporation after the Effective Time, as the same may
thereafter be amended in accordance with its terms
and as provided under the Rhode Island Business
Corporation Act.
e. The last sentence of Section 3.1(a) of the Agreement is
hereby amended to read in its entirety:
Each Shareholder and each of Mark McCormick, Terry
Szczesiul and Janet Cordano (as new shareholders of
the Company) shall be
<PAGE> 3
entitled to receive the percentages of the aggregate
consideration issuable pursuant to this Section
3.1(a) as set forth on Schedule 1 to this Amendment.
3. No Other Amendments to Agreement. Except as specifically set forth
in this Amendment, the Agreement shall remain in full force and effect,
without any amendment or modification thereto.
4. Counterparts and Facsimile Signatures. This Amendment may be
executed in any number of counterparts, and signature pages may be
delivered by telecopy, with the original executed signature pages to be
furnished promptly thereafter.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
---------------------------------------
Mark A. Rome, Executive Vice President
RESTEC ACQUISITION CORP.,
a Rhode Island corporation
By: /s/ Mark A. Rome
---------------------------------------
Mark A. Rome, Vice President
RESTEC ACQUISITION CORP.,
a Delaware corporation
By: /s/ Mark A. Rome
---------------------------------------
Mark A. Rome, Vice President
NEW ENGLAND TREATMENT COMPANY, INC.
By: /s/ Paul A. Toretta
---------------------------------------
Paul A. Toretta, President
/s/ Paul A. Toretta
------------------------------------------
Paul A. Toretta, individually
<PAGE> 5
/s/ Frances A. Guerrera
------------------------------------------
Frances A. Guerrera, individually
THE RICHARD J. GUERRERA REVOCABLE TRUST
By: /s/ Frances A. Guerrera
---------------------------------------
Frances A. Guerrera, Co-Trustee
By: /s/ Robert Dionne
---------------------------------------
Robert Dionne, Co-Trustee
THE ESTATE OF RICHARD J. GUERRERA
By: /s/ Frances A. Guerrera
---------------------------------------
Frances A. Guerrera, Executrix
<PAGE> 6
SCHEDULE 1 TO SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER
Paul A. Toretta 46%
Estate of Richard J. Guerrera 46%
Mark McCormick 4%
Terry Szczesiul 2.5%
Janet Cordano 1.5%
<PAGE> 1
EXHIBIT 2.5
SECOND AMENDMENT
TO PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT ("Amendment") is entered into as of January 26,
2000, by and between SYNAGRO TECHNOLOGIES, INC., a Delaware corporation
("Purchaser"), PAUL A. TORETTA, individually ("Mr. Toretta"), EILEEN TORETTA, as
Trustee of the Paul A. Toretta 1998 Grat (the "Grat"), FRANCES A. GUERRERA,
individually ("Mrs. Guerrera"), FRANCES A. GUERRERA, as Executrix of the Estate
of Richard J. Guerrera (the "Estate"), and FRANCES A. GUERRERA and ROBERT
DIONNE, as Co-Trustees of the Richard J. Guerrera Revocable Trust under
agreement dated November 2, 1998 (the "Trust") (collectively, the "Parties").
RECITALS
WHEREAS, the Parties entered into that certain Purchase and Sale
Agreement dated October 20, 1999, as amended by a letter agreement dated January
7, 2000 (as amended, the "Agreement");
WHEREAS, the Parties now desire to amend the Agreement to provide,
among other things, that the cash portion of the Purchase Price is reduced by an
amount equal to certain bonuses which Purchaser has agreed to pay to certain
employees of the Companies, as more fully set forth herein; and
WHEREAS, capitalized terms used herein shall have the meanings ascribed
to them herein or in the Agreement, and references to Sections herein shall mean
the corresponding Sections of the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable and consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Adoption of Letter Agreement. The parties hereto hereby consent to,
confirm, approve and adopt the letter agreement dated January 7, 2000,
among Parent, Mr. Toretta, the Grat, the Trust, the Estate, and Mrs.
Guerrera.
2. NETCO-Waterbury Systems, Inc. The Sellers jointly and severally
represent to the Purchaser that all of the capital stock of
NETCO-Waterbury Systems, Inc., a Delaware corporation ("Waterbury"), is
pledged to First Union Bank (the "Trustee") pursuant to that certain
Pledge and Security Agreement (the "Pledge and Security Agreement")
dated June 30, 1995, between the Trustee, Mr. Toretta and Richard J.
Guerrera, in connection with a loan agreement dated June 1, 1995,
between the Connecticut Development Authority and NETCO-Waterbury
Limited Partnership, a Delaware limited partnership. Upon execution and
delivery of this Amendment and subject to any liens created by the
Pledge and Security Agreement, the Sellers hereby convey, assign,
transfer, set over and deliver all right, title and interest in and to
all of the capital stock of Waterbury to the Purchaser. In the event
either Seller receives any stock certificate(s) representing capital
stock of Waterbury, whether from the Trustee or otherwise, such Seller
shall immediately deliver such stock certificate(s) to the Purchaser.
