SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
March 6, 2000
----------------------------------------------------
THERMORETEC CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 1-12636 59-3203761
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
Damonmill Square
9 Pond Lane, Suite 5A 01742-2851
Concord, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number including area code: (781) 622-1000
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
Item 2. Disposition of Assets
On March 6, 2000, TPST Soil Recyclers of California, Inc. ("TPST"), an
indirect wholly-owned subsidiary of ThermoRetec Corporation (the "Company"),
sold all of the assets of its soil-remediation facility located at the West
Contra Costa Sanitary Landfill in Contra Costa County, California (the
"Facility") to Nove Investments I, LLC, a California limited liability company
(the "Buyer"). The Facility is in the business of providing soil-remediation
services.
The assets sold in the transaction include all rights under certain
contracts, the permits possessed by the Facility and fixed assets and equipment
used at the Facility. The Buyer assumed all liabilities and obligations under
the assumed contracts and all liabilities and obligations relating to the land
and building where the Facility operates, including all environmental
liabilities.
The purchase price for the assets was $400,000 in cash, of which $250,000
was placed in escrow. The release of the escrowed funds to TPST is contingent
upon the satisfaction of certain post-closing conditions, primarily the
achievement of fuel efficiency targets for certain equipment. If certain of the
post-closing conditions are not satisfied, some or all of the escrowed funds
will be returned to the Buyer. The purchase price of the assets was determined
by the parties in arms-length negotiations.
In connection with the transaction, the Operating Agreement by and among
TPST, West County Landfill and West Contra Costa County Sanitary Landfill
relating to the operation of the Facility was terminated and the Company was
released from its guaranty of TPST's performance obligations under the Operating
Agreement. TPST will, however, continue to operate the Facility on the Buyer's
behalf for a period not to exceed three months after the closing under a
management agreement pursuant to which TPST will be reimbursed by the Buyer for
its "Allowable Costs" as that term is defined in the agreement.
2
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FORM 8-K
THERMORETEC CORPORATION
Item 7. Financial Statements, Pro Forma Condensed Financial Information and
Exhibits
(a) Financial Statements
Not applicable.
(b) Pro Forma Condensed Financial Statements
The following unaudited pro forma condensed statements of operations set
forth the results of operations for the fiscal year ended April 3, 1999, and the
nine months ended January 1, 2000, as if the disposition by the Company of the
Facility had occurred at the beginning of fiscal 1999. The unaudited pro forma
condensed balance sheet sets forth the financial position as of January 1, 2000,
as if the disposition had occurred as of that date.
The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the sale of
the Facility been consummated at the beginning of fiscal 1999. These statements
should be read in conjunction with the accompanying notes herein and the
historical consolidated financial statements and related notes of the Company
included in its Annual Report on Form 10-K, as amended, for the fiscal year
ended April 3, 1999, and Quarterly Report on Form 10-Q for the nine months ended
January 1, 2000.
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<PAGE>
FORM 8-K
THERMORETEC CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Fiscal Year Ended April 3, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Pro Forma
ThermoRetec Less: Facility Adjustments Pro Forma
(In thousands except per share amounts)
Revenues $141,946 $ 3,358 $ - $138,588
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 119,483 2,720 - 116,763
Selling, general, and administrative 16,820 395 - 16,425
expenses
Restructuring costs 9,176 6,846 - 2,330
-------- -------- -------- --------
145,479 9,961 - 135,518
-------- -------- -------- --------
Operating Income (Loss) (3,533) (6,603) - 3,070
Interest Income 795 - 18 813
Interest Expense (2,168) - - (2,168)
-------- -------- -------- --------
Income (Loss) Before Income Taxes (4,906) (6,603) 18 1,715
Income Tax (Provision) Benefit 1,045 2,311 (7) (1,273)
-------- -------- -------- --------
Net Income (Loss) $ (3,861) $ (4,292) $ 11 $ 442
======== ======== ======== ========
Basic and Diluted Earnings (Loss) per Share $ (.29) $ .03
======== ========
Weighted Average Shares:
Basic 13,089 13,089
======== ========
Diluted 13,089 24 13,113
======== ======== ========
4
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Nine Months Ended January 1, 2000
(Unaudited)
Pro Forma
ThermoRetec Less: Facility Adjustments Pro Forma
(In thousands except per share amounts)
Revenues $116,986 $ 1,499 $ - $115,487
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of revenues 97,276 1,489 - 95,787
