1
ASSET PURCHASE AGREEMENT
between
KTI NEW JERSEY FIBERS, INC.
and
ATLANTIC COAST FIBERS, INC.
Dated as of August 21, 1998
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Table of Contents
of
Asset Purchase Agreement
Section and Heading Page
Page
1. PURCHASE AND SALE.....................................................1
1.1. Purchase and Sale of Assets................................1
1.2. Excluded Assets............................................2
1.3. Method of Conveyance.......................................3
1.4. Assumed Obligations........................................4
2. PURCHASE PRICE AND CLOSING............................................4
2.1. Purchase Price.............................................4
2.2. Allocation of Purchase Price...............................6
2.3. Closing....................................................6
2.4. Payment of Purchase Price..................................6
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER..........................7
3.1. Corporate Organization.....................................7
3.2. Authorization..............................................8
3.3. No Violation...............................................8
3.4. Financial Statements.......................................8
3.5. No Undisclosed Liabilities.................................9
3.6. Accounts Receivable........................................9
3.7. Inventories...............................................10
3.8. Interim Operations........................................10
3.9. Compliance with Law; Necessary Authorizations.............12
3.10. Title to Assets...........................................13
3.11. Plant and Equipment.......................................14
3.12. Patents, Trademarks, and Trade Names......................14
3.13. Leases....................................................15
3.14. Taxes.....................................................16
3.15. Contracts and Commitments.................................17
3.16. Customers and Suppliers...................................18
3.17. Agreements in Full Force and Effect.......................19
3.18. Insurance.................................................19
3.19. Labor.....................................................20
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3.20. Litigation, Judgments, Decrees............................21
3.21. No Condemnation or Expropriation..........................21
3.22. Consents and Approvals of Governmental
Authorities and Others..................................21
3.23. Employee Benefit Plans; Pension Plans.....................21
3.24. Brokers and Finders.......................................23
3.25. Personnel.................................................23
3.26. Accuracy of Representations and Documents.................23
3.27. Distinct Entity...........................................23
3.28. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇.........................................23
3.29. Books and Records.........................................23
3.30. Small Business Set-Asides.................................23
3.31. Waste Treatment and Storage...............................23
3.32. Remedial Action Claim Notices Received....................24
3.33. Investment Representations................................24
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER..........................25
4.1. Corporate Organization, Etc...............................25
4.2. Authorization, Etc........................................25
4.3. No Violation..............................................25
4.4. Common Stock..............................................25
5. CERTAIN COVENANTS AND AGREEMENTS.....................................25
5.1. Full Access...............................................26
5.2. Consents..................................................26
5.3. Licenses and Permits......................................26
5.4. Notice of Claims and Investigations.......................26
5.5. No Solicitation or Negotiation of Other Offers............26
5.6. Press Releases............................................27
5.7. Consummation of Transactions..............................27
5.8. Post-Closing Cooperation..................................27
5.9. Risk of Loss..............................................27
5.10. Outstanding Checks and Accrued Employee Benefits..........27
5.11. Post-Closing Authority....................................27
5.12. Non-Competition and Nondisclosure.........................28
5.13. Change of Name............................................29
5.14. Income Taxes..............................................29
5.15. Employees.................................................29
5.16. Supplements to Disclosure Schedule; Notice and Cure.......29
6. CONDUCT OF THE SELLER'S BUSINESS PENDING THE CLOSING.................30
6.1. Regular Course of Business................................30
6.2. Subsidiaries..............................................30
6.3. Organization..............................................30
6.4. Certain Changes...........................................30
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6.5. Insurance; Property.......................................32
6.6. No Default................................................32
6.7. Compliance with Laws......................................32
6.8. Representations and Warranties............................32
7. CONDITIONS TO THE OBLIGATIONS OF THE SELLER..........................32
7.1. Representations and Warranties True.......................32
7.2. Performance...............................................32
7.3. No Proceeding.............................................32
7.4. Buyer's Officer's Certificates............................33
7.5. Agreements................................................33
7.6. Registration Rights Agreement.............................33
7.7. Additional Documents......................................33
7.8. Car Lease Assumption......................................33
8. CONDITIONS TO THE OBLIGATIONS OF BUYER...............................33
8.1. Representations and Warranties True.......................33
8.2. Performance...............................................34
8.3. No Proceeding.............................................34
8.4. Seller's Officer's Certificates...........................34
8.5. Material Change...........................................36
8.6. Certification of Non-Foreign Status.......................36
8.7. Due Diligence.............................................36
8.8. Compliance With Bulk Sales Law............................36
8.9. Proxy Statement and Shareholders' Meeting.................36
8.10. Employment Agreements.....................................36
8.11. Additional Documents......................................36
8.12. Credit Cards..............................................36
8.13. ▇▇▇▇▇▇▇▇ Brothers.........................................36
8.14. Lease.....................................................36
8.15. Termination of Security Interests.........................36
8.16. Vehicle Conveyance........................................36
8.17. Assignment of Insurance Policies..........................37
8.18. Amendment to 401(k) Plan..................................37
8.19. Lender Requirements.......................................37
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION..........37
9.1. Survival of Representations...............................37
9.2. Statements as Representations and Warranties..............37
9.3. Remedies Cumulative.......................................37
9.4. Buyer's Indemnity.........................................37
9.5. The Seller's Indemnity....................................38
9.6. Successors to the Seller..................................39
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9.7. Indemnity Procedure.......................................39
10. TERMINATION..........................................................40
10.1. Methods of Termination....................................40
10.2. Procedure Upon Termination................................41
10.3. Effect of Termination.....................................41
11. MISCELLANEOUS PROVISIONS.............................................41
11.1. Amendment and Modification................................41
11.2. Waiver of Compliance......................................41
11.3. Expenses..................................................41
11.4. Notices...................................................41
11.5. Binding Effect; Assignment................................42
11.6. Governing Law.............................................42
11.7. Counterparts..............................................42
11.8. Headings..................................................42
11.9. Entire Agreement..........................................42
11.10. Third Parties.............................................43
11.11. Severability..............................................43
Exhibit A Real Property Lease
Exhibit B Instruments of Conveyance
Exhibit C Registration Rights Agreement
Exhibit D Employment Agreement - ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Exhibit E Employment Agreement - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit F Certification of Non-Foreign Status
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated as of August 21, 1998, between Atlantic Coast
Fibers, Inc. ("Atlantic" or the "Seller"), a New Jersey corporation, and KTI New
Jersey Fibers, Inc., a Delaware corporation (the "Buyer") and a wholly-owned
subsidiary of KTI, Inc., a New Jersey corporation ("KTI"). KTI's stock is traded
on the NASDAQ National Market System under the symbol "KTIE".
The Buyer desires to purchase from the Seller, and the Seller desires
to sell, assign and transfer to the Buyer, all of the Seller's business and
substantially all of the assets relating thereto, but excluding certain real
estate occupied by the Seller, including all improvements thereon, all on the
terms and conditions hereinafter set forth. As part of the transaction, the
Buyer intends to rent the real estate and improvements thereon, commonly known
as ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Real Estate") from the Seller
pursuant to a lease in substantially the form of Exhibit A hereto (the "Passaic
Lease"). The business operations and assets of the Seller and the business
operations and assets of Atlantic, when located at the Real Estate collectively
constitute the "Facility".
Accordingly, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties agree as follows:
1. Purchase and Sale.
1.1. Purchase and Sale of Assets. On the terms and subject to the
conditions herein set forth, at the Closing (as such term is hereinafter
defined), the Seller shall sell, transfer, convey, assign and deliver to Buyer,
and the Buyer shall purchase and accept delivery of, all of the tangible and
intangible assets and properties of every kind and description, wherever
located, of and in any way related to, the Seller's business, as of the Closing
Date (as such term is hereinafter defined), owned by the Seller or in which the
Seller has an interest, other than those assets specifically excluded pursuant
to Section 1.2 of this Agreement, such as the real estate subject to the Passaic
Lease. Such assets and properties of the Seller to be purchased by the Buyer as
herein provided shall include, without limiting the generality of the foregoing,
the following:
(a) all cash, accounts receivable, inventories of materials
and products, supplies, spare parts, shipping materials, packaging, advance
payments, deposits and other prepaid items, security deposits and credits;
(b) all of the Seller's interest as lessor and as lessee in
the Leases (as such term is defined in Section 3.13(a) hereof);
(c) all furniture, fixtures, computer hardware and software,
machinery, tools, parts, office equipment, automobiles, trucks and vehicles;
(d) any and all patents of the Seller, including without
limitation, the patents described in Section 3.12(a) of the Disclosure Schedule
which is attached hereto and forms a part
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of this Agreement (the "Disclosure Schedule"), trademarks, trade names
(including, but not limited to, the name of the Seller), service marks and
copyrights and all registrations, applications and other rights associated with
the foregoing, including the right to ▇▇▇ for past infringement;
(e) all books and operations records, including but not
limited to, all personnel files;
(f) all designs, plans, trade secrets, inventions, procedures,
research, records, processes know-how, and similar information wherever located
(collectively, the "Know-How");
(g) all of the Seller's interest in and to the Seller's
telephone, facsimile and telex (if any) numbers and telephone and other
directory listings;
(h) all stationery, purchase order and other forms, labels,
shipping materials, catalogs, brochures, art work, photographs, sales
literature, promotional literature, marketing materials and advertising
material;
(i) all performance bonds of the Seller;
(j) all of the Seller's rights under all contracts and
agreements, including insurance policies (other than individual life insurance
policies on the lives of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇); and
(k) all other tangible and intangible personal property and
assets of the Seller, including without limitation, the Seller's goodwill,
franchises (other than the Seller's franchises as a corporation), permits and
licenses, including a license to use any and all patents owned or used by the
Seller which are used by the Seller in its business, customer lists, rights of
offset, causes of action, defenses, judgments, claims and demands of any nature,
benefits due to the Seller under its policies of insurance and fidelity bonds
with respect to all events and periods prior to the Closing Date, in respect of
which any third party may seek to impose liability on Buyer, restrictive
covenants, confidentiality obligations and similar obligations of present and
former shareholders, officers and employees, all books, files, papers, records
and other data of the Seller (or, at the Seller's election and expense, accurate
and complete copies thereof) and all other property and rights of every kind or
nature of the Seller whether or not specifically referred to in this Agreement
and whether or not carried on the books of the Seller as an asset.
The aforesaid assets and properties to be transferred to the Buyer hereunder are
collectively referred to herein as the "Assets", and the Assets as of the date
of the Unaudited Financial Statements (as hereinafter defined) are listed in
Sections 1.1 and 1.4 of the Disclosure Schedule.
1.2. Excluded Assets. It is specifically understood and agreed by the
parties hereto that the Seller is not selling, and the Buyer is not purchasing
the following assets (the "Excluded Assets"):
(a) the Seller's franchises as a corporation and any prepaid
taxes or expenses or deferred charges in connection therewith;
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(b) the Seller's minute books, corporate seals and stock
books;
(c) the consideration to be paid by the Buyer to the Seller
pursuant to this Agreement;
(d) the shares of capital stock of the Seller;
(e) those items set forth in Section 1.2 of the Disclosure
Schedule; and
(f) the Seller's interest in the real estate and improvements
thereon commonly known as ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
1.3. Method of Conveyance.
(a) The sale, transfer, conveyance, assignment and delivery by
the Seller of the Assets to the Buyer in accordance with Section 1.1 hereof
shall be effected on the Closing Date by the Seller's execution and delivery of
assignments of leases, bills of sale and other instruments of conveyance and
transfer as applicable substantially in the forms attached hereto as Exhibit B
(collectively, the "Instruments of Conveyance").
(b) At the Closing, good and valid title to all of the Assets
shall be transferred, conveyed, assigned and delivered by the Seller to the
Buyer pursuant to this Agreement and the Instruments of Conveyance, free and
clear of any and all Liens (as defined below) except as set forth in Section
3.10 of the Disclosure Schedule. For the purposes of this Agreement, the term
"Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind whatsoever (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or
similar statute of any jurisdiction) including materialmen's, mechanics',
repairmen's, employees', operators' or other similar Liens arising in the
ordinary course of business incidental to construction, maintenance or operation
of any property of the Seller that have not as of the date hereof been filed
pursuant to law. No Lien or Liens may individually or in the aggregate interfere
materially with the use or operation by the Seller of the property affected
thereby for the purposes for which such property was acquired or is held by the
Seller.
(c) The Seller shall be responsible for and shall pay any
sales or use taxes, if applicable, payable by reason of the purchase and sale of
the Assets hereunder. The Buyer shall be entitled to pay the Seller's portion of
such taxes at the Closing and shall be entitled to deduct the same from the
amount otherwise payable to the Seller at the Closing pursuant to Section 2.4.
If any portion of such cash payment is needed to release any liens on Assets,
written pay-off letters must be delivered to the Buyer not less than five
business days prior to the Closing Date. To the extent that the exact amount of
liens has not been ascertained at the Closing Date, the Buyer may retain such
amounts as the Buyer and Seller estimate in good faith to be due. Such amounts
shall be adjusted promptly when the exact amounts due are ascertained.