<PAGE> 2
3. Amendments to Agreement.
a. Section 3.2(i) of the Agreement is hereby amended to read
in its entirety:
(i) cash equal to Forty-Four Million Six
Hundred Thousand Dollars ($44,600,000) minus (1) the
Companies' Indebtedness as of Closing, plus or minus
(2) the amount, if any, by which the Companies' Net
Working Capital as of Closing is greater than or less
than Four Hundred Ninety Thousand Dollars ($490,000),
minus (3) the amount, if any, of the Employee Bonuses
(as defined in Section 3.3(e)). The amount, if any,
by which the cash portion of the Purchase Price is
adjusted pursuant to this Section 3.2(i) (i.e., the
sum of (1), (2) and (3) above) is referred to herein
as the "Adjustment Amount"; and
b. Section 3.3 of the Agreement is hereby amended to add a new
subparagraph (e), as follows:
(e) As soon as practicable after
Closing, the Companies shall pay in the aggregate a
bonus of $423,394.50 to Janet Cordano; a bonus of
$1,129,052.00 to Mark McCormick; and a bonus of
$705,657.50 to Terry Szczesiul (collectively, the
"Employee Bonuses"). The parties acknowledge that
such bonuses were awarded prior to Closing. The cash
portion of the Purchase Price shall be reduced by the
total dollar amount of the Employee Bonuses as set
forth in Section 3.2, and such Employee Bonuses shall
be excluded from the computations of Indebtedness and
Net Working Capital for purposes of this Agreement.
4. No Other Amendments to Agreement. Except as specifically set forth
in this Amendment, the Agreement shall remain in full force and effect,
without any amendment or modification thereto.
5. Counterparts and Facsimile Signatures. This Amendment may be
executed in any number of counterparts, and signature pages may be
delivered by telecopy, with the original executed signature pages to be
furnished promptly thereafter.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day first written above.
SYNAGRO TECHNOLOGIES, INC.
By: /s/ Mark A. Rome
----------------------------------------
Mark A. Rome, Executive Vice President
/s/ Paul A. Toretta
----------------------------------------
Paul A. Toretta, individually
THE PAUL A. TORETTA 1998 GRAT
By: /s/ Eileen Toretta
----------------------------------------
Eileen Toretta, Trustee
<PAGE> 4
/s/ Frances A. Guerrera
----------------------------------------
Frances A. Guerrera, individually
THE ESTATE OF RICHARD J. GUERRERA
By: /s/ Frances A. Guerrera
----------------------------------------
Frances A. Guerrera, Executrix
THE RICHARD J. GUERRERA REVOCABLE TRUST
By: /s/ Frances A. Guerrera
----------------------------------------
Frances A. Guerrera, Co-Trustee
By: /s/ Robert Dionne
----------------------------------------
Robert Dionne, Co-Trustee
<PAGE> 1
EXHIBIT 99
[SYNAGRO LOGO]
CONTACT: Ross M. Patten
CEO, Chairman
(713) 369-1700
FOR IMMEDIATE RELEASE: JANUARY 27, 2000
SYNAGRO ANNOUNCES NEW FINANCIAL PARTNERS, CLOSING OF
RESIDUAL TECHNOLOGIES, L.P., APPOINTMENT OF NEW PRESIDENT, AND
4TH QUARTER NON-RECURRING CHARGES
HOUSTON, TEXAS, JANUARY 27, 2000 --- SYNAGRO TECHNOLOGIES, INC. (NASDAQ
SMALLCAP: SYGR), the leading growth company in the residuals management
business, announced today that it has closed a new financing transaction with
GTCR Golder Rauner, LLC, entered into a new senior credit facility co-led by
Bank of America and CIBC World Markets, closed the acquisition of Residual
Technologies, L.P. and its affiliates, appointed Randall S. Tuttle as its new
President and Chief Operating Officer, and provided information on expected 4th
quarter 1999 non-recurring charges.
FINANCING
The GTCR transaction, which has been approved by a majority of Synagro
shareholders by written consent, is in the form of a commitment to fund up to
$125 million of convertible preferred stock with an annual dividend rate of 8%,
which accumulates and is not required to be paid in cash, and a $125 million
senior subordinated credit facility with an annual fixed interest rate of 12%,
which is payable quarterly (the "GTCR Financing"). The initial investment from
the GTCR Financing, which closed yesterday, consists of $20 million in voting
convertible preferred stock (the "Preferred Stock") and $20 million in senior
subordinated debt (the "Subordinated Debt"). The Preferred Stock is convertible
into 8,000,000 shares of Synagro common stock at a $2.50 per share conversion
price. Warrants issued with the Subordinated Debt are exercisable for Preferred
Stock at $.01 per share, which is convertible into 1,142,857 shares of Synagro
common stock. The new senior credit facility provides for term and revolving
loans on a senior secured basis with an aggregate principal of up to $110
million with an annual floating interest rate which currently approximates 9%
(the "Senior Credit Facility"). The GTCR Financing and the Senior Credit
Facility will enable the Company to implement its business plan by providing
capital necessary to fund acquisitions and the Company's on-going working
capital needs.