Selling, general, and administrative 12,812 222 - 12,590
expenses
Restructuring costs 9,625 9 - 9,616
Gain on sale of fixed assets (38) - - (38)
-------- -------- -------- --------
119,675 1,720 - 117,955
-------- -------- -------- --------
Operating Loss (2,689) (221) - (2,468)
Interest Income 1,138 - 14 1,152
Interest Expense (1,661) - - (1,661)
-------- -------- -------- --------
Loss Before Income Taxes (3,212) (221) 14 (2,977)
Income Tax Benefit 642 80 (5) 557
-------- -------- -------- --------
Net Income (Loss) $ (2,570) $ (141) $ 9 $ (2,420)
======== ======== ======== ========
Basic and Diluted Loss per Share $ (.19) $ (.18)
======== =======
Basic and Diluted Weighted Average Shares 13,568 13,568
======== ========
5
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
PRO FORMA CONDENSED BALANCE SHEET
As of January 1, 2000
(Unaudited)
Pro Forma
ThermoRetec Less: Facility Adjustments Pro Forma
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 3 $ - $ 400 $ 403
Advance to affiliate 29,306 - - 29,306
Accounts receivable, net 24,529 613 - 23,916
Unbilled contract costs and fees 16,754 33 - 16,721
Deferred tax asset and refundable 3,830 - - 3,830
income taxes
Prepaid expenses 1,749 61 - 1,688
-------- -------- -------- ---------
76,171 707 400 75,864
-------- -------- -------- ---------
Property, Plant, and Equipment, at Cost, Net 22,001 775 - 21,226
-------- -------- -------- ---------
Other Assets 7,466 (620) - 8,086
-------- -------- -------- ---------
Cost in Excess of Net Assets of 33,916 - - 33,916
Acquired Companies -------- -------- -------- ---------
$139,554 $ 862 $ 400 $ 139,092
======== ======== ======== =========
6
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
PRO FORMA CONDENSED BALANCE SHEET (continued)
As of January 1, 2000
(Unaudited)
Pro Forma
ThermoRetec Less: Facility Adjustments Pro Forma
(In thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Subordinated convertible debentures $ 40,600 $ - $ - $ 40,600
Accounts payable 14,648 115 - 14,533
Accrued payroll and employee benefits 5,999 117 - 5,882
Deferred revenue 3,677 23 - 3,654
Billings in excess of revenues earned 828 - - 828
Other accrued expenses 5,744 77 75 5,742
Due to parent company and affiliated 1,896 - - 1,896
companies -------- -------- --------- --------
73,392 332 75 73,135
-------- -------- --------- --------
Shareholders' Investment:
Common stock 143 - - 143
Capital in excess of par value 87,729 - - 87,729
Accumulated deficit (15,989) - (205) (16,194)
Treasury stock at cost (5,721) - - (5,721)
Parent company investment - 530 530 -
-------- -------- --------- --------
66,162 530 325 65,957
-------- -------- --------- --------
$139,554 $ 862 $ 400 $139,092
======== ======== ========= ========
</TABLE>
7
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Pro Forma Adjustments to Pro Forma Condensed Statements of Operations
(In thousands, except in text)
<TABLE>
<CAPTION>
<S> <C> <C>
Fiscal Year Ended Nine Months Ended
April 3, 1999 January 1, 2000
Debit (Credit)
Interest Income
Increase in interest income earned on the $325,000 of $(18) $(14)
net cash paid to the Company by the acquirer, which ---- ----
includes $250,000 of cash in escrow, calculated
using the 30-day Commercial Paper Composite Rate
plus 50 basis points, or 5.46% in fiscal 1999 and
5.58% in the first nine months of fiscal 2000
Income Tax Provision
Increase in the income tax provision as a result of $ 7 $ 5
an increase in interest income calculated at an ---- ----
effective income tax rate of 37%
Diluted Weighted Average Shares
Increase in weighted average shares for the dilutive 24 -
effect of stock options, which were previously ---- ----
antidilutive, as a result of the pro forma adjustments
</TABLE>
Note 2 - Pro Forma Adjustments to Pro Forma Condensed Balance Sheet
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
January 1, 2000
Debit (Credit)
Cash and Cash Equivalents
Cash received for sale of assets of the Facility $ 400
------
Other Accrued Expenses
Estimated accrued transaction costs, including legal $ (75)
fees and other costs ------
Shareholders' Investment
Elimination of the Facility's equity account and excess $ (325)
of parent company investment in the Facility over ------
proceeds from sale
</TABLE>
8
<PAGE>
FORM 8-K
THERMORETEC CORPORATION
Item 7. Financial Statements, Pro Forma Condensed Financial Information and
Exhibits (continued)
(c) Exhibits
2.1 Asset Purchase Agreement dated March 6, 2000, by and among TPST Soil
Recyclers of California, Inc. and Nove Investments I, LLC. Exhibits to
the Agreement have been omitted from the copy of the Agreement filed
herewith. Copies of such exhibits will be furnished supplementally to
the Commission upon request to the Company.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 21st day of March 2000.
THERMORETEC CORPORATION
By: /s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of March 6, 2000, by and among TPST Soil Recyclers of California Inc., a
California corporation ("Seller"), and Nove Investments I, LLC, a California
limited liability company ("Buyer).