(d) Notwithstanding any provision herein to the contrary, in
the period beginning on the date hereof through the Closing Date (the "Interim
Period") the Seller shall operate the business and preserve the Assets to be
transferred to the Buyer on the Closing Date,
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unless and until this Agreement is terminated, prior to the Closing Date,
pursuant to Article 10 hereof. In the event that such termination occurs, the
Seller and the Buyer shall not be obligated to each other with respect to any
actions or events occurring during the Interim Period.
1.4. Assumed Obligations. Except as expressly disclosed in Section 1.4
of this Agreement, pursuant to this Agreement, the Buyer does not assume any of
the liabilities or obligations of the Seller, whether absolute, accrued,
contingent or otherwise, incurred prior to the Closing Date. At the Closing, the
Buyer shall not assume any of the liabilities or obligations of the Seller,
whether absolute, accrued, contingent or otherwise, except for those obligations
listed in Section 1.4 of the Disclosure Schedule (the "Assumed Obligations").
2. Purchase Price and Closing.
2.1. Purchase Price. (a) The consideration (the "Purchase price") for
the Assets to be sold, transferred and conveyed by the Seller to the Buyer
pursuant to this Agreement shall be (i) an initial payment in cash of the
difference of Six Million Five Hundred Thousand and no/100 Dollars
($6,500,000.00) and the Accrued Employee Benefit Amount as of the Closing Date
(the "Cash Payment"); (ii) shares of KTI common stock, no par value per share
("Common Stock") having a fair market value of Two Million Five Hundred and
no/100 Dollars ($2,500,000.00), computed in the manner set forth in Section
2.4(b), (iii) the Incentive Payment (as hereinafter defined), and (iv) certain
incidental payments described in Section 2.4(d).
(b) The Incentive Payments shall be computed on the basis of
earnings before interest, taxes, depreciation and amortization of the combined
businesses of Seller and ▇▇▇▇▇▇▇▇ Brothers & Co., Inc., a New Jersey corporation
("▇▇▇▇▇▇▇▇ Brothers") to be conducted in the Real Estate (the "Combined
Business"). Not later than 90 days after the last day of the Annual Period (as
hereinafter defined), KTI shall prepare and deliver to the parties hereto and
▇▇▇▇▇▇▇▇ Brothers the following financial statements (the "Combined Pool
Financial Statements"): (i) a statement of operations of the Combined Businesses
for the twelve calendar month period, beginning on the first day of the calendar
month which is not less than 180 days after the Closing Date but not more than
210 days after the Closing Date (the "Annual Period"), as the same shall be
determined by the mutual agreement of Buyer, Seller and ▇▇▇▇▇▇▇▇ Brothers (the
"Annual Period Statement of Operations") and (ii) a statement calculating the
earnings before interest, taxes, depreciation and amortization of the Combined
Business ("EBITDA") for the Annual Period (the "EBITDA Statement"), derived from
the Annual Period Statement of Operations. Each of the Combined Pool Financial
Statements shall be prepared in accordance with generally accepted accounting
principles, consistently applied, and those additional accounting principles set
forth in Section 2.1 (b) of the Disclosure Schedule. The "Combined Pool" shall
be equal to the sum of (a) EBITDA during the Annual Period less Three Million
and no/100 Dollars ($3,000,000.00), multiplied by five (5.0) and (b) EBITDA
during the Annual Period less Four Million and no/100 Dollars ($4,000,000.00),
multiplied by one-half (0.5). The "Incentive Payment" due to the Seller shall be
50% of the Combined Pool. In the event that additional businesses are purchased
and are to be conducted at the Real Estate during the Annual Period, upon the
mutual agreement of the Seller and ▇▇▇▇▇▇▇▇ Brothers, such additional businesses
may be considered part of the Combined Business, in which event the calculation
of EBITDA shall be
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reduced by the cost of funds utilized to purchase such additional businesses,
which cost of funds shall be established as 15% per annum of the purchase price
for such additional businesses.
(c) The Seller shall have the right during the 45 days
following receipt of the Combined Pool Financial Statements to dispute the
calculation of EBITDA. The Seller shall either deliver a written acceptance of
such EBITDA calculation or deliver a written notice of dispute, identifying the
basis for the dispute to the extent possible and the Seller's calculation of
EBITDA ("Seller's EBITDA"). Upon receipt of the acceptance or notice of dispute
(the date of the receipt by the Buyer of such notice, the "Notice Date"), KTI
shall make payment of the Incentive Payment due in accordance with the
calculation of EBITDA set forth in the EBITDA Statement. The Seller's right to
accept or dispute the calculation of EBITDA is independent of the rights of the
▇▇▇▇▇▇▇▇ Brothers to accept or dispute the calculations of EBITDA. If either the
Seller or the ▇▇▇▇▇▇▇▇ Brothers accept EBITDA as calculated, the EBITDA
calculated shall be conclusive as to the accepting party, but not to the
non-accepting party. If the Seller fails to deliver a notice of acceptance or
dispute within the 45-day period, the Seller shall be deemed conclusively to
have accepted such calculation. Upon the earlier to occur of the Notice Date or
the expiration of the 45 day period, KTI shall make payment of the Incentive
Payment due in accordance with the EBITDA Statement (the "Incentive Payment
Date"). The Incentive Payment shall be made in the form of shares of KTI Common
Stock and the amount to be issued shall be computed by dividing such Incentive
Payment amount by the average closing sale price per share of KTI's Common Stock
for the ten day period immediately preceding the Notice Date or the last day of
the 45-day period, as the case may be.
(d) Any dispute concerning the calculation of EBITDA shall be
resolved pursuant to an agreed procedure process to be performed by a certified
public accounting firm of nationally recognized standing. KTI shall select the
certified public accounting firm, which shall be reasonably acceptable to the
non-accepting party. If the non-accepting party shall reject such certified
public accounting firm, such certified public accounting firm shall be deemed to
have been rejected by both the Seller and the ▇▇▇▇▇▇▇▇ Brothers. KTI shall then
select a second firm, which shall be used unless both the Seller and the
▇▇▇▇▇▇▇▇ Brothers reject such firm. If KTI's first two choices are rejected,
then KTI shall select a third firm, which shall be used under all circumstances,
and the Seller hereby accepts such accounting firm. The written determination
(the "EBITDA Determination") by such accounting firm of the EBITDA, pursuant to
the EBITDA Statement after considering all written objections thereto in
accordance with the foregoing procedure, shall be conclusive and binding upon
all parties. Any fees and expenses payable to such accounting firm for services
pursuant to this Section 2.1(d) shall be borne by the Seller and the Buyer
proportionately, based on the difference between the EBITDA Determination and,
on the one hand with respect to the Buyer, EBITDA as set forth in the EBITDA
Statement and, on the other hand with respect to the Seller, Seller's EBITDA. By
way of example, if EBITDA as set forth in the EBITDA Statement is lower than
EBITDA as set forth in the EBITDA Determination by $50,000 and if Seller's
EBITDA is higher than EBITDA as set forth in the EBITDA Determination by
$100,000, then the Buyer shall bear one-third of the fees and expenses payable
to such accounting firm and the Seller shall bear two-thirds of such fees and
expenses.
(e) If the amount of the Incentive Payment, as determined in
accordance with Subsection (d) above, is less than the Incentive Payment
actually made by the Seller, no later
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than 10 business days after the delivery of the EBITDA Determination, 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 Incentive Payment). If the amount of the Incentive Payment, as
determined in accordance with Subsection (d) above, is greater than the
Incentive Payment actually made by the Seller, no later than 10 business days
after the delivery of the EBITDA Determination, 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 Incentive Payment was actually made
had EBITDA equaled EBITDA as set forth in the EBITDA Determination.
(f) The consideration set forth in this Section 2.1 is
hereinafter collectively referred to as the "Purchase Price".
2.2. Allocation of Purchase Price. The parties hereby agree that the
Purchase Price for federal income tax purposes is allocated among the Assets
being purchased hereunder as set forth on Schedule 1 hereto. Notwithstanding the
foregoing, the allocation of the Purchase Price shall in no event limit the
liability of the Seller to the Buyer with respect to damages, liabilities or
expenses incurred by the Buyer with respect to any breach of the Seller's
representations, warranties, covenants or agreements set forth herein.
2.3. Closing. Subject to the provisions contained herein, the closing
of the transactions provided for in this Agreement (the "Closing") shall take
place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. (Eastern Prevailing Time) on August 20,
1998 (or such other place, time and date, as the parties hereto may agree, prior
to the last of: (a) September 15, 1998; (b) the receipt by the Buyer of all
necessary permits from the State of New Jersey or (c) the expiration of any
waiting period required by any Federal or state law). The date on which the
Closing actually occurs is herein referred to as the "Closing Date".
2.4. Payment of Purchase Price. The Buyer shall pay the Purchase Price
in the following manner:
(a) The Cash Payment shall be paid on the Closing Date in
cash. Any cash to be paid shall be sent by wire transfer of immediately
available funds to the Seller pursuant to the written wire transfer instructions
delivered by the Seller to the Buyer not less than five business days prior to
the scheduled Closing Date. If the Seller desires to use a portion of such
initial cash payment to release any liens on the assets, written pay-off letters
and appropriate wire transfer instructions must be delivered to KTI not less
than five business days prior to the scheduled Closing Date.
(b) Shares of KTI Common Stock having a fair market value of
Two Million Five Hundred and no/100 Dollars ($2,500,000.00) shall be issued to
the Seller on the Closing Date. The number of shares to be issued and delivered
shall be computed by dividing Two Million Five Hundred Thousand and no/100
Dollars ($2,500,000.00) by the average closing sale price per share of KTI's
Common Stock for the ten-day period immediately preceding the day before the
Closing Date. KTI will also execute and deliver a registration rights agreement
12
relating to such shares of Common Stock in substantially the form of Exhibit C
hereto (the "Registration Rights Agreement")
(c) The Incentive Payment shall be paid to the Seller in the
manner and at the time specified in Section 2.1. The Seller shall provide
written instructions as to the name in which such shares are to be registered,
the taxpayer identification number of the proposed registered owner of the stock
and such owner's address for dividends. Instructions for registration must be in
writing and delivered to the Buyer not less than five business days prior to the
scheduled payment date.
(d) In addition to the payments referred to in Section 2.4
(a), (b), and (c) above, on the Closing Date, the Buyer shall also make the
following payments on behalf of the Seller:
(i) The Buyer shall make a payment of $650,000.00 to
Valley National Bank, which currently is providing the Buyer with a
line of credit (the "Line of Credit"); provided, that such payment
shall only be made if (i) the amount owed by the Seller on the Closing
Date under the Line of Credit is not greater than $972,000.00 and (ii)
the Seller provides such evidence as the Buyer shall reasonably request
to demonstrate that the Seller is paying the remaining balance of the
Line of Credit on the Closing Date.
(ii) The Buyer shall make a payment of $100,000.00 to
Valley National Bank, which currently is providing the Buyer with a
loan with a principal amount of $115,000.00; provided, that such
payment shall only be made if (i) the amount owed on such loan on the
Closing Date is not greater then $115,000.00, and (ii) the Seller
provides such evidence as the Buyer shall reasonably request to
demonstrate that the Seller is paying the remaining balance of the loan
an the Closing Date.
(iii) The Buyer shall make a payment of approximately
$50,600.00 to two lenders for two vehicles presently used by Messrs.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇. in full payment of the
Seller's debt relating thereto (with any amount owed in excess thereof
being the sole responsibility of the Seller). At Closing, the Seller
shall convey title to such vehicles to Messrs. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Vehicle Conveyance").
3. Representations and Warranties of the Seller. The Seller hereby represents
and warrants to the Buyer as follows:
3.1. Corporate Organization.
(a) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of New Jersey and has all requisite
power and authority to carry on its business as it is now being conducted and to
own, lease and operate its properties and assets as and in the places where such
business is now conducted and where such properties and assets are now owned,
leased or operated.
13
(b) The Seller is not qualified or licensed to do business as
a foreign corporation in any other state.
(c) The Seller has no direct or indirect subsidiaries, or any
direct or indirect interest by stock ownership or otherwise in any corporation,
or in any firm, association or business enterprise.
(d) Section 3.1 of the Disclosure Schedule sets forth the
names of all corporations, associations, partnerships or other entities in any
way related to the Seller's business, other than the Seller, in which and any
officer, director or 10% stockholder of the Seller directly or indirectly, has
any ownership interest and describes such interest.
3.2. Authorization. The Seller has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement. The Seller
has taken all action required by law or otherwise to be taken to authorize the
Seller's execution and delivery of this Agreement and the Seller's consummation
of the transactions contemplated hereby. This Agreement is, and when executed
and delivered, the Instruments of Conveyance will be, the legal, valid and
binding obligation of the Seller, enforceable in accordance with their
respective terms.
