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Exhibit 4.1
STOCK FOR STOCK REORGANIZATION AGREEMENT
DATED AS OF JANUARY 27, 1999
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TABLE OF CONTENTS
Page
ARTICLE 1. CERTAIN DEFINITIONS.................................................1
1.1. Definitions.....................................................1
ARTICLE 2. SALE OF SHARES; PURCHASE PRICE......................................5
2.1. Purchase and Sale of Securities.................................5
2.2. Method of Conveyance............................................5
2.3. No Assumed Obligations..........................................6
2.4. Purchase Price..................................................6
2.5. Escrow Amount...................................................6
2.6. Purchase Price Adjustment.......................................6
ARTICLE 3. OTHER AGREEMENTS....................................................8
3.1. Access and Information; Confidentiality.........................8
3.2. Public Announcement.............................................8
ARTICLE 4. CERTAIN COVENANTS...................................................8
4.1. Conduct of Business.............................................8
4.2. Filings.........................................................9
4.3. Consummation of Agreement.......................................9
4.4. Employee Benefits..............................................10
4.5. Certain Transactions...........................................10
4.6. Tax Records....................................................10
4.7. Notice of Developments.........................................11
4.8. Exclusivity....................................................11
4.9. Title Insurance................................................11
4.10. Surveys.......................................................12
4.11. Tax Matters...................................................12
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE AGRO SELLER......14
5.1. Capital Stock..................................................14
5.2. Organization and Standing......................................15
5.3. Authorization; Consents; Enforceability........................15
5.4. No Violation...................................................16
5.5. Insurance......................................................16
5.6. Liens and Encumbrances.........................................16
5.7. Absence of Certain Changes.....................................16
5.8. Financial Statements...........................................17
5.9. Real Property..................................................17
5.10. Fixed Assets..................................................17
5.11. Intellectual Property.........................................18
5.12. Ownership of Assets...........................................18
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5.13. Contracts.....................................................18
5.14. Litigation....................................................18
5.15. Operations Conducted Lawfully.................................19
5.16. Environmental Matters.........................................19
5.17. Taxes.........................................................19
5.18. Labor Relations...............................................20
5.19. Employee Plans................................................20
5.20. Investment....................................................21
5.21. Title to Assets...............................................21
5.22. Subsidiaries..................................................21
5.23. Undisclosed Liabilities.......................................21
5.24. Certain Business Relationships With the Target and Its
Subsidiaries..................................................21
5.25. Disclosure....................................................22
5.26. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.............................................22
5.27. Pooling.......................................................22
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF BUYER............................22
6.1. Organization and Standing of Buyer.............................22
6.2. No Violation...................................................22
6.3. Authorization; Enforceability; Consents........................23
6.4. No Litigation..................................................23
6.5. Financing......................................................23
6.6. Investment Intent..............................................23
6.7. Securities Exchange Act of 1934................................23
ARTICLE 7. CONDITIONS PRECEDENT...............................................24
7.1. General Conditions.............................................24
7.2. Conditions to Obligations of the Buyer.........................24
7.3. Conditions to Obligation of Sellers and the Agro Seller........25
ARTICLE 8. THE CLOSING........................................................26
8.1. Closing........................................................26
8.2. Deliveries at Closing..........................................26
ARTICLE 9. TERMINATION........................................................27
9.1. Termination....................................................27
9.2. Effect of Termination..........................................27
ARTICLE 10. INDEMNIFICATION...................................................27
10.1. Indemnification by the Sellers and the Agro Seller............27
10.2. Indemnification by Buyer......................................28
10.3. Procedure....................................................29
10.4. Nature and Survival of Representations and Warranties and
Certain Liabilities...........................................29
10.5. Subrogation...................................................29
10.6. Net Indemnity Payment.........................................29
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ARTICLE 11. GENERAL PROVISIONS................................................30
11.1. Expenses......................................................30
11.2. Brokerage.....................................................30
11.3. Notices.......................................................30
11.4. Further Assurances............................................31
11.5. Resolution of Disputes........................................31
11.6. Assignment; Successors In Interest............................32
11.7. Governing Law.................................................32
11.8. Counterparts..................................................32
11.9. No Third Party Rights.........................................32
11.10. Severability.................................................33
11.11. Obligations of the AFA Group and Agro........................33
11.12. Entire Agreement.............................................33
11.13. Amendment; Waiver............................................33
11.14. Headings.....................................................33
11.15. Fair Construction............................................33
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EXHIBITS
Exhibit A Shareholders of the AFA Group and Agro
Exhibit B Escrow Agreement
Exhibit C Apollo Lease
Exhibits D-1
and D-2 Employment Agreements
Exhibits E-1
through E-3 Registration Rights Agreements
SCHEDULES
Schedule 2.4(a) Allocation of Stock
Schedule 2.6(a) Net Worth as of June 30, 1998
Schedule 4.1 Conduct of Business
Schedule 5.1 Capital Stock
Schedule 5.3(b) Consents of Sellers of the AFA Group and Agro
Schedule 5.4 Violations and Conflicts
Schedule 5.5 Insurance
Schedule 5.6 Liens
Schedule 5.7 Certain Changes
Schedule 5.9 Real Property
Schedule 5.10 Fixed Assets
Schedule 5.11 Intellectual Property
Schedule 5.13 Material Contracts
Schedule 5.14 Litigation
Schedule 5.15 Violations of Law
Schedule 5.17 Taxes
Schedule 5.19 Benefit Plans
Schedule 6.3(b) Consents of Buyers
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STOCK FOR STOCK REORGANIZATION AGREEMENT
THIS STOCK FOR STOCK REORGANIZATION AGREEMENT dated as of January 27,
1999 of , by and among ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Seller" and
collectively, the "Sellers"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (the "Agro Seller"), The AFA
Group, Inc., AFA Pallet Co., Inc., Advanced Enterprises Recycling, Inc., Allied
Equipt. & Sales Corp., Inc., American Supplies Sales Group, Inc., Artic, Inc.
and Atlantic Transportation Technologies, Inc., all New Jersey corporations
(collectively, the "AFA Group"), Agro Products, Inc., a New Jersey corporation
("Agro") and KTI Recycling of New Jersey, Inc., a Delaware corporation (the
"Buyer").
The Buyer desires to purchase from the Sellers, and the Sellers desire
to sell, assign and transfer to the Buyer all of the stock in the AFA Group
which any of the Sellers own or in which a Seller has an interest all on the
terms and subject to the conditions hereinafter set forth. The Buyer and Sellers
and the Agro Seller intend that the transaction be structured as a tax deferred
transaction and accounted for by Buyer as a pooling of interests transaction
under the Internal Revenue Code.
The Buyer desires to purchase from the Agro Seller, and the Agro Seller
desires to sell, assign and transfer to the Buyer all of the Agro Seller's stock
in Agro, which the Agro Seller owns or in which the Agro Seller has an interest
all on the terms and subject to the conditions hereinafter set forth. The Buyer
and Agro Seller intend that the transaction be structured as a tax deferred
transaction and accounted for by Buyer as a pooling of interests transaction
under the Internal Revenue Code.
Collectively, the securities of the AFA Group and of Agro to be
purchased by the Buyer pursuant to this Agreement are the "Securities".
The parties hereto, in consideration of the mutual promises set forth
below, the mutuality and sufficiency of which are hereby acknowledged, hereby
agree as follows:
ARTICLE 1.
CERTAIN DEFINITIONS
1.1. Definitions.
"Adjusted Purchase Price" shall have the meaning specified in Section
2.6 of this Agreement.
"AFA Group and Agro" shall have the meaning specified in the recitals
to this Agreement.
"AFA Group and Agro Employee Plan" shall mean any Employee Plan that
The AFA Group and Agro maintain or contribute to or are required to contribute
to or in which The AFA Group and Agro otherwise participate.
"AFA Group and Agro Employees" shall have the meaning specified in
Section 4.4 (a) of this Agreement.
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"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended
from time to time.
"Apollo Lease" shall mean that particular Lease between Apollo Land and
Development Corporation ("Apollo"), Advanced Enterprise Recycling, Inc. and
Allied Equipt. & Sales Corp., Inc., in the form attached as Exhibit C hereto.
"Base Purchase Price" shall have the meaning specified in Section 2.4
of this Agreement.
"Business Day" shall mean any day which is not a Saturday, Sunday, or
other day on which banks in the States of New Jersey and New York are authorized
or required to close.
"Buyer Losses" shall have the meaning specified in Section 10.1 of this
Agreement.
"Buyer Plans" shall have the meaning specified in Section 4.4 (b) of
this Agreement.
"Escrowed Shares" shall have the meaning specified in Section 2.5 of
this Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq.
"Claim" shall have the meaning specified in Section 10.3 (a) of this
Agreement.
"Closing" shall have the meaning specified in Section 8.1 of this
Agreement.
"Closing Balance Sheet" shall have the meaning specified in Section 2.6
(a) of this Agreement.
"Closing Date" shall have the meaning specified in Section 8.1 of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consent" means any consent, waiver, approval, authorization,
exemption, registration or declaration.
"Contracts" shall mean all contracts, understandings, commitments or
agreements, whether oral or written, to which any of the corporations comprising
the AFA Group or Agro is a party.
"EEOC" shall have the meaning specified in Section 5.18 of this
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Effective Time" shall have the meaning specified in Section 8.1 of
this Agreement.
"Employee Plan" shall mean any "employee benefit plan" (as defined in
subsection 3(3) of ERISA), any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for any current
or
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former employee, director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not constitute an
employee benefit plan, and any employment agreement or consulting agreement.
"Environmental Claims" shall mean any administrative, regulatory or
judicial action, suit, demand, claim, lien and notice of noncompliance or
violation relating to an Environmental Law by Governmental Authorities, or by
private third parties.
"Environmental Law" shall mean any applicable federal, state or local
statute, law, rule, regulation, ordinance, permit or order relating to the
protection of the environment, including without limitation CERCLA; the Toxic
Substances Control Act, as amended, 15 U.S.C. Sections 2601 et seq.; the Clean
Air Act, as amended, 42 U.S.C. Sections 7401 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sections 1251 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901 et seq.; and
any similar state or local law.
"Escrow Account" shall mean the account established pursuant to the
Escrow Agreement.
"Escrow Agreement" shall mean the Escrow Agreement to be dated the
Closing Date between the Buyer, the Sellers, the Agro Seller and Key Trust
Company, National Association, or an affiliate, in substantially the form
attached hereto as Exhibit B.
"Escrow Amount" shall mean 40,000 shares of KTI Common Stock.
"Financial Statements" shall have the meaning specified in Section 5.8
of this Agreement.
"GAAP" shall mean generally accepted accounting principles, as in
effect from time to time in the United States.