WHEREAS, Seller is the owner of certain equipment, buildings, contracts
and other rights with respect to a soil remediation facility located at the West
Contra Costa Sanitary Landfill, Contra Costa County, California (the
"Facility"); and
WHEREAS, Buyer desires to purchase and Seller desires to sell all of
Seller's right and interest in the assets relating to the Facility and the
business of providing soil remediation services at the Facility (the
"Business"), all upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by each party
hereto, the parties hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE
Section 1.1 PURCHASE AND SALE OF ASSETS OF SELLER. At the Closing (as
defined in Section 2.3), Seller shall sell, convey, transfer, assign and
deliver, or cause to be sold, conveyed, transferred, assigned and delivered, to
Buyer, and Buyer shall purchase from Seller, subject to the terms and conditions
hereof, the following assets (collectively, the "Purchased Assets") constituting
all of the assets of Seller used in the Business at the Facility other than the
name "TPS Technologies", free and clear of any mortgage, attachment, lien,
pledge, option, title retention, conditional sale or other security interest,
restriction, claim, charge or other encumbrance of any kind except Permitted
Liens (as defined in Section 3.1(f)):
(i) CONTRACT RIGHTS. All right, title and interest of Seller
in, under and to the contracts listed on EXHIBIT A, and all rights, causes of
action and claims related thereto (the Contracts");
(ii) BOOKS AND RECORDS. All books, records and accounts,
correspondence, technical, accounting, manufacturing and procedural manuals and
customer lists and reports located at the Facility and relating to the Business;
(iii) PERMITS AND APPROVALS. All right, title and interest of
Seller, if any, in and to the permits, franchises and licenses listed on EXHIBIT
B (the "Permits");
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(iv) FIXED ASSETS. All rights, titles and interest of Seller
in and to the fixed assets and other equipment listed on EXHIBIT C, including
any documentation and warranties related thereto; and
(v) INTELLECTUAL PROPERTY. Any licenses and or other legal
rights necessary to operate the Business and the equipment.
Section 1.2 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall
assume all of the liabilities and obligations of Seller under the Contracts (set
forth on Exhibit A hereto), all liabilities and obligations relating to the
physical Facility and the land on which the Facility is located such as
environmental liabilities (hereinafter referred to as "Sub-surface
Liabilities"), and all liabilities of the Business arising on and after the
Closing Date but excluding all liabilities of the Business which existed prior
to the Closing Date, provided, however, Sub-surface Liabilities shall be assumed
by Buyer (the "Assumed Liabilities").
ARTICLE 2
PURCHASE PRICE; CLOSING; ESCROW
Section 2.1 PURCHASE PRICE. Subject to the terms and conditions of this
Agreement and subject to adjustment as set forth in Section 2.5, Buyer agrees to
pay a purchase price of $400,000 (the "Purchase Price"). $250,000 of the
Purchase Price (the "Escrowed Amount") shall be placed in escrow subject to the
terms and conditions of an escrow agreement in the form attached as EXHIBIT D.
Section 2.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated as set forth in EXHIBIT E. Buyer and Seller will each report the
federal, state, provincial, foreign and local income and other tax consequences
of the transaction contemplated hereby in a manner consistent with such
allocation.
Section 2.3 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place on or before
March 6, 2000 at such time and at such place, as the parties hereto mutually
agree (the "Closing Date").
Section 2.4 DELIVERIES AT CLOSING.
(a) At the Closing, Buyer shall deliver the following:
(i) Wire transfer of $150,000 to an account designated by
Seller;
(ii) Wire transfer of $250,000 to an account designated by the
Escrow Agent;
(iii) Assumption Agreement executed by Buyer;
(iv) The Escrow Agreement executed by Buyer;
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(v) The Management Agreement in the form attached as EXHIBIT F
(the "Management Agreement") executed by Buyer; and
(vi) The Termination Agreement in the form attached as EXHIBIT
G terminating that certain Agreement to Operate Soil Remediation Facility among
West Contra Costa Sanitary Landfill, Inc. ("WCCSL"), Seller and West County
Landfill, Inc. and the Corporate Guaranty of Thermo Remediation Inc. (now
ThermoRetec Corporation), each dated September 25, 1996 (the "Termination
Agreement") executed by WCCSL and West County Landfill, Inc.
(b) At the Closing, Seller shall deliver to Buyer:
(i) The Purchased Assets;
(ii) A Bill of Sale executed by Seller;
(iii) The Escrow Agreement executed by Seller;
(iv) The Management Agreement executed by Seller; and
(v) The Termination Agreement executed by Seller.
Section 2.5 EQUIPMENT TESTS; ADJUSTMENT OF PURCHASE PRICE.
(a) Immediately following the Closing (if it has not been done prior to
the Closing), Seller agrees to make the repairs, at Seller's sole expense, to
the defective burner, drum flights and propane pipe lines described in EXHIBIT H
(the "Repaired Equipment"). Immediately following completion of the repairs to
the Repaired Equipment, but in any event prior to the end of the period covered
by the Management Agreement, Seller shall conduct tests to determine the fuel
efficiency of the Repaired Equipment. The nature of the soil to be processed,
the tonnage of the soil to be tested, the fuel, the testing criteria and the
nature of the certification to be provided by Seller to Buyer are set forth in
EXHIBIT I.
(b) The Purchase Price shall be subject to adjustment based on the
certified test results as follows:
If the number of gallons of fuel used in the test divided by the tons
of soil treated is less than 18, no adjustment in the Purchase Price shall be
made. The Purchase Price shall be reduced by $6,000 for each one-tenth of a
gallon of fuel used per ton of soil treated in the test in excess of 18 gallons
per ton of soil, up to a maximum reduction of $200,000.