3.3. No Violation. Neither the execution and delivery of this Agreement
by the Seller nor the consummation of the transactions contemplated hereby will
(i) violate any provision of the Certificate of Incorporation or By-Laws of the
Seller or, (ii) be in conflict with, or constitute a default (or an event which,
with or without notice, lapse of time or both, would constitute a default)
under, or result in the termination or invalidity of, or accelerate the
performance required by, or cause the acceleration of the maturity of any debt
or obligation pursuant to, any agreement or commitment to which the Seller in a
party or by which it is bound, or result in the creation or imposition of any
Lien upon any of the Assets, or (iii) violate any statute or law or any
judgment, decree, order, regulation or rule of any domestic or foreign court or
governmental authority.
3.4. Financial Statements.
(a) Section 3.4 of the Disclosure Schedule sets forth the
balance sheet, and the related statements of income, retained earnings and cash
flows for the last complete fiscal year, together with the related notes thereto
(collectively, the "Annual Financial Statements"), in each case compiled by the
independent public accountants of the Seller. The Seller makes and keeps books,
records and accounts which, in reasonable detail, accurately and fairly reflect
its transactions and dispositions of its assets, and maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to maintain
accountability for Assets and (iii) the recorded accountability for Assets is
compared with the existing Assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(b) Except as set forth in Section 3.4 of the Disclosure
Schedule, the Annual Financial Statements are complete and accurate in all
material respects taking the Seller's business as a whole and fairly present the
assets, liabilities and financial condition of the Seller as at the date
thereof, and fairly present the results of operations and changes in financial
14
position of the Seller for the period referred to therein, in all cases in
accordance with generally accepted accounting principles consistently applied.
(c) Section 3.4 of the Disclosure Schedule sets forth the
internal financial statements for the Seller as of and for the three month
period ended March 31, 1998, containing an unaudited balance sheet (the
"Balance Sheet") and the related unaudited statements of income and retained
earnings (collectively, the "Unaudited Financial Statements"). The Unaudited
Financial Statements are substantially complete and accurate in all material
respects taking the Seller's business as a whole and are historically consistent
with unaudited financial statements of the Seller for the same periods in each
fiscal year from 1996 to the present. The Annual Financial Statements and the
Unaudited Financial Statements are collectively referred to hereinafter as the
"Financial Statements".
(d) Without limiting the generality of the foregoing, except
as set forth in Section 3.5 of the Disclosure Schedule, the Annual Financial
Statements reflect all appropriate accruals, in accordance with generally
accepted accounting principles consistently applied, for vacation pay, bonuses,
medical benefits (including post-retirement medical benefits, if any), accrued
sick days and profit sharing to employees ("Accrued Employee Benefits").
3.5. No Undisclosed Liabilities. Except as set forth in Section 3.5 of
the Disclosure Schedule, the Seller had at December 31, 1997, no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), in any
way relating to the Seller, which were not fully disclosed or reserved against
in the Annual Financial Statements, which liabilities and obligations were
required to be disclosed or reserved against therein in accordance with
generally accepted accounting principles consistently applied, and the reserves
reflected in such Annual Financial Statements were adequate, appropriate and
reasonable in accordance with generally accepted accounting principles
consistently applied. Since December 31, 1997 except as set forth in Section 3.5
of the Disclosure Schedule, the Seller has not incurred any liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) in any
way relating the Seller, except those which are in the ordinary and usual course
of business and consistent with past practice.
3.6. Accounts Receivable. Except as set forth in Section 3.6 of the
Disclosure Schedule, all of the accounts receivable of the Seller which are
reflected in the Financial Statements and all of the accounts receivable of the
Seller which are presently outstanding:
(a) represent (and as of the Closing Date will represent)
sales actually made in the ordinary and usual course of business and in bona
fide transactions with unaffiliated third parties;
(b) have been collected or are current, net of reserves (for
purposes of this Agreement "current" shall mean 60 days), except as set forth in
the accounts receivable aging schedule as at March 31, 1998 which is included in
Section 3.6 of the Disclosure Schedule and is correct and complete;
(c) have not been extended or rolled over in order to make
them current;
15
(d) will be fully collectible, net of any applicable reserve
for bad debts set forth on the Balance Sheet, within 90 days from the Closing
Date; and
(e) are not disputed as to amount and validity.
The reserve for the Seller's bad debts as of March 31, 1998, both as a
percentage of total accounts receivable and in number of dollars, is set forth
in Section 3.6 of the Disclosure Schedule. All of the Seller's notes receivable,
as of March 31, 1998, are described in Section 3.6 of the Disclosure Schedule.
3.7. Inventories. Except as set forth in Section 3.7 of the Disclosure
Schedule, (i) all items of inventory are of a quality and quantity useable and
salable after the Closing Date in the ordinary and usual course of business;
(ii) all inventories not written off have been priced at the lower of cost
(using the FIFO method) or market; (iii) any unsalable inventory has been
written off and is not reflected in the Financial Statements or considered part
of the Seller's present inventory; and (iv) the quantities of each type of
inventory are not excessive, but are reasonable, adequate and appropriate for
sale in the ordinary and usual course of business.
3.8. Interim Operations. Since March 31, 1998 the business of the
Seller has been conducted only in the ordinary and usual course of business,
consistent with past practice. Without limiting the generality of the foregoing,
except as set forth in Section 3.8 of the Disclosure Schedule, the Seller has
not, since March 31, 1998 with respect to the Seller's business:
(a) suffered any material adverse change in financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
accounts receivable, inventories, reserves, business, operations or prospects;
(b) borrowed or agreed to borrow any funds or incurred,
assumed or become subject to, whether directly or by way of guarantee or
otherwise, any liabilities or obligations (absolute, accrued, contingent or
otherwise), including claims or liabilities for returns or allowances, other
than returns or allowances in the ordinary and usual course of business and
consistent with past practice;
(c) increased, or experienced any change in any assumptions
underlying, or methods of calculating, any bad debt, contingency or any other
reserve;
(d) paid, discharged or satisfied any claim, liability or
obligation (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction of liabilities and obligations which were reflected or
reserved against in the Financial Statements or were incurred in the ordinary
and usual course of business and consistent with past practice;
(e) prepaid any obligation having a fixed maturity of more
than 90 days from the date such obligation was issued or incurred, or not paid,
when due, any account payable, or sought the extension of the due date of any
account payable other than any account payable which was being contested in good
faith by the Seller;
16
(f) permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Liens except
for Liens set forth in Section 3.10 of the Disclosure Schedule;
(g) written down the value of any inventory (including
write-downs by reason of shrinkage or markdown) or written off as uncollectible
any notes or accounts receivable, except for (1) immaterial write-downs and
write-offs in the ordinary and usual course of business and consistent with past
practice and (2) unsalable inventory written down in the ordinary course of
business;
(h) canceled any debts or waived any claims or rights of
substantial value;
(i) sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
in the ordinary and usual course business and consistent with past practice;
(j) disposed of or permitted to lapse any rights to the use of
any patent, trademark, trade name, service ▇▇▇▇ or copyright used in the conduct
of the Seller's business, or disposed of or disclosed, or permitted to be
disclosed (except as necessary in the conduct of the Seller's business), to any
person other than representatives of the Buyer, any trade secret, formula,
process or similar information not theretofore a matter of public knowledge;
(k) excluding items, which have been expensed prior to March
31, 1998, made capital expenditures or commitments, in excess of $25,000.00 in
the aggregate for repairs or additions to property, plant, machinery, equipment
or tangible capital assets;
(l) made any change in any method of accounting or accounting
principle;
(m) failed to maintain its books, accounts and records in the
usual, regular and ordinary manner and in accordance with generally accepted
accounting principles consistently applied;
(n) granted or committed to any increase in the compensation
of any employee including, without limitation, any increase pursuant to any
bonus, pension, profit-sharing or other plan or commitment or made any loans or
advances to any such person;
(o) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors, key employees, stockholders or any "affiliate"
or "associate" (as such terms are defined in Rule 405 under the Securities Act
of 1933, as amended) or any immediate or extended family member of any of such
persons (collectively, the "Related Persons" and, individually, a "Related
Person"), except for compensation to such persons at rates not exceeding the
rates of compensation paid as of March 31, 1998 and advances to or reimbursement
of such persons for routine business expenses;
(p) declared, paid or set aside for payment any dividend or
other distribution (other than in cash,) in respect of its capital stock or
other ownership interests or redeemed,
17
purchased or otherwise acquired, directly or indirectly, any shares of its
capital stock or other ownership interests; or
(q) agreed, whether in writing or otherwise, to take any
action described in this Section 3.8, except as otherwise expressly permitted in
this Agreement.
3.9. Compliance with Law; Necessary Authorizations.
(a) Except as set forth in Section 3.9 (a) of the Disclosure
Schedule, the Seller has duly complied and is presently duly complying, in all
material respects, in respect of its business, operations and properties,
including the Assets, with all applicable laws (whether statutory or otherwise),
rules, regulations, orders, building and other codes, zoning and other
ordinances, permits, licenses, authorizations, judgments and decrees of all
Federal, state, local, foreign or other governmental authorities, including, but
not limited to, all applicable domestic and foreign laws, rules and regulations
relating to the safe conduct of business, employment discrimination, wages and
hours, employment of illegal aliens, antitrust, consumer protection, product
labeling, environmental protection, hazardous waste, currency exchange, and
securities.
(b) The Seller is not aware of and has not received any
written or oral notification from any third party (including but not limited to
employees and government agencies) of any present or past failure so to comply
or of any present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may materially interfere with or
prevent continued compliance with any laws, rules or regulations or which may
give rise to any liability, or otherwise form the basis of any claim, action,
suit, proceeding, hearing or investigation.
(c) The Seller has duly obtained all material permits,
concessions, grants, licenses and other governmental authorizations and
approvals necessary for the conduct of the Seller's business, each of which is
set forth in Section 3.9 of the Disclosure Schedule and is in full force and
effect; there are no proceedings pending or, to the knowledge of the Seller,
threatened, which may result in the revocation, cancellation, suspension or
modification thereof; and the consummation of the transactions contemplated
hereby will not result in any such revocation, cancellation, suspension or
modification. The Seller is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
continued compliance, or which may give rise to any liability, or otherwise form
the basis of any claim, action, suit, proceeding, hearing or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste in connection with the
Seller's business.
(d) Without limiting the generality of the foregoing, the
Seller has not transported, stored, treated or disposed, nor has it allowed or
arranged for any third persons to transport, store, treat or dispose waste to or
at: (i) any location other than a site lawfully permitted to receive such waste
for such purposes or (ii) any location designated for remedial action pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA") or any similar federal or state statute; nor has it
performed,
18
arranged for or allowed by any method or procedure such transportation or
disposal in contravention of any laws or regulations or in any other manner
which may result in liability for contamination of the environment. The Seller
has not disposed, nor has it allowed or arranged for any third parties to
dispose, of waste upon property owned or leased by it, except as permitted by
law.
(e) The Seller has not received notification of any past or
present failure by the Seller to comply with any laws, regulations, permits,
franchises, licenses or orders applicable to it or the Assets. Without limiting
the generality of the foregoing, the Seller has not received any notification
(including requests for information directed to the Seller) from any
governmental agency asserting that Seller is or may be a "potentially
responsible person" for a remedial action at a waste storage, treatment or
disposal facility, pursuant to the provisions of CERCLA, or any similar federal
or state statute assigning responsibility for the costs of investigating or
remediating releases of contaminants into the environment.
(f) Section 3.09 (f) of the Disclosure Schedule is a complete
and accurate list covering the period prior to the date hereof, as well as, to
the best of Seller's knowledge, the period prior to such (identified by address,
owner/operator, type of facility, type and form of waste, estimated volume of
waste and period of time the facility was used) to which the Seller has ever
transported, or ever caused to be transported, allowed or arranged for any third
party to transport, any type of waste material generated by the Seller's
customers or the Seller, for storage, treatment, burning, recycling or disposal
and (b) storage, treatment, burning, recycling or disposal activities which the
Seller has undertaken, at any time, at locations then or presently owned or
occupied by the Seller (such list to include property address, nature of the
Seller's interest in the property, current owner of the property, nature of the
activity conducted at such location, type and form of waste, estimated volume of
waste disposal on or in ground and period of time the activity was conducted).
3.10. Title to Assets.
(a) Section 3.10 (a) of the Disclosure Schedule contains an
accurate and complete list of all real property used, or owned, by the Seller.
(b) Section 3. l0 (b) of the Disclosure Schedule contains an
accurate and complete list of all tangible personal property reflected in the
Financial Statements of the Seller or acquired by the Seller (for use in the
Seller's business) after March 31, 1998 (except to the extent disposed of in the
ordinary course of business). Section 3.10 of the Disclosure Schedule also
contains an accurate and complete list of all property in the possession of the
Seller on the date hereof, as bailee or otherwise, which is owned by any third
party and the identity of any such third party.
(c) The Seller has, and will have at the Closing, good and
valid title to the Assets being conveyed by it hereunder.
(d) Except as set forth in Section 3.10 (d) of the Disclosure
Schedule, all of the Assets are free and clear of all title defects or
objections, Liens or other encumbrances or restrictions of any nature
whatsoever.
