================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
================================================================================
ALLIED WASTE INDUSTRIES, INC., RABANCO ACQUISITION COMPANY, RABANCO
ACQUISITION COMPANY TWO, RABANCO ACQUISITION COMPANY THREE, RABANCO ACQUISITION
COMPANY FOUR, RABANCO ACQUISITION COMPANY FIVE, RABANCO ACQUISITION COMPANY SIX,
RABANCO ACQUISITION COMPANY SEVEN, RABANCO ACQUISITION COMPANY EIGHT, RABANCO
ACQUISITION COMPANY NINE, RABANCO ACQUISITION COMPANY TEN, RABANCO ACQUISITION
COMPANY ELEVEN, AND RABANCO ACQUISITION COMPANY TWELVE
and
RABANCO, LTD.,
RABANCO RECYCLING, INC.,
UNITED WASTE CONTROL CORP.,
RABANCO INTERMODAL/B.C., INC.,
WJR ENVIRONMENTAL, INC.,
WASTE ASSOCIATES, INC.,
PAPER FIBERS, INC.
MJS ASSOCIATES, INC.
S&L, INC.
ALASKA STREET ASSOCIATES, INC.
SSWI, INC.
AND
CCAI, INC.
Dated as of June 25, 1998
iii
Table of Contents
Page
ARTICLE I DEFINITIONS........................................................2
ARTICLE II THE MERGERS.......................................................9
2.1 EFFECTIVE TIME OF THE MERGERS.......................................9
2.2 CLOSING.............................................................9
2.3 EFFECTS OF THE MERGERS..............................................9
2.4 CONVERSION OF STOCK OF COMPANIES....................................9
2.5 DELIVERY OF CERTIFICATES...........................................10
2.6 TAX-DEFERRED REORGANIZATION........................................10
2.7 ACCOUNTING TREATMENT...............................................10
2.8 NO FURTHER OWNERSHIP RIGHTS IN CAPITAL STOCK OF THE COMPANIES......10
2.9 POST-CLOSING ADJUSTMENTS...........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANIES.................12
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES............................12
3.2 CAPITAL STRUCTURE..................................................12
3.3 AUTHORITY..........................................................13
3.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.........................13
3.5 FINANCIAL STATEMENTS...............................................14
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.................................15
3.7 NO MATERIAL ADVERSE CHANGE.........................................15
3.8 TAXES..............................................................15
3.9 LABOR CONTROVERSIES................................................16
3.10 EMPLOYEE BENEFIT PLANS.............................................17
3.11 CERTAIN AGREEMENTS.................................................17
3.12 LITIGATION.........................................................17
3.13 TITLE TO AND CONDITION OF ASSETS...................................18
3.14 MAJOR CONTRACTS....................................................18
3.15 MATERIAL RELATIONS.................................................19
3.16 REAL PROPERTY......................................................19
3.17 ENVIRONMENTAL MATTERS..............................................20
3.18 TECHNOLOGY.........................................................21
3.19 QUESTIONABLE PAYMENTS..............................................22
3.20 BROKERS AND FINDERS................................................22
3.21 ACCOUNTING MATTERS.................................................22
3.22 BOOKS AND RECORDS..................................................22
3.23 INSURANCE..........................................................22
3.24 COMPLETE DISCLOSURE................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS................23
4.1 ORGANIZATION; STANDING AND POWER...................................23
4.2 CAPITAL STRUCTURE..................................................23
4.3 AUTHORITY..........................................................24
4.4 SEC DOCUMENTS AND FINANCIAL STATEMENTS.............................24
4.5 NO MATERIAL ADVERSE CHANGE.........................................25
4.6 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS.........................25
4.7 INTERIM OPERATION OF SUBS..........................................25
4.8 ACCOUNTING MATTERS.................................................25
4.9 BROKERS AND FINDERS................................................26
ARTICLE V COVENANTS OF COMPANIES............................................26
5.1 CONDUCT OF BUSINESS................................................26
5.1.1 Ordinary Course...............................................26
5.1.2 Dividends: Changes in Stock..................................27
5.1.3 Issuance of Securities........................................27
5.1.4 Governing Documents...........................................27
5.1.5 No Acquisitions...............................................27
5.1.6 No Dispositions...............................................27
5.1.7 Indebtedness..................................................27
5.1.8 Plans; Employees..............................................27
5.1.9 Claims........................................................28
5.1.10 Agreement.....................................................28
5.2 BREACH OF REPRESENTATION AND WARRANTIES............................28
5.3 CONSENTS...........................................................28
5.4 REASONABLE EFFORTS.................................................28
5.5 TAX RETURNS........................................................28
5.7 POOLING............................................................28
5.7 AUDITOR'S CONSENT..................................................28
5.8 ACQUISITION OF ESSENTIAL ASSETS....................................29
ARTICLE VI COVENANTS OF PARENT..............................................29
6.1 BREACH OF REPRESENTATIONS AND WARRANTIES...........................29
6.2 CONSENTS...........................................................29
6.3 REASONABLE EFFORTS.................................................29
6.4 POOLING............................................................29
6.5 SEVERANCE..........................................................29
6.6 COMBINED FINANCIAL RESULTS.........................................29
ARTICLE VII ADDITIONAL AGREEMENTS...........................................30
7.1 ACCESS TO INFORMATION..............................................30
7.2 LEGAL CONDITIONS TO THE MERGERS....................................30
7.3 AFFILIATES.........................................................30
7.4 HSR ACT FILINGS....................................................31
7.5 EMPLOYEE BENEFITS..................................................31
7.6 OFFICERS AND DIRECTORS.............................................32
7.7 EXPENSES...........................................................32
7.8 ADDITIONAL AGREEMENTS..............................................32
7.9 PUBLIC ANNOUNCEMENTS...............................................32
7.10 TAXES..............................................................32
7.11 CERTAIN INSURANCE POLICIES.........................................35
ARTICLE VIII CONDITIONS PRECEDENT...........................................35
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS........35
8.1.1 Consents......................................................36
8.1.2 No Restraints.................................................36
8.1.3 No Burdensome Condition.......................................36
8.2 CONDITIONS OF OBLIGATIONS OF PARENT AND SUBS.......................36
8.2.1 Representations and Warranties of Company.....................36
8.2.2 Performance of Obligations of Companies.......................36
8.2.3 Affiliates....................................................36
8.2.4 Pooling of Interests..........................................37
8.2.5 Opinion of Companies' Counsel.................................37
8.3 CONDITIONS OF OBLIGATIONS OF COMPANIES.............................37
8.3.1 Representations and Warranties of Parent and Subs.............37
8.3.2 Performance of Obligations of Parent and Subs.................37
8.3.3 Pooling of Interests..........................................37
8.3.4 Opinion of Parent Counsel.....................................37
ARTICLE IX INDEMNIFICATION................................................38
9.1 INDEMNIFICATION BY SHAREHOLDERS....................................38
9.2 INDEMNIFICATION BY PARENT..........................................38
9.3 NOTICE OF CLAIMS...................................................39
9.4 DEFENSE OF THIRD PARTY CLAIMS......................................39
9.5 TIME LIMIT.........................................................40
9.6 LIMITATIONS........................................................40
9.7 TAX CONSEQUENCES..................................................41
9.8 SPECIAL INDEMNITY FOR PERMIT MATTER...............................41
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.................................41
10.1 TERMINATION........................................................41
10.2 EFFECT OF TERMINATION..............................................42
10.3 AMENDMENT..........................................................42
10.4 EXTENSION, WAIVER..................................................42
ARTICLE XI GENERAL PROVISIONS...............................................42
11.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS..........42
11.2 NOTICES............................................................43
11.3 INTERPRETATION.....................................................45
11.4 COUNTERPARTS.......................................................45
11.5 MISCELLANEOUS......................................................45
11.6 NO JOINT VENTURE...................................................45
11.7 TRANSACTIONAL EXPENSES.............................................45
11.8 GOVERNING LAW......................................................45
EXHIBIT 2.1 (a)...Agreement and Plan of Merger
EXHIBIT 2.1 (b)...Articles of Merger
EXHIBIT 5.8....... ▇▇▇▇▇ Agreement
EXHIBIT 7.3....... Affiliates Agreement
EXHIBIT 8.2.5..... Opinion of Companies' Counsel
EXHIBIT 8.3.4..... Opinion of Parent Counsel
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION, is made
and entered into as of June 25, 1998, by and among Allied Waste Industries,
Inc., a Delaware corporation ("Parent"); Rabanco Acquisition Company, Rabanco
Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco Acquisition
Company Four, Rabanco Acquisition Company Five, Rabanco Acquisition Company Six,
Rabanco Acquisition Company Seven, Rabanco Acquisition Company Eight, Rabanco
Acquisition Company Nine, Rabanco Acquisition Company Ten, Rabanco Acquisition
Company Eleven, and Rabanco Acquisition Company Twelve, each of which is a
Washington corporation and a wholly-owned subsidiary of Parent (each a "Sub" and
together the "Subs"); Rabanco, Ltd., a Washington corporation, ("Limited"),
Rabanco Recycling, Inc., a Washington corporation ("Recycling"), United Waste
Control Corp., a Washington corporation ("United"), Rabanco Intermodal/B.C.,
Inc., a Washington corporation ("Intermodal"), WJR Environmental, Inc., a
Washington corporation ("WJR"), Waste Associates, Inc., a Washington corporation
("Waste Associates"), Paper Fibers, Inc., a Washington corporation ("Paper
Fibers"), MJS Associates, Inc., a Washington corporation ("MJS"), Alaska Street
Associates, Inc., a Washington corporation ("Alaska Street"), S&L, Inc., a
Washington corporation ("S&L"), SSWI, Inc., a Washington QSSS corporation
("SSWI"), and CCAI, inc., a Washington QSSS corporation ("CCAI") (each a
"Company" and collectively, the "Companies"); and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇ (collectively the "Razore
Shareholders"), and Sphere Solid Waste, Inc., a Washington corporation and CCA,
inc., a Washington corporation (collectively the "Non-Razore Shareholders") (The
Razore Shareholders and the Non-Razore Shareholders are sometimes referred to
herein individually as a "Shareholder" and collectively as the "Shareholders").