(c) Any reduction of the Purchase Price pursuant to (b) above shall be
made out of the Escrowed Funds, with the balance, if any, paid to Seller. All
payments made out of the Escrow Fund shall be made in accordance with the
provisions of the Escrow Agreement.
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(d) If at any time prior to the conclusion of the Term of the
Management Agreement Buyer has obtained and delivered to Seller originals of
releases from each of Nevada Hydrocarbon, Inc. and Charles C. Chisholm (the
"Chisholm Parties") releasing Seller and its affiliates, officers, directors and
employees from any and all claims, damages, liabilities from the beginning of
time to the date of signature of the release signed by or on behalf of each of
them (the "Chisholm Party Releases") or, provided that Buyer shall deliver to
Seller an indemnification from WCCSL, Inc. against claims against Buyer by the
Chisholm Parties in a form reasonably acceptable to Buyer (the "Chisholm
Indemnification"), then, $50,000 of the Escrowed Funds shall be paid to Buyer
upon notice thereof by Buyer to the Escrow Agent and Seller pursuant to Section
4 of the Escrow Agreement. If at the conclusion of the Term of the Management
Agreement Buyer has not obtained and delivered the Chisholm Party Releases or
the Chisholm Indemnification to Seller, then, $50,000 of the Escrowed Funds
shall be paid to Seller upon notice thereof by Seller to the Escrow Agent and
Buyer pursuant to Section 4 of the Escrow Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents
and warrants to Buyer that, except as set forth in a schedule to the Disclosure
Statement attached as SCHEDULE 3.1:
(a) ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite power and authority to own, operate, lease
and license its properties and to carry on its business as it is now being
conducted.
(b) AUTHORITY. Seller has full right, power, capacity and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized by all
necessary corporate action on the part of Seller and constitutes the valid and
binding obligation of Seller, enforceable against Seller in accordance with its
terms. Neither the execution, delivery and performance of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) conflict with
or result in a violation, breach, termination or acceleration of, or default
under (or would result in a violation, breach, termination, acceleration or
default with the giving of notice or passage of time, or both), any of the
terms, conditions or provisions of the Articles of Incorporation or Bylaws of
Seller, as amended, or of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which Seller is a party or by
which Seller, or any of its properties or assets, may be bound or affected; (ii)
result in the violation of any order, writ, injunction, decree, statute, rule or
regulation applicable to Seller, or its properties or assets; or (iii) result in
the imposition of any lien, encumbrance, charge or claim upon any of the
Purchased Assets. No consent or approval by, or notification to or filing with,
any court, governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by Seller, or the
consummation of the transactions contemplated hereby.
(c) FINANCIAL STATEMENTS. Seller has delivered to Buyer prior to the
execution of this Agreement true and complete copies of the unaudited balance
sheets of the Business as of the end of
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each month of 1999 and of January 2000 (the "Balance Sheets") and the unaudited
income statements of the Business for the fiscal monthly periods of October,
November and December 1999 and January 2000 (the "Operating Statements", which,
together with the Balance Sheets, are hereinafter sometimes collectively
referred to as the "Financial Statements"), which Financial Statements are true
and correct in all material respects.
(d) NO UNDISCLOSED LIABILITIES. Seller has no liabilities or
obligations of any nature with respect to the Business or the Facility other
than those set forth in the Financial Statements or arising under the Contracts,
or as otherwise disclosed in this Agreement. As used in this Agreement, the term
"liability" includes those liabilities which are known or unknown, absolute,
accrued, contingent or otherwise, and whether due or to become due.
(e) TAXES. Seller has accurately prepared and duly and timely filed all
federal, state, local or foreign tax and other returns and reports which were
required to be filed, in respect of all income, franchise, excise, sales, use,
property (real and personal), payroll and other taxes, levies, imports, duties,
license and registration fees, charges or withholdings of any nature whatsoever
related to the Business (collectively, "Taxes"), and has paid all Taxes due with
respect to the Business except for where the same are being contested in good
faith and adequate reserves have been established therefor. Seller is not in
default in the payment of any Taxes due and payable or on any assessments
received in respect thereof; and there are no claims pending or, to the best of
Seller's knowledge, threatened, against Seller for past due Taxes, nor is there
any basis for any such claim. Seller has withheld or collected from each payment
made to each of the consultants or other payees of the Business the amount of
all Taxes required to be withheld or collected therefrom, and, to the extent
required by law has paid the same to the proper tax receiving officers or
authorized depositories.
(f) PROPERTIES. Seller has good, full and valid title to, or a valid
and continuing license of, the fixed assets included in the Purchased Assets,
free and clear of all mortgages, liens, attachments, pledges, encumbrances or
security interests of any nature whatsoever, except for liens for taxes not yet
due (the "Permitted Liens").
No facility or site (other than the Facility) has been or is currently
owned, leased or licensed by Seller with respect to the Business. There are no
claims, litigation or other proceedings (including without limitation notices of
violation, notices of noncompliance, citations, orders, consent orders,
investigation reports, consent decrees or administrative or judicial enforcement
proceedings) affecting the Business pending or, to the best knowledge of Seller,
threatened, which could have an adverse effect on the use of any such property
for the purposes for which it was licensed by Seller.