19
(e) Except as set forth in Section 3.10 (e) of the Disclosure
Schedule, the Assets include all rights, properties and other assets necessary
to permit the Seller to continue to conduct its business after the date hereof
to the Closing, and to permit the Buyer to conduct the Seller's business as is
being acquired hereunder after the Closing, in substantially the same manner as
the Seller's business has been and is now being conducted.
(f) Set forth in Section 3.10 (f) of the Disclosure Schedule
is:
(i) As of May 31, 1998, the number and size of
containers, stationary compactors, bailers and other processing
equipment, and any other equipment owned or leased by the Seller; and
(ii) As of May 31, 1998, the number of vehicles used
by the Seller in its business together with information as to the make,
description of body and chassis, model number, serial number and year
of each such vehicle.
Such schedule is complete and correct. All Assets so listed have been
well maintained, are fit for the purposes for which they are used and were
intended, are in good operating condition and repair, ordinary wear and tear
excepted, and are fully licensed for operation in the jurisdiction where they
are operated in the normal course of business, if such licensing is required.
3.11. Plant and Equipment.
(a) Except as set forth in Section 3.11 (a) of the Disclosure
Schedule, none of the Seller's equipment has any material defects. All such
equipment is in good operating condition repair and is adequate for the uses to
which it is being put, ordinary wear and tear excepted.
(b) Except as set forth in Section 3.11 (b) of the Disclosure
Schedule, the Seller has not received any written or oral notification that it
is in violation of any applicable anti-pollution, health or other law, ordinance
or regulation in respect of the Seller's equipment or any of the Seller's
operations and no such violation exists.
3.12. Patents, Trademarks, and Trade Names.
(a) Section 3.12 (a) of the Disclosure Schedule lists:
(i) all patents held by the Seller for use in or
which are otherwise used in the Seller's business, and all reissues,
divisions, continuations and extensions thereof and all pending patent
applications by or for the Seller's benefit, including for each such
patent the serial or patent number, country, filing and expiration date
and title;
(ii) all registered and unregistered trademarks,
trade names and service marks owned by the Seller for use in or which
are otherwise used in the Seller's business, and all pending
registrations of trademarks, trade names and service marks which are or
were intended to be used in the Seller's business, including for each
such trademark,
20
trade name or service ▇▇▇▇ the registration number, country, filing and
expiration date, ▇▇▇▇ and class, and date of application; and
(iii) all registered copyrights of the Seller or
which are used by the Seller in the Seller's business, and applications
for registration of copyrights, which are or were intended to be used
in the Seller's business, including the registration number, country,
filing and expiration date of each such copyright.
(b) Section 3.12 (b) of the Disclosure Schedule identifies all
licenses (whether as licensor, licensee or otherwise) and other contracts or
commitments to which the Seller is a party or to which the Seller or any of the
Seller's assets is otherwise subject relating to any trademarks, trade names,
service marks or copyrights (or applications for any thereof), trade secrets or
other proprietary Know-How, processes or technology which are or have been used
in or cover products that are under development or were under development in
connection with the Seller's business.
(c) Except as set forth in Section 3.12 (c) of the Disclosure
Schedule, (i) no claims have been asserted by any person to the use of any such
patents, trademarks, trade names, service marks, copyrights or to any trade
secrets, technology, Know-How or processes used by the Seller or challenging or
questioning the validity or effectiveness of any license or agreement referred
to in this Section 3.12, and there is no valid basis for any such claim; (ii)
the Seller has not, nor has been alleged to have, infringed upon any patent,
trademark, trade name, service ▇▇▇▇ or copyright or misappropriated or misused
any invention, trade secret or other proprietary information entitled to legal
protection; (iii) the Seller has not asserted any claim of infringement,
misappropriation or misuse against any person; and (iv) the Seller has good and
valid title to, or otherwise possesses adequate and exclusive rights to use, all
patents, trademarks, trade names, service marks, copyrights, inventions, trade
secrets and other proprietary information necessary to permit the Buyer, after
the Closing, to conduct the business being acquired hereunder in the same manner
as such business has been conducted.
(d) Each license agreement, contract or commitment identified
in Section 3.12 (b) of the Disclosure Schedule is a valid, legally binding
obligation of all parties thereto, enforceable against each party thereto in
accordance with its terms, and with respect to each such item there is no
default (or event which with the giving of notice or lapse of time or both would
constitute a default) by any party thereto.
3.13. Leases.
(a) Section 3.13 (a) of the Disclosure Schedule constitutes a
complete and accurate list of all personal property leases, subleases,
concessions, occupancy agreements, conditional sales agreements or other title
retention agreements (collectively the "Leases" and individually a "Lease") to
which the Seller is a party, as lessor or lessee, in connection with the
Seller's business.
(b) All Leases are valid and binding on all parties thereto
and enforceable against such parties in accordance with their terms, and are in
full force and effect; and with respect to each such Lease, there are no
existing defaults thereunder (whether or not waived by
21
lessor) and no event has occurred which (whether with or without notice, lapse
of time or both, or the happening of any other event) would constitute default
thereunder.
(c) Except as set forth in Section 3.13 (c) of the Disclosure
Schedule, all Leases (i) are free and clear of all Liens or other restrictions
of any nature whatsoever, and (ii) are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
easements (recorded or unrecorded), options, reservations or limitations of any
nature whatsoever.
3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule:
(a) The Seller has duly and accurately filed or caused to be
filed all tax reports and returns (including information returns) required to be
filed in connection with the Seller's business for all periods ending on the
date hereof and will make all such filings required to be made prior to the
Closing Date. The Seller has duly paid, or provided for in accordance with
generally accepted accounting principles, consistently applied, all taxes and
other charges due or claimed to be due from it to any federal, state, local or
foreign taxing authority (including, without limitation, those due in respect of
properties, income, franchises, licenses, sales or payrolls), except for taxes
being contested in good faith for which adequate reserves have been established.
(b) There are no tax liens upon any of the Assets except liens
for current taxes not yet due and payable.
(c) The Seller has made, for all periods ending on or before
the Closing Date, all required declarations of estimated Federal, state, local
and foreign income taxes (including, without limitation, those due in respect of
properties, income, franchises, licenses, sales or payrolls) and has paid or
provided for all taxes as shown on such declarations.
(d) There are no facts which exist or have existed which would
constitute grounds for the assessment of any tax liability against the Seller or
any of the Assets and neither the Internal Revenue Service nor any other taxing
authority is now asserting against any of the Assets, nor to the knowledge of
the Seller is there threatened, any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith. Seller has not been
audited within the past five (5) taxable years.
(e) There are no outstanding agreements or waivers binding on
the Seller (or the filer of any return of any consolidated group in which the
Seller is a member) which extend the statutory period of limitations applicable
to any tax return for any period.
(f) All taxes and other assessments and levies required to be
withheld by the Seller from customers, with respect to sales of goods, or from
employees for income taxes, social security taxes, unemployment insurance taxes
and the like have been collected or withheld, and either paid to the respective
governmental agencies or set aside in accounts and held for such purpose, or for
which the Seller has or will have adequate cash with which to pay the same.
22
3.15. Contracts and Commitments.
(a) Except as set forth in Section 3.15 (a) of the Disclosure
Schedule, the Seller has no agreements, contracts or commitments, written or
oral, which may be material to the Seller's business.
(b) Except as set forth in Section 3.15 (b) of the Disclosure
Schedule, no purchase contract or commitment of the Seller with respect to the
Seller's business, whether for raw materials, packaging or otherwise, (i)
continues for a period of more than three (3) months from the date hereof, (ii)
is in excess of the normal, ordinary and usual requirements of the Seller's
business, or (iii) is on other than arm's-length terms.
(c) Except as set forth in Section 3.15 (c) of the Disclosure
Schedule, the Seller has no outstanding sales contracts, sales commitments or
written or binding oral bids with respect to the Seller's business which (i)
continue for a period of more than 3 (three) months from the date hereof or (ii)
are at prices materially below or above the Seller's usual prices for the same
or similar products.
(d) Except as set forth in Section 3.15 (d) of the Disclosure
Schedule, the Seller has no outstanding contracts, agreements or arrangements,
with respect to the Seller's business which will be binding on Buyer, (i) with
any Federal, state, local or foreign government, or any governmental or
quasi-governmental agency, board, bureau, authority or commission, or any
utility company (other than agreements with utility companies which are common
to all comparable users of such utilities), (ii) with any charitable
organization, (iii) with any Related Person that are not cancelable by the
Seller on notice of not more than thirty (30) days and without liability,
penalty or premium, or (iv) providing for the payment of any bonus or commission
based on sales or earnings.
(e) The Seller is not a party to or bound by any employment
agreement or non-competition agreement with respect to the Seller's business
which will be binding on Buyer, or any other agreement with respect to the
Seller's business which will be binding on the Buyer that contains any severance
or termination pay liabilities or obligations.
(f) The Seller is not a party to or bound by any collective
bargaining or union contracts or agreements or any practices or understandings
with any employees which are not embodied in a written collective bargaining or
union contract or agreement, complete and accurate copies of which the Seller
has heretofore delivered to Buyer.
(g) The Seller is not in default nor is there any basis for
any valid claim of default under any contract, agreement, commitment or
restriction to which it is a party by which any of the Assets or the Seller is
bound and no event of default has occurred which (whether with or without the
giving of notice, lapse of time, or both, or the happening or occurrence of any
other event) would constitute a default thereunder.
(h) Except as set forth in Section 3.15 (h) of the Disclosure
Schedule, the Seller has not engaged any consultants.
23
(i) The Seller is not restricted by any agreement, which at
any time after the Closing will be binding on the Buyer, from carrying on the
Seller's business.
(j) The Seller is not obligated to or bound by any agreement
with respect to the return of inventory or goods in the possession of
wholesalers, distributors, retailers or other customers by reason of alleged
overshipments; and, following the Closing, the Buyer will not have any liability
with respect to the return of any inventory sold prior to the Closing.
(k) Except as set forth in Section 3.15 (k) of the Disclosure
Schedule, the Seller has no debt obligation for borrowed money and at no time
after the Closing will any debt obligation be binding on the Buyer or encumber
any of the Assets.
(l) Except as set forth in Section 3.15 (l) of the Disclosure
Statement, the Seller has no outstanding loans in connection with the Seller's
business to any person.
(m) Except as set forth in Section 3.15 (m) of the Disclosure
Statement, there are no credit cards issued to the Seller or for which the
Seller is liable.
(n) The Seller has no powers of attorney outstanding
(including but not limited to powers of attorney in favor of customs brokers) or
any obligations or liabilities (whether absolute, accrued, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of any obligation of the Seller with respect to the
Seller's business or which will be binding on the Buyer or to which any of the
Assets is or will be subject, or in respect of any other person, corporation,
partnership, joint venture, association, organization or other entity (including
but not limited to customs brokers) with respect to the Seller's business or
which will be binding on the Buyer or to which any of the Assets is or will be
subject.
(o) The Seller is not a party to any barter or countertrade
agreement with respect to the Seller's business.
(p) The Seller is not a party to any cooperative advertising
arrangement with respect to the Seller's business.
(q) Except as set forth in Section 3.15 (q) of the Disclosure
Schedule, the Seller has no other contract relating to the Seller's business or
the operation thereof which is material to the Seller's business or under which
it has any material obligation in respect of the Seller's business.
3.16. Customers and Suppliers.
(a) Section 3.16 (a) of the Disclosure Schedule sets forth:
(i) an accurate and complete list of the ten largest
customers of the Seller, in terms of sales (A) during the fiscal year
ended December 31, 1997, and (B) the three months ended March 31, 1998,
showing the approximate total sales in dollars to each such customer
during each such period;
24
(ii) an accurate and complete list of the ten largest
suppliers to the Seller, in terms of purchases during (A) the fiscal
year ended December 31, 1997, and (B) the three months ended March 31,
1998, showing the approximate total purchases in dollars from each such
supplier during each such period; and
(b) Except to the extent set forth in Section 3.16 (b) of the
Disclosure Schedule, there has not been any material change and there are no
facts known to the Seller which indicate that any material adverse change may
occur in the business relationship of the Seller with any customer or supplier
named in Section 3.16 (a) of the Disclosure Schedule, except for any changes
which might occur as a result of the Seller selling its business.
(c) Except for the customers and suppliers identified by name
in Section 3.16 (a) of the Disclosure Schedule, the Seller's business has had no
customer which accounted for more than 5% of its sales for (i) its fiscal year
ended December 31, 1997, or (ii) the three months ended March 31, 1998, or any
supplier from which the Seller purchased more than 5% of the goods and services
which the Seller's business purchased during each such period. To the best
knowledge of the Seller, no supplier had indicated that it intends to cease
doing business with the Buyer or materially alter the amount and pricing of the
goods delivered to the Buyer as compared to the goods delivered to the Seller,
as and when the Buyer becomes the successor in interest to the Seller under
their respective agreements.
(d) The Seller has not violated any copyright or trademark of
any supplier named in Section 3.16 (a) of the Disclosure Schedule.