"Governmental Authority" means any governmental, quasi-governmental,
judicial, or regulatory agency or entity or subdivision thereof with
jurisdiction over any of the corporations comprising the AFA Group or Agro, any
of the Sellers or the Agro Seller or the Buyer or any of their respective
affiliates or any of the transactions contemplated by this Agreement.
"Indemnitee" shall have the meaning specified in Section 10.3 (a) of
this Agreement.
"Indemnitor" shall have the meaning specified in Section 10.3 (a) of
this Agreement.
"Individual Shares" shall have the meaning specified in Section 5.1 (a)
of this Agreement.
"Intellectual Property" shall mean all patents, copyrights, trademarks,
service marks, trade secrets and other intellectual property owned or used by
any of the corporations comprising the AFA Group or Agro.
"Interim Statements" shall have the meaning specified in Section 5.8 of
this Agreement.
"Knowledge" shall mean, with respect to the Sellers and the Agro
Seller, the actual knowledge of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (with
respect to the AFA Group) and
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▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (with respect to Agro) and, with respect to Buyer, the actual
knowledge of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇.
"KTI" shall mean KTI, Inc. the parent company of the Buyer.
"KTI Common Stock" shall mean the Common Stock, par value $.01 per
share, of KTI.
"Leases" shall mean all leases by which any of the corporations
comprising the AFA Group or Agro leases Real Property identified as "leased" on
Schedule 5.9.
"Losses" shall have the meaning specified in Section 10.1 of this
Agreement.
"Material Adverse Effect" shall mean, with respect to a Person, any
effect that is or is reasonably expected to be materially adverse to the
business, results of operations, or financial or operating condition of such
Person and, if applicable, its Subsidiaries, taken as a whole.
"Material Contract" shall have the meaning specified in Section 5.13 of
this Agreement.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
section 4001(a)(3) of ERISA.
"NLRB" shall have the meaning specified in Section 5.18 of this
Agreement.
"OSHA" shall mean the Occupational Safety and Health Administration of
the United States Department of Labor.
"Permits" shall mean all permits, authorizations, approvals,
registrations, licenses, certificates or variances granted by or obtained from
any Governmental Authority.
"Person" shall mean any individual, company, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Authority.
"Prime Rate" shall have the meaning specified in Section 2.5 of this
Agreement.
"Real Property" shall mean the real property specified in Schedule 5.9,
and the structures, improvements, buildings and facilities located thereon and
the easements and appurtenants thereto.
"Redemption" shall have the meaning set forth in the recitals to this
Agreement.
"Securities" shall have the meaning specified in the recitals to this
Agreement.
"Seller" shall have the meaning specified in the recitals to this
Agreement.
"Seller Losses" shall have the meaning specified in Section 10.2 of
this Agreement.
"Subsidiary" shall mean, with respect to a specified Person, each
corporation, partnership or other entity in which the specified Person owns or
controls, directly or indirectly through one or more
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intermediaries, fifty percent (50%) or more of the stock or other interests
having general voting power in the election of directors or Persons performing
similar functions or rights to fifty percent (50%) or more of any distributions.
"Tax" shall mean any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, imposed by any United States federal,
state, local or foreign taxing authority.
"Tax Return" shall mean any return, declaration, report, claim for
refund, information return, statement, or other similar document relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereto.
"Third Party Claim" shall have the meaning specified in Section 10.3(b)
of this Agreement.
"Third Party Funded Debt" shall have the meaning specified in Section
2.2(c) of this Agreement. ARTICLE 2.
SALE OF SHARES; PURCHASE PRICE
2.1. Purchase and Sale of Securities. On the terms and subject to the
conditions herein set forth, the Buyer shall purchase from the Sellers and the
Agro Seller all of the Securities, as of the Closing Date (as such term is
heretofore defined).
2.2. Method of Conveyance.
(a) The sale, transfer, conveyance, assignment and delivery by the
Sellers and the Agro Seller of the Securities to the Buyer shall be effected on
the Closing Date by the execution and delivery of the Securities and customary
stock powers, duly guaranteed and other appropriate documents by the Sellers and
the Agro Seller, as appropriate (collectively, the "Instruments of Conveyance")
to the Buyer, or its assignees.
(b) At the Closing, good and valid title to all of the Securities
shall be transferred, conveyed, assigned and delivered by the Sellers and the
Agro Seller to the Buyer, or its assignees, pursuant to this Agreement and the
Instruments of Conveyance, free and clear of any and all Liens (as defined
below). For the purposes of this Agreement, the term "Lien" shall mean any
pledge, security interest, encumbrance, lien or charge of any kind whatsoever.
(c) At the Closing, the Sellers and the Agro Seller shall cause
each corporation comprising the AFA Group and Agro to provide to the Buyer with
an estoppel certificate signed by each creditor (excluding trade creditors) of
any such corporation or Agro (the "Third Party Funded Debt"), each certificate
indicating the balance due on the Third Party Funded Debt, including any
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accrued and unpaid interest thereon, as of the end of the preceding month,
together with a per diem interest rate during the month in which the Closing
occurs. If any of the Third Party Funded Debt has a personal guaranty from any
of the Sellers or the Agro Seller, the Buyer shall use commercially reasonable
efforts to obtain the release of such guarantees. If the holder of such Third
Party Funded Debt refuses to release such guarantees, the Buyer shall pay such
Third Party Funded Debt within 5 business days of the Closing Date or, if such
debt has prepayment penalties or other features which mitigate against
prepayment in the reasonable opinion of the Buyer, indemnify the Sellers or the
Agro Seller, as appropriate, against any claims under such guarantees. The Buyer
agrees to pay any Third Party Debt that is called as a result of the transaction
contemplated by this Agreement.
(d) At the Closing the Sellers and the Agro Seller shall cause
each corporation comprising the AFA Group and Agro to provide to the Buyer a
certificate signed by each such corporation indicating the balance of trade
accounts payable ("Trade Accounts Payable") due to third parties, including any
accrued and unpaid interest thereon, as of the end of the preceding month,
together with a per diem interest rate, if any, during the month in which the
Closing occurs.
2.3. No Assumed Obligations. Pursuant to this Agreement, the Buyer does
not assume any of the liabilities or obligations of any corporation comprising
the AFA Group or Agro whether absolute, accrued, contingent or otherwise,
whenever incurred; provided, that the Buyer understands that the assets of the
corporations comprising the AFA Group and Agro are subject to existing
liabilities and obligations.
2.4. Purchase Price. In consideration of the transfer to the Buyer of
the Securities and subject to the terms and conditions of this Agreement, the
Buyer shall pay to the Sellers and the Agro Seller an aggregate amount (the
"Aggregate Purchase Price") equal to: (i) 460,000 shares of KTI Common Stock
(the "Base Purchase Price") (the same being allocated between the Sellers and
the Agro Seller as set forth in Schedule 2.4(a), and 40,000 shares of which
shall constitute the Escrow Deposit) and (ii) the Purchase Price Adjustment (as
hereinafter defined, and which may be either positive or negative).
2.5. Escrow Amount. The Buyer shall deposit the Escrow Amount into the
Escrow Account not later than five Business Days after the Closing Date. The
Escrow Amount, upon release from the Escrow Account, shall be delivered by the
Escrow Agent to the Sellers and the Agro Seller in proportion to their
respective holdings of the Securities as set forth in Exhibit A to this
Agreement.
2.6. Purchase Price Adjustment. The Base Purchase Price shall be
adjusted as follows (such adjustment being referred to herein as the "Purchase
Price Adjustment"):
(a) The Base Purchase Price shall be adjusted for any change in
the dollar by dollar for each dollar of total combined net worth of the AFA
Group and Agro on the Closing Date from the combined net worth of the AFA Group
and Agro on June 30, 1998 set forth on Schedule 2.6(a) hereto. The Buyer shall
prepare a combined balance sheet of the AFA Group and Agro as of the Closing
Date (the "Closing Balance Sheet") promptly after the Closing Date but no later
than 45 days after the Closing Date.
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(b) The Sellers and the Agro Seller shall have the right during
the 45 days following receipt of the Closing Balance Sheet to dispute the
Closing Balance Sheet presented. The Sellers and the Agro Seller shall have the
right to examine the books and records from which the Closing Balance Sheet was
made. The Sellers and the Agro Seller shall either deliver a written acceptance
of such Closing Balance Sheet or deliver a written notice of dispute,
identifying the basis for the dispute to the extent possible and the Sellers and
the Agro Seller's Closing Balance Sheet (the "Sellers and Agro Seller's Closing
Balance Sheet"). If Sellers and Agro Seller fail to deliver a notice of
acceptance or dispute within the 45-day period, the Sellers and the Agro Seller
shall be deemed conclusively to have accepted the Buyer's Closing Balance Sheet.
Upon receipt of the acceptance or notice of dispute (the date of receipt by the
Buyer shall be the "Balance Sheet Notice Date") or the expiration of the 45-day
period, the Buyer shall make the Purchase Price Adjustment Payment in accordance
with its calculation. The Purchase Price Adjustment Payment shall be in the form
of shares of KTI Common Stock. The number of shares to be issued shall be
calculated by dividing the Purchase Price Adjustment Payment by the average
closing sale price per share for the ten trading days immediately preceding the
Balance Sheet Notice Date or the last day of the 45-day period as appropriate.
(c) Any dispute concerning the Closing Balance Sheet shall be
settled by an agreed procedure to be performed by a certified public accounting
firm of nationally recognized standing (currently known as the "Big 5"
accounting firms). The Buyer shall select the certified public accounting firm,
which shall be reasonably acceptable to the Sellers and the Agro Seller. If the
Sellers and the Agro Seller reject such firm, then KTI shall select a second
firm. If the Sellers and the Agro Seller reject such firm, then KTI shall select
a third firm, which shall be used under all circumstances and the Sellers and
the Agro Seller hereby accept such accounting firm. The written determinations
(the "Balance Sheet Calculations") by such accounting firm after consideration
of all written objections thereto in accordance with the foregoing procedure
shall be conclusive and binding on all parties. Any fees and expenses of the
accounting firm for the special procedure shall be borne by the parties
proportionately, based on the difference between the Balance Sheet Calculation
and the calculation by the Buyer on one hand and the Sellers and the Agro Seller
on the other. By way of example, if the calculation by the Buyer is lower by
$50,000 and the calculation by the Sellers and the Agro Seller is higher by
$100,000, then the Buyer shall pay one-third of the cost and the Sellers and the
Agro Seller shall pay two-thirds of the cost. Regardless of the parties paying
the accounting firm, both sides shall have full and complete access to the
accounting firm, its records, work papers and related documents.