"My management team and I are delighted to be partnering with GTCR," said Ross
Patten, Synagro's Chairman and CEO. "GTCR offers a valuable and proven
perspective that will be helpful as we execute our growth strategies, including
making and integrating additional acquisitions."
"Synagro is a leader in the fragmented and growing residuals management
industry," noted David A. Donnini, principal of GTCR. "With Ross Patten's vision
and proven leadership, Synagro has the potential to grow exponentially and
represents an exciting investment opportunity for our investors." Mr. Donnini
and Vincent J. Hemmer, also of GTCR, will join Synagro's Board of Directors in
connection with the GTCR Financing.
Founded in 1980, GTCR is a leading private equity investment firm and long-term
strategic partner for companies similar to Synagro. GTCR has pioneered the
investment strategy of identifying and partnering with companies in fragmented
and growing industries. GTCR currently manages more than $4.5 billion in equity
capital. More information about GTCR can be found at www.gtcr.com.
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<PAGE> 2
[SYNAGRO LOGO]
RESIDUAL TECHNOLOGIES, L.P.
Synagro also announced today that it has closed the acquisition of Residual
Technologies, Limited Partnership and its affiliates ("RESTEC"). The initial
tranche of the GTCR Financing will be used primarily to finance the RESTEC
purchase price which consists of $44,600,000 in cash and assumed indebtedness
and 1,325,000 shares of Synagro common stock. Additional purchase price of up to
$12 million will be payable to the RESTEC shareholders and key employees if
certain performance targets are met. RESTEC engages in the contract management
of municipal residuals in New England handling, an average of 165 dry tons per
day of residuals from more than 75 customers. RESTEC operates three residuals
thermal processing facilities located in Woonsocket, Rhode Island, and New Haven
and Waterbury, Connecticut. RESTEC has annual revenues of approximately $22
million, a substantial portion of which are generated from multi-year contracts.
Paul Toretta, co-owner and President, and other key RESTEC employees will
continue to work with Synagro after the acquisition. Mr. Patten noted that "the
RESTEC acquisition provides Synagro with a leading position in the New England
market. Moreover, RESTEC brings unique technical skills in the thermal
processing of biosolids that we hope to leverage throughout the country."
MANAGEMENT CHANGES
Effective January 1, 2000, Randall S. Tuttle has been appointed Synagro's new
President and Chief Operating Officer. Randall joined Synagro as a result of the
acquisition of AMSCO, Inc. on April 30, 1999. He was co-owner and President of
AMSCO. Prior to this appointment, Randall served as a Regional Vice President
responsible for all of the Company's operations in the Southeast--Synagro's
largest region. Randall stated, "I am excited to be moving to Synagro's
corporate office in Houston and joining the team that will guide the Company's
future. Over the past thirteen years, I have developed successful methods for
managing and growing residuals management operations, resulting in strong top
line and bottom line results. I look forward to implementing these concepts in
our operations around the country and to assisting our operations teams in
building a company focused on satisfying our clients, our shareholders, and our
employees." Paul Sellew, Synagro's former President and COO, will continue with
the Company by focusing on emerging technologies.
Synagro also announced the promotions of Brent McManigal, Kim Nicholson, and Roy
Whitaker. Brent has moved from Synagro's Mid-Atlantic office to become the
Regional Vice President for the Western Region. Kim, formerly of National
Resource Recovery, has been appointed as Regional Vice President for the
Mid-West Region. Roy, formerly with AMSCO, has been appointed to Regional Vice
President for the Southeast Region. "We are very excited to make these
promotions and proud that such talent resides within the Synagro companies,"
noted Mr. Patten.
4TH QUARTER NON-RECURRING CHARGES
Synagro also announced that it expects to report non-recurring special charges
for the 4th quarter of 1999 totaling approximately $1.5 million. These charges
include legal, accounting, and financing fees primarily related to the proposed
preferred stock investment and the merger discussions with Azurix, both of which
were terminated by Azurix in October 1999. Consequently, the Company expects to
report a loss for the 4th quarter of 1999. Synagro is continuing to pursue its
litigation against Azurix.
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[SYNAGRO LOGO]
Synagro is the fastest growing company focused exclusively on organic residuals
management services, and has operations located throughout the country. In
addition to pursuing acquisitions in key markets, the company 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.
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