3.17. Agreements in Full Force and Effect. All contracts required to be
disclosed pursuant to Section 3.15 hereof, agreements, plans, leases and
licenses which are or will be assumed by or binding on the Buyer or to which any
of the Assets is or will be subject, and all insurance policies referred to in
Section 3.18 hereof, are valid and in full force and effect, and the Seller has
no reason to believe that any of the same will not continue to be so on the
terms and conditions following the Closing except to the extent otherwise
expressly provided in this Agreement, without need for any action by the Seller
the Buyer as a result of the Closing, and accurate and complete copies thereof,
including amendments thereto, have been heretofore delivered by the Seller to
the Buyer.
3.18. Insurance.
(a) Section 3.18 (a) of the Disclosure Schedule contains an
accurate and complete list of all policies of fire, disability, workers'
compensation, products liability, performance bonds and other instruments
supporting the performance of the Seller and other forms of insurance owned or
held by or beneficially for the Seller which relate to or provide coverage for
the Seller's business and the Assets.
(b) All such policies are in full force and effect, all
premiums with respect thereto covering all periods through the Closing have been
or will be paid by the Seller, and no notice of cancellation or termination has
been received with respect to any such policy.
(c) Such policies are sufficient for compliance with all
requirements of law and of all agreements to which the Seller is a party; are
valid, outstanding and enforceable
25
policies; provide adequate insurance coverage for the assets and operations of
the Seller's business; and, with respect to periods prior to the Closing will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.
(d) Section 3.18(d) of the Disclosure Schedule describes, with
respect to the Seller's business, (i) all risks for which the Seller is
self-insured, retentions, umbrella and other insurance coverage and reserves
with respect thereto, and the manner in which claims relating thereto are
processed and paid, and (ii) the Seller's workers' compensation and unemployment
insurance ratings.
(e) Except as set forth in Section 3.18 (e) of the Disclosure
Schedule, (i) the Seller has not been refused any insurance for which it has
applied, nor has its coverage for the Seller's business been limited by any
insurance carrier to which it has applied for any insurance or with which it has
carried such insurance; (ii) since March 31, 1998, neither the amount nor scope
of any insurance referred to in Section 3.18 (a) of the Disclosure Schedule or
premiums therefore has been materially changed; and (iii) the Seller has not
been notified of any material adverse change or proposed change in its workers'
compensation or unemployment insurance ratings.
3.19. Labor. (a) Except to the extent set forth in Section 3.19 (a) of
the Disclosure Schedule:
(i) there is no labor strike, dispute, grievance,
arbitration proceeding, slowdown or stoppage, or charge of unfair labor
practice actually pending or, to the Seller's knowledge, threatened
against or affecting the Seller's business;
(ii) no labor union representation question exists
respecting employees of the Seller or respecting the performance of
work for the Seller;
(iii) the Seller has not, during the five-year period
prior to the date hereof, experienced any material work stoppage or
other material labor difficulty;
(iv) there are no charges or complaints of
discrimination pending before the Equal Employment Opportunity
Commission or any state or local agency with respect to the Seller's
business;
(v) the Seller is not engaged in any material unfair
labor practice, nor at any time during the past five years has any
material unfair labor practice complaint against the Seller been filed
with or, to the Seller's knowledge, threatened to be filed by any
employee with, the National Labor Relations Board, the Equal Employment
Opportunity Commission, the Department of Labor or any agency or
instrumentality of any state or local government; and
(vi) no collective bargaining agreement covering
employees of the Seller restricts the Seller or any successor to the
Seller's business from relocating or closing any of the facilities or
operations of the Seller's business.
26
(b) As of the date hereof, to the knowledge of the Seller, no
current employee of the Seller having management or significant operational
responsibilities, and no other employees of the Seller constituting in the
aggregate more than 10% of the Seller's current workforce, has or have indicated
an intention to not be available for employment by the Buyer after the Closing
on substantially the same terms as those pertaining to his or her current
employment.
(c) The Seller is not party to any agreement with any employee
(i) the benefits of which (including, without limitation, severance benefits)
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Seller of the nature of any of the
transactions contemplated by this Agreement or (ii) providing severance benefits
in excess of those generally available under the Seller's severance policies as
in effect on the date hereof, or which are conditioned upon a change of control,
after the termination of employment of such employees regardless of the reason
for such termination of employment.
3.20. Litigation, Judgments, Decrees. Except as set forth in Section
3.20 of the Disclosure Schedule, there is currently no claim, action, suit,
inquiry, proceeding or investigation of any nature whatsoever (including, but
not limited to, products liability), at law or in equity or both, by or before
any domestic or foreign court or governmental or other regulatory or
administrative agency, arbitration tribunal, board, bureau, authority or
commission pending or, to the best knowledge, after due inquiry, of the Seller,
threatened against or involving the Seller or any of the Assets, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by the Seller pursuant to this Agreement or in connection with the
transactions contemplated hereby; and, there is no valid basis for any such
action, suit, inquiry, proceeding or investigation. The Seller is not subject to
any judgment, order or decree (i) which may have an adverse effect on the
Seller's business practices or on the Seller's ability to acquire any property
or conduct its business in any area or (ii) is or will be binding on Buyer.
3.21. No Condemnation or Expropriation. Neither the whole nor any
portion of the Assets is subject to any governmental decree or order to be sold
or is being condemned, expropriated or otherwise taken by any domestic or
foreign public authority with or without payment of compensation therefor, nor
has any such condemnation, expropriation or taking, to the Seller's knowledge,
been proposed.
3.22. Consents and Approvals of Governmental Authorities and Others.
Except as set forth in Section 3.22 of the Disclosure Schedule, no consent,
approval, authorization, order or other action of, or declaration, filing or
registration with, or the giving of notice to, any domestic or foreign
governmental or regulatory authority or any other person or entity is required
in connection with the execution, delivery and performance by the Seller of this
Agreement or the consummation by the Seller of the transactions contemplated
hereby.
3.23. Employee Benefit Plans; Pension Plans.
(a) Except as set forth in Section 3.23 (a) of the Disclosure
Schedule, the Seller has no bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option, phantom stock,
medical, post-retirement medical or any other employee benefit plan, arrangement
or practice, whether written or unwritten (an "Employee Benefit Plan"). True
27
copies of each written Employee Benefit Plan and an accurate and complete
written description of each oral Employee Benefit Plan have been heretofore
delivered by the Seller to Buyer. Section 3.23(a) of the Disclosure Schedule
sets forth the annual amounts paid or accrued in connection with each Employee
Benefit Plan since December 31, 1995, and an estimate of the amounts payable or
accruable in connection therewith through March 31, 1998, to the extent such
amounts are presently fixed or determinable. The Annual Financial Statements
accurately and completely reflect accruals of all amounts accrued but unpaid
under the Employee Benefit Plans as of the respective dates thereof. The Seller
has made no commitment, whether formal or informal and whether legally binding
or not, to create any additional such plan or arrangement.
(b) Included in Section 3.23 (b) of the Disclosure Schedule is
a list of each "employee pension benefit plan" in the meaning of the Employee
Retirement Income Security Act of 1974 and the regulations thereunder ("ERISA"),
maintained or contributed to by the Seller (the "Pension Plans") and no Pension
Plan is a "multi-employer plan" within the meaning of ERISA. There has been no
"prohibited transaction," to which the Seller or any of the Seller's officers
have been a party, within the meaning of Section 4975 of the Internal Revenue
Code of 1986 (the "Code"), or Section 406 of ERISA, with respect to any Pension
Plan which might subject any such plan or related trust, or any trustee or
administrator thereof, or the Seller to the tax or penalty imposed by Section
4975 of the Code or to a civil penalty imposed by Section 502 of ERISA. Except
as set forth in Section 3.24 (b) of the Disclosure Schedule, each of the Pension
Plans is and has been in material compliance with the applicable provisions of
ERISA and the Code. The present value of all accrued benefits, whether vested or
not, under the Pension Plans subject to Title IV of ERISA do not exceed the
value of the assets of such plans allocable to such accrued benefits. Except as
set forth in Section 3.23 (b) of the Disclosure Schedule, none of the Pension
Plans subject to Title IV of ERISA has, since December 31, 1995, been completely
or partially terminated, nor has there been any "reportable event," as such term
is defined in Section 4043(b) of ERISA, with respect to any such plan since the
effective date of said Section 4043(b). None of the Pension Plans or trusts have
incurred any "accumulated funding deficiency," as such term is defined in
Section 412 of the Code, whether or not waived, since the effective date of said
Section 412.
(c) Section 3.23 (c) of the Disclosure Schedule is a list of
all "employee welfare benefit plans," within the meaning of ERISA, whether or
not insured, maintained by either the Seller ("Welfare Plans"). Except as set
forth in Section 3.23 (c) of the Disclosure Schedule, each Welfare Plan is and
has been in material compliance with the applicable provisions of ERISA and the
Code. The Seller has complied in all material respects with all of its
respective obligations, if any, including the making of all required
contributions, under each of the Welfare Plans.
28
3.24. Brokers and Finders. No person has been authorized by the Seller,
or by anyone acting on its behalf, or its respective shareholders, officers,
directors or employees, to act as a broker, finder or in any other similar
capacity in connection with the transactions contemplated by this Agreement.
3.25. Personnel. Section 3.25 of the Disclosure Schedule sets forth an
accurate and complete list of:
(a) the names and current salaries of each of the Seller's
employees; and
(b) the customary increases on a periodic basis in the
compensation of each of the foregoing or any increases required by any agreement
or understanding with each of the foregoing.
3.26. Accuracy of Representations and Documents. No representation or
warranty made by the Seller in this Agreement or in the Disclosure Schedule
hereto (which is an integral part hereof) nor any statement, certificate or
other document furnished as an exhibit hereto, or any other document furnished
by the Seller to the Buyer or any of its representatives in connection with this
Agreement is, or will be when so furnished, false or misleading in any material
respect or contains any material misstatement of fact or omits to state any fact
necessary to be stated make the statements made in any such representation or
warranty false or misleading in any material respect.
3.27. Distinct Entity. Other than as set forth in Section 3.27 of the
Disclosure Schedule, the Seller does not share any personnel or assets with
affiliates of any third party.
3.28. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The Seller shall deliver a certificate of an
officer of the Seller certifying the revenue of the Seller in calendar year 1997
("1997 Revenue") and the assets and liabilities of the Seller as of the date of
the Seller's most recent regularly prepared balance sheet (the "Recent Asset
Value"). Except for ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, there is no single stockholder of the
Seller that holds more than 50% of the Seller's outstanding equity or equity
with general voting rights. ▇▇. ▇▇▇▇▇▇▇▇▇▇'▇ ▇▇▇▇▇ assets are less than $10
million.
3.29. Books and Records. The books and records pertaining to the
business of the Seller delivered or made available to the Buyer and its
representative for review are complete and correct in all material respects and
have been maintained in a manner that is adequate to the needs of the business
of the Seller and, to the knowledge of the Seller customary in the industry in
which the Seller operates.
3.30. Small Business Set-Asides. Listed on Section 3.30 of the
Disclosure Schedule are those customer accounts of the Seller which have been
designated by an appropriate governmental authority as a "small business
set-aside" contract (as such term is defined in 15 U.S.C.A. 644, Commerce and
Trade).
3.31. Waste Treatment and Storage. All waste generated by the Seller is
given to a commercial hauler which disposes non-hazardous waste. There are no
liabilities or obligations of, or claim or proceeding which have been asserted
against, or to Seller's knowledge threatened the Seller or the Assets that would
constitute environmental liabilities, and there exist no facts or
29
circumstances that would form the basis for any liability or obligation of, or
claim or proceeding which may be asserted against, the Seller or the Assets and
would constitute an environmental liability.
3.32. Remedial Action Claim Notices Received. The Seller has not
received any written or, to the knowledge of the Seller, oral notification
(including requests for information directed to the Seller) from any
governmental agency or any other person claiming to be a past or present owner
or operator of a waste storage, treatment or disposal facility or otherwise
liable for such response costs at such a facility, asserting that any Seller is
or may be a "potentially responsible person" or otherwise liable with respect to
a remedial action or the payment of response costs at such a facility, pursuant
to the provisions of CERCLA.
3.33. Investment Representations. The Seller has (i) received from the
Buyer copies of (a) the Annual Report to shareholders of KTI for the fiscal year
ended December 31, 1997, (b) KTI's definitive proxy statement dated March 28,
1998 for its 1998 meeting of shareholders, and (c) KTI's Quarterly Reports on
Form 10-Q for the quarter ended March 31, 1998 and (ii) had the opportunity to
ask questions of and receive answers from the Buyer and KTI concerning the terms
and conditions of this Agreement and to obtain from the Buyer and KTI any
additional information that the Buyer or KTI possesses or can acquire without
unreasonable effort or expense necessary to verify the accuracy of the
information described in the preceding clause (i).
(b) The Seller will hold the shares of KTI Common Stock
received by it hereunder for investment only and not with a view toward, or for
offer or sale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), or any applicable state
securities laws. The Seller acknowledges that the shares of KTI Common Stock are
not presently registered under the 1933 Act or under any state securities laws.