All licenses pursuant to which Seller licenses personal property with
respect to the Business or the Facility are in good standing, and are valid and
in full force and effect in all material respects in accordance with their
respective terms. There are no material defaults under any such licenses
attributable to Seller, and no event has occurred that (whether or not with
notice, lapse of time or both) would constitute such a default.
(g) INVENTORIES. Seller does not maintain any inventory with respect to
the Business or the Facility, except as shown on SCHEDULE 3.1(G).
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(h) PURCHASE AND SALE COMMITMENTS. Seller has no outstanding purchase
commitments with respect to the Business or the Facility other than those
contained in the Contracts. Seller has no outstanding commitment for the sale of
any product or service with respect to the Business or the Facility other than
purchase orders or contracts for soil remediation services entered into in the
ordinary course of business, all of which are included in the Contracts.
(i) GOVERNMENTAL AUTHORIZATIONS. Seller is in compliance with the
requirements of the Permits, and no suspension, modification or cancellation of
any of them is threatened to the best knowledge of Sellers. Except for the
failure of the applicable governmental authority to approve the transfer to
Buyer of any of the Permits, Seller has no knowledge of any fact or
circumstance, which would prevent, limit or restrict Buyer from utilizing the
Permits, in its own name and on its own behalf. To the best knowledge of Seller,
there is no fact or circumstance that would prevent or materially impede Buyer
from obtaining the consent or approval of all applicable governmental
authorities to the transfer to Buyer of the Permits. Seller has furnished or
made available to Buyer all reports filed by Seller with respect to the Business
or the Facility with any governmental agency in the last two (2) years. To the
best knowledge of Seller, and WCCSL, jointly or severally, have all necessary
Permits to operate the Business at the Facility.
(j) MATERIAL CONTRACTS. Except for the Contracts, Seller is not a party
to or bound by any written or oral:
(i) lease with respect to any real property;
(ii) contract for the purchase of materials, supplies or
services, or lease of personal property;
(iii) dealer's, manufacturer's representative, sales agent's
or distributor's agreement;
(iv) contract under which any amount payable is dependent upon
the revenues of the Business;
(v) mortgage, chattel mortgage, pledge, title retention,
conditional sales contract, factoring agreement, security agreement, UCC
financing statement or similar agreement encumbering any of the Purchased
Assets;
(vi) contract or other commitment for capital expenditures;
(vii) licensing agreement under which royalties or other
payments are paid or received on behalf of the Business;
(viii) agreement, contract, arrangement, commitment,
understanding or obligation included in the Purchased Assets or Assumed
Liabilities with, to or from Seller pursuant to which any officer, director or
affiliates of Seller has any personal interest, whether direct or indirect; or
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(k) VALIDITY. Except as set forth on the Disclosure Statement:
(i) Each Contract is a valid and binding agreement of Seller,
enforceable against Seller in accordance with its terms, and Seller has no
knowledge that any Contract is not a valid and binding agreement of the other
party or parties thereto enforceable against such other party or parties in
accordance with its terms;
(ii) Seller has fulfilled in all material respects all
material obligations required pursuant to the Contracts to have been performed
by it prior to the Closing Date, and Seller has no reason to believe that Seller
would not be able to fulfill, when due, all of its obligations under the
Contracts which remain to be performed after the Closing Date;
(iii) Seller is not in material breach of or default under any
Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute such a default, result in a loss of rights or
result in the creation of any lien, charge or encumbrance on the Purchased
Assets, thereunder or pursuant thereto; and
(iv) To the best knowledge of Seller, there is no existing or
threatened material breach or default by any other party to any Contract, and no
event has occurred which with the passage of time or giving of notice or both
would constitute a default by such other party, result in a loss of rights or
result in the creation of any lien, charge or encumbrance thereunder or pursuant
thereto.
True, correct and complete copies of all Contracts have previously been
delivered or made available by Seller to Buyer.
(l) NO CHANGES. Except as set forth in Section 3.1(l) of the Disclosure
Schedule, since the date of the Balance Sheet, there has not been:
(i) Any change in the physical condition, assets, or
liabilities of the Business except for changes in the ordinary course, none of
which individually or in the aggregate has been or will be materially adverse to
the Business;
(ii) Any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the business prospects or any
property of the Business;
(iii) Any increase in the compensation payable or to become
payable by Seller to any of its employees, agents or consultants engaged by the
Business or any bonus arrangement made with any of such persons, except those
made in the normal and ordinary course of business and consistent with general
prevailing practices of the Business;
(iv) Any mortgage, lien, pledge, encumbrance or security
interest (other than liens for current taxes not yet due and payable) created on
any of the Purchased Assets, or assumed, by Seller or others, with respect to
any such assets;
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(v) Any amendment, termination or waiver of any material right
belonging to Seller with respect to the Business or the Facility;
(vi) Any strike, labor dispute or labor union trouble
(including, without limitation, any negotiation or request for negotiation, with
respect to any union representation or any labor contract);
(vii) Any indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred, or other
transaction engaged in by Seller solely with respect to the Business, except
those in the ordinary course of business;
(viii) Any other action or event not in the ordinary course of
business.