(d) If the amount of the Purchase Price Adjustment, as determined
in accordance with Subsection (c) above, is less than the Purchase Price
Adjustment Payment actually made by the Buyer, no later than 10 business days
after the delivery of the Balance Sheet Calculation, the Seller shall deliver to
the Buyer the amount of such overpayment in shares of KTI Common Stock (the
amount being determined utilizing the same price per share as was utilized in
the calculation of the number of shares to be delivered in making the Purchase
Price Adjustment). If the amount of the Purchase Price Adjustment, as determined
in accordance with subsection (d) above, is greater than the Purchase Price
Adjustment actually made by the Seller, no later than 10 business days after the
delivery of the Balance Sheet Calculation, the Buyer shall deliver to the Seller
such number of additional shares of KTI Common Stock as would have been
deliverable to the Seller at the time the Purchase Price Adjustment was actually
made had the calculation equaled the calculation as set forth in the Balance
Sheet Calculation.
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The Base Purchase Price as adjusted by the Purchase Price Adjustment shall be
referred to herein as the "Adjusted Purchase Price."
ARTICLE 3.
OTHER AGREEMENTS
3.1. Access and Information; Confidentiality. From the date hereof
until the Closing Date:
(a) The Sellers and the Agro Seller will cause the AFA Group and
Agro to give to Buyer and its representatives full access to the AFA Group and
Agro's properties, books, records, contracts and agreements and will furnish all
such information and documents relating to the properties and business of the
AFA Group and Agro as the Buyer may reasonably request; provided, however, (i)
that such investigation by Buyer shall be conducted in such a manner as not to
unreasonably interfere with the normal operation of the business of the AFA
Group and Agro and (ii) that no environmental sampling or investigation of any
of the Real Property shall be done without the consent of the Sellers.
(b) The confidentiality agreement dated September 28, 1998 (the
"Confidentiality Agreement") between the Sellers and the Agro Seller and the
Buyer will remain in effect.
3.2. Public Announcement. The Buyer, the Sellers and the Agro Seller
agree that neither party shall make any public announcement or issue any press
release concerning the transactions contemplated hereby without prior written
agreement with the other party, except as a party may determine in good faith is
required by law, in which case the party making such announcement or release
shall use reasonable efforts to permit the other party to review such
announcement or release in advance to the extent that compliance with applicable
law is not prejudiced.
ARTICLE 4.
CERTAIN COVENANTS
4.1. Conduct of Business. Except as otherwise contemplated by the terms
of this Agreement or as set forth on Schedule 4.1 or with the prior written
consent of Buyer, from the date hereof until the Closing, the Sellers and the
Agro Seller will cause the AFA Group and Agro to: (a) not enter into any
material contract or agreement other than in the ordinary course of business or
terminable upon not more than thirty (30) days' prior notice; (b) not amend,
modify or waive any material provision of any existing Material Contract or
agreement other than in the ordinary course of business; (c) not mortgage,
pledge, sell or transfer any of its assets, except in the ordinary course of
business; (d) conduct the business only in the ordinary course (including with
respect to the payment of accounts payable and the collection of accounts
receivable) and in substantially the same manner as heretofore conducted; (e)
maintain and keep its properties and equipment in reasonable and normal working
order and condition, except for ordinary wear and tear; (f) keep in full force
and effect insurance comparable in amount and scope of coverage to that now
maintained; (g) perform its obligations under all contracts and agreements in
all material respects; (h) use its reasonable
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efforts to maintain and preserve its business organizations, retain its present
managerial employees and maintain its relationships with material suppliers,
customers and others having business dealings with it; (i) maintain its books of
account and records in the usual and regular manner and not make any material
changes in its accounting practices; (j) comply in all material respects with
all material laws and regulations applicable to it; (k) except for changes in
compensation in the ordinary course of business, not make any change in any
Employee Plan or compensation to any officers, directors or employees or adopt
any new Employee Plan; (l) not amend its articles of incorporation or bylaws;
(m) not redeem or otherwise acquire any shares of its capital stock or issue any
capital stock or any option, warrant or right relating thereto or any dividend
or other payment (whether in cash or other property) in respect thereof; (n) not
merge or consolidate with, or purchase a substantial portion of the assets of,
any Person, or otherwise acquire any material assets, except in the ordinary
course of business consistent with past practice; (o) not take any action that
would, to the Sellers and the Agro Sellers' knowledge, make any of the
representations or warranties of Sellers and the Agro Seller contained in this
Agreement to be untrue or incorrect or would result in any of the conditions set
forth in this Agreement not being satisfied; and (p) not agree, whether in
writing or otherwise, to do any of the foregoing.
4.2. Filings. The Buyer and the Sellers and the Agro Seller will make
or cause to be made all such filings and submissions under applicable laws and
regulations as may be required for the consummation of the transactions
contemplated hereunder. The Buyer and the Sellers and the Agro Seller will
cooperate and coordinate with one another in connection with any such filings or
submissions.
4.3. Consummation of Agreement. The Buyer and the Sellers and the Agro
Seller will use their reasonable efforts to perform or fulfill all conditions
and obligations to be performed or fulfilled by each of them under this
Agreement so that the transactions contemplated hereby shall be consummated. In
addition, subject to the terms and conditions of this Agreement, each of the
parties hereto will use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated hereby. Except for events that are the subject of specific
provisions of this Agreement, if any event should occur, either within or
outside the control of the Buyer or the Sellers and the Agro Seller, that could
materially delay or prevent fulfillment of the conditions upon the obligations
of any party hereto to consummate the transactions contemplated by this
Agreement, the Buyer or the Sellers and the Agro Seller, as applicable, will
notify the other of such event and each of them will use reasonable, diligent
and good faith efforts to cure or minimize the same as expeditiously as
possible.
4.4. Employee Benefits.
(a) The Buyer has no present intention to terminate any person who
is an employee of the AFA Group and Agro as of the Closing Date (the "AFA Group
and Agro Employees") but will have no obligation to continue the employment of
any of the AFA Group and Agro Employees.
(b) The Buyer agrees that, following the Closing Date, it shall,
or shall cause the AFA Group and Agro to, provide that the AFA Group and Agro
Employees may participate in the plans of the Buyer under the same terms as the
Buyer's present employees (such plans, the "Buyer Plans").
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(c) The Buyer agrees that for purposes of all AFA Group and Agro
Employee Plans and the Buyer Plans under which an employee's benefit depends, in
whole or in part, on length of service, credit will be given to the AFA Group
and Agro Employees for service previously credited with the AFA Group and Agro
prior to the Closing Date, provided, that such crediting of service does not
result in duplication of benefits, and provided that such crediting of service
shall not be given for benefit accrual purposes under any defined benefit plan.
The AFA Group and Agro Employees shall also be given credit under any Buyer Plan
for any deductible or co-payment amounts paid under any AFA Group and Agro
Employee Plan in respect of the plan year in which the Closing Date occurs, to
the extent that, following the Closing Date, they participate in any Buyer Plan
for which deductibles or co-payments are required. The Buyer shall also cause
each Buyer Plan to waive (i) any preexisting condition restriction which was
waived under the terms of any analogous AFA Group and Agro Employee Plan
immediately prior to the Closing Date or (ii) any waiting period limitation
which would otherwise be applicable to a AFA Group and Agro Employee on or after
the Closing Date to the extent such AFA Group and Agro Employee had satisfied
any similar waiting period limitation under an analogous AFA Group and Agro
Employee Plan prior to the Closing Date.
4.5. Certain Transactions.
(a) On or prior to the Closing Date, the Sellers and the Agro
Seller shall cause the AFA Group and Agro to satisfy or collect, as the case may
be, any and all outstanding inter-company balances debt (including any interest
thereon) existing between any of the corporations comprising the AFA Group and
Agro and Apollo.
(b) On or prior to the Closing Date, the Sellers and the Agro
Seller shall use commercially reasonable efforts to obtain the consent of any
holders of Third Party Funded Debt to the transactions contemplated by this
Agreement.
4.6. Tax Records. The Sellers and the Agro Seller shall make available
to the Buyer such records as the Buyer may require for the preparation of any
Tax Returns or other similar reports or forms required to be filed by the Buyer
and such records as the Buyer may require for the defence of any audit,
examination, administrative appeal or litigation of any such Tax Return or other
similar report or form. The Buyer shall make available to the Sellers and the
Agro Seller such records as the Sellers and the Agro Seller may require for the
preparation of any Tax Returns or other similar reports or forms required to be
filed by Sellers and the Agro Seller and such records as the Sellers and the
Agro Seller may require for the defence of any audit, examination,
administrative appeal or litigation of any such Tax Return or other similar
report or form.
4.7. Notice of Developments. The Sellers and the Agro Seller will give
prompt written notice to the Buyer of any material adverse development causing a
breach of any of the representations and warranties in this Agreement. The Buyer
will provide the Sellers and the Agro Seller with copies of all filings made by
KTI with the Securities and Exchange Commission. Each Person will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties. No disclosure by
any Person pursuant to this Section 4.7, however, shall be deemed to amend or
supplement any Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
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4.8. Exclusivity. None of the Sellers or the Agro Seller will (and the
Sellers or the Agro Seller will not cause or permit any of the corporations
comprising the AFA Group or Agro to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of any of the corporations comprising the AFA Group or Agro
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Sellers or the Agro Seller will vote their Securities in
favor of any such acquisition structured as a merger, consolidation, or share
exchange.
4.9. Title Insurance. The Sellers and the Agro Seller will cause the
corporations comprising the AFA Group and Agro or, if applicable, their
respective affiliates, to obtain the following title insurance policies, or
irrevocable binding commitments to issue the same:
(a) If requested by the Buyer, at Buyer's expense (including
related legal fees), after the Closing, with respect to each parcel of real
estate that any of the corporations comprising the AFA Group or Agro leases or
subleases, an ALTA Leasehold Owner's Policy of Title Insurance-1987 (or
equivalent policy reasonably acceptable to the Buyer if the real property is
located in a state in which an ALTA Leasehold Owner's Policy of Title
Insurance-1987 is not available), or at the option of the Buyer, endorsements to
existing title insurance policies, issued by a title insurer reasonably
satisfactory to the Buyer (the "Title Company") (and, if requested by the Buyer,
reinsured in whole or in part by one or more insurance companies and pursuant to
a direct access agreement reasonably acceptable to the Buyer) in such amount as
the Buyer reasonably may determine (taking into account the time cost of money
and such other factors as whether the fair market rental value of the premises
exceeds the stipulated consideration in the lease or sublease, whether the
tenant or subtenant has any option to renew or extend, whether the tenant or
subtenant owns any improvements located on the premises, whether the tenant or
subtenant is permitted to sublease, and whether the tenant or subtenant would
owe any amount under the lease or sublease if evicted), insuring title to the
leasehold or subleasehold estate to be in the respective corporation comprising
the AFA Group or Agro as of the Closing.