(c) The Seller is an "accredited investor" as that term is
defined under Regulation D under the 1933 Act and has such knowledge or
experience in financial and business matters that it is capable of evaluating
the merits and risks of engaging in the transactions described in this
Agreement, including without limitation its acquisition of KTI Common Stock.
(d) The Seller represents and warrants that the KTI Common
Stock being acquired will be acquired for the Seller's own account and will not
be sold or otherwise disposed of except pursuant to (i) an exemption from the
registration requirements under the 1933 Act, which does not require the filing
by KTI with the Securities and Exchange Commission (the "Commission") of any
registration statement, offering circular or other document, in which case the
Seller shall first supply to KTI an opinion of counsel (which opinion and
counsel shall be satisfactory to KTI) that such exemption or exclusion is
available, or (ii) a registration statement filed by KTI with the Commission
under the 1933 Act pursuant to the terms of the Registration Rights Agreement.
(e) The Seller agrees that the certificates for the KTI Common
Stock received shall bear the following legend:
30
The Shares represented by this certificate
have not been registered under the
Securities Act of 1933 or any state
securities laws, and may not be transferred
or disposed of by the holder without
compliance with said registration
requirements or an exemption from such
registration requirements.
and that KTI may place stop transfer orders with its transfer agents with
respect to such certificates for the purpose of enforcing such restrictions on
transfer.
4. Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Seller as follows:
4.1. Corporate Organization, Etc. The Buyer is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to carry on its business as
it is now being conducted and to own, lease and operate its properties and
assets as and in the places where such business is now conducted and where such
properties and assets are now owned, leased or operated.
4.2. Authorization, Etc. The Buyer has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.
This Agreement is valid and binding upon the Buyer, enforceable in accordance
with its terms.
4.3. No Violation. Neither the execution and delivery of this Agreement
by the Buyer nor the consummation of the transactions contemplated hereby by the
Buyer will violate any provisions of the Certificate of Incorporation of the
Buyer, or be in conflict with, or constitute a default (or an event which, with
or without notice, lapse of time or both, would constitute a default) under, or
result in the termination or invalidity of, or accelerate the performance
required by, or cause the acceleration of the maturity of any debt or obligation
pursuant to, any agreement or commitment to which the Buyer is a party or by
which the Buyer is bound, or violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority.
4.4. Common Stock. The shares of Common Stock issuable pursuant to
Section 2.1(b) hereof shall, when issued and when the consideration for such
shares has been received, be duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock.
5. Certain Covenants and Agreements.
5.1. Full Access. The Buyer has had access to the Seller's books and
records for purposes of conducting its due diligence investigation prior to the
date of this Agreement. The Seller agrees, without in any way detracting from
its representations, warranties and agreements set forth in this Agreement, to
afford the Buyer and its counsel, accountants and other representatives, after
the date hereof, full access during normal business hours to its plants,
offices, warehouses, properties, employees, counsel, accountants and other
representatives, books and records, including accountant's workpapers, in order
that the Buyer may have full
31
opportunity to make such investigations as it shall desire to make of the
affairs of the Seller. The Seller agrees to furnish to the Buyer additional
financial and operating data and other information, including that portion of
the Seller's tax returns that relate to the Seller's business, as the Buyer
shall from time to time reasonably request. In addition to the foregoing, the
Seller shall provide all authorizations requested by the Buyer to permit Olympic
Insurance Associates, Inc. to contact the carriers of the insurance policies to
be assigned to the Buyer pursuant to this Agreement to obtain all necessary
assurances that such insurance carriers will accept the assignment of such
policies to the Buyer pursuant to the terms of this Agreement. From and after
the Closing, the Buyer shall permit the Seller to have reasonable access to the
books and records of the Seller transferred to the Buyer as Assets hereunder
solely for the purpose of (a) providing an indemnity for Buyer's Adverse
Consequences (as hereinafter defined); provided, however, that any such access
shall (i) be conducted during normal business hours and in such a manner as not
to interfere with the operation of the business of the business comprised by the
Assets and (ii) terminate upon the termination of the Seller's obligations to
indemnify against Buyer's Adverse Consequences hereunder and (b) for the purpose
of any legitimate business purpose.
5.2. Consents. The Seller agrees to obtain, at the Seller's expense,
prior to the Closing, all consents necessary to consummate the transactions
contemplated hereby in accordance with the terms hereof including, without
limitation, the consents set forth in Section 3.22 of the Disclosure Schedule.
All such consents will be in writing and executed counterparts thereof will be
delivered to the Buyer at or prior to the Closing. The Buyer agrees to cooperate
with the Seller in its efforts to obtain such consents.
5.3. Licenses and Permits. At the Closing the Seller shall assign any
and all Federal, state, county and local licenses and permits necessary for the
operation of the Seller's business to the extent the same may be assigned, and
shall cooperate with the Buyer and assist the Buyer in obtaining any other
licenses or permits that are not assignable or that are necessary for the Buyer
to continue to operate the Seller's business, including, without limitation, an
application to the State of New Jersey for a transfer of the Seller's permit to
operate the Facility. The Buyer and the Seller shall prepare an application for
the transfer of such permit and shall file such application immediately upon the
execution of this Agreement.
5.4. Notice of Claims and Investigations. Each party will immediately
give notice to the other of, and confer with the other with respect to, any
claims, investigations by governmental authorities or threatened litigation
relating to the transactions contemplated by this Agreement.
5.5. No Solicitation or Negotiation of Other Offers. The Seller agrees
that from the date hereof through the Closing Date neither it nor any of its
officers, directors, employees, representatives or agents, acting on behalf of
the Seller, shall pursue, encourage or solicit any inquiries or proposals by, or
engage in any discussions or negotiations with, any person concerning any merger
with the Seller, any purchase of shares of stock of the Seller, or any other
exchange, consolidation, assets or stock acquisition or disposition or tender
offer or any other takeover or change in control transaction involving the
Seller, and the Seller will promptly communicate to the Buyer the substance of
any inquiry or proposal concerning any such transaction which it may receive.
32
5.6. Press Releases. Without the written consent of the other party,
which shall not be unreasonably withheld, each of the parties hereto agrees not
to make any public announcements or press releases regarding the transactions
contemplated hereby until such transactions are consummated; provided that,
notwithstanding the foregoing, KTI shall have the right to issue a press release
and file a report on Form 8-K disclosing the transaction contemplated by this
Agreement to the extent that it believes such disclosure is required by law.
5.7. Consummation of Transactions. Each of the parties agrees to use
its best efforts to bring about the satisfaction of the conditions required to
be performed, fulfilled or complied with by it hereunder and to take or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
appropriate party will take all such necessary action, including without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party or parties for such purposes
or otherwise to complete or perfect the transactions contemplated hereby.
5.8. Post-Closing Cooperation. After the Closing, the Buyer and the
Seller shall cooperate fully with each other and shall make available to each
other and to any taxing authority all information, records or documents
reasonably requested in connection with the preparation of any tax returns or in
connection with any tax liability of the Seller with respect to any period prior
to the Closing, and otherwise in connection with matters, such as but not
limited to litigation and personnel matters, involved in the transition of the
ownership and operation of the Seller's business from the Seller to the Buyer.
5.9. Risk of Loss. Prior to the Closing, the risk of loss or damage to,
or destruction of, any or all of the Seller's business or any or all of the
Assets shall remain with the Seller.
5.10. Outstanding Checks and Accrued Employee Benefits. The Seller
represents, warrants and agrees that it has or will have sufficient cash in
banks to cover all of it's unpaid checks which shall have been issued to third
parties on or prior to the Closing Date. The Seller agrees that it will prepare
a schedule of all Accrued Employee Benefits, listing the name of each employee
entitled to such benefits, the type of benefits to which such employee is
entitled and the dollar amount of such benefits (as updated through and
including the Closing Date, the aggregate amount thereof, the "Accrued Employee
Benefits Amount"). The Seller hereby agrees to continually update such schedule
through and including the Closing Date.
5.11. Post-Closing Authority. Subject to the provisions of Section 9.5
hereof, the Seller hereby constitutes and appoints the Buyer, its successors and
assigns, effective as of the Closing, the true and lawful attorney or attorneys
of the Seller, with full power of substitution, in the name of the Buyer or in
the name of the Seller, but by and on behalf of and for the sole benefit of
Buyer, its successors and assigns, to demand and receive from time to time any
and all of the Assets, and from time to time to institute and prosecute, in the
name of the Seller or otherwise, any and all proceedings at law, in equity or
otherwise which the Buyer or its successors or assigns may deem necessary or
desirable in order to receive, collect, assert or enforce any right, title,
benefit or interest of any kind in or to the Assets, and to defend and,
33
subject to Section 9.7(c) hereof, compromise any and all actions, suits or
proceedings in respect thereof and to do all such acts and things and execute
any instruments in relation thereto as the Buyer or its successors or assigns
shall deem advisable. Without limiting the foregoing, the Seller hereby
authorizes any officer of the Buyer to endorse or assign any instrument,
contract or chattel paper relating to the Assets. The Seller agrees that the
foregoing appointment made and the powers hereby granted are coupled with an
interest and shall, if the Closing occurs, be irrevocable by the Seller and such
appointment and powers will not be revoked by its dissolution or in any manner
or for any reason.
5.12. Non-Competition and Nondisclosure.
(a) For a period of six years from the Closing Date (the
"Term") the Seller will not, directly or indirectly, without the prior written
consent of the Buyer, become associated with, render services to, become a
partner in, become the proprietor of, invest in, represent, advise or otherwise
participate in (other than stock interests in each case not in excess of 5%, in
securities of publicly held and traded companies), any business, firm,
partnership, individual, corporation, joint venture or other entity which
engages in any business similar to that heretofore engaged in by the Seller
within 600 miles of the Seller's principal place of business.
(b) The Seller agrees and will cause its officers and
principal shareholders to agree that, unless duly authorized in writing by the
Buyer, or required by law, it and they will not at any time reveal, divulge or
make known to any person (other than the Buyer or any affiliate of the Buyer)
any confidential or proprietary data or information relating to the Seller's
business. The term "confidential or proprietary data or information" as used in
this Agreement shall include, without limitation, personnel information,
customer lists, supplier lists, trade secrets, computer data and programs, and
costing and advertising data and all Know-How.
(c) The Seller agrees that, for a period of one year from the
Closing Date, it will not and will cause its officers and principal shareholders
to agree that they will not, during the Term, whether for its own account or for
the account of any other person, interfere with Buyer's relationship with (i)
any supplier to or customer (other than the Seller or the Seller's affiliates)
of the Seller's business prior to the Closing Date, (ii) any supplier to or
customer of Buyer or any of the Buyer's subsidiaries subsequent to the Closing
Date, or (iii) or any employee who shall be employed by the Buyer or any of the
Buyer's subsidiaries in connection with the Seller's business. The Buyer hereby
recognizes the relationship of certain officers of the Seller with N&V
International Inc., Montriv L.L.C. and Babylon Source Separation Commercial
Inc.; The Seller and these officers represent that the businesses conducted by
these companies are non-competitive. The Buyer hereby irrevocably agrees that
(a) the activities of N&V International, disclosed in a letter dated May 15,
1998 attached hereto, are not competitive; (b) Montriv L.L.C. is not competitive
so long as its activities are limited to consulting and (c) so long as ▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ are not in the management of Babylon Source
Separation Commercial, Inc. any ownership of Babylon Source Separation
Commercial, Inc. is permitted.
(d) The Seller recognizes that its breach or threatened breach
of any of the provisions of this Section would cause irreparable injury and that
the remedy at law may be
34
inadequate. The Seller agrees and will cause its officers and principal
shareholders to agree that in the event of any such breach or threatened breach
the Buyer or any of its affiliates, in addition to all other rights and remedies
at law or in equity as may exist in its favor, shall have the right to obtain
temporary and permanent injunctive relief, without the necessity of proving
actual damage, restraining the Seller, and any business, firm, partnership,
individual, corporation or entity with which it is associated, from any act
which would violate any of the above provisions. To the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit and without notice.
The losing party will reimburse the prevailing party or cause it to be
reimbursed for all costs and expenses, including reasonable attorney's fees,
incurred by the prevailing party by reason of any controversy concerning the
above covenants.
(e) If any of the covenants contained in this Section is held
to be invalid or unenforceable because of the duration of such provision or the
area covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration or area of such provision to the
extent necessary to render such provision valid and enforceable and, in its
reduced form, said provision shall then be valid and enforceable.
5.13. Change of Name. Within ten (10) days following the date hereof,
the Seller shall file an amendment to their certificate of incorporation
changing their names to a name which is not confusingly similar to their present
names and thereafter, shall cease and desist from using such names or any names
confusingly similar thereto in connection with their ongoing business, if any.
5.14. Income Taxes. The Buyer does not assume any liability or
obligations for income taxes accrued and not paid for any period prior to the
Closing Date or any penalties or interest in relation thereto.