RECITALS
WHEREAS, Parent, Rabanco Acquisition Company, Limited, Recycling,
United, Intermodal, WJR, Waste Associates, Paper Fibers, MJS, and the Razore
Shareholders entered into an Agreement and Plan of Reorganization dated as of
April 23, 1998 (the "First Agreement");
WHEREAS, Section 7.13 of the First Agreement provided for its amendment
to include Alaska Street, S&L, SSWI, CCAI, and the Non-Razore Shareholders;
WHEREAS, Alaska Street, S&L, SSWI, CCAI, and the Non-Razore
Shareholders desire to become parties to the First Agreement; and
WHEREAS, the parties hereto desire to amend and restate the First
Agreement in its entirety, with the intent that the First Agreement be
superseded by this Agreement;
INTENDING TO BE LEGALLY BOUND, and in consideration of the foregoing
premises and the mutual representations, warranties, covenants and agreements
contained herein, Parent, Subs, the Companies, and the Shareholders hereby agree
as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, capitalized terms shall have the
following meanings:
"Aboveground Storage Tank" shall have the meaning ascribed to such term
in RCRA or any applicable state or local statute, law, ordinance, code, rule,
regulation, or Order.
"Adjustment Amount" shall have the meaning given in Section 2.9(c).
"Affiliate" shall mean any person or entity that is an affiliate for
purposes of pooling regulations.
"Affiliate Agreements" shall have the meaning given in Section 7.3.
"Agreement" shall mean this Amended and Restated Agreement and Plan of
Reorganization.
"Alaska Street" shall mean Alaska Street Associates, Inc., a Washington
corporation.
"Antitrust Laws" shall mean the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended,
the ▇▇▇▇▇▇▇ Act, as amended, the Federal Trade Commission Act, as amended, and
any other federal, state or foreign statutes, rules, regulations, or Orders that
are designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade.
"Assets" shall mean all of the properties and assets owned or leased by
any Company or Subsidiary, except for the Owned Properties and the Leased
Premises, whether personal or mixed, tangible or intangible, wherever located.
"Business Condition" with respect to any entity shall mean the
business, financial condition, results of operations or assets (without giving
effect to the consequences of the transactions contemplated by this Agreement)
of such entity and its subsidiaries taken as a whole.
"CCAI" shall mean CCAI, inc., a Washington QSSS corporation.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. ▇▇.▇▇. 9601, et. seq.
"Claim Notice" shall mean a written notice in reasonable detail of the
facts and circumstances that form the basis of an indemnification claim
hereunder and setting forth an estimated amount of the potential Losses, if
possible, and the sections of this Agreement upon which the claim for
indemnification for such Losses is based.
"Closing" shall mean the closing of the Merger.
"Closing Date" shall have the meaning given in Section 2.2.
"Closing Date Working Capital" shall have the meaning given in Section
2.9.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" and "Companies" shall mean any and all, respectively, of the
following companies: Limited, Recycling, United, Intermodal, WJR, Waste
Associates, Paper Fibers, MJS, Alaska Street, S&L, CCAI, and SSWI.
"Companies' Disclosure Schedule" shall mean a document referring
specifically to the representations and warranties in this Agreement that is
delivered by the Companies to Parent prior to the execution of this Agreement.
"Company Percentages" shall have the meaning given in Section 2.4.
"Companies' Required Statutory Approvals" shall have the meaning given
in Section 3.4(c).
"Company Shares" shall mean the issued and outstanding shares of
capital stock of the Companies.
"Company Voting Debt" shall mean bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of Company
Shares on any matter.
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nonsolicitation Agreement entered into between Rabanco Companies and Parent.
"Consent" shall mean a consent, approval, Order or authorization of or
registration, declaration or filing with or exemption by a Governmental Entity.
"Counternotice" shall mean a written objection to a claim or payment
setting forth the basis for disputing such claim or payment.
"Current Balance Sheets" shall have the meaning given in Section 3.5.
"Discharge" shall mean any manner of spilling, leaking, dumping,
discharging, releasing or emitting, as any of such terms may further be defined
in any Environmental Law, into ground water, surface water, or soil.
"Effective Time" shall have the meaning given in Section 2.1.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Environmental Audits" shall mean studies or investigations undertaken
to assess compliance with Environmental Laws.
"Environmental Laws" means all federal, state, regional or local
statutes, laws, rules, regulations, codes, Orders, plans, or ordinances, or
similar laws of foreign jurisdictions where any Company or Subsidiary conducts
business, any of which govern (or purport to govern) or relate to pollution,
protection of the environment, public health and safety, air emissions,
water discharges, hazardous or toxic substances, solid or hazardous waste or
occupational health and safety, as any of these terms are defined in such
statutes, laws, rules, regulations, codes, Orders, or ordinances, including
without limitation CERCLA; RCRA; the Hazardous Materials Transportation Act,
as amended, 49 U.S.C. ss.ss.1801, et. seq.; the Clean Water Act, as amended, 33
U.S.C. ▇▇.▇▇. 1311, et. seq. ("CWA"); the Clean Air Act, as amended, 42 U.S.C.
▇▇.▇▇. 7401-7642; the Toxic Substances Control Act, as amended, 15 U.S.C.
▇▇.▇▇. 2601 et. seq.; FIFRA; EPCRA; and OSHA.
"Environmental Site Assessment" shall mean a study or investigation
undertaken to determine if a particular parcel of real property is subject to a
"recognized environmental condition", as defined by ASTM E 1527-97.
"EPCRA" shall mean the Emergency Planning and Community Right-to-Know
Act of 1986 as amended, 42 U.S.C. ss.ss.11001, et. seq. (Title III of ▇▇▇▇).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"FIFRA" shall mean the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. ▇▇.▇▇. 136-136y.
"Financial Statements" shall have the meaning given in Section 3.5.
"First Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of April 23, 1998, by and among Parent, Rabanco
Acquisition Company, Limited, Recycling, United, Intermodal, WJR, Waste
Associates, Paper Fibers, MJS, and the Razore Shareholders.
"Fixed Assets" shall mean all vehicles, machinery, equipment, tools,
supplies, leasehold improvements, furniture, and fixtures used by or located on
the premises of any Company or Subsidiary or set forth in the Current Balance
Sheets or acquired by any Company or Subsidiary since the date of the Current
Balance Sheets.
"Funded Debt" shall have the meaning given in Section 2.9.
"GAAP" shall have the meaning given in Section 2.9.
"Governmental Entity" shall mean a court, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign.
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"Hazardous Substances" shall be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other contaminant, pollutant
or constituent thereof, whether liquid, solid, semi-solid, sludge and/or
gaseous, including without limitation, chemicals, compounds, by-products,
pesticides, asbestos-containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires investigation or
remediation under any Environmental Laws, or which are or become regulated,
listed or controlled by, under or pursuant to any Environmental Laws.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"Income Taxes" shall mean any and all federal, state, local, or foreign
Taxes imposed on net income.
"Intellectual Property Rights" shall mean the rights to all patents,
trademarks, trade names, service marks, copyrights and any applications
therefor, and tangible or intangible proprietary information or material that in
any material respect are used in the business of such Company or Subsidiary as
currently conducted.
"Intermodal" shall mean Rabanco Intermodal/B.C., Inc., a Washington
corporation.
"Knowledge of the Companies" shall mean the actual knowledge, without
further inquiry, of the following individuals: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇.
"Liabilities" shall mean liabilities, obligations, or contingencies.
"Leased Premises" shall mean all parcels of real estate subject to
Leases to which any Company or Subsidiary is a party as a lessee.
"Leases" shall mean leases, licenses, or similar agreements.
"Licenses" means all licenses, certificates, permits, approvals and
registrations as are required by any Governmental Entity.
"Limited" shall mean Rabanco, Ltd., a Washington corporation.
"Losses" shall mean direct and actual losses, damages, liabilities,
claims, judgments, settlements, fines, costs, and expenses (including reasonable
attorneys' fees) of any kind, but excluding all indirect and/or consequential
damages of any kind.
"Material Adverse Effect" shall mean a material adverse effect other
than resulting from (i) changes attributable to conditions affecting the
disposal, collection, or recycling business generally, (ii) changes in general
economic conditions, or (iii) changes attributable to the announcement or
pendency of the Merger.
"Mergers" shall have the meaning given in Section 2.1.
"Merger Documents" shall mean an Agreement and Plan of Merger and
Articles of Merger with respect to each of the Mergers substantially in the form
of Exhibits 2.1(A)-(B).
"Merger Shares" shall have the meaning given in Section 6.6.
"MJS" shall mean MJS Associates, Inc., a Washington corporation.
"Non-Razore Shareholders" shall mean Sphere Solid Waste, Inc., a
Washington corporation and CCA, inc., a Washington corporation.
"Notice of Objection" shall have the meaning given in Section 2.9.
"Notices" shall mean non-compliance orders and notices of violation.
"Order" shall mean a decree, judgment, injunction, ruling, or other
order of a Governmental Entity having jurisdiction, whether temporary,
preliminary, or permanent.
"OSHA" shall mean the Occupational Safety and Health Act of 1970, as
amended, 29 U.S.C. ▇▇.▇▇. 651, et. seq.
"Owned Property" shall mean a parcel of real estate owned by a Company
or Subsidiary as of the date hereof.
"Paper Fibers" shall mean Paper Fibers, Inc., a Washington corporation.
"Parent" shall mean Allied Waste Industries, Inc., a Delaware
corporation.