(m) LITIGATION OR PROCEEDINGS. With respect to the Business or the
Facility, Seller is not engaged in, or a party to, or, to the best knowledge of
Sellers, threatened with, any claim or legal action or other proceeding before
any court, any arbitrator of any kind or any administrative agency, or any
governmental investigation, nor to the best of its knowledge does any basis for
any such claim or legal action or other proceeding or governmental investigation
exist, other than potential claims of the Chisholm Parties. There are no orders,
rulings, decrees, judgments or stipulations with respect to the Business or the
Facility, to which Seller is a party by or with any court, arbitrator or
administrative agency affecting the Business or the Purchased Assets.
(n) COMPLIANCE WITH LAWS. With respect to the Business or the Facility,
Seller (i) has not been or is in violation of any applicable building, zoning,
occupational safety and health, pension, export control, environmental control
or other federal, state, local or foreign law, ordinance, regulation, rule,
order or governmental policy, or any employment, equal opportunity or similar
law, ordinance, regulation, rule, order or governmental policy, or any other
law, ordinance, regulation, rule, order or governmental policy; (ii) has not
received any complaint from any governmental authority, and to the best
knowledge of Sellers, none is threatened, alleging that Seller has violated any
such law, ordinance, regulation, order or policy; (iii) has not received any
notice from any governmental authority of any pending proceedings to take all or
any part of the properties of Seller (whether leased, licensed or owned) by
condemnation or right of eminent domain and, to the best knowledge of Sellers,
no such proceeding is threatened; and (iv) is not a party to any agreement or
instrument, or subject to any charter or other corporate restriction or
judgment, order, writ, injunction, rule, regulation, code or ordinance, which
adversely affects, or might reasonably be expected adversely to affect, the
Business, the Facility or the Purchased Assets.
(o) BROKERS AND FINDERS. Seller has not employed any broker, agent or
finder or incurred any liability for any brokerage fees, agents' commissions or
finders' fees in connection with the transactions contemplated hereby, except
that Seller's parent company has hired EnCapital Inc. of Boston, Massachusetts
to represent it in the sale of the Facility as well as certain other properties.
(p) REAL PROPERTY. With respect to the Business or the Facility, Seller
has never owned any real property.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to Seller that:
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(a) ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted.
(b) AUTHORITY. The execution and delivery hereof, and the consummation
of the transactions contemplated hereby, have been duly and validly authorized
by all necessary corporate action on the part of Buyer, and this Agreement
constitutes the valid and legally binding obligation of the Buyer enforceable
against it in accordance with its terms. Neither the execution and delivery
hereof by Buyer nor the consummation of the transactions contemplated hereby by
will conflict with or result in a violation, breach or termination of or default
under (or would result in a violation, breach, termination or default with the
giving of notice or passage of time or both) any of the terms, conditions or
provisions of the Certificate of Incorporation or Bylaws of Buyer or of any
note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Buyer is a party, or by which Buyer or any of their
respective properties or assets is bound or affected or (ii) result in the
violation of any order, writ, injunction, decree, statute, rule or regulation
applicable to or its properties or assets. No consent or approval by, or
notification to or filing with, any court, governmental authority or third party
is required in connection with the execution, delivery and performance of this
Agreement by Buyer or the consummation of the transactions contemplated hereby.
(c) BROKERS AND FINDERS. Buyer has not, directly or indirectly,
employed any broker, agent or finder or incurred any liability for any brokerage
fees, agents' commissions or finders' fees in connection with the transactions
contemplated hereby.
ARTICLE 4
MODIFICATION AND WAIVER
Section 4.1. MODIFICATION. This Agreement may be amended, modified or
supplemented only by a writing signed by the party against whom enforcement of
the amendment is sought.
Section 4.2. WAIVERS. Any party may, by a written signed instrument,
extend the time for or waive the performance of any of the obligations of
another party or waive compliance by such other party with any of the covenants
or conditions contained herein. No waiver at any time of any provision hereof by
any party shall be construed as a waiver of any other provision hereof.
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ARTICLE 5
INDEMNIFICATION
Section 5.1. INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this Article 5, Seller shall defend and indemnify Buyer for the
full amount of all damages (as defined below) suffered by Buyer as a result of:
(i) the material inaccuracy of any representation or warranty
made by Seller in or pursuant to this Agreement, or the omission of any material
fact relating thereto;
(ii) any material failure by Seller to perform any obligation
or comply with any covenant or agreement specified herein; or
(iii) any liability or obligation other than as included in
the Assumed Liabilities arising out of the operation of the Business by Seller
prior to the Closing Date.
For the purpose of this Article 5, the term "damages" shall be
determined and computed by reference to the effect of the compensable event on
Buyer and/or Seller and shall be deemed to include without limitation all
losses, liabilities, expenses or costs incurred by Buyer, including without
limitation reasonable attorneys' fees and disbursements and court costs.
Section 5.2. INDEMNIFICATION BY BUYER. Subject to the terms and
conditions of this Article 5, Buyer shall defend and indemnity Seller for the
full amount of all damages suffered by a direct or indirect result of (i) the
material inaccuracy of any representation or warranty made by Buyer in or
pursuant to this Agreement, or the omission of any material fact relating
thereto; (ii) any material failure by Buyer to perform any obligation or comply
with any covenant or agreement specified herein or (iii) any liability or
obligation arising out of the operation of the Business by Buyer or its designee
after the Closing Date.