5.15. Employees. The Buyer shall have the right to offer employment to
all or any portion of the employees of the Seller that are employed exclusively
in connection with the Seller's business prior to, on, or after the date hereof,
on such terms and conditions determined by the Buyer in its sole discretion.
5.16. (a) Supplements to Disclosure Schedule: Notice and Cure. From
time to time prior to the Closing, the Seller and the Buyer will promptly
supplement or amend the Disclosure Schedule relating to their respective
representations and warranties in this Agreement with respect to any matter,
condition or occurrence hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
their respective Disclosure Schedule or would otherwise have given rise to a
breach of any representations or warranties herein. No supplement or amendment
by either party shall be deemed to cure (or affect the rights of any party with
respect to) any breach of any representation or warranty made in this Agreement
or have any effect for the purpose of determining satisfaction of the conditions
set forth in Article 7 or Article 8 hereof.
(b) Each of the Seller and the Buyer shall inform the other in
writing of, and contemporaneously with such notice will provide to the other
reasonable details (and other information reasonably requested) concerning, any
event, transaction or circumstances occurring
35
after the date hereof that causes any of its covenants or agreements under this
Agreement to be breached.
6. Conduct of the Seller's Business Pending the Closing. From the date
hereof until the Closing, and except as otherwise expressly consented to or
approved by the Buyer in writing:
6.1. Regular Course of Business.
(a) The Seller agrees to carry on the Seller's business in
substantially the same manner as heretofore conducted, and the Seller will not
institute or effect any new methods of manufacture, management, accounting or
operation or engage in any transaction or activity, enter into any lease or
other agreement or make any purchase, sale or commitment of any nature, except
in the ordinary and usual course of business and consistent with past practice.
The Seller agrees to use all reasonable efforts, consistent with its past
practices, to promote the Seller's business, to maintain the goodwill and
reputation associated with the Seller's business and shall not take or omit to
take any action which causes, or which in the Seller's reasonable judgment is
likely to cause, any deterioration of the Seller's present business or
relationships with suppliers or customers.
(b) The Seller agrees to maintain the Assets in substantially
the same condition and repair as such Assets are maintained as of the date
hereof, ordinary wear and tear excepted, and to take all reasonable steps
necessary to maintain and protect the intangible assets included in the Assets.
(c) The Seller will not, without the Buyer's prior written
consent, modify or amend any material contract.
(d) The Seller will not incur any obligations under the Line
of Credit in excess of its obligation, as of the date of the Balance Sheet, of
$972,000.
6.2. Subsidiaries. The Seller agrees not to organize any subsidiary,
acquire any capital stock or other securities of any corporation or acquire any
equity, ownership or other interest in any business that in any way might
significantly and adversely impact on the Seller's business.
6.3. Organization. The Seller agrees to use its best efforts to keep
available to the Buyer all of its employees and preserve for the Buyer its
relationships with licensors, suppliers, distributors, customers and others
having business relations with the Seller.
6.4. Certain Changes. The Seller agrees that it will not, after the
date of this Agreement:
(a) except as set forth in Section 6.4 of the Disclosure
Schedule, borrow or agree to borrow any funds or incur or assume or become
subject to, whether directly or by way of guarantee or otherwise, any obligation
or liability (absolute, accrued, contingent or otherwise);
(b) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction of such
36
liabilities or obligations incurred in the ordinary and usual course of business
and consistent with past practice;
(c) permit or allow any of the Assets to be subjected to any
Lien, except for those Liens set forth in Section 3.10 of the Disclosure
Schedule;
(d) except in accordance with past practice and in the
ordinary and usual course of business, write down the value of any inventory;
(e) waive any claims or rights of substantial value or sell,
transfer, or otherwise dispose of any of the Assets, except in the ordinary and
usual course of business and consistent with past practice;
(f) dispose of or permit to lapse any rights to the use of any
patent, trademark, trade name, service ▇▇▇▇ or copyright used in the conduct of
the Seller's business, or dispose of or disclose to any person other than the
Buyer or its representatives, any designs in process or similar information not
theretofore a matter of public knowledge;
(g) grant any increase in the compensation of any key employee
(other than any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment disclosed herein);
(h) make any capital expenditures or commitment for repairs or
additions to property, plant, equipment or intangible capital assets in excess
of $25,000.00 without the prior written consent of the Buyer;
(i) pay, loan, distribute or advance any amount to, or sell,
transfer or lease any properties or assets to, or enter into any agreement or
arrangement with any Related Person, except for compensation and payments due
pursuant to the terms of agreements scheduled in Section 6.4 of the Disclosure
Schedule, at rates not exceeding the rates of compensation paid as of the date
hereof;
(j) declare or pay any dividend or other distribution on, or
incur any liability to make any other payment in respect of, capital stock of
any shareholder of the Seller;
(k) make any payment or distribution on account of the
purchase, redemption, defeasance (including in-substance or legal defeasance) or
other retirement of any capital stock of any shareholder of the Seller, or of
any warrant, option or other right to acquire such capital stock, or any other
payment or distribution made in respect thereof;
(l) fail to maintain its books, accounts and records in the
usual, regular and ordinary manner and in accordance with the Seller's past
practices consistently applied for the past two years;
(m) except for endorsement for payment of checks made payable
to the Seller, grant or extend any power of attorney or act as guarantor,
surety, cosigner, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity;
37
(n) maintain the Seller's assets and the quality of the
Seller's services to the Seller's customers to the same extent to which such
assets and services have been maintained to date; and
(o) conduct its business other than in the ordinary and usual
course consistent with past practice, except as otherwise contemplated by this
Agreement.
6.5. Insurance; Property. The Seller will continue to insure all of its
property, real, personal and mixed, tangible and intangible, which is owned or
leased by it, against all ordinary and insurable risks in the amounts and
coverages applicable to such property as in effect on the date hereof. Without
limiting the foregoing, the Seller shall continue to maintain and make all
required payments with respect to all presently held insurance policies covering
interruptions to its business.
6.6. No Default. The Seller will not do any act or omit to do any act,
or permit any act or omission to act, which will cause a breach of any material
contract or commitment with respect to its business.
6.7. Compliance with Laws. The Seller will duly comply in all material
respects with all laws applicable to it and its properties, operations, business
and employees.
6.8. Representations and Warranties. The Seller will not take any
actions or allow anything to occur which would cause any of the representations
or warranties made herein to be untrue on, at, and as of the Closing Date or
during the Interim Period.
7. Conditions to the Obligations of the Seller.
The obligation of the Seller to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by the Seller:
7.1. Representations and Warranties True. The representations and
warranties of the Buyer contained in this Agreement shall be true, complete and
accurate in all material respects as of the date when made and at and as of the
Closing as though such representations and warranties were being made at and as
of the Closing Date, and except for changes expressly permitted or contemplated
by the terms of this Agreement.
7.2. Performance. The Buyer shall have performed, fulfilled and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed, fulfilled or complied
with by it on or prior to the Closing Date.
7.3. No Proceeding. No suit, action, investigation, inquiry or other
proceeding by any governmental body or other person shall have been instituted
which arises out of or relates to this Agreement or the transactions
contemplated hereby or seeks to obtain substantial damages in respect thereof,
and, on the Closing Date, there shall be no effective permanent or preliminary
injunction, writ, temporary restraining order or any order of any nature issued
by a court of
38
competent jurisdiction directing that the transactions provided for herein not
be consummated as so provided.
7.4. Buyer's Officer's Certificates.
(a) The Buyer shall have furnished the Seller with
certificates dated the Closing Date (i) confirming its performance of and
compliance with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing, and
(ii) confirming that, except for changes expressly permitted by this Agreement,
the representations and warranties made by it in this Agreement are true,
complete and accurate in all material respects at and as of the date of the
Closing as though such representations and warranties were made at and as of
such date.
(b) The Buyer shall have furnished the Seller with (i) a copy
of its Certificate of Incorporation, certified by the Secretary of State of
Delaware, (ii) a certified copy of resolutions adopted by the Board of Directors
of the Buyer approving the execution and delivery of this Agreement and related
documents and the consummation of the transaction contemplated hereunder; and
(iii) a Certificate of Incumbency setting forth the officers of the Buyer.
7.5. Agreements.
The Buyer shall have executed and delivered employment agreements with
each of Messrs. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in substantially the
form of Exhibits D and E, respectively, attached hereto.
7.6. Registration Rights Agreement.
KTI shall have executed and delivered the Registration Rights Agreement
in the forms of Exhibits F-1 and F-2.
7.7. Additional Documents. The Buyer shall have delivered to the
Seller such other documents, instruments and certificates as shall be reasonably
required by the Seller for the purpose of effecting the transactions provided
for and contemplated by this Agreement.
7.8. Car Lease Assumption. The Buyer shall have assumed the obligations
of the Seller under the two car leases more particularly described in Section
7.8 of the Disclosure Schedule.
8. Conditions to the Obligations of Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing, of each of the following conditions,
unless waived in writing by the Buyer:
8.1. Representations and Warranties True. The representations and
warranties of the Seller contained in this Agreement including the Disclosure
Schedule attached hereto, shall be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were being made at and as of the Closing
Date (except that representations and warranties which refer to conditions
existing on a
39
specific date, such as representations and warranties regarding the Financial
Statements, shall continue to refer to that date) and except for changes
expressly permitted or contemplated by the terms of this Agreement.
8.2. Performance.
(a) The Seller shall have performed, fulfilled and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed, fulfilled or complied with by them on or
prior to the Closing, including delivery to the Buyer of all of the Assets
through appropriate instruments of conveyance and, for any assets which have
title documents or are registered, the necessary transfer of title or
registration documents executed by all parties necessary to the transfer of such
title or registration with all necessary transfer stamps attached.
(b) All of the consents of third parties listed on Section
3.24 of the Disclosure Schedule hereto shall have been obtained.
8.3. No Proceeding. No suit, action, investigation, inquiry or other
proceeding by any governmental body or other person shall have been instituted
or threatened which arises out of or relates to this Agreement or the
transactions contemplated hereby or seeks to obtain substantial damages in
respect thereof, and, on the Closing Date, there shall be no effective permanent
or preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.
8.4. Seller's Officer's Certificates. The Seller will have furnished
the Buyer with the following certificates:
(a) a certificate of a duly authorized officer of the Seller
(who shall incur no personal liability in connection with providing such
certificate) dated as of the Closing Date (i) confirming its performance of and
compliance with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing, and
(ii) confirming that, except for changes expressly permitted by this Agreement,
the representations and warranties made by it in this Agreement are in all
material respects true, complete and accurate at and as of the Closing Date as
though such representations and warranties were made at and as of such date
(except that representations and warranties which refer to conditions existing
on a specific date shall continue to refer to that date);
(b) long-form certificates dated as of a date or dates
reasonably close to the Closing Date of the appropriate officials of the
jurisdictions set forth in Section 3.1 or listed in Section 3.1 of the
Disclosure Schedule, as to the good standing of the Seller in such jurisdictions
and its payment of taxes and filing of required reports in those jurisdictions;
and
(c) (i) a copy of the corporate charter of the Seller, with
all amendments, certified by the Secretary of State of New Jersey; (ii) a copy
of the By-Laws of the Seller, with all amendments, certified by the Secretary of
the Seller; (iii) certified copies of minutes of action taken by the Board of
Directors of the Seller, approving the execution and delivery of this Agreement
and related documents and the consummation of the transaction contemplated
40
hereunder; and (iv) a Certificate of Incumbency setting forth the officers and
directors of the Seller.
41
8.5. Material Change. The Seller shall not, after March 31, 1998, have
suffered any material and adverse change or damage or loss by theft, casualty or
otherwise, whether or not insured against by the Seller, in its business or in
its financial condition, the Assets (taken as a whole), liabilities (absolute,
accrued, contingent or otherwise) or operations; provided, however, that the
Buyer in its sole discretion may waive this condition in consideration of the
payment by the Seller to the Buyer of all amounts received with respect to the
Seller's insurance policies covering interruptions to its business and the
assignment to the Buyer of the all of the rights of the Seller in and to such
policies.
8.6. Certification of Non-Foreign Status. The Seller shall have
delivered to the Buyer a certificate of non-foreign status in substantially the
form of Exhibit F annexed hereto.
8.7. Due Diligence. The due diligence performed by representatives of
the Buyer in connection with the transactions provided for and contemplated
hereby, shall be satisfactory to the Buyer in all material respects, including
satisfactory environmental audits.
8.8. Compliance With Bulk Sales Law. Counsel to the Seller shall
deliver a letter to the effect that, except for Section 6-104 of the Uniform
Commercial Code as in force in the State of New Jersey, there are no bulk sale
provisions in the State of New Jersey.
8.9. Proxy Statement and Shareholders' Meeting. The Seller shall
deliver an opinion of legal counsel, satisfactory to the Buyer in form and
substance that the Seller has no obligation to obtain stockholder approval of
this Agreement and the sale of the Assets and all actions contemplated hereby
or, alternately, an officer's certificate stating that all necessary approvals
have been received.