"Parent Average Closing Price" shall mean the average closing price as
publicly reported for the Nasdaq Stock Market as of 4:00 p.m. Eastern Time of
Parent Common Shares over the last twenty (20) trading days ending two (2)
trading days prior to the agreed Closing Date.
"Parent Common Shares" shall have the meaning given in Section 2.4.
"Parent Common Stock" shall have the meaning given in Section 4.2.
"Parent Financial Statements" shall mean the financial statements of
Parent included in the Parent SEC Documents.
"Parent Notice" shall have the meaning given in Section 7.10(d).
"Parent Required Statutory Approvals" shall have the meaning given in
Section 4.6.
"Parent SEC Documents" shall mean all statements, reports, schedules,
registration statements, and definitive proxies or information statements filed
by Parent with the SEC since July 1, 1995.
"Parent Voting Debt" shall mean bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of Parent
Common Stock on any matter.
"Payment Certificate" shall mean a written claim for payment of Losses,
in reasonable detail and specifying the amount of such Losses.
"Permitted Exceptions" shall have the meaning given in Section 3.16(a)
(i).
"Plan" shall mean an employee bonus, profit sharing, retirement, stock
purchase, stock option, recapitalization, insurance, medical, life, disability,
severance, or other benefit plan.
"Proceedings" shall mean claims, suits, actions, or administrative or
judicial proceedings.
"Proceeding Notice" shall have the meaning given in Section 7.10(d).
"Rabanco Companies & Affiliates" shall mean the following Company
and Subsidiaries: United, Rabanco Companies, U.S. Disposal II, Recycle
Seattle II, and Kent-Meridian Disposal.
"Razore Shareholders" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, and ▇▇▇▇▇▇ ▇▇▇▇▇.
"RCRA" shall mean the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. ▇▇.▇▇. 6901 et. seq.
"Recycling" shall mean Rabanco Recycling, Inc., a Washington
corporation.
"Regional Disposal Company & Affiliates" shall mean the following
Subsidiaries: Regional Disposal Company and Roosevelt Associates.
"Required Statutory Approvals" shall mean the Parent Required Statutory
Approvals and the Companies' Required Statutory Approvals.
"Return Periods" shall have the meaning given in Section 3.8(a).
"Rights of First Offer Claims" shall have the meaning given in Section
9.2.
"S&L" shall mean S&L, Inc., a Washington corporation.
"S Corporation Taxable Periods" shall mean the taxable periods for
which each Company is a valid S corporation under Section 1361(a) of the Code,
including the taxable period ending at the close of business the day before the
Closing Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Settlement Statement" shall have the meaning given in Section 2.9.
"Shareholders" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Sphere Solid Waste, Inc., a Washington corporation, and
CCA, inc., a Washington corporation.
"SSWI" shall mean SSWI, Inc., a Washington QSSS corporation.
"Sub" or "Subs" shall mean any or all of Rabanco Acquisition Company,
Rabanco Acquisition Company Two, Rabanco Acquisition Company Three, Rabanco
Acquisition Company Four, Rabanco Acquisition Company Five, Rabanco Acquisition
Company Six, Rabanco Acquisition Company Seven, Rabanco Acquisition Company
Eight, Rabanco Acquisition Company Nine, Rabanco Acquisition Company Ten,
Rabanco Acquisition Company Eleven, and Rabanco Acquisition Company Twelve, all
of which are Washington corporations and wholly-owned subsidiaries of Parent.
"Subsidiary" means Rabanco Companies, a Washington general partnership,
Regional Disposal Company, a Washington general partnership, Rabanco Regional
Landfill Corporation, a Washington QSSS corporation, Roosevelt Associates, a
Washington partnership, Paper Fibres Company, a Washington partnership,
Kent-Meridian Disposal Company, a Washington joint venture, Recycle Seattle II,
a Washington joint venture, and US Disposal II, a Washington joint venture.
"Surviving Corporations" shall mean the Companies after the Mergers.
"Tax" and "Taxes" shall mean any and all taxes, charges, fees, levies,
or other assessments of whatever kind or nature, including without limitation
any federal, state, local, or foreign net income, gross income, gross receipts,
unitary, license, payroll, unemployment, excise, severance, stamp, premium,
windfall profits, environmental (including without limitation taxes under
section 59A of the Code), occupational, lease, fuel, customs, duties, capital
stock, franchise, profits, withholding, Social Security, disability, real
property, personal property (tangible and intangible), sales, use, transfer,
registration, value added, alternative or minimum, estimated, or any other kind
of tax whatsoever (whether computed on a separate, consolidated, unitary,
combined or other basis), including the recapture of any tax items, and
including any interest, addition, penalty or other associated charge thereto,
whether disputed or not. The term "Taxes" includes any liability for the payment
of any amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement whereby liability for payment of such amounts was
determined or taken into account with reference to the liability of any other
person.
"Tax Returns" shall mean any returns, informational returns, reports,
declarations, estimates, or statements with respect to Taxes that are required
to be filed with any taxing authority.
"Threshold Amount" shall have the meaning given in Section 9.6.
"Underground Storage Tank" shall have the meaning ascribed to such term
in Section 6901 et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, or Order.
"United" shall mean United Waste Control Corp., a Washington
corporation.
"Violation" shall have the meaning given in Section 3.4(b).
"Waste" shall be construed broadly to include agricultural wastes,
biomedical wastes, biological wastes, bulky wastes, construction and demolition
debris, garbage, household wastes, industrial solid wastes, liquid wastes,
recyclable materials, sludge, solid wastes, special wastes, used oils, white
goods, and yard trash as those terms are defined under any applicable
Environmental Laws.
"Waste Associates" shall mean Waste Associates, Inc., a Washington
corporation.
"WBCA" shall mean the Washington Business Corporation Act.
"WJR" shall mean WJR Environmental, Inc., a Washington corporation.
ARTICLE II
THE MERGERS
2.1 Effective Time of the Mergers. Subject to the provisions of this
Agreement, each Sub will be merged into its corresponding Company as indicated
on the attached Schedule 2.1 (the "Mergers"). The Merger Documents shall be duly
prepared, executed, and acknowledged by the parties and thereafter delivered to
the Secretary of State of the State of Washington, for filing, as provided in
the WBCA as soon as practicable on or after the Closing Date. The Mergers shall
become effective upon the filing of the Merger Documents with the Secretary of
State of the State of Washington or at such time thereafter as is provided in
the Merger Documents (the "Effective Time").
2.2 Closing. The Closing will take place as soon as practicable on the
first business day after satisfaction or waiver of the last to be fulfilled of
the conditions set forth in Article VIII that by their terms are not to occur at
the Closing (the "Closing Date"), at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP,
Seattle, Washington, unless another date or place is agreed to in writing by the
parties hereto.
2.3 Effects of the Mergers. At the Effective Time, (i) the separate
existence of each Sub shall cease and each Sub shall be merged with and into the
corresponding Company, (ii) the Articles of Incorporation of each Sub shall be
the Articles of Incorporation of the corresponding Surviving Corporation, until
duly amended, (iii) the Bylaws of each Sub shall be the Bylaws of the
corresponding Surviving Corporation until duly amended, (iv) the directors of
each Sub shall be the directors of the corresponding Surviving Corporation, (v)
the officers of each Sub shall be the officers of the corresponding Surviving
Corporation, (vi) the issued and outstanding capital stock of each Sub shall
continue to be the issued and outstanding capital stock of the corresponding
Surviving Corporation, (vii) all contracts, agreements, purchase orders, leases,
licenses, permits, and authorizations affecting or relating to each of the
Companies shall continue unimpaired as to the corresponding Surviving
Corporation, (viii) all debts, liabilities, and obligations of each Company,
whether known or unknown, fixed or contingent, shall accede to the corresponding
Surviving Corporation, and (ix) the Mergers shall, from and after the Effective
Time, have all the effects provided by applicable law.
2.4 Conversion of Stock of Companies.
(a) Subject to adjustment as set forth in Section 2.9, at and
as of the Effective Time and by virtue of the Mergers, the issued and
outstanding shares of the capital stock of each Company (except for CCAI and
SSWI) shall be converted, without any action on the part of the holders thereof,
into the right of the Razore Shareholders to receive an aggregate of Fourteen
Million (14,000,000) shares of Parent Common Stock (the "Parent Common Shares"),
in proportion to their respective ownership interests in the Companies and in
proportion to the value of each of the Companies in relation to the transactions
contemplated hereby as expressed in a percentage (the "Company Percentages") and
as set forth on Schedule 2.4(a); provided, however, that in the event that the
Parent Average Closing Price is less than Twenty Five Dollars and Twenty-One
cents ($25.21) per share, the Razore Shareholders shall instead receive that
number of shares equal to Three Hundred Fifty Three Million Dollars
($353,000,000) divided by the Parent Average Closing Price. Appropriate
adjustments shall be made for any stock-splits, stock dividends or other capital
adjustments. No fractional shares of Parent Common Stock will be issued in the
Mergers. In lieu of such issuance, the shares of Parent Common Stock issued to
the Razore Shareholders pursuant to the terms of this Agreement shall be rounded
at each incident of issuance to the closest whole share of Parent Common Stock.
(b) Subject to adjustment as set forth in Section 2.9, at and
as of the Effective Time and by virtue of the Mergers, the issued and
outstanding shares of the capital stock of SSWI and CCAI shall be converted,
without any action on the part of the holders thereof, into the right of the
Non-Razore Shareholders to receive at Closing cash or immediately available
funds in proportion to their respective Company Percentages as set forth on
Schedule 2.4(b). In no event shall the amount of cash paid pursuant to this
Section 2.4(b) be in an amount that would disqualify the entire business
combination to be effected by the Mergers from being treated as a "pooling of
interests" for accounting purposes.