(b) Each such title insurance policy, or at the option of the
Buyer, an endorsement to an existing title policy, delivered shall (A) insure
title to the real property and all recorded easements benefiting such real
property, (B) contain an "extended coverage endorsement" insuring over the
general exceptions contained customarily in such policies, (C) contain an ALTA
Zoning Endorsement 3.1 (or equivalent), (D) contain an endorsement insuring that
the real property described in the title insurance policy is the same real
estate as shown on the survey delivered with respect to such property, (E)
contain an endorsement insuring that each street adjacent to the real property
is a public street and that there is direct and unencumbered pedestrian and
vehicular access to such street from the real property, (F) contain an inflation
endorsement providing for annual adjustments in the amount of coverage
corresponding to the annual percentage increase, if any, in the United States
Department of Commerce Composite Construction Cost Index (Base Year = 1997), (G)
if the real property consists of more than one record parcel, contain a
"contiguity" endorsement insuring that all of the record parcels are contiguous
to one another, (H) contain a "non-imputation" endorsement to the effect that
title defects known to the officers, directors, and stockholders of the owner
prior to the
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Closing shall not be deemed "facts known to the insured" for purposes of the
policy and (I) be otherwise satisfactory to the Buyer and contain such other
endorsements and affirmative coverages as may be reasonably requested by the
Buyer.
4.10. Surveys. With respect to each parcel of real property that any of
the corporations comprising the AFA Group or Agro leases or subleases, and as to
which a title insurance policy may be procured pursuant to Section 4.9(a) above,
the Sellers and the Agro Seller have caused each of the corporations comprising
the AFA Group and Agro or, if applicable, their respective affiliates, to
deliver prior to the Closing the most current survey or site plan of the real
property (the "Survey").
4.11. Tax Matters.
The following provisions shall govern the allocation of responsibility
as between parties to this Agreement for certain tax matters following the
Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. The Seller
and the Agro Seller shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for each corporation comprising the AFA Group and Agro
for all periods ending on or prior to the Closing Date which are filed after the
Closing Date other than income Tax Returns with respect to periods for which a
consolidated, unitary or combined income Tax Return of Seller will include the
operations of each of the corporations comprising the AFA Group and Agro. The
Sellers and the Agro Seller shall permit the Buyer to review and comment on each
such Tax Return described in the preceding sentence prior to filing and shall
make such revisions to such Tax Returns as are reasonably requested by the
Sellers and the Agro Seller. The Sellers and the Agro Seller shall reimburse the
Buyer for Taxes of each corporation comprising the AFA Group and Agro with
respect to such periods within fifteen (15) days after payment by the Buyer or
any corporation comprising the AFA Group or Agro of such taxes to the extent
such Taxes are not reflected in the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and tax income) shown on the face of the Closing Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of each corporation comprising the AFA Group and Agro for
tax periods which begin before the Closing Date and end after the Closing Date.
The Seller and the Agro Seller shall pay to the Buyer within fifteen (15) days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such taxes which relates to the portion of such taxable
period ending on the Closing Date to the extent such Taxes are not reflected in
the reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and tax income) shown on
the face of the Closing Balance Sheet. For purposes of this Section, in the case
of any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the
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case of any Tax based upon or related to income or receipts be deemed equal to
the amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of each of the corporations comprising the AFA Group and Agro.
(c) Refunds and Tax Benefits. Any Tax refunds that are received by
the Buyer or any of the corporations comprising the AFA Group, Agro or any of
their respective affiliates, and any amounts credited against Tax to which the
Buyer or any of the corporations comprising the AFA Group, Agro or any of their
respective affiliates become entitled, that relate to Tax periods or portions
thereof ending on or before the Closing Date shall be for the account of the
Buyer.
(d) Cooperation on Tax Matters.
(i) The Buyer, each of the corporations comprising the AFA
Group, Agro and their respective affiliates and the Sellers and the
Agro Seller shall cooperate fully, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Each of the
corporations comprising the AFA Group, Agro and their respective
affiliates and Sellers and the Agro Seller agree (A) to retain all
books and records with respect to Tax matters pertinent to each of the
corporations comprising the AFA Group, Agro and their respective
affiliates relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the
extent notified by the Buyer or the Sellers and the Agro Seller, any
extensions thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and,
if the other party so requests, each of the corporations comprising the
AFA Group, Agro and their respective affiliates or the Sellers and the
Agro Seller, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) The Buyer, Sellers and the Agro Seller further agree,
upon request, to use their best efforts to obtain any certificate or
other document from any governmental authority or any other Person as
may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) The Buyer, Sellers and the Agro Seller further agree,
upon request, to provide the other party with all information that
either party may be required to report pursuant to Section 6043 of the
Code and all Treasury Department Regulations promulgated thereunder.
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(e) Compliance with Commission Accounting Series Releases 130 and
135. Each Seller and the Agro Seller further represents and warrants that, prior
to the publication and dissemination of financial statements by KTI following
the Closing covering a period of at least thirty (30) days of combined,
post-acquisition results of KTI and the AFA Group and Agro, said Seller or the
Agro Seller will not sell or otherwise transfer or dispose of any of the KTI
Common Stock Shares (including the creation of any derivative security with
respect thereto) without compliance with Commission Accounting Series Releases
130 and 135 as codified in Section 201.01 of the Commission Financial Reporting
Release No. 1.
(f) Use of Acquired Assets. The Buyer will continue to conduct the
businesses historically conducted by and acquired from the Sellers and the Agro
Sellers or will use a significant portion of the assets comprising such business
in a business in accordance with Section 1.368-1(d) of the Treasury regulations
promulgated under the Code.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE AGRO SELLER
Each of the Sellers and the Agro Seller, severally and not jointly,
represents and warrants to the Buyer as of the date of this Agreement as
follows:
5.1. Capital Stock.
(a) As of the date of this Agreement, the authorized capital stock
of each corporation comprising the AFA Group and Agro are as listed on Schedule
5.1(a). No other class of stock of any of the corporations comprising the AFA
Group and Agro is authorized or outstanding. Each Seller or the Agro Seller is
the owner, beneficially and of record, of the Securities set forth opposite his
name on Schedule 5.1(a) hereto (the "Individual Shares"). All of the Individual
Shares have been duly authorized and validly issued and are fully paid and
non-assessable, and are all of the shares of capital stock, or any securities
exchangeable, convertible or exercisable into, capital stock of each of the
corporations comprising the AFA Group and Agro. At the Closing, the Individual
Shares will not be subject to any liens or restrictions on transfer, other than
restrictions imposed by applicable securities laws and, upon the transfer of the
Individual Shares from the Sellers and the Agro Seller to the Buyer, the Buyer
will obtain good and marketable title to the Individual Shares, free and clear
of all liens, claims and encumbrances of any kind. At the Closing Date, there
will be no authorized or outstanding option, subscription, warrant, call, right,
commitment or other agreement obligating any of the corporations comprising the
AFA Group and Agro to issue or transfer any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
None of the Sellers or the Agro Seller is a party to any voting trust, proxy or
other agreement or understanding with respect to the Securities.
(b) The AFA Group and Agro, as of the Closing Date (i) are not
participants in any partnership, joint venture or other similar agreement and
(ii) do not hold equity securities in any other Person.
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5.2. Organization and Standing. Each of the corporations comprising the
AFA Group and Agro is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
corporate power and authority necessary to own, operate and conduct its business
as it is presently conducted. Each of the corporations comprising the AFA Group
and Agro and their respective affiliates is duly licensed or qualified to do
business and is in good standing as a foreign corporation in all states in which
it conducts business, except where failure to be so qualified would not have a
Material Adverse Effect.
5.3. Authorization; Consents; Enforceability.
(a) This Agreement, the Escrow Agreement and the other agreements
and instruments contemplated by or delivered in connection with this Agreement
or the Escrow Agreement to which such Seller or the Agro Seller or any
corporation comprising the AFA Group and Agro is a party or a signatory, have
been duly authorized, executed and delivered by such Seller, the Agro Seller,
the corporation comprising the AFA Group or Agro, as the case may be, and
constitute the legal, valid and binding obligation of such Seller, the Agro
Seller or the corporation comprising the AFA Group or Agro, as the case may be,
enforceable in accordance with their respective terms subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general principles of equity.
(b) Except as specifically set forth on Schedule 5.3(b), no
Consent is required to be obtained by any Seller, the Agro Seller, any of the
corporations comprising the AFA Group or Agro (or by any of their respective
Affiliates) from, and no notice or filing is required to be given by, any
Seller, the Agro Seller, or the AFA Group or Agro (or by any of their respective
Affiliates) to or made by any Seller, the Agro Seller, or the AFA Group or Agro
(or by any of their respective Affiliates) with, any Governmental Authority or
other Person in connection with the execution, delivery and performance by such
Person of this Agreement and the Escrow Agreement, other than in all cases where
the failure to obtain such Consent or to give or make such notice or filing
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
5.4. No Violation. The execution and delivery by each Seller, the Agro
Seller, each corporation comprising the AFA Group and Agro of this Agreement and
the Escrow Agreement does not, and the consummation by such Person of the
transactions contemplated hereby or thereby will not (i) violate or conflict
with any provision of the certificate of incorporation or bylaws of or the AFA
Group or Agro, (ii) except as set forth on Schedule 5.4, violate or conflict
with, or result (with the giving of notice or lapse of time or both) in a
violation of or constitute a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, agreement or other instrument or obligation to which any Seller,
the Agro Seller, any of the corporations comprising the AFA Group or Agro is a
party or by which any of their assets may be bound, except for such violations
or defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or which, individually or in
the aggregate, would not have a Material Adverse Effect, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable any
Seller, the Agro Seller, any of the corporations comprising the AFA Group or
Agro, or any of their respective assets except for such violations that
individually or in the aggregate would not have a Material Adverse Effect.
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5.5. Insurance. Schedule 5.5 accurately lists all policies of insurance
covering the assets and operations of the AFA Group and Agro as of November 30,
1998 and for each indicates the insurer's name, policy number, expiration date
and amount and type of coverage. All such policies are in full force and effect
and none of the corporations comprising the AFA Group or Agro, nor, to the
knowledge of any Seller or the Agro Seller, any other party thereto is in breach
or default under any such policies (and no event has occurred which, with the
giving of notice or the passage of time, or both, would constitute a breach or
default). No written notice of termination of any such policy has been received
by any of the corporations comprising the AFA Group or Agro.