Section 5.3. LIMITATION OF LIABILITY. The maximum liability of Buyer
under clause (i) of Section 5.2 or of Seller under clause (i) of Section 5.1,
shall not exceed the Purchase Price. It is expressly understood and agreed that
the limitations on liability set forth in this Section 5.3 shall in no event be
deemed to apply to (a) the liability of Buyer under clauses (ii) or (iii) of
Section 5.2 above or (b) the liability of Sellers under clauses (ii) or (iii) of
Section 5.1 above. Notwithstanding the foregoing, Seller shall have no liability
to Buyer unless and until the aggregate value of all damages for which Buyer is
entitled to indemnification hereunder exceeds $100,000.
Section 5.4. CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise
for indemnification under this Article 5 the party seeking indemnification (the
"Indemnified Party"), shall promptly notify the party from whom indemnification
is sought (the "Indemnifying Party") of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnifying Party shall
specify, if known, the amount or any estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without
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the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld, unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit as provided in
Section 5.5 of this Agreement.
Section 5.5 DEFENSE BY INDEMNIFYING PARTY. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any claim or
legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
(i) the claim is one for money damages only and (ii) the Indemnifying Party
acknowledges to the Indemnified Party in writing its obligations to indemnity
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made;
(a) the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem appropriate, including, but not limited to, settling such
claim or litigation, after giving notice of the same to the Indemnifying Party,
on such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense.
Section 5.6. SURVIVAL OF REPRESENTATIONS. The representations and
warranties set forth in Sections 3.1 and 3.2 shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto until March
1, 2001. Buyer shall be presumed to have relied upon the representations and
warranties of Seller, and Seller shall be presumed to have relied upon the
representations and warranties of Buyer, notwithstanding any investigation made
by any party prior to Closing.
ARTICLE 6
COVENANTS
Section 6.1 SHARING OF DATA. Seller shall have the right for a period
of seven (7) years following the Closing Date to have access, during normal
business hours and upon reasonable notice, to such books, records and accounts,
including without limitation financial and tax information, correspondence and
other similar information, as are transferred to Buyer pursuant to the terms of
this Agreement as shall be necessary to permit them to comply with their
obligations under applicable securities, tax, environmental or other laws and
regulations. Buyer shall have the right for a period of seven (7) years
following the Closing Date to have access, during normal business hours and upon
reasonable notice, to such books, records and accounts, including without
limitation financial and tax information, correspondence and other similar
information, which are retained by Seller pursuant to the terms of this
Agreement as shall be necessary to permit Buyer to comply with its obligations
under applicable securities, tax, environmental or other laws and regulations.
Section 6.2. COOPERATION IN LITIGATION. Each party hereto will fully
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted hereafter against or by
such party relating to or arising out of the Business or the Facility
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prior to the Closing Date or the conduct of the Business by Buyer after the
Closing Date (other than litigation arising out of the transactions contemplated
by this Agreement). The party requesting such cooperation shall pay the
out-of-pocket expenses (including without limitation reasonable legal fees and
disbursements and court costs) of the party providing such cooperation and of
its officers, directors, employees and agents reasonably incurred in connection
with providing such cooperation, but shall not be responsible to reimburse the
party providing such cooperation for such party's time spent in such cooperation
or the salaries or costs of fringe benefits or similar expenses paid by the
party providing such cooperation to its officers, directors, employee and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
Section 6.4. TRANSFER AND SALES TAX. Each party shall pay all sales,
use, transfer and other taxes, if any, applicable to it as a result of the sale
or transfer of any of the Purchased Assets hereunder.
Section 6.5. EXPENSES. Buyer and Seller will bear entirely their
respective expenses incurred in connection with this Agreement and the
transactions contemplated hereby, including but not limited to legal and
accounting expenses.
Section 6.6. REIMBURSEMENT FOR REPAIR OF RUPTURED TEST WELLS. Seller
agrees to reimburse Buyer up to $151,955 minus $30,0000, the amount previously
deposited as security by Seller to Buyer to cover actual expenses incurred by
Buyer for engineering and other work required to repair the existing ruptured
test wells caused by the shifting of the Facility. All reimbursements shall be
made within thirty (30) days of receipt by Seller of an invoice therefore, with
back up supporting invoices.
Section 6.7. PRORATION OF REAL ESTATE TAXES AND UTILITIES. Seller
agrees to reimburse Buyer upon demand for real estate taxes and utility charges
covering the period through the Closing Date and Buyer agrees to reimburse
Seller for any prepaid real estate taxes and utilities covering the period
following the Closing Date.
Section 6.8. USE OF NAME AND MARKETING MATERIALS. Seller grants Buyer
the right to use the name "TPS Technologies" in connection with the Business at
the Facility for the duration of the Management Agreement. Buyer agrees to use
reasonable efforts to change the name under which the Business is conduced as
soon as practicable following termination of the Management Agreement, but in
any event, no later than 6 months from the Closing Date. For the duration of the
Management Agreement, Buyer also may use and distribute marketing materials
containing the TPS Technologies name that are included in the Purchased Assets.