2.5 Delivery of Certificates. Each holder of a certificate or
certificates representing shares of the capital stock of the Companies shall
surrender such certificates to Parent, together with such duly executed
documentation as may be reasonably required by Parent to effect a transfer of
such shares, and upon such surrender each Razore Shareholder shall be entitled
to receive the shares of Parent Common Stock as indicated on Schedule 2.4(a).
2.6 Tax-Deferred Reorganizations. Each of the Mergers (except for the
two Mergers involving SSWI and CCAI) is intended to be a reorganization within
the meaning of Section 368 of the Code and this Agreement is intended to be a
"plan of reorganization" within the meaning of the regulations promulgated under
Section 368 of the Code.
2.7 Accounting Treatment. The entire business combination to
be effected by the Mergers is intended to be treated for accounting
purposes as a "pooling of interests".
2.8 No Further Ownership Rights in Capital Stock of the Companies. All
shares of Parent Common Stock issued, and all cash paid, at the Effective Time
upon cancellation of the shares of capital stock of the Companies in accordance
with the terms hereof shall respectively be deemed to have been delivered in
full satisfaction of all rights pertaining to the shares of capital stock of the
Companies. After the Effective Time, there shall be no transfers on the stock
transfer books of the Companies of the shares of the Companies' stock.
2.9 Post-Closing Adjustments.
(a) The consideration payable pursuant to Section 2.4 shall be
subject to adjustment after the Closing Date as provided in this Section 2.9. On
or before sixty (60) days following the Closing Date, Parent shall calculate and
deliver to the Shareholders a written statement (the "Settlement Statement")
setting forth the amount of the working capital of each of the Companies and
Subsidiaries as of the Closing Date (the "Closing Date Working Capital") and the
total amount of Funded Debt as of the Closing Date. "Closing Date Working
Capital" shall mean the difference obtained by subtracting (a) the amount which
would be reflected in accordance with generally accepted accounting principles
consistently applied ("GAAP") as current operating liabilities of the Companies
and Subsidiaries as of the Closing Date, but excluding Funded Debt, from (b) the
amount that would be reflected in accordance with GAAP as current operating
assets of the Companies and Subsidiaries as of the Closing Date. The Settlement
Statement shall be calculated by Parent and certified in writing by the Chief
Financial Officer of Parent. "Funded Debt" shall mean (i) indebtedness of the
Companies or Subsidiaries for borrowed money, including indebtedness to family
members and non-sale related entities, (ii) indebtedness of the Companies or
Subsidiaries with respect to capitalized lease obligations, in either case
outstanding as of the Closing Date, and (iii) bonus amounts which may be paid as
described in and pursuant to Section 5.1.8.
(b) The Settlement Statement shall be final and binding on the
Shareholders unless, within thirty (30) days following the date of delivery to
them of the Settlement Statement, the Shareholders notify Parent in writing (a
"Notice of Objection") that the Shareholders do not accept as correct the amount
of any calculation reflected in the Settlement Statement. If the Shareholders
timely deliver a Notice of Objection to Parent, then the Shareholders and Parent
shall respectively instruct ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. to attempt
to reach mutual agreement as to each disputed calculation made in the Settlement
Statement. If within ten (10) days after the matter has been referred to such
accounting firms they have not reached agreement as to all disputed
calculations, then ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. shall be promptly
instructed by the Shareholders and Parent, respectively, to designate a third
accounting firm of internationally recognized standing, which (acting as experts
and not as arbitrators) shall be instructed to make, as soon as practicable
after the matter is referred to such firm, all calculations which are in
dispute, and the determination of such third accounting firm in the matter shall
be final and binding on all parties.
(c) Once all amounts required to be calculated under the
preceding provisions of this Section 2.9 have been finally determined under this
Section 2.9, the parties shall calculate the "Adjustment Amount", which shall be
defined as: (i) Funded Debt (reflected as a positive number), plus (ii) Closing
Date Working Capital (reflected as a positive number if a deficit and as a
negative number if a surplus). If the Adjustment Amount exceeds Forty-Five
Million Dollars ($45,000,000), then the Shareholders shall pay to Parent, in the
manner described below the amount of Adjustment Amount in excess of Forty-Five
Million Dollars ($45,000,000), which payment shall be accounted for as a
reduction of the consideration paid pursuant to Sections 2.4(a) and (b). The
Shareholders shall make any payments required by this Section 2.9 by either: (i)
returning that number of Parent Common Shares equal to the amount of the
required payment divided by the closing price of the Parent Common Shares as
publicly reported for the Nasdaq Stock Market on the Closing Date; and/or (ii)
paying cash, in proportion to their percentage ownership in the Companies and
the Company Percentages, within seven (7) days after the amount of the
adjustment has been finally determined as provided by this Section 2.9. Each of
Parent and the Shareholders shall pay its own fees and expenses associated with
the preparation of the Settlement Statement or any other calculations made
hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES
Except as disclosed in the Companies' Disclosure Schedule, the
Companies jointly and severally represent and warrant to Parent and Subs as
follows:
3.1 Organization and Standing; Subsidiaries. Each Company and each of
the Subsidiaries is a corporation, partnership, or other entity duly organized
and validly existing under the laws of the State of Washington, has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which a failure so to
qualify would have a Material Adverse Effect on the Business Condition of the
Companies. The Subsidiaries are the only entities controlled by the Companies.
Rabanco Companies is a Washington general partnership owned by Limited and
Recycling. Regional Disposal Company is a Washington general partnership owned
33.33% by Rabanco Regional Landfill Corp., a Washington corporation; 46.67% by
WJR, 10% by Waste Associates, and 10% by MJS. Rabanco Regional Landfill Corp. is
a Washington QSSS corporation, 100% of the outstanding shares of which are owned
by Limited. Roosevelt Associates is a Washington partnership owned 50% by
Regional Disposal Company. Paper Fibres Company is a Washington general
partnership owned 33.33% by Paper Fibers and 66.67% by Recycling. Kent-Meridian
Disposal Company is a Washington joint venture 50% of which is owned by Rabanco
Companies. Recycle Seattle II is a Washington joint venture 72% of which is
owned by Paper Fibres Company, 7% of which is owned by CCAI, and 21% of which is
owned by SSWI. US Disposal II is a Washington joint venture 70.5% of which is
owned by United, 20.5% of which is owned by SSWI, and 9% of which is owned by
CCAI. The Companies are the lawful record and beneficial owners of all such
equity interests in the Subsidiaries and have valid title thereto, free and
clear of all liens, pledges, encumbrances, security interests, restrictions on
transfer (other than restrictions under federal and state securities laws),
claims, and equities of every kind. There are no outstanding warrants, options,
or rights of any kind to acquire from the Companies any such equity interests in
any Subsidiary.
3.2 Capital Structure. The authorized capital stock of Limited consists
of Fifty Thousand (50,000) shares of common stock, of which Three Hundred Fifty
Two and Two Tenths (352.2) shares are issued and outstanding. The authorized
capital stock of Recycling consists of Fifty Thousand (50,000) shares of common
stock, of which Six Thousand Six Hundred Sixty Seven (6,667) shares are issued
and outstanding. The authorized capital stock of United consists of Five Hundred
(500) shares of common stock, of which One Hundred Five (105) shares are issued
and outstanding. The authorized capital stock of Intermodal consists of Fifty
Thousand (50,000) shares of common stock, of which Ten Thousand (10,000) shares
are issued and outstanding. The authorized capital stock of WJR consists of One
Thousand (1,000) shares of common stock, of which One Thousand (1,000) shares
are issued and outstanding. The authorized capital stock of Waste Associates
consists of One Thousand (1,000) shares of common stock, of which One Thousand
(1,000) shares are issued and outstanding. The authorized capital stock of Paper
Fibers consists of Ten Thousand (10,000) shares of common stock, of which One
Hundred (100) shares are issued and outstanding. The authorized capital stock of
MJS consists of One Thousand (1,000) shares of common stock, of which One
Thousand (1,000) shares are issued and outstanding. The authorized capital stock
of Alaska Street consists of Ten Thousand (10,000) shares of common stock, of
which Nine Thousand (9,000) shares are issued and outstanding. The authorized
capital stock of S&L consists of Ten (10) shares of common stock, of which Four
(4) shares are issued and outstanding. The authorized capital stock of CCAI
consists of One Hundred Thousand (100,000) shares of common stock, of which One
Thousand (1,000) shares are issued and outstanding. The authorized capital stock
of SSWI consists of One Hundred Thousand (100,000) shares of common stock, of
which One Thousand (1,000) shares are issued and outstanding. All Company Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were issued in compliance with applicable federal and state securities laws.
There are not any options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements, or rights of
any character to which any Company is a party or by which any Company may be
bound obligating such Company to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of the capital stock of such Company, or
obligating such Company to grant, extend, or enter into any such option,
warrant, call, conversion right, commitment, agreement, contract, understanding,
restriction, arrangement, or right. None of the Companies has outstanding any
bonds, debentures, notes, or other indebtedness the holders of which have the
right to vote (or convertible or exercisable into securities having the right to
vote) with holders of common stock of any Company on any matter. The
Shareholders are the lawful record and beneficial owners of all of the Company
Shares shown as owned by such Shareholders on Schedules 2.4(a) and (b) and have
valid title thereto, free and clear of all liens, pledges, encumbrances,
security interests, restrictions on transfer (other than restrictions under
federal and state securities laws), claims, and equities of every kind. Except
for this Agreement, there are no outstanding warrants, options, or rights of any
kind to acquire from such Shareholders any Company Shares.