5.6. Liens and Encumbrances. Except as set forth on Schedule 5.6, at
the time of Closing, none of the assets of any of the corporations comprising
the AFA Group or Agro will be subject to any liens or encumbrances of any nature
arising out of transactions entered into, or any state of facts existing, prior
to or on the Closing Date.
5.7. Absence of Certain Changes. Except as reflected on the Financial
Statements or as set forth on Schedule 5.7, since the date of the Interim
Statements, there has not been: (a) any material adverse change in the business,
results of operations or financial or operating condition of any corporation
comprising the AFA Group or Agro; (b) any material loss or damage (whether or
not covered by insurance) to any assets of any corporation comprising the AFA
Group or Agro, which materially adversely affects or impairs the ability of such
corporations to conduct its business in the ordinary course; (c) any mortgage or
pledge of any of the assets of any corporation comprising the AFA Group or Agro;
(d) any contract or agreement entered into by any of the corporations comprising
the AFA Group or Agro other than in the ordinary course of business; (e) any
increase in the rate or terms of compensation payable to the employees of any of
the corporations comprising the AFA Group or Agro's employees, except increases
occurring in accordance with the AFA Group and Agro's customary practices, or
any modifications in employee benefits to any employee of the corporations
comprising the AFA Group or Agro; or (f) any loss or termination of any customer
contracts representing ▇▇▇▇▇▇▇▇ aggregating in excess of $100,000 during the
12-month period prior to loss or termination.
5.8. Financial Statements. The Sellers and the Agro Seller have
delivered to the Buyer true and complete copies of the combined income
statements, statements of cash flow and balance sheets for the AFA Group and
Agro and their respective affiliates for each of the two fiscal years ended
December 31, 1997 and 1996 (the "Year End Statements"), and the six months ended
June 30, 1998 (the "Interim Statements," and, together with the Year End
Statements, the "Financial Statements"). The Financial Statements have been
prepared from the books and records of the AFA Group and Agro and fairly present
in all material respects the financial position and results of operations of the
AFA Group and Agro as of the dates thereof and for the periods presented
thereby.
5.9. Real Property. Schedule 5.9 sets forth a complete and accurate
list of all Real Property that any of the corporations comprising the AFA Group
or Agro leases and applicable Lease pursuant to which such corporation leases
the Real Property. No Lease has been modified or amended except as described on
Schedule 5.9. None of the corporations comprising the AFA Group or Agro owns any
Real Property. No act or event has occurred which, with notice or lapse of time
or both, would constitute a default on the part of any of the corporations
comprising the AFA Group or Agro or, to the knowledge of any of the Sellers or
the Agro Seller, on the part of any
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other person, under any of the Leases, and the consummation of the transactions
described in this Agreement will not create or cause a default, termination or
modification under any of the Leases. None of the Leases of the corporations
comprising the AFA Group or Agro is subject to any liens or encumbrances or any
leases or rights of occupancy by any third party. There are not any intended
public improvements which will result in any charge levied against, or in the
creation of any encumbrance upon, the Real Property or any portion thereof. The
improvements on the Real Property are in reasonably good operating condition and
in a state of good maintenance and repair, ordinary wear and tear excepted, are
adequate and suitable for the purposes for which they are presently being used
and there are no condemnation or appropriation proceedings pending or, to the
knowledge of the Sellers and the Agro Seller, threatened against any such Real
Property or the improvements thereon. True, correct and complete copies of all
Leases, existing title insurance reports, policies and surveys, relating to the
Real Property have been provided to the Buyer prior to the Closing. With respect
to the Apollo Lease, the following shall have occurred: (i) a memorandum of
lease in a form suitable for recording and otherwise reasonably satisfactory to
the Buyer shall have been executed by the lessor and the lessee under the Apollo
Lease and (ii) a non-disturbance agreement from the holder of any existing
mortgage (the "Mortgagee") on the lessor's interest in the property demised
under the Apollo Lease shall have been executed and delivered to the Buyer in
form suitable for recording providing in substance that, as long as no default
exists, the Apollo Lease will not be terminated, nor shall the lessee's, or its
successors' or assigns', use, possession or enjoyment of the premises demised
under the Apollo Lease be interfered with, nor shall the leasehold estate
granted by the Apollo Lease be affected in any other manner, by any foreclosure
by an applicable Mortgagee.
5.10. Fixed Assets. Schedule 5.10 sets forth a complete and accurate
list of each item of equipment and other fixed assets owned by any of the
corporations comprising the AFA Group or Agro as of October 31, 1998 that has a
book value in excess of $10,000. All material items of such assets have been
adequately maintained and are in normal operating condition (with the exception
of normal wear and tear).
5.11. Intellectual Property.
(a) Schedule 5.11(a) separately lists (i) all registered
trademarks, service marks and copyrights owned or used by any of the
corporations comprising the AFA Group or Agro (together with any applications
therefor), and (ii) all non-registered trademarks, service marks, trade names
and service names used by any of the corporations comprising the AFA Group or
Agro (collectively, "Intellectual Property").
(b) Except as set forth on Schedule 5.11(b), the AFA Group and
Agro own or have the right to use all Intellectual Property that is material for
the operation of its respective business.
(c) No claims have been asserted during the past three years by
any Person against the use by any of the corporations comprising the AFA Group
or Agro, or challenging or questioning the validity of effectiveness, of any
Intellectual Property, or any agreement relating thereto to which any of the
corporations comprising the AFA Group or Agro is a party.
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5.12. Ownership of Assets. Each of the AFA Group and Agro owns, leases,
or has the right to use all assets currently used in the conduct of their
respective business.
5.13. Contracts. Schedule 5.13 lists each Contract (a "Material
Contract") of any of the corporations comprising the AFA Group or Agro as of
October 31, 1998 that either (i) involves payment by any of the corporations
comprising the AFA Group or Agro of more than $25,000, (ii) has a term of 12
months or more and involves payment by any of the corporations comprising the
AFA Group or Agro of more than $10,000, or (iii) was entered into other than in
the ordinary course of business, other than the Leases listed on Schedule 5.9.
The Sellers and the Agro Seller have caused the AFA Group and Agro to make
available to the Buyer true and accurate copies of all Material Contracts,
together with all amendments, modifications and supplements thereof and waivers
and consents thereunder. Except as set forth on Schedule 5.13, none of the
corporations comprising the AFA Group or Agro, and, to the knowledge of each
Seller and the Agro Seller, no other party is in default in connection with any
Material Contract; no act or event has occurred which, with notice or lapse of
time or both, would constitute a default under any Material Contract with
respect to any of the corporations comprising the AFA Group or Agro, or, to the
knowledge of each Seller and the Agro Seller, any other party; there is no
outstanding notice of cancellation or termination in connection with any
Material Contract; and each Material Contract is the valid and binding agreement
of the respective corporation in AFA Group or Agro (as the case may be) and, to
the knowledge of such Seller and the Agro Seller, of each other party thereto,
and is in full force and effect in accordance with its terms and will not be
affected by, or, except as described on Schedules 5.3(b) or 5.4, require the
consent of any other party to the transactions contemplated by this Agreement.
5.14. Litigation. Except as set forth on Schedule 5.14, there is no
litigation, action, claim, proceeding or governmental investigation pending or,
to the knowledge of any Seller or the Agro Seller, threatened against such
Seller, the Agro Seller, or any of the corporations comprising the AFA Group or
Agro (i) that could have a Material Adverse Effect on any of the corporations
comprising the AFA Group or Agro, or (ii) which may affect such Seller's, the
Agro Seller's or any of the corporations comprising the AFA Group's or Agro's
ability to perform his or its obligations under this Agreement.
5.15. Operations Conducted Lawfully. Except as set forth on Schedule
5.15, to the knowledge of each Seller and the Agro Seller, for the three (3)
years preceding the Closing Date, the AFA Group and Agro have conducted their
respective operations in accordance with applicable federal, state and local
laws, statutes, rules, administrative regulations and ordinances except for
infractions and violations that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect, and none of the
corporations comprising the AFA Group or Agro has received any written notice to
the contrary. Any infractions and violations disclosed on Schedule 5.15 has, to
such Seller's knowledge or the Agro Seller's knowledge, been resolved to the
satisfaction of the Governmental Authority having jurisdiction of the matter, or
if not, is so noted on Schedule 5.15. Each of the corporations comprising the
AFA Group and Agro has operated from its inception, and will continue to operate
through the Closing, legally and in compliance in all material respects with all
conditions and requirements of all applicable zoning laws and permits.
5.16. Environmental Matters.
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(a) The AFA Group and Agro are in material compliance with all
Environmental Laws;
(b) The AFA Group and Agro have obtained and are in material
compliance with the conditions of all Permits required under applicable
Environmental Laws for the continued conduct of their respective businesses in
the manner now conducted; and
(c) To the knowledge of the Sellers and the Agro Seller, there is
no threatened or existing Environmental Claim indicating that any of the
corporations comprising the AFA Group or Agro may be (a) in material violation
of any Environmental Law, (b) subject to liabilities or obligations for any
cleanup, remediation or corrective action under any Environmental Law, (c)
subject to claims arising under any Environmental Law for personal injury,
property damage, or damage to natural resources, or (d) subject to fines or
penalties arising under any Environmental Law.
5.17. Taxes. All Tax Returns filed with respect to each of the
corporations comprising the AFA Group and Agro are correct and complete in all
material respects. Except as disclosed in Schedule 5.17, each of the
corporations comprising the AFA Group and Agro have (i) properly filed all Tax
Returns required to be filed by them, and no filing extensions for any such
returns are in effect; and (ii) paid and satisfied on or before its respective
due dates all Taxes (whether or not requiring the filing of Tax Returns)
required to be paid by them. All Taxes which any of the corporations comprising
the AFA Group or Agro is or was required by law to withhold or collect with
respect to their respective business, including sales, unemployment and payroll
Taxes, have been duly withheld and collected and paid over to the proper
Governmental Authority or held by the AFA Group and Agro in separate bank
accounts for such payment. Except as disclosed in Schedule 5.17, none of the
corporations comprising the AFA Group or Agro has granted an extension of the
statute of limitations on assessments of any Taxes. Except as disclosed in
Schedule 5.17, to the knowledge of the Sellers and the Agro Seller, there are no
audits or examinations in progress by any Governmental Authority with respect to
any of the corporations comprising the AFA Group or Agro. Except as disclosed in
Schedule 5.17, none of the corporations comprising the AFA Group or Agro has
received any notice from any Governmental Authority of additional Taxes owed,
adjustments being considered or audits to be commenced. There are no agreements
or understandings between any of the corporations comprising the AFA Group or
Agro and any Governmental Authority, whether oral or written, with respect to
the payment of any Taxes or any matter required or permitted to be included or
excluded from any Tax Return. There are no Tax sharing agreements or similar
agreements with respect to or involving any of the corporations comprising the
AFA Group or Agro.