Buyer may use words in its marketing materials to the effect that the Facility
and the process employed by the Facility were designed by TPS for so long as
such statement shall remain true. Buyer may use the substance of the text of
Seller's marketing materials provided that Buyer shall not use Seller's name
after 6 months from the Closing Date except as allowed under the terms of this
Section 6.8. Buyer shall provide Seller with a copy of any marketing materials
using Buyer's name for Seller's approval prior to distribution. Seller shall
approve such materials provided that they are consistent with this Section 6.8.
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Section 6.9. SOIL INVENTORY. The final inventory as of the close of
business of the day immediately prior to the Closing is 3670 tons.
Section 6.10. NONCOMPETE. Until September 30, 2006, Seller agrees and
covenants that neither Seller nor any affiliate of Seller shall operate any
facility or enter into any agreement by which facilities now owned by Seller or
any of its affiliates or purchasers of such facilities may process PCM (as
defined in the Operating Agreement) within the area bounded by latitude 36.5 on
the south, latitude 40.5 on the north, and the borders of California on the east
and west, (the "Service Zone"), nor process any PCM originating in the Service
Zone at any facility located outside the Service Zone.
Section 6.11. CONTINUING HEALTHCARE BENEFITS. For a period of thirty
days following date, after the Closing Date, when employees of Seller are hired
by Buyer, Seller shall, at Seller's expense, maintain the medical insurance
coverage of each of Seller's employees who becomes an employee of Buyer.
ARTICLE 7
GENERAL
Section 7.1. NOTICES. All notices, requests, demands, consents and
other communications which are required or permitted hereunder shall be in
writing, and shall be deemed given when actually received or if earlier, one day
after deposit with a nationally recognized air courier or express mall, charges
prepaid or three days after deposit in the U.S. mail by certified mall, return
receipt requested, postage prepaid, addressed as follows:
If to Seller:
TPST Soil Recyclers of California, Inc.
c/o TPS Technologies Inc.
7400 E. MacDonald Dr., Suite 3-123
Scottsdale, AZ 85250
Attention: President
With a copy to:
TPS Technologies Inc.
81 Wyman Street
Waltham, Massachusetts 02254-9046
Attention: General Counsel
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If to Buyer:
Nove Investments I, LLC
c/o West Contra Costa Sanitary Landfill, Inc.
3260 Blume Drive, Suite 210
Richmond, CA 94806
Attention: Dennis Varni, CFO
With a copy to:
Norris & Norris, PC 3260 Blume Drive, Suite 400
Richmond, CA 94806
Attention: Richard Norris, Esq.
or to such other address as any party hereto may designate in writing to the
other parties, specifying a change of address for the purpose of this Agreement.
Section 7.2. ENTIRE AGREEMENT. This Agreement supersedes any and all
oral or written agreements or understandings heretofore made relating to the
subject matter hereof (including without limitation the Letter of Intent among
Buyer and Seller dated January 7, 1999, and constitutes the entire agreement of
the parties relating to the subject matter hereof
Section 7.3. PARTIES IN INTEREST. All covenants and agreements,
representations and warranties contained in this Agreement made by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the parties
hereto and, subject to Section 7.9, their respective successors and assigns.
Section 7.4. NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise
expressly provided herein, nothing herein expressed or implied is intended or
shall be construed to confer upon or to give any person, firm or corporation,
other than the parties hereto, any rights or remedies under or by reason of this
Agreement.
Section 7.5. HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning hereof
Section 7.6. SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision shall not be affected thereby.
Section 7.7. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The faxed signature of
any party hereto shall be treated as the same as an original signature.
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Section 7.8. EXHIBITS AND SCHEDULES The Exhibits, Schedules and the
Disclosure Statement attached hereto and referred to in this Agreement are a
part of this Agreement for all purposes.
Section 7.9. ASSIGNMENT. This Agreement and the rights and duties
hereunder shall be binding upon and inure to the benefit of the successors and
assigns of the parties hereto, but shall not be assignable or delegable by any
party without the prior written consent of the other parties and any purported
assignment without such prior written consent shall be null and void; provided,
however, that Buyer may assign some or all of its rights and obligations
hereunder to an affiliate of Buyer without the consent of any other party
hereto.
Section 7.10. JOINT WORK PRODUCT. This Agreement is the joint work
product of the duly authorized representatives of Buyer and Seller and,
accordingly, in the event of ambiguities, no inferences will be drawn against
either party.
Section 7.11. FURTHER ASSURANCES. Sellers will execute and furnish to
Buyer all documents and will do or cause to be done all other things that Buyer
may reasonably request from time to time in order to give full effect to this
Agreement and to effectuate the intent of the parties.
Section 7.12. GOVERNING LAW. This Agreement shall be governed by the
law of the State of California applicable to agreements made and to be performed
wholly within such jurisdiction, without regard to the conflicts of laws
provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TPST SOIL RECYCLERS OF CALIFORNIA INC.
By:/s/ George A. Catalano
----------------------
George A. Catalano
President
NOVE INVESTMENTS I, LLC
By:/s/ Dennis Vasni
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