3.3 Authority. Each Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the Companies' Required
Statutory Approvals, to consummate the transactions contemplated hereby. Each of
the Shareholders has the full power and authority to enter into this Agreement
and the transactions contemplated herein. The execution and delivery by each
Company of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each Company, including the unanimous approval of the Board of Directors and
the Shareholders. This Agreement has been duly executed and delivered by each
Company and constitutes a valid and binding obligation of each Company
enforceable in accordance with its terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization, or other similar laws
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
3.4 Compliance with Laws and Other Instruments.
(a) To the Knowledge of the Companies, each Company and each
Subsidiary holds all Licenses necessary for the lawful conduct of their
respective businesses pursuant to all applicable statutes, laws, ordinances,
rules, and regulations of all Governmental Entities having jurisdiction over
them or any part of their operations, excepting, however, when such failure to
hold would not have a Material Adverse Effect on the Business Condition of the
Companies, and excepting Licenses required under Environmental Laws. To the
Knowledge of the Companies, there are no violations or claimed violations of any
such License or any such statute, law, ordinance, rule, or regulation, except
with regard to Environmental Laws and Licenses required thereunder.
(b) Subject to the satisfaction of the conditions set forth in
Sections 8.1 and 8.3, the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and thereby will not,
conflict with or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, or acceleration of any obligation or to loss of a material benefit
under, or the creation of a lien, pledge, security interest, charge, or other
encumbrance on assets (any such conflict, violation, default, right, loss or
creation being referred to herein as a "Violation") pursuant to (i) any
provision of the Articles of Incorporation or Bylaws of any Company or the
comparable governing instruments of any Subsidiary or (ii) any loan or credit
agreement, note, bond, mortgage, indenture, contract, lease, or other agreement
or instrument, permit, concession, franchise, license, Order, statute, law,
ordinance, rule or regulation applicable to any Company or any Subsidiary or
their respective properties or assets, other than, in the case of (ii), any such
Violation which individually or in the aggregate would not have a Material
Adverse Effect on the Business Condition of the Companies.
(c) No Consent of any Governmental Entity is required by or
with respect to any Company in connection with the execution and delivery of
this Agreement or the consummation by the Companies of the transactions
contemplated hereby or thereby, except for Consents, if any, relating to (i) the
filing of a premerger notification report and all other required documents by
Parent and the Companies, and the expiration of all applicable waiting periods,
under the HSR Act, (ii) such filings, authorizations, Orders and approvals as
may be required under foreign laws, state securities laws and the NASD Bylaws or
"blue sky" laws, and (iii) the filing of the Merger Documents with the Secretary
of State of the State of Washington (the filings and approvals referred to in
clauses (i), (ii) and (iii) are collectively referred to as the "Companies'
Required Statutory Approvals") and except for such other Consents which if not
obtained or made would not have a Material Adverse Effect on the Business
Condition of the Companies.
3.5 Financial Statements. Attached as Schedule 3.5 are the following
financial statements: (i) audited combined income statements, changes in equity,
balance sheets, and statements of cash flow of (x) Rabanco Companies &
Affiliates; and (y) Regional Disposal Company & Affiliates as of the close of
the fiscal years ended December 1995 through 1996, and draft audited combined
income statements, changes in equity, balance sheets, and statements of cash
flow of (x) Rabanco Companies & Affiliates; and (y) Regional Disposal Company &
Affiliates as of the close of the fiscal year ended December 1997, (ii) an
interim combined income statements, balance sheets, and statements of cash flow
of Rabanco Companies & Affiliates and Regional Disposal Company & Affiliates for
the period from January 1, 1998 to February 28, 1998 (which balance sheets,
together with the balance sheet referred to in clause (iv) below, shall be
referred to as the "Current Balance Sheets"); (iii) unaudited income statements,
changes in equity, balance sheets, and statements of cash flow of Intermodal as
of the close of the fiscal years from inception through December 31, 1997, (iv)
an interim income statement, balance sheet, and statement of cash flow of
Intermodal for the period from January 1, 1998 to February 28, 1998, (v)
unaudited income statements, changes in equity, balance sheets, and statements
of cash flow of S&L as of the close of the fiscal years from January 1, 1995
through December 31, 1997, (vi) an interim income statement, balance sheet, and
statement of cash flow of S&L for the period from January 1, 1998 to February
28, 1998, (vii) an interim income statement, balance sheet, and statement of
cash flow of Alaska Street for the period from May 18, 1998 to May 22, 1998,
(viii) an interim income statement, balance sheet, and statement of cash flow of
SSWI for the period from May 7, 1998 to May 22, 1998, and (ix) an interim income
statement, balance sheet, and statement of cash flow of CCAI for the period from
May 7, 1998 to May 22, 1998 (the statements in (i) through (ix) above
collectively referred to as the "Financial Statements"). Such Financial
Statements: (i) are in accordance with the books and records of such Companies
and Subsidiaries; (ii) present fairly, in all material respects, the financial
position of such Companies and Subsidiaries as of the dates indicated; and (iii)
have been prepared in accordance with GAAP consistently applied (subject to the
absence of footnote disclosure and year-end adjustments, which will not be
material either individually or in the aggregate).
3.6 Absence of Undisclosed Liabilities. The Companies and the
Subsidiaries, taken as a whole, have no liabilities or obligations (whether
absolute, accrued or contingent) except (i) Liabilities that are accrued or
reserved against in the Current Balance Sheets or (ii) additional Liabilities
reserved against since February 28, 1998 that (x) have arisen in the ordinary
course of business; and (y) are accrued or reserved against on the books and
records of the Companies and the Subsidiaries.
3.7 No Material Adverse Change. Since January 1, 1998, each Company and
each Subsidiary has conducted its business in the ordinary course and there has
not been: (i) to the Knowledge of the Companies, any Material Adverse Effect on
the Business Condition of the Companies or any development or combination of
developments that is reasonably likely to result in such an effect; (ii) any
damage, destruction or loss, whether or not covered by insurance, having a
Material Adverse Effect on the Business Condition of the Companies; (iii) any
declaration, setting aside, or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of any
Company, except as otherwise provided in Section 7.10(a); (iv) any increase or
change in the compensation or benefits payable or to become payable by any
Company or any Subsidiary to any of its employees, except in the ordinary course
of business consistent with past practice; (v) any acquisition or sale of a
material amount of property of any Company or any Subsidiary, except in the
ordinary course of business; (vi) any increase or modification in any bonus,
pension, insurance, or other employee benefit plan, payment or arrangement made
to, for, or with any of its employees; or (vii) the granting of stock options,
restricted stock awards, stock bonuses, stock appreciation rights and similar
equity based awards.
3.8 Taxes.
(a) Each Company and each Subsidiary has timely filed or
caused to be filed (or been included in) all federal, state, local and foreign
tax returns, reports and information statements required to be filed by each of
them (or in which any of them was required to be included), which returns,
reports, and statements are true, correct, and complete in all material
respects, and paid all Taxes required to be paid as shown on such returns,
reports, and statements. All Taxes required to be paid in respect of the periods
covered by such returns ("Return Periods") have either been paid or fully
accrued on the books of each Company or Subsidiary. Each Company and each
Subsidiary has fully accrued all unpaid Taxes in respect of all periods (or the
portion of any such periods) subsequent to the Return Periods. No deficiencies
or adjustments for any material amount of Tax have been claimed, proposed or
assessed, or to the Knowledge of the Companies, threatened. The Companies'
Disclosure Schedule accurately sets forth the years for which Company's federal
and state income tax returns, respectively, have been audited and any years that
are the subject of a pending audit by the Internal Revenue Service and the
applicable state agencies. Except as so disclosed, no Company is subject to any
pending or, to the Knowledge of the Companies, threatened, tax audit or
examination and no Company has waived any statute of limitation with respect to
the assessment of any Tax. The Current Balance Sheets contain adequate accruals
for all unpaid Taxes. The Companies have provided Parent true and correct copies
of all tax returns, information statements, reports, work papers and other tax
data reasonably requested by Parent. No consent or agreement has been made under
Section 341 of the Code by or on behalf of any Company or any predecessor
thereof.
(b) There are no liens for Taxes upon the assets of any
Company or any Subsidiary except for Taxes that are not yet payable. The Company
has not entered into any agreements, waivers, or other arrangements in respect
of the statute of limitations in respect of its Taxes or tax returns. Each
Company and each Subsidiary has complied with all applicable laws, rules and
regulations related to the withholding of Taxes and has timely paid all such
amounts withheld to the proper taxing authority.
(c) No Company and no Subsidiary is required to include in
income any adjustment pursuant to Section 481 of the Code (or similar provisions
of other law or regulations) in its current or in any future taxable period, by
reason of a change in accounting method; nor, to the Knowledge of the Companies,
has the IRS (or other taxing authority) proposed, or is the IRS (or other taxing
authority) considering, any such change in accounting method. No Company and no
Subsidiary is a party to any agreement, contract, or arrangement that would
result in the payment of any "excess parachute payment" within the meaning of
Section 280G of the Code. None of the assets of any Company or of any Subsidiary
is property that is required to be treated as owned by any other person pursuant
to the "safe harbor lease" provisions of former Section 168(f)(8) of the
Internal Revenue Code of 1954 as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 and none of the assets of any Company or
any Subsidiary is "tax exempt use property" within the meaning of Section 168(h)
of the Code. None of the assets of any Company or of any Subsidiary secures any
debt the interest on which is tax exempt under Section 103 of the Code.
(d) No distributions or other transfers of any asset or assets
of any of the Companies or any of the Subsidiaries has occurred, or will occur
prior to the Closing, which would result in Parent failing to acquire
"substantially all of the properties" of such Companies and Subsidiaries within
the meaning of Code Section 368(a)(2)(E).
(e) No Shareholder currently has, or will have as of the
Closing, the plan or intent to transfer any of the Parent Common Shares to be
received by it pursuant to this Agreement to the Parent or any person or entity
related to, affiliated with or, to the knowledge of any Shareholder, acting on
behalf of or in concert with Parent.
(f) Each Company has, for each taxable period since its
inception, been a valid S corporation within the meaning of Section 1361 of the
Code and each Company will continue to be an S corporation through the close of
business on the day immediately prior to the Closing Date. Each current
corporate Subsidiary of each Company is a "qualified subchapter S subsidiary"
within the meaning of Code Section 1361(b)(3).