5.18. Labor Relations. To the knowledge of the Sellers and the Agro
Seller, the AFA Group and Agro are in compliance in all material respects with
all federal and state laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and has not engaged in any
unfair labor or unfair employment practices, (ii) as of the date hereof, (A)
there is no unlawful employment practice discrimination charge against any of
the corporations comprising the AFA Group or Agro pending before the Equal
Employment Opportunity Commission ("EEOC") or any EEOC recognized state
"referral agency," (B) there is no unfair labor practice charge or complaint
against any of the corporations comprising the AFA Group or Agro pending before
the National Labor Relations Board ("NLRB"), (C) there is no labor strike,
dispute,
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slowdown or stoppage actually pending or, to the knowledge of any Seller or the
Agro Seller, threatened against or affecting any of the corporations comprising
the AFA Group or Agro, (D) no labor organization or group of employees of any
corporations comprising the AFA Group or Agro has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings presently pending or, to the knowledge of the Sellers and the Agro
Seller, threatened to be brought or filed with the NLRB or any other labor
relations tribunal or authority, (E) no grievance or arbitration proceeding
against any corporation comprising the AFA Group or Agro is pending and no
written claim therefor exists, and (iii) there is no collective bargaining
agreement that is binding on any corporations comprising the AFA Group or Agro.
5.19. Employee Plans.
(a) A list of every AFA Group and Agro Employee Plan is set forth
on Schedule 5.19 (a). None of the AFA Group and Agro Employee Plans is a
Multiemployer Plan and none of the AFA Group and Agro Employer Plans is subject
to Title IV of ERISA. Except as required by Part 6, Subtitle B, Title I of ERISA
or Section 4980B of the Code and except as set forth on Schedule 5.19 (a), no
AFA Group and Agro Employee Plan that is a welfare plan (as such term is defined
in Section 3 (1) of ERISA) provides for health benefit coverage to any
individual for events occurring or expenses incurred after termination of
employment.
(b) Each AFA Group and Agro Employee Plan that is an "employee
pension benefit plan" within the meaning of section 3(2) of ERISA that is
intended to satisfy the requirements of sections 401(a) and 501(a) of the Code
has received a favorable determination letter from the Internal Revenue Service.
The AFA Group and Agro have furnished the Buyer with respect to each AFA Group
and Agro Employee Plan, to the extent applicable, a copy of the most recent
annual report, each plan document end related, trust agreements and/or insurance
contracts, the most recent "summary plan description" and the most recent
Internal Revenue Service determination letter.
(c) To the knowledge of the Sellers and the Agro Seller, each of
the AFA Group and Agro Employee Plans has been administered in form and
operation in all material respect with all applicable requirements of law. There
are no pending or threatened claims by or on behalf of any AFA Group and Agro
Employee Plan, by any employee or beneficiary covered under any AFA Group and
Agro Employee Plan, or otherwise involving any AFA Group and Agro Employee Plan
(other than routine claims for benefits).
5.20. Investment. Each Seller and the Agro Seller (a) understands that
the KTI Common Stock to be received by such Person has not been, as of the date
hereof, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state securities laws, and is being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering, (b) understands that the KTI Common Stock may not be reoffered,
resold, pledged or otherwise transferred except pursuant to an effective
registration statement or in accordance with another exemption from the
registration requirements of the Securities Act, (c) is acquiring the KTI Common
Stock solely for his own account as a principal, for investment purposes, and
not with a view to the sale or distribution thereof except pursuant to the
Registration Rights Agreement, (d) has received certain information concerning
the Buyer and KTI and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks
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inherent in holding the KTI Common Stock, (e) is able to bear the economic risk
and lack of liquidity inherent in holding the KTI Common Stock, (f) is a
sophisticated investor with knowledge and experience in business and financial
matters, and (g) is an "accredited investor" (as such term is defined under the
Securities Act).
5.21. Title to Assets. Each of the corporations comprising the AFA
Group and Agro have good and marketable title to, or a valid leasehold interest
in, the properties and assets used by them, located on their premises, or shown
on the Intern Balance Sheet or acquired after the date thereof, free and clear
of all Liens, except for properties and assets disposed of in the ordinary
course of business since the date of the Intern Balance Sheet, except as set
forth in Schedule 5.6.
5.22. Subsidiaries. None of the corporations comprising the AFA Group
or Agro have any Subsidiaries.
5.23. Undisclosed Liabilities. None of the corporations comprising the
AFA Group, Agro, or any of their respective affiliates has any material
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes), except for (i) liabilities set forth on the face of the Intern Balance
Sheet (rather than in any notes thereto) and (ii) liabilities which arose
thereafter in the ordinary course of business.
5.24. Certain Business Relationships. Other than the Apollo Lease, none
of the Sellers or the Agro Seller or their respective Affiliates has been
involved in any material business arrangement or relationship with any of the
corporations comprising the AFA Group or Agro within the past 12 months, and
none of the Sellers or the Agro Seller or their respective Affiliates owns any
material asset, tangible or intangible, which is used in the business of any of
corporations comprising the AFA Group or Agro.
5.25. Disclosure. The representations and warranties contained in this
Article 5 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article 5 not misleading.
5.26. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. Each Seller and the Agro Seller shall deliver
a certificate certifying the revenue of such corporation comprising the AFA
Group and Agro in calendar year 1998 ("1998 Revenue") and the assets and
liabilities of such corporation comprising the AFA Group and Agro as of the date
of the most recent regularly prepared balance sheet of such corporation
comprising the AFA Group and Agro (the "Recent Asset Value"). Each of the
Sellers' and the Agro Seller's gross assets are less than $10 million.
5.27. Pooling. To the best knowledge of the Sellers and the Agro Seller
none of the companies comprising the AFA Group or Agro or any of their
respective Affiliates has through the date of this Agreement taken or agreed to
take any action that would prevent the Buyer from accounting for the business
combination to be effected by the transactions contemplated by this Agreement as
a "pooling of interests" in conformity with GAAP.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers and the Agro Seller as
follows:
6.1. Organization and Standing of Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to enter
into this Agreement and the Escrow Agreement and perform its obligations
hereunder and thereunder.
6.2. No Violation. The execution and delivery of this Agreement and the
Escrow Agreement does not and the consummation by the Buyer of the transactions
contemplated hereby and thereby does not and will not (i) violate or conflict
with any provision of the articles of incorporation or the bylaws of the Buyer,
(ii) violate or conflict with, or result (with the giving of notice or lapse of
time or both) in a violation of or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, license, agreement of other instrument or
obligation to which Buyer is a party or by which any of its assets may be bound,
except for such violations or defaults (or rights of termination, cancellation
or acceleration) as to which requisite waivers or consents have been obtained,
or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or any of its assets.
6.3. Authorization; Enforceability; Consents
(a) This Agreement, the Escrow Agreement and the other agreements
and instruments contemplated by this Agreement or the Escrow Agreement to which
the Buyer is a party or a signatory have been duly authorized, executed and
delivered by Buyer and constitute the legal, valid and binding obligations of
the Buyer enforceable in accordance with their respective terms. All necessary
corporate proceedings of the Buyer, other than the approval by the Board of
Directors of the Buyer and the approval of Key Trust Company, National
Association, as Agent, have been taken to authorize this Agreement, the Escrow
Agreement and the other agreements contemplated by this Agreement or the Escrow
Agreement and all transactions contemplated hereby and thereby.
(b) Except as specifically set forth on Schedule 6.3 (b), no
Consent is required to be obtained by the Buyer or any Affiliate from, and no
notice or filing is required to be given by the Buyer or any Affiliate to or
made by the Buyer or any Affiliate with, any Governmental Authority or other
Person in connection with the execution, delivery and performance by the Buyer
of this Agreement and the Escrow Agreement, other than in all cases where the
failure to obtain such Consent or to give or make such notice or filing would
not, individually or in the aggregate, materially impair the Buyer's ability to
effect the Closing.
6.4. No Litigation. There is no litigation, action, claim, proceeding,
or governmental investigation pending or to the Buyer's knowledge threatened
against the Buyer which may materially affect the Buyer's ability to perform its
obligations hereunder, under the Escrow
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Agreement or under any agreement or instruments contemplated by this Agreement
or the Escrow Agreement and, to the knowledge of the Buyer, there is no basis
for any such action.
6.5. Financing. The Buyer has available to it sufficient funds to
enable it to consummate the transactions contemplated by this Agreement and the
Escrow Agreement.
6.6. Investment Intent. The Buyer (i) understands that the Securities
have not been, as of the date hereof, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(ii) understands that the Securities may not be reoffered, resold, pledged or
otherwise transferred except pursuant to an effective registration statement or
in accordance with another exemption from the regulation requirements of the
Securities Act, (iii) has received certain information concerning the AFA Group
and Agro and has had the opportunity to obtain additional information as desired
in order to evaluate the merits and the risks inherent in holding the
Securities, (iv) is a sophisticated investor with knowledge and experience in
business and financial matters, (v) is able to bear the economic risk and lack
of liquidity inherent in holding the Securities, (vi) is an "accredited
investor" as such term is defined under the Securities Act and (vii) is
acquiring such Securities for its own account as principal, for investment
purposes, and not with a view to the sale or distribution thereof.
6.7. Securities Exchange Act of 1934. KTI has previously furnished the
Sellers and the Agro Seller with true and complete copies of (i) the KTI 1997
Annual Report on Form 10-K (the "KTI 1997 Annual Report"), as filed with the
Securities and Exchange Commission (the "Commission"), (ii) the annual report to
shareholders of KTI for the year ended December 31, 1997, (iii) the KTI
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and
September 30, 1998 (the "KTI Quarterly Report"), (iv) all of its Current Reports
on Form 8-K filed subsequent to December 31, 1997, and (v) proxy statements
relating to all meetings of its stockholders (whether annual or special) since
December 31, 1997 (collectively, the "KTI SEC Filings"). As of their respective
dates, the KTI SEC Filings did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited financial statements and unaudited
interim financial statements of KTI included or incorporated by reference in the
KTI 1997 Annual Report and the KTI Quarterly Report, respectively, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of KTI and its subsidiaries as at the
dates thereof and the results of their operations and changes in financial
position for the periods then ended.
ARTICLE 7.
CONDITIONS PRECEDENT
7.1. General Conditions. The obligations of each party to this
Agreement to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction at or prior to the Closing of the following
conditions:
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(a) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or other
Governmental Authority that prohibits the consummation of the transactions
contemplated by this Agreement; and
(b) All filings under all laws applicable to the transactions
contemplated by this Agreement shall have been made and any required waiting
period under such laws applicable to the transactions contemplated by this
Agreement shall have expired or been earlier terminated.