8.10. Employment Agreements. Messrs. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ each shall have executed and delivered their employment agreements with
the Buyer in substantially the form of Exhibits D and E, respectively, attached
hereto.
8.11. Additional Documents. The Seller shall have delivered to the
Buyer such other documents, instruments and certificates as shall be reasonably
requested by the Buyer for the purpose of effecting the transactions provided
for and contemplated by this Agreement.
8.12. Credit Cards. All of the credit cards set forth in Section 3.15
(m) of the Disclosure Statement shall have been paid in full and been
terminated.
8.13. ▇▇▇▇▇▇▇▇ Brothers. The Buyer (or an affiliate thereof) shall have
consummated and closed the purchase of substantially all the assets of ▇▇▇▇▇▇▇▇
Brothers.
8.14. Lease. The Seller shall have executed and delivered to the Buyer
the Passaic Lease.
8.15. Termination of Security Interests. The Buyer shall have received
a termination of any security agreement and related UCC-3 Termination Statements
with respect to each of the loans of the Seller described in Section 8.15 of the
Disclosure Schedule.
8.16.Vehicle Conveyance. The Vehicle Conveyance shall have occurred.
42
8.17. Assignment of Insurance Policies. The Buyer shall have received a
"broker of record" designation naming Olympic Insurance Associates, Inc. as
agent of record for all Assigned Insurance Policies, and all such Assigned
Insurance Policies shall have been assigned to the Buyer.
8.18. Amendment to 401(k) Plan. The Seller shall have amended its
401(k) plan or plans, if any, which are to continue from and after the Closing
Date so that the provisions of such 401(k) plan or plans match the provisions of
KTI's 401(k) plan to the satisfaction of the Buyer.
8.19. Lender Requirements. The Seller shall have delivered to the Buyer
a plat of survey of the Real Estate, made by a surveyor registered in the State
of New Jersey and made in accordance with the American Land Title Association
Survey Standards which does not indicate any title exceptions or, to the extent
such exceptions exist, such exception are not material and are deemed acceptable
by the Lender. Such survey shall accurately locate all improvements, building
lines, any encroachments of the improvements on the Real Estate over easements,
setback lines or onto adjoining properties, or encroachments of the improvements
on adjoining properties onto the Real Estate, recorded easements, lines and
rights of way, all roadways and include a metes and bounds description and
calculation of acreage. The Owner shall certify to the Buyer and to Key Bank,
National Bank, as Agent (the "Lender") that there have been no changes to the
footprint of the buildings indicated on such survey. The Seller, the Buyer and
the Lender shall have executed a waiver of any Landlord's lien with respect to
the Real Estate in a form reasonably acceptable to the Lender.
9. Survival of Representations and Warranties; Indemnification.
9.1. Survival of Representations. Notwithstanding any investigation at
any time made by or on behalf of any party hereto, all representations and
warranties of the Seller referred to in Section 9.5(i)(A) and of the Buyer set
forth in this Agreement shall survive the Closing and continue thereafter until
the time of payment for the fifth anniversary of the last day of the Annual
Period.
9.2. Statements as Representations and Warranties. All statements
contained herein, in the Disclosure Schedule, or in any other schedule,
certificate, list or other document delivered or to be delivered pursuant to
this Agreement shall be deemed representations and warranties as such terms are
used in this Agreement and any material misstatement or omission in any thereof
shall be deemed a breach of a representation or warranty hereunder.
9.3. Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party of any other rights or
the seeking of any other remedies against any other party.
9.4. Buyer's Indemnity. The Buyer agrees to defend, indemnify and hold
harmless the Seller from, against and in respect of any and all demands, claims,
actions or causes of action, losses, liabilities, damages, assessments,
deficiencies, taxes, costs and expenses, including without limitation, interest,
penalties and reasonable attorneys' fees and expenses, asserted against, imposed
upon or paid, incurred or suffered by the Seller ("Seller's Adverse
Consequences") as a result of, arising from, in connection with or incident to
(i) any breach or
43
inaccuracy of any representation or warranty of the Buyer contained in this
Agreement or (ii) any breach of any covenant or agreement of the Buyer contained
in this Agreement. Such indemnification shall be limited to $2,500,000.
Notwithstanding the foregoing, the Buyer shall have no indemnification
obligation under this Section 9.4 until Seller's Adverse Consequences are in
excess of $20,000; provided that the foregoing limitation shall not apply to any
payment obligation of the Buyer pursuant to Section 2.4 hereof.
9.5. The Seller's Indemnity.
The Seller agree to defend, indemnify and hold harmless the Buyer from,
against and in respect of any and all demands, claims, actions or causes of
action, losses, liabilities, damages, assessments, deficiencies, taxes, costs
and expenses, including without limitation, interest, penalties and reasonable
attorneys' fees and expenses, asserted against, imposed upon or paid, incurred
or suffered by Buyer ("Buyers Adverse Consequences"):
(i) as a result of, arising from, in connection
with or incident to:
(A) any act or condition existing on the date of
Closing, or omission of information, which results
any breach or inaccuracy of any representation or
warranty of the Seller in this Agreement or in any
Instrument of Conveyance; provided, however, that
officers of the Seller shall have no liability
pursuant to this Section 9.5 for inaccuracies in any
representation or warranty of the Seller, or
(B) any breach of any covenant or agreement of the
Seller contained in this Agreement or in any
Instrument of Conveyance;
(ii) as a result of, or with respect to, any and all
obligations or liabilities of the Seller, whether known or unknown,
asserted or unasserted, contingent or otherwise including, without
limitation of the foregoing, any Accrued Employee Benefits which were
not listed on the schedule of Accrued Employee Benefits as of the
Closing Date;
(iii) arising out of any acts, events or
circumstances by the Seller prior to Closing Date;
(iv) due to any failure to have obtained any
certificate of occupancy, building permit, land use permit and other
similar governmental permit or license required to have been obtained
prior to the Closing with respect to the property subject to the
Passaic Lease;
(v) due to, with respect to any governmental permit
or license needed to conduct the business to be conducted by the Buyer
with the Assets in the manner such business was conducted by the Seller
immediately prior to Closing, including, without limitation, any such
permit or license not presently possessed by the Seller (collectively,
the "Required Permits"), any failure by the parties to have obtained
prior to Closing a consent to the transfer to the Buyer of such
Required Permit or, if any such Required Permit may not be transferred
to the Buyer, the failure by the Buyer to obtain or have on
44
or after the Closing a newly issued governmental permit or license in
its own name and covering the same properties or activities as are or
would have been covered by the Required Permit; and
(vi) resulting from any liability of the Seller which
is not an Assumed Obligation.
Notwithstanding the foregoing, the Seller shall have no indemnification
obligation under this Section 9.5: (i) until Buyer's Adverse Consequences are in
excess of $20,000, and (ii) for consequential damages arising from any
acquisition of all or substantially all of the assets or capital stock of any
entity occurring subsequent to the Closing Date except for the purchase by the
Buyer of substantially all of the assets of ▇▇▇▇▇▇▇▇ Brothers (provided, that
the Seller is not responsible for any misrepresentation or miswarranties of
▇▇▇▇▇▇▇▇ Brothers). The Seller's indemnification is limited to and shall not in
any event exceed the Purchase Price.
9.6. Successors to the Seller. The merger, consolidation, liquidation,
dissolution or winding up of, or any similar transaction with respect to, the
Seller shall not affect in any manner the obligations of the Seller pursuant to
this Section or any other term or provision of this Agreement, and the Seller
covenants and agrees to make adequate provision for its liabilities and
obligations hereunder in the event of any such transaction.
9.7. Indemnity Procedure.
(a) A party agreeing to indemnify against any matter pursuant
to this Agreement is referred to herein as the "Indemnifying Party" and the
other party claiming indemnity is referred to herein as the "Indemnified Party".
(b) An Indemnified Party under this Agreement shall give
prompt written notice to the Indemnifying Party of any liability, which might
give rise to a claim for indemnity under this Agreement. As to any claim,
action, suit or proceeding by a third party, the Indemnifying Party shall have
the right, exercisable by notifying the Indemnified Party within twenty days
after receipt of such notice from the Indemnified Party, to assume the entire
control of the defense, compromise or settlement thereof, all at the
Indemnifying Party's expense including employment of counsel, and in connection
therewith the Indemnified Party shall cooperate fully to make available to the
Indemnifying Party all pertinent information under its control. The Indemnified
Party may at its expense, if it so elects, designate its own counsel to
participate with counsel designated by the Indemnifying Party in the conduct of
any such defense. If the defense of any such matter is tendered to the
Indemnifying Party by notice as set forth above and the Indemnified Party is
entitled to indemnification pursuant hereto with respect to such matter, and the
Indemnifying Party declines or otherwise fails to (1) promptly pay or settle the
same, or (2) vigorously investigate and defend the same, the Indemnified Party
may investigate and defend the same and the Indemnifying Party will reimburse
the Indemnified Party for all judgments, settlement payments and reasonable
expenses, including reasonable attorneys' fees, incurred and paid by it in
connection therewith.
(c) An Indemnified Party shall not make any settlement of any
claim without the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.
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(d) Except as set forth in subsection (b) in the event of any
litigation brought by either party hereto to seek indemnity under this
Agreement, the prevailing party shall be entitled to recover attorneys' fees
upon final judgment on the merits.
10. Termination.
10.1. Methods of Termination. Anything herein or elsewhere to the
contrary notwithstanding, the transactions contemplated hereby may be terminated
and abandoned at any time prior to the Closing:
(a) by mutual consent of the Buyer and the Seller; or
(b) by the Seller if, on the Closing Date, any of the
conditions set forth in Section 7 shall not have been met;
(c) by the Buyer if, on the Closing Date, any of the
conditions set forth in Section 8 shall not have been met; or
(d) by either party if, without fault of the terminating
party, the Closing shall not have occurred by September 30, 1998.
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10.2. Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, written notice thereof shall
forthwith be given to the other parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned without
further action by the Buyer or the Seller.
10.3. Effect of Termination. In the event of termination of this
Agreement as expressly provided in Section 10.1 above, this Agreement shall
forthwith become void (except for Section 3.26) and neither the Buyer, on the
one hand, nor the Seller, on the other, shall have any liability to the other;
provided, however, that if such termination shall result from the
misrepresentation or breach of warranty when made by a party or the
non-fulfillment of any covenant or agreement required to be performed by a
party, then such party shall be fully liable to the other party for all costs
and expenses (including reasonable attorneys' fees and disbursements) incurred
by the other party in connection with its due diligence and the negotiation,
preparation and execution of this Agreement and the transactions contemplated
hereby and for all damages sustained or incurred by the other party as a result
of such misrepresentation, breach or non-performance. Any termination of this
Agreement shall not result in the termination of that certain Confidentiality
Agreement dated March 18, 1998 by and between KTI and the Seller.
11. Miscellaneous Provisions.
11.1. Amendment and Modification. This Agreement may be amended,
modified and supplemented by the parties hereto only by written instrument
signed by or on behalf of the party to be charged thereunder.
11.2. Waiver of Compliance. Any failure of the Seller, on the one hand,
or the Buyer on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by an
authorized officer of the other party, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to any subsequent or other
failure.
11.3. Expenses. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. The Seller shall bear all
sales, use and transfer taxes arising out of this transaction as provided above
in Section 1.3(c).
11.4. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail,
with postage prepaid as follows:
If to Seller: Atlantic Coast Fibers, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
47
▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Jeffer, Hopkinson & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer or KTI: c/o KTI, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Buyer shall furnish to the
Seller in writing.
11.5. Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, administrators, executors, legal
representatives, such successors and assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
provided, however, that the Buyer may freely assign this Agreement or all or any
rights it may have hereunder to any of its subsidiaries or affiliated companies,
but no such assignment shall relieve the Buyer of its obligations hereunder.
11.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey. For the purpose of any
suit, action or proceeding involving this Agreement, each of the parties hereto
expressly submits to the jurisdiction of all federal and state courts located in
the State of New Jersey, and waives any objection that it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any federal or state court located in the
State of New Jersey.
11.7. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute the same instrument.
11.8. Headings. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
11.9. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein, and supersedes all prior-agreements, promises, letters of
intent, covenants, arrangements,
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communications, representations or warranties, whether oral or written, by any
party hereto or by any Related Person of any party hereto. All Exhibits attached
hereto, the Disclosure Schedule, any exhibits thereto and all certificates,
documents and other instruments delivered or to be delivered pursuant to the
terms hereof are hereby expressly made a part of this Agreement as fully as
though set forth herein, and all references herein to the terms "this
Agreement", "hereunder", "herein", "hereby" or "hereto" shall be deemed to refer
to this Agreement and to all such writings.
11.10. Third Parties. Except as specifically set forth or referred to
herein, nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any person, firm, partnership, corporation
or other entity other than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
11.11. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Atlantic Coast Fibers Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: President
KTI New Jersey Fibers, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
Solely to the extent of its
rights and obligations
under the provisions of
this Agreement:
KTI, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
SOLELY FOR THE PURPOSE OF
MAKING THE REPRESENTATION
IN THE LAST SENTENCE OF
SECTION 3.28:
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