3.9 Labor Controversies. There are no material controversies pending
or, to the Knowledge of the Companies, threatened between any Company or
Subsidiary and any representatives of any of their employees. To the Knowledge
of the Companies, there are no material organizational efforts presently being
made involving any of the presently unorganized employees of any Company or
Subsidiary, except for such controversies and organizational efforts that
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Business Condition of the Companies.
3.10 Employee Benefit Plans. Each Plan covering active, former, or
retired employees of any Company or any Subsidiary is listed in Schedule 3.10.
(i) Each Plan has been maintained and administered in material compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, Orders, rules, and regulations, and is, to the extent required by
applicable law or contract, fully funded without having any deficit or unfunded
actuarial liability (including but not limited to any contribution to the
Companies' 401(k) Plan to the extent commitments to make any such contributions
have been made by the Companies); (ii) All required employer contributions under
any such plans have been made and the applicable funds have been funded in
accordance with the terms thereof and no past service funding liabilities exist
thereunder; (iii) Each Plan that is required or intended to be qualified under
applicable law or registered or approved by a Governmental Entity has been so
qualified, registered, or approved by the appropriate Governmental Entity, and,
to the Knowledge of the Companies, nothing has occurred since the date of the
last qualification, registration, or approval to affect adversely, or cause the
appropriate Governmental Entity to revoke, such qualification, registration, or
approval; (iv) To the extent applicable, the Plans comply, in all material
respects, with the requirements of ERISA and the Code, and any Plan intended to
be qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to be so qualified and, to the Knowledge of the
Companies, nothing has occurred to cause the loss of such qualified status; (v)
No Plan is covered by Title IV of ERISA or Section 412 of the Code; (vi) Neither
any Company nor any Subsidiary has incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA; (vii) There are no pending
or anticipated material claims against or otherwise involving any of the Plans
and no suit, action, or other litigation (excluding claims for benefits incurred
in the ordinary course of Plan activities) has been brought against or with
respect to any such Plan; (viii) All material contributions, reserves or premium
payments, required to be made as of the date hereof to the Plans have been made
or provided for; (ix) Neither any Company nor any Subsidiary has incurred any
liability under Subtitle C or D of Title IV of ERISA with respect to any
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any Company, any Subsidiary, or any entity
that is considered one employer with Company under Section 4001 of ERISA; (x)
Neither any Company nor any Subsidiary has incurred any withdrawal liability
under Subtitle E of Title IV of ERISA with respect to any "multiemployer plan,"
within the meaning of Section 4001(a)(3) of ERISA; and (ix) Neither any Company
nor any Subsidiary has any obligations for retiree health and life benefits
under any Plan, and there are no restrictions on the rights of the Companies or
the Subsidiaries to amend or terminate any such Plan without incurring any
liability thereunder.
3.11 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (i) result in any payment (including, without limitation,
severance, unemployment compensation, parachute payment, bonus or otherwise)
becoming due to any director, employee, or independent contractor of any Company
or any Subsidiary, from any Company or any Subsidiary under any Plan, agreement,
or otherwise, (ii) materially increase any benefits otherwise payable under any
Plan or agreement, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
3.12 Litigation. There is no claim, action, suit or proceeding pending
or, to the Knowledge of Companies, threatened, that would, if adversely
determined, individually or in the aggregate, have a Material Adverse Effect on
the Business Condition of the Companies, nor is there any Order of any
Governmental Entity or arbitrator outstanding against any Company or any
Subsidiary having, or which, insofar as reasonably can be foreseen, in the
future could have, any such effect. To the Knowledge of Companies, there is no
investigation pending or threatened against any Company or any Subsidiary,
before any foreign, federal, state, municipal, or other governmental department,
commission, board, bureau, agency, instrumentality, or other Government Entity.
3.13 Title to and Condition of Assets.
(a) Each Company or Subsidiary has good and marketable title
to all of its Assets, free and clear of any material liens or restrictions that
would preclude the current use, except: (i) liens of current property taxes and
assessments not yet delinquent, (ii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to materialmen,
warehousemen and the like, and (iii) liens on the landlord's interest in real
property leased by the Companies as tenants.
(b) The Fixed Assets taken as a whole currently in use or
necessary for the business and operations of any Company or Subsidiary are in
reasonable working condition for operations of the business. Except as set forth
in this Agreement, the Assets are AS IS, WHERE IS, and without representation as
to merchantability or fitness for any particular purpose.
(c) The Assets, the Owned Properties, and the Leased Premises
constitute all of the essential assets used in connection with the businesses of
the Companies and the Subsidiaries as of the date of this Agreement.
3.14 Major Contracts. Schedule 3.14 contains a list of each of
the following agreements to which any Company or any Subsidiary is a party or
subject:
(a) Any union contract, or any employment contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director, or employee which (i) exceeds $125,000 per annum,
or (ii) is not terminable by it or its Subsidiary on thirty (30) days' notice or
less without penalty or obligation to make payments related to such termination;
(b) Any joint venture contract or arrangement or any other
agreement that has involved or is expected to involve a sharing of gross
revenues of $1 million per annum or more to other persons;
(c) Any lease for personal property in which the amount of
payments that Company is required to make on an annual basis exceeds $100,000,
which is for a duration of more than one year, and which is not reflected in the
Financial Statements as a capitalized lease;
(d) Any material disposal, collection, or recycling
agreement;
(e) Any contract containing covenants purporting to materially
limit a Company's freedom or that of any Subsidiary to compete in any line of
business in any geographic area;
(f) Any contract granting to a third party any right of first
refusal, right of first offer, or other preferential right to purchase the
Company Shares or the Assets or Owned Properties of any Company or any
Subsidiary; and
(g) Any other contract involving material non-contingent
payment obligations by a Company or Subsidiary.
All contracts, plans, arrangements, agreements, leases, franchises,
indentures, instruments, and other commitments listed in Schedule 3.14 are valid
and in full force and effect and neither any Company nor any Subsidiary has, nor
to the Knowledge of the Companies has any other party thereto, breached any
material provisions of, or is in default in any material respect under the terms
thereof.
To the Knowledge of the Companies, the only contract listed in Schedule
3.14(d) "Collection" ("Collection Contract") subject to adjustment and rebate of
prior charges based on past operating results is that certain Solid Waste,
Recyclables, and Yard Waste Collection Agreement dated April 1, 1994, by and
between Rabanco Companies and the City of Bellevue. To the Knowledge of the
Companies, the Companies have not received any notice of any proposed rate audit
or rate adjustment and there currently are no rate audit or rate adjustment
Proceedings pending or threatened against the Companies with respect to such
contract with the City of Bellevue or any other Collection Contract.
3.15 Material Relations. To the Knowledge of the Companies, none of the
parties to any of the major contracts identified in Schedule 3.14 have
terminated, and no such party has in any way expressed an intent to terminate
its business with any Company in the future or to reduce the amount of such
business in a manner that would have a Material Adverse Effect on the Business
Condition of the Companies.
3.16 Real Property.
(a) Schedule 3.16(a) sets forth the street address and legal
description of each Owned Property. With respect to the Owned Properties:
(i) A Company or Subsidiary has good and
marketable title to each parcel of Owned Properties, free and clear of any
liens, easements, covenants, and restrictions other than: (x) liens for real
estate taxes and assessments not yet delinquent; (y) easements, covenants, and
other restrictions that do not preclude the current use or occupancy of the
property subject thereto; and (z) liens securing indebtedness reflected in the
Current Balance Sheets (collectively, "Permitted Exceptions").
(ii) There are no pending or, to the
Knowledge of the Companies, threatened condemnation proceedings, suits, or
administrative actions relating to any of the Owned Properties affecting
adversely the current use or occupancy thereof;
(iii) There are no contracts granting to any party or
parties the right of use or
occupancy of any portion of the parcels of Owned Properties;
(iv) There are no outstanding options or rights
of first refusal to purchase the parcels of Owned Properties, or any portion
thereof or interest therein;
(v) There are no parties (other than the
Companies or Subsidiaries) in possession of the parcels of Owned Properties;
and
(vi) No owner of a parcel of Owned Properties
has received written notice of: (a) any condemnation proceeding with respect to
any portion of any parcel of Owned Properties or any access thereto; or (b) any
special assessment which may encumber any parcel of Owned Properties.
(b) Schedule 3.16(b) sets forth a list of all Leased Premises,
in each case, setting forth (A) the lessor and lessee thereof and the date and
term of each of the Leases, and (B) the street address of each property covered
thereby. The Leases are in full force and effect and have not been amended, and
no Company or Subsidiary is in material default or breach under any such Lease.
No event has occurred which, with the passage of time or the giving of notice or
both would cause a material breach of or default under any of such Leases. With
respect to each such Leased Premises:
(i) The Company or Subsidiary indicated on
Schedule 3.16(b) has a valid leasehold interest in the Leased Premises and, to
the Knowledge of the Companies, the full right to exercise the renewal options
set forth in the Leases;
(ii) The Leased Premises that are used in the
business of each Company or
Subsidiary are in the aggregate sufficient to meet the requirements of such
Company's or Subsidiary's current normal business activities as conducted
thereat;
(iii) Each of the Leased Premises is served by
utilities in such quantity and
quality as are sufficient to meet the requirements of the current normal
business activities as conducted at such parcel; and
(iv) No Company or Subsidiary has received
notice of: (a) any condemnation proceeding with respect to any portion of
the Leased Premises or any access thereto; or (b) any special assessment
that may encumber any of the Leased Premises.