7.2. Conditions to Obligations of the Buyer. The obligations of
Buyer under this Agreement to purchase the Securities and to consummate the
other transactions contemplated by this Agreement are subject to the
fulfillment, at or prior to the Closing, of each of the following conditions,
each of which may be waived in whole or in part by the Buyer in its sole
discretion:
(a) The representations and warranties of the Sellers and the Agro
Seller contained herein shall be true and correct in all material respects on
and as of the Closing Date with the same effect as though made on and as of the
Closing Date, except (i) representations expressly made as of a particular date
and (ii) as modified by transactions permitted by this Agreement.
(b) The Sellers and the Agro Seller shall have duly performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
(c) The Sellers and the Agro Seller shall have delivered to the
Buyer a certificate, dated the Closing Date, to the effect set forth in
paragraphs (a) and (b) of this Section 7.2.
(d) All the actions referred to in Section 4.5(a) shall have been
consummated and any necessary Consents to this transaction shall have been
obtained.
(e) All necessary parties shall have executed and delivered the
Escrow Agreement.
(f) The Buyer shall have received environmental audits for the
real estate of the AFA Group and Agro, which are satisfactory to it, in its sole
discretion.
(g) The Board of Directors of the Buyer has adopted a resolution
approving the transactions contained in this Agreement.
(h) Key Trust Company, National Association has approved the
transactions.
(i) Apollo shall have entered into the Apollo Lease.
7.3. Conditions to Obligation of Sellers and the Agro Seller. The
obligations of each Seller and the Agro Seller under this Agreement to sell the
Securities and to consummate the other transactions contemplated by this
Agreement is subject to the fulfillment, at or prior to the Closing, of each of
the following conditions, each of which may be waived in whole or in part by the
Sellers and the Agro Seller in their sole discretion:
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(a) The representations and warranties of the Buyer contained
herein shall be true and correct in all material respects on and as of the
Closing Date with the same effect as though made on and as of the Closing Date,
except (i) representations expressly made as of a particular date and (ii) as
modified by transactions permitted by this Agreement.
(b) The Buyer shall have duly performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing.
(c) The Buyer shall have delivered to the Sellers and the Agro
Seller a certificate of the Buyer, dated the Closing Date, to the effect set
forth in paragraphs (a) and (b) in this Section 7.3.
(d) All necessary parties shall have executed and delivered the
Escrow Agreement.
(e) Buyer shall have executed and delivered Employment Agreements
to ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ in the forms of Exhibits D-1 and D-2
attached hereto.
(f) KTI, Inc. shall have executed and delivered Registration
Rights Agreements in the forms of Exhibits E-1 through E-3 attached hereto.
(g) Apollo shall have entered into the Apollo Lease.
ARTICLE 8.
THE CLOSING
8.1. Closing. The consummation of the transaction contemplated by this
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, 1290 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, on January 27,
1999, or at such other time and place as mutually agreed to by the parties
(hereinafter referred to as the "Closing Date"). The transaction is to be
effective as of 11:59 p.m. New York City time on the Closing Date (the
"Effective Time").
8.2. Deliveries at Closing.
(a) Deliveries by Sellers and the Agro Seller. At or prior to the
Closing, the Sellers and the Agro Seller shall deliver to Buyer the following:
(i) Certificates evidencing the Securities duly endorsed in
blank for transfer by the Sellers and the Agro Seller, with signature
guarantees, corporate resolutions and certificates of incumbency, to
the extent applicable.
(ii) Corporate certificates of good standing for each of the
corporations comprising the AFA Group and Agro issued by the Secretary
of State (or similar applicable offices) of their respective
jurisdictions of incorporation.
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(iii) A certificate of the secretary of each of the
corporations comprising the AFA Group and Agro certifying and attaching
copies of the certificate of incorporation, bylaws and resolutions
approving the transactions contemplated by this Agreement for each of
the corporations comprising the AFA Group and Agro.
(iv) Such other documents, certificates and items reasonably
requested by the Buyer to consummate the transactions contemplated
hereby and effect the transfer of the Securities as provided herein.
(v) A certificate of an officer of each corporation which owns
the real estate and improvements relating to each Survey certifying
that the respective Survey reflects the current status of the real
estate and improvements to which such Survey relates.
(b) Deliveries by the Buyer. Upon the Sellers and the Agro
Sellers' tender of delivery of the foregoing at the Closing, the Buyer shall
deliver to, or for, the Sellers and the Agro Seller the following:
(i) The number of shares of KTI Common stock equal to the
difference between the Base Purchase Price and the Escrow Amount (and
the Escrow Amount shall be delivered to the Escrow Agent by the Buyer
within five (5) days of the Closing).
(ii) A corporate certificate of good standing for Buyer issued
by the Secretary of State of Delaware.
(iii) A copy of the resolutions adopted by the Board of
Directors of the Buyer approving the transactions contemplated by this
Agreement.
(iv) Such other documents, certificates and items reasonably
requested by the Sellers and the Agro Seller to consummate the
transactions contemplated hereby.
ARTICLE 9.
TERMINATION
9.1. Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing:
(a) by mutual written consent of the Buyer, the Sellers and the
Agro Seller; or
(b) by any of the Buyer, the Sellers or the Agro Seller by giving
written notice of such termination to the other party, if the Closing shall not
have occurred by January 27, 1999; or
(c) by any of the Buyer, the Sellers or the Agro Seller if a
Governmental Authority shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
reasonable best efforts to lift), in each case permanently restraining,
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enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action has become final and
nonappealable.
9.2. Effect of Termination. If this Agreement is terminated in
accordance with the foregoing provisions, all further obligations of the parties
hereunder shall terminate, except that the obligations contained in Sections
3.1(b) (Confidentiality), 11.1 (Expenses), 11.3 (Notices) and 11.7 (Governing
Law) shall survive. In the event of a termination contemplated hereby by any
party pursuant to Section 9.1, the transactions contemplated hereby shall be
abandoned without further action by any party hereto, and there shall be no
obligation of or liability to any party hereto, or their respective
shareholders, directors, officers, employees, representatives or agents, unless
such termination was the result of an intentional breach of any representation,
warranty, covenant or other provision in this Agreement, or an intentional act
or omission that resulted in any representation, warranty, covenant or other
provision in this Agreement to be breached, in which case the party who breached
the representation, warranty, covenant or other provision shall be liable at law
or in equity to the other party for the violation or breach of this Agreement.
ARTICLE 10.
INDEMNIFICATION
10.1. Indemnification by the Sellers and the Agro Seller. The Sellers
and the Agro Seller and their successors in interest, severally and not jointly,
shall reimburse, indemnify and hold harmless the Buyer as provided in this
Article 10, at all times on and after the date of this Agreement, against and in
respect of any and all claims, causes of action, suits, proceedings, demands,
assessments, judgments, losses, damages, costs, expenses and liabilities
whatsoever (individually a "Loss" and collectively "Losses") arising out of,
related to, resulting from or based upon any of the following:
(a) any breach or non-fulfillment of any of the covenants or
agreements of any of the Sellers or the Agro Seller contained in or made
pursuant to this Agreement;
(b) any inaccuracy or breach of any of the representations and
warranties of any of the Sellers or the Agro Seller that are contained in this
Agreement, or in any certificate furnished to the Buyer hereunder (all Losses
arising under clause (i) and (ii) of this Section 10.1 are collectively referred
to herein as "Buyer Losses"); provided, however, that the Sellers and the Agro
Seller shall not be required to indemnify the Buyer under this Article 10 in
respect of any Buyer Losses based on a breach of a representation or warranty
until the aggregate amount of all such Buyer Losses exceeds $25,000, whereupon
the Sellers and the Agro Seller shall be required to indemnify Buyer in respect
of such Buyer Losses to the extent of such Buyer Losses. Any provision in this
Agreement to the contrary notwithstanding, Sellers and the Agro Seller's
collective liability for Buyer Losses under this Article 10 (other than such
Losses as were the result of fraud by a Seller or the Agro Seller, in which
event there shall be no such limitation or recourse) shall be satisfied only by
recourse to the Escrow Amount remaining in the Escrow Account and after such
time as the Escrow Amount has been expended or distributed in accordance with
the provisions of the Escrow Agreement, the Sellers and the Agro Seller shall
have no further obligation to indemnify the Buyer from and against any future
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Buyer Losses suffered by reason of such breaches; provided, however, that,
notwithstanding the foregoing, the representation and warranties set forth in
Section 5.1 (Capital Stock), 5.16 (Environmental Matters) and 5.17 (Taxes) shall
survive the Closing and the termination of the Escrow Account, and shall
continue in full force and effect for the applicable statutes of limitations
governing any claims which can be brought for matters addressed by such
representations and warranties and shall not be limited in amount to the Escrow
Amount, but shall be limited in amount to the Aggregate Purchase Price; and
(c) any Loss resulting from any of the matters set forth on
Schedule 5.14.
10.2. Indemnification by Buyer. Buyer and its successors in interest
shall, and shall cause the AFA Group and Agro and its successors in interest to
indemnify and hold each Seller, the Agro Seller and their respective successors
and assigns, at all times on and after the date of this Agreement, harmless from
and against and in respect of any and all Losses arising out of, related to,
resulting from or based upon any of the following: (i) any breach or
non-fulfillment of any of the covenants or agreements of the Buyer contained in
or made pursuant to this Agreement and (ii) any inaccuracy or breach of any of
the representations or warranties of the Buyer that are contained in this
Agreement or in any certificate or other instrument furnished to any Seller or
the Sellers and the Agro Seller hereunder (all Losses arising under clause (i)
and (ii) of this Section 10.2 are collectively referred to herein as "Seller
Losses") and (iii) any liability or obligation of the AFA Group and Agro except
for (A) liabilities or obligations that constitute a breach of this Agreement or
(B) other than payables and liens which arose in the ordinary course of
business, which arose, or were the result of facts or circumstances existing,
prior to the Closing Date.
10.3. Procedure.
(a) Notice. Promptly after receipt by a party or parties seeking
indemnification under this Article 10 ("Indemnitee") of notice of any loss,
claim, liability or expense to which the indemnification obligations hereunder
would apply, taking into account the thresholds contained in the proviso to
Section 10.1 above (a "Claim"), the Indemnitee shall give notice thereof in
writing to the other party or parties who are to provide indemnification
("Indemnitor") of the facts that are the basis of the Claim. Subject to Section
10.6, the amount of the Claim as set forth in the notice shall be based upon the
Indemnitee's good faith estimate of the maximum exposure to Indemnitee
(including, but not limited to, attorneys' and other professionals' fees)
presented under the circumstances of the Claim; provided, however, that the
amount set forth in the notice of Claim shall not limit Indemnitee's rights to
indemnification under this Article 10 if the ultimate Loss to Indemnitee shall
exceed the amount set forth in the notice of Claim.