3.17 Environmental Matters.
(a) To the Knowledge of the Companies, each Company and each
Subsidiary is and has at all times been in material compliance with all
Environmental Laws governing its business, operations, properties, and assets,
including, without limitation: (i) all requirements relating to the Discharge
and Handling of Hazardous Substances or other Waste; (ii) all requirements
relating to notice, record keeping and reporting; (iii) all requirements
relating to obtaining and maintaining Licenses for the ownership of its
properties and assets and the operation of its business as presently conducted,
including Licenses relating to the Handling and Discharge of Hazardous
Substances and other Waste; and (iv) all applicable Licenses and Orders issued
pursuant to any Environmental Laws.
(b) There are no (and, to the Knowledge of the Companies,
there is no reasonable basis for any) Notices or Proceedings pending or, to the
Knowledge of the Companies, threatened against the Companies or the
Subsidiaries, or their respective businesses, operations, properties, or assets,
issued by any Governmental Entity or third party with respect to any
Environmental Laws (or Licenses issued to a Company or Subsidiary thereunder) in
connection with, related to or arising out of the ownership by such Company or
Subsidiary of its properties or assets or the operation of its business, which
have not been resolved to the satisfaction of the issuing Governmental Entity or
third party in a manner that would not impose any obligation, burden or
continuing liability on Parent or the Surviving Corporations in the event that
the transactions contemplated by this Agreement are consummated, or which could
have a Material Adverse Effect on the Companies, including, without limitation,
(i) Notices or Proceedings related to such Company's being a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under any applicable Environmental Laws; (ii) Notices or
Proceedings in connection with any federal or state environmental cleanup site,
or in connection with any real property or premises where such Company has
transported, transferred or disposed of other Waste; (iii) Notices or
Proceedings relating to such Company's being responsible to undertake any
response or remedial actions or clean-up actions of any kind; or (iv) Notices or
Proceedings related to such Company's being liable under any Environmental Laws
for personal injury, property damage, natural resource damage, or clean up
obligations.
(c) To the Knowledge of the Companies, no Company or
Subsidiary has Discharged, nor has it allowed or arranged for any third party to
Discharge, Hazardous Substances or other Waste to, at, or upon: (i) any location
other than a site lawfully permitted to receive such Hazardous Substances or
other Waste; (ii) any real property currently or previously owned or leased by
any Company or Subsidiary; or (iii) any site which, pursuant to any
Environmental Laws, (x) has been placed on the National Priorities List or its
state equivalent; or (y) the Environmental Protection Agency or the relevant
state agency or other Governmental Entity has notified the Companies that such
Governmental Entity has formally proposed to place on the National Priorities
List or its state equivalent. To the Knowledge of the Companies, there has not
occurred, nor is there presently occurring, a Discharge, or threatened
Discharge, of any Hazardous Substance on, into or beneath the surface of any
real property, currently or previously owned or leased by a Company or a
Subsidiary, in an amount requiring any Company or Subsidiary to make a notice or
report to a Governmental Entity.
(d) No Company or Subsidiary owns or operates, nor has any
Company or Subsidiary owned or operated any Aboveground Storage Tanks or
Underground Storage Tanks, and, to the Knowledge of the Companies, there are not
now nor have there ever been any Underground Storage Tanks beneath any real
property currently or previously owned or leased by a Company or Subsidiary that
are required to be registered under applicable Environmental Laws.
(e) Schedule 3.17 identifies: (i) documented results of all
Environmental Audits or Environmental Site Assessments undertaken by each
Company or Subsidiary or its respective agents or, to the Knowledge of the
Companies, undertaken by any Governmental Entity or any third party and
possessed by any Company or Subsidiary or their agents on behalf of any Company
or Subsidiary, regarding a Company or Subsidiary or any real property currently
or previously owned or leased by a Company or Subsidiary; and (ii) the
documented results of any ground, water, soil, air or asbestos monitoring
undertaken by a Company or Subsidiary or its agents or undertaken by any
Governmental Entity or any third party and in the possession of the Companies,
Subsidiaries, or their agents on behalf of the Company or Subsidiary, regarding
a Company or Subsidiary or any real property currently or previously owned or
leased by the Company which indicate the presence of Hazardous Substances at
levels: (x) requiring a notice or report to be made to a Governmental Entity, or
(y) in violation of any applicable Environmental Laws.
3.18 Technology. Each Company or Subsidiary owns, or is licensed to
use, the Intellectual Property Rights. Schedule 3.18 lists: (i) all material
trademarks, trade names, service marks, registered copyrights, patents, and any
applications therefor included in the Intellectual Property Rights; and (ii) all
material written licenses and other agreements to which any Company or any
Subsidiary is a party and pursuant to which such Company or such Subsidiary is
authorized to use any Intellectual Property Right, and includes the identities
of the parties thereto, a description of the nature and subject matter thereof,
the applicable royalty and the term thereof. Neither any Company nor any
Subsidiary is, or as a result of the execution, delivery, or performance of
Company's obligations hereunder will be, in violation of any material license or
agreement listed in Schedule 3.18. No claims with respect to the Intellectual
Property Rights have been asserted or, to the Knowledge of the Companies, are
threatened by any person nor, to the Knowledge of the Companies, are there any
valid grounds for any bona fide claims against the use by any Company or any
Subsidiary of any trademarks, trade names, trade secrets, copyrights,
technology, know-how, processes, or computer software programs and applications
used in the business of the Companies and the Subsidiaries as currently
conducted or proposed to be conducted. To the Knowledge of the Companies all
registered trademarks listed on Schedule 3.18 are valid, enforceable, and
subsisting. To the Knowledge of the Companies, there is no material unauthorized
use, infringement or misappropriation of any of the Intellectual Property Rights
by any third party, employee, or former employee.
3.19 Questionable Payments. Neither any Company nor any Subsidiary nor,
to the Knowledge of the Companies, any director, officer, employee, or agent of
any Company or any Subsidiary has: (i) made any payment or provided services or
other favors in the United States or any foreign country in order to obtain
preferential treatment or consideration by any Governmental Entity with respect
to any aspect of the business of any Company or any Subsidiary; (ii) made any
political contributions that would not be lawful under the laws of the United
States, any foreign country or any jurisdiction within the United States or any
foreign country; or (iii) otherwise taken any action which would cause it to be
in violation of the Foreign Corrupt Practices Act of 1977, as amended. Neither
any Company nor any Subsidiary, nor, to the Knowledge of the Companies, any
director, officer, employee, or agent of the Companies or the Subsidiaries has
been or is the subject of any investigation by any Governmental Entity in
connection with any such payment, provision of services, or contribution.
3.20 Brokers and Finders. Other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. in accordance
with the terms of its engagement letter, no Company or Subsidiary nor any of
their respective directors, officers, or employees has employed any broker or
finder or incurred any liability for any financial advisory fees, brokerage
fees, commissions, or similar payments in connection with the transactions
contemplated by this Agreement.
3.21 Accounting Matters. To the Knowledge of the Companies, neither any
Company nor any Subsidiary has taken or agreed to take any action that, without
giving effect to any action taken or agreed to be taken by Parent or any of its
Affiliates, would prevent Parent from accounting for the entire business
combination to be effected by the Mergers as a pooling of interests.
. To the Knowledge of the Companies, the minute books of the Companies contain
accurate records of meetings and accurately reflect all other action taken by
the respective boards of directors and the shareholders of the Companies.
Complete and accurate copies of all such minute books have been made available
by the Companies for inspection by Subs. At the Closing, all of those books and
records will be in the possession of the Companies.
3.23 Insurance. Set forth in Schedule 3.23 is a complete and accurate
list as of the date hereof of all insurance policies carried by the Companies
(as parties, named insureds or otherwise the beneficiaries of coverage) and an
accurate list of all self-insured and insurance-covered losses and workers'
compensation claims since January 1, 1995, excluding any losses or claims below
the deductibles. All insurance policies are in full force and effect and shall
remain in full force and effect through the Closing Date. Neither the Companies
nor, to the Knowledge of the Companies, any other insured party to any insurance
policy, is in breach or default (including any breach or default with respect to
the payment of premiums or the giving of notices), and to the Knowledge of the
Companies, no event has occurred that, with notice or lapse of time or both,
would constitute such a breach or default or permit termination or modification
of any such policy. The Companies have not been denied coverage since January 1,
1995.
3.24 Complete Disclosure. To the Knowledge of the Companies, this
Agreement and the schedules hereto and all other documents and written
information furnished to Subs and Parent and their representatives pursuant
hereto, taken as a whole, do not and will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading. To the Knowledge of the Companies, the Companies are not
aware of any fact or facts pertaining to Companies, the Subsidiaries or their
respective businesses which could have a Material Adverse Effect and which have
not been disclosed to Subs and Parent by the Companies in writing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBS
Parent and Subs represent and warrant to the Companies as follows in
this Section 4.
4.1 Organization; Standing and Power. Parent and each of the Subs are
corporations duly organized, validly existing, and in good standing under the
laws of their respective jurisdictions of incorporation, have all requisite
power and authority to own, lease, and operate their respective properties and
to carry on their respective businesses as now being conducted, and are duly
qualified and in good standing to do business in each jurisdiction in which a
failure so to qualify would have a Material Adverse Effect on the Business
Condition of Parent.