(b) Third Party Claims. If any Claim is based upon an asserted
liability or obligation to a person or entity that is not a corporation
comprising the AFA Group, Agro or a party to this Agreement (a "Third Party
Claim"), Indemnitor shall have the right to defend or settle such Third Party
Claim and Indemnitee shall have the right to participate in such defense or any
settlement negotiations. If any Claim is not a Third Party Claim, such Claim
shall be satisfied as provided in subsection (a). Notwithstanding the foregoing,
Indemnitor may not settle any Third Party Claim without the prior written
consent of Indemnitee, which consent shall not be unreasonably withheld or
delayed (it being acknowledged and agreed that Indemnitee may withhold its
consent if, among
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other things, a proposed settlement (i) would not include as an unconditional
term thereof a release of Indemnitee from all liability in respect of such Claim
or (ii) involves any relief other than the payment by Indemnitor of money
damages).
10.4. Nature and Survival of Representations and Warranties and Certain
Liabilities. The representations, warranties, covenants, indemnities and
agreements of the parties contained herein or in any instrument or document
delivered or to be delivered pursuant to this Agreement shall survive the
Closing, but (i) all claims for any losses or damage arising from the
transactions contemplated by this Agreement shall be made pursuant to, and
subject to the limitations of, this Article 10, and (ii) the parties'
indemnification obligations pursuant to this Article 10 shall terminate on, and
all representations and warranties contained in this Agreement shall survive
until, the termination of the Escrow Account, except with respect to (A) the
matters set forth in Sections 10.1 and 10.2 and (B) Losses related to Claims for
which notice has been given, on or before such anniversary, pursuant to Section
10.3.
10.5. Subrogation. The rights of any Indemnitor shall be subrogated to
any right of action which the Indemnitee may have against any other person with
respect to any matter giving rise to a claim for indemnification under this
Agreement.
10.6. Net Indemnity Payment. Any amounts payable under Section 10.1 or
Section 10.2 shall be treated by the Buyer, the Sellers and the Agro Seller as a
further adjustment to the Base Purchase Price of the Securities, and shall be
calculated after giving effect to any proceeds received from insurance policies
covering the damage, loss, liability, or expense that it the subject to the
claim for indemnity. Sellers and the Agro Sellers are permitted to make any
indemnification payments required hereunder in cash as opposed to from the
Escrow Amount.
ARTICLE 11.
GENERAL PROVISIONS
11.1. Expenses. Except as otherwise expressly provided in this
Agreement, the Buyer on one hand, and the Sellers and the Agro Seller on the
other, shall pay their own expenses and costs incurred in connection with the
negotiations and consummation of this Agreement and the transactions
contemplated hereby.
11.2. Brokerage. There are no broker's or finder's fees for commissions
payable to any person as a result of this Agreement or the transactions
contemplated hereby. The Sellers and the Agro Seller, jointly and severally,
agree that they will defend, indemnify and hold the Buyer harmless from and
against any and all damages, liabilities and expenses, including reasonable
attorneys' fees, which may be incurred by the Buyer as a result of any claims
asserted against the Buyer by any broker or other person on the basis of any
arrangement made or alleged to have been made by the Sellers and the Agro Seller
or any corporation comprising the AFA Group or Agro. The Buyer agrees that it
will defend, indemnify and hold each Seller and the Agro Seller and their
respective successors and assigns harmless from any and all damages, losses,
liabilities and expenses, including reasonable attorneys' fees, which may be
incurred by such Seller or the Agro Seller as a result of any
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claims asserted against such Seller or the Agro Seller by any broker or other
person on the basis of any arrangements or agreements made or alleged to have
been made by the Buyer.
11.3. Notices. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
delivered in person, sent by overnight courier service (with all fees prepaid)
or mailed by registered or certified mail, return receipt requested (with
postage prepaid), as follows:
Notices to the Buyer: KTI Recycling of New Jersey, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Sellers and the Agro ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Seller: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Bivonia, Cohen, Kunzman, Coley, Yospin,
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
Any such notice, request, demand or other communication shall be given to such
other representative or at such other address as a party to this Agreement may
furnish to the other parties in writing pursuant to this Section 11.3.
11.4. Further Assurances. Each of the Sellers and the Agro Seller and
the Buyer will, from time to time after the Closing, at the Buyer's or the
Sellers and the Agro Seller's request, as the case may be, execute, acknowledge
and deliver or will cause to be executed, acknowledged and delivered, all such
additional documents and will take all such further action as may be reasonably
required by the Buyer or the Sellers and the Agro Seller, as the case may be, in
order to consummate the
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transactions contemplated by this Agreement and to convey and confirm the
benefits intended by this Agreement and will provide such information after the
Closing as the Buyer or the Sellers and the Agro Seller, as the case may be, may
reasonably request.
11.5. Resolution of Disputes. (a) If a dispute arises concerning or
related to this Agreement or the transactions contemplated hereby, the parties
agree to enter into good faith efforts to resolve the dispute at a meeting or
meetings in which a senior official or officials of the Buyer with
decision-making power and the Sellers and the Agro Seller shall participate. The
purpose of such negotiations will be an honest effort to allow a corporate
official of the Buyer and the Sellers and the Agro Seller to resolve the dispute
prior to expensive and lengthy litigation. The parties shall have complete
discretion as to what procedures shall be used and what agenda shall be
discussed.
(b) If the dispute cannot be resolved as such meeting or
meetings, the parties agree to submit the dispute to nonbinding mediation by a
mediator mutually selected by the parties. If the parties are unable to agree
upon a mediator, then the mediator shall be appointed by the American
Arbitration Association. In any event, the mediation shall take place within
thirty (30) days of the date a party gives the other parties written notice of
its desire to mediate the dispute.
(c) Any such meeting or mediation shall be held as confidential
by all parties and the parties hereto do commit themselves that they shall not
disclose either the existence of such meetings or mediation or the content
thereof. Any participation in or initiation of such meetings or negotiations
shall not be deemed to be an admission of liability and no statement made or
provided in or related thereto shall be construed as a statement against
interest or otherwise disclosed or used in any proceeding involving the parties.
(d) The parties agree not to file litigation (whether by original
complaint, third party complaint or otherwise) before the completion of the
meetings and mediation. In the event a party files litigation prior to the
conclusion of such meetings and mediation, any other party may request the Court
to grant a stay of the litigation while the parties attempt to settle the
litigation through such meetings and mediation, and the party which has filed
the litigation (i) agrees not to oppose such a stay and (ii) shall be liable to
the other parties for the reasonable attorney fees and expenses of the other
parties incurred in seeking a stay of the litigation pending the conclusion of
such meetings and mediation.
11.6. Assignment; Successors In Interest.
(a) Except with the prior written consent of the other parties
hereto (which shall not be unreasonably withheld), no transfer or assignment by
any party of any of its rights under this Agreement shall be made to any person
or entity.
(b) This Agreement shall be binding upon the parties to this
Agreement and their respective successors and assigns (whether or not
permitted), shall inure to the benefit of the parties to this Agreement and
their respective permitted successors and assigns (and to or for the benefit of
no other person or entity, whether an employee or otherwise, whatsoever), and
any reference to a party to this Agreement shall also be a reference to a
successor or assign.
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11.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New Jersey regardless of principles of conflict
of laws. The courts of the State of New Jersey or of the United States sitting
in the State of New Jersey shall have the exclusive jurisdiction over any and
all claims, lawsuits and litigation relating to or arising out of this
Agreement, the subject matter hereof or the transactions contemplated hereby.
Each of the parties hereto hereby irrevocably (a) submits to the personal
jurisdiction of such courts over such party in connection with any litigation,
proceeding or other legal action arising out of or in connection with this
Agreement, (b) waives to the fullest extent permitted by law any objection to
the venue of any such litigation, proceeding or action which is brought in any
such court and (c) agrees to the mailing of service of process to the address
specified above for such party as an alternative method of service of process in
any legal proceeding brought in any such court.
11.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
11.9. No Third Party Rights. This Agreement is intended to be solely
for the benefit of the parties to this Agreement and is not intended to confer
any benefits upon, or create any rights in favor of, any person other than the
parties to this Agreement and their heirs, successors and assigns.
11.10. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
in invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in any acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
11.11. Obligations of the AFA Group and Agro. Whenever this Agreement
requires any corporation comprising the AFA Group or Agro to take any action,
such requirement shall be deemed to include an undertaking on the part of the
Sellers and the Agro Seller (prior to Closing) and on the part of the Buyer
(after Closing) to cause such corporation to take such action.
11.12. Entire Agreement. This Agreement, which is deemed to include all
exhibits, schedules and certificates delivered pursuant to the terms hereof, and
the Confidentiality Agreement embody the entire agreement of the parties hereto
with respect to the subject matter hereof and supersede all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, whether expressed or implied (collectively,
"Prior Inducements"), by any Seller or the Agro Seller, or any officer, employee
or representative of any party hereto with respect thereto. The Buyer, the
Sellers and the Agro Seller acknowledge and agree that in entering into this
Agreement none of them has relied upon any such Prior Inducements, and Buyer,
the Sellers and the Agro Seller agree that none of them will seek to initiate or
maintain any suit, action, claim or defense based upon or arising out of any
Prior Inducement.
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11.13. Amendment; Waiver. This Agreement may be amended, and any
provision hereof waived, but only in a writing signed by the party against whom
such amendment or waiver is sought to be enforced. The granting of any waiver
with respect to any failure to comply with any provision of this Agreement shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply with any provision of this Agreement.
11.14. Headings. Headings and numbers have been set forth herein for
convenience only and are not to affect the construction or be taken into
consideration in interpreting this Agreement.
11.15. Fair Construction. This Agreement shall be deemed to be the
joint work product of the Buyer, the Sellers and the Agro Seller without regard
to the identity of the draftsperson, and any rule of construction that a
document shall be interpreted or construed against the drafting party shall not
be applicable.
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IN WITNESS WHEREOF the parties have duly executed this Agreement as of
the day and year first above written.
BUYER:
KTI Recycling of New Jersey, Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
SELLERS:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Attorney in Fact for
----------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
The AFA Group, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
AFA Pallet Co., Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Advanced Enterprises Recycling, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
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Allied Equipt. & Sales Corp., Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
American Supplies Sales Group, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Artic, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Atlantic Transportation Technologies, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Agro Products Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------
Attorney in Fact for
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
35