4.2 Capital Structure. The authorized capital stock of Parent consists
of 200,000,000 shares of Parent common stock, $0.01 par value ("Parent Common
Stock"), of which there are 105,966,151 shares issued and outstanding at March
31, 1998 and 10,000,000 shares of Parent preferred stock, $0.10 par value, of
which there were no shares issued or outstanding at March 31, 1998. All
outstanding shares of Parent Common Stock are validly issued, fully paid,
nonassessable and not subject to any preemptive rights, or to any agreement to
which Parent is a party or by which Parent may be bound that would conflict with
the obligations of Parent under this Agreement, any ancillary agreements
executed in connection herewith, or the transactions contemplated hereby or
thereby. The shares of Parent Common Stock issuable upon the Mergers: (i) are
duly authorized and reserved for issuance; (ii) will as of the Closing be
registered under the Securities Act and available for sale in the public market
without restriction (other than such restrictions imposed by Rule 145 under the
Securities Act); and (iii) when issued in accordance with the terms of the
Merger Agreements, will be validly issued, fully paid, nonassessable, and not
subject to any preemptive rights. The authorized capital stock of Rabanco
Acquisition Company consists of 1,000 shares of common stock, no par value, of
which 1,000 shares are issued and outstanding. The authorized capital stock of
Rabanco Acquisition Company Two consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. The authorized capital
stock of Rabanco Acquisition Company Three consists of 1,000 shares of common
stock, no par value, of which 1,000 shares are issued and outstanding. The
authorized capital stock of Rabanco Acquisition Company Four consists of 1,000
shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of Rabanco Acquisition Company Five
consists of 1,000 shares of common stock, no par value, of which 1,000 shares
are issued and outstanding. The authorized capital stock of Rabanco Acquisition
Company Six consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital stock of Rabanco
Acquisition Company Seven consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. The authorized capital
stock of Rabanco Acquisition Company Eight consists of 1,000 shares of common
stock, no par value, of which 1,000 shares are issued and outstanding. The
authorized capital stock of Rabanco Acquisition Company Nine consists of 1,000
shares of common stock, no par value, of which 1,000 shares are issued and
outstanding. The authorized capital stock of Rabanco Acquisition Company Ten
consists of 1,000 shares of common stock, no par value, of which 1,000 shares
are issued and outstanding. The authorized capital stock of Rabanco Acquisition
Company Eleven consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital stock of Rabanco
Acquisition Company Twelve consists of 1,000 shares of common stock, no par
value, of which 1,000 shares are issued and outstanding. All such shares of each
of the Subs are validly issued, fully paid, and nonassessable and owned by
Parent. Parent does not have outstanding any Parent Voting Debt.
4.3 Authority. Parent and Subs have all requisite corporate power and
authority to enter into this Agreement, and subject to the Parent Required
Statutory Approvals, to consummate the transactions contemplated hereby and
thereby. The execution and delivery by Parent and Subs of this Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and Subs,
including the unanimous approval of each of the respective Boards of Directors.
This Agreement has been duly executed and delivered by Parent and Subs and
constitutes a valid and binding obligation of Parent and Subs enforceable in
accordance with its terms, except that such enforceability may be subject to (i)
bankruptcy, insolvency, reorganization, or other similar laws relating to
enforcement of creditors' rights generally and (ii) general equitable
principles.
4.4 SEC Documents and Financial Statements. Parent has furnished the
Companies with a true and complete copy of each of the Parent SEC Documents,
which are all the documents (other than preliminary material) that Parent was
required to file with the SEC since such date. As of their respective filing
dates, the Parent SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Documents, and none of the Parent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they were made, not misleading. The Parent
Financial Statements comply as to form in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto and have been prepared in accordance with
generally accepted accounting principles consistently applied (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of Parent as at the dates thereof and the results of their operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring audit adjustments not material in scope or
amount). There has been no change in Parent's accounting policies or the methods
of making accounting estimates or changes in estimates that are material to
Parent Financial Statements or estimates except as described in the notes
thereto.
4.5 No Material Adverse Change. Since January 1, 1998, Parent has
conducted its businesses in the ordinary course and there has not been a
Material Adverse Effect on the Business Condition of Parent or any development
or combination of developments of which management of Parent has knowledge which
is reasonably likely to result in such an effect.
4.6 Compliance with Laws and Other Instruments.
(a) To the knowledge of Parent and Subs, Parent and Subs hold
all licenses, permits, and authorizations from all Governmental Entities
necessary for the lawful conduct of their businesses pursuant to all applicable
statutes, laws, ordinances, rules, and regulations of all such authorities
having jurisdiction over them or any part of their operations, excepting,
however, when such failure to hold would not have a Material Adverse Effect on
the Business Condition of Parent or Subs. There are no violations or claimed
violations known by Parent or Subs of any such license, permit, or authorization
or any such statute, law, ordinance, rule or regulation.
(b) Subject to satisfaction of the conditions set forth in
Sections 8.1 and 8.2, the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby and thereby will not,
conflict with or result in any Violation of (i) any provision of the Articles of
Incorporation or Bylaws of Parent or (ii) any loan or credit agreement note,
bond, mortgage, indenture, contract, lease, or other agreement or instrument,
permit, concession, franchise, license, Order, statute, law, ordinance, rule or
regulation applicable to Parent or its properties or assets, other than, in the
case of (ii), any such Violation, which individually or in the aggregate would
not have a Material Adverse Effect on the Business Condition of Parent.
(c) No Consent is required by or with respect to Parent or
Subs in connection with the execution and delivery of this Agreement by Parent
or Subs or the consummation by Parent and Subs of the transactions contemplated
hereby, except for (i) the filing of a premerger notification report by Parent
and the Companies under the HSR Act, (ii) filing with the SEC with respect to
the Parent Common Shares or the Mergers, and (iii) the filing of the Merger
Documents with the Secretary of State of the State of Washington (the filings
and approvals referred to in clauses (i), (ii) and (iii) are collectively
referred to as the "Parent Required Statutory Approvals") and except for such
other Consents which if not obtained or made would not have a Material Adverse
Effect on the value of the Parent Common Stock and would not have a Material
Adverse Effect on the Business Condition of Parent.
4.7 Interim Operation of Subs. Subs were formed solely for the purpose
of engaging in the transactions contemplated hereby, have engaged in no other
business activities and have conducted their respective operations only as
contemplated hereby.
4.8 Accounting Matters. To the knowledge of Parent, Parent has not
taken or agreed to take any action that, without giving effect to any action
taken or agreed to be taken by the Companies or any of their Affiliates, would
prevent Parent from accounting for the entire business combination to be
effected by the Mergers as a pooling of interests.
4.9 Brokers and Finders. Neither Parent nor any of its directors,
officers or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
similar payments in connection with the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF COMPANIES
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, each
Company agrees (except as expressly contemplated by this Agreement or with
Parent's prior written consent, which will not be unreasonably withheld) that:
5.1 Conduct of Business.
5.1.1 Ordinary Course. Each Company and its Subsidiaries shall
carry on their respective businesses in the usual, regular, and ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent with such businesses, use all reasonable efforts consistent with past
practice and policies to preserve intact their present business organizations,
keep available the services of their present officers, consultants, and
employees, and preserve their relationships with customers, suppliers,
distributors and others having business dealings with them. The Companies shall
promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business, of any Company or any of its Subsidiaries, and
material and adverse to the Business Condition of such Company. Neither any
Company nor any Subsidiary shall:
(a) grant any severance or termination pay to any
officer or director or, except in the ordinary course of business
consistent with past practices, to any employee of such Company or
Subsidiary;
(b) commence a lawsuit other than: (i) for the
routine collection of bills; (ii) in such cases where such Company in
good faith determines that failure to commence suit would result in a
material impairment of a valuable aspect of such Company's business,
provided such Company consults with Parent prior to filing such suit;
or (iii) for a breach of this Agreement; or
(c) enter into, without the prior consent of Parent,
which consent shall not be unreasonably withheld, any lease or contract
that involves: (i) in the case of service/customer contracts, a term of
one year or greater and/or greater than $500,000 of annualized revenue;
or (ii) in the case of vendor contracts, a term of six (6) months or
greater and/or the purchase of any non-capitalized item in excess of
$50,000 per purchase.
5.1.2 Dividends; Changes in Stock. No Company shall, and no
Company shall permit any of its Subsidiaries to: (i) declare or pay any
dividends on or make other distributions (whether in cash, stock, or property)
in respect to any of its capital stock, except as otherwise provided in Section
7.10(a); (ii) split, combine, or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) repurchase or otherwise
acquire, directly or indirectly, any shares of its capital stock other than
repurchase of vested stock from former employees; or (iv) propose any of the
foregoing.
5.1.3 Issuance of Securities. No Company shall, and no Company
shall permit any of its Subsidiaries to, issue, deliver, or sell, or authorize,
propose, or agree or commit to the issuance, delivery, or sale of any shares of
their capital stock of any class, any Company Voting Debt or any securities
convertible into its capital stock or Company Voting Debt, any options,
warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character obligating
it or any of its Subsidiaries to issue any such shares, Voting Debt or other
convertible securities.
5.1.4 Governing Documents. No Company shall, and no Company
shall permit any of its Subsidiaries to, amend its Articles of Incorporation or
Bylaws or similar governing documents.
5.1.5 No Acquisitions. Except as set forth in Section 5.9, no
Company shall, and no Company shall permit any of its Subsidiaries to, acquire
or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association, or other business organization or
division thereof or otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Business Condition of such
Company.
5.1.6 No Dispositions. Except as set forth in Section 5.9 and
except for the sale of Limited's interest in Environmental Security Corporation,
a Washington corporation, and Transwaste, Inc., an Oregon corporation, prior to
the Closing, no Company shall, and no Company shall permit any of its
Subsidiaries to, sell, lease, license, transfer, mortgage, encumber or otherwise
dispose of any of its assets or cancel, release, or assign any indebtedness or
claim, except in the ordinary course of business or in amounts which are not
material, individually or in the aggregate, to the Business Condition of such
Company.
5.1.7 Indebtedness. No Company shall, and no Company shall
permit any of its Subsidiaries to, incur any indebtedness for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise, except in the ordinary course of
business or in amounts that are not material, individually or in the aggregate,
to the Business Condition of such Company.
5.1.8 Plans; Employees. No Company shall, and no Company shall
permit any of its Subsidiaries to, adopt or amend in any material respect any
Plan, or pay any pension or retirement allowance not required by any existing
Plan. No Company shall, and no Company shall permit any of its Subsidiaries to,
enter into any employment contracts, pay any special bonuses or special
remuneration to officers, directors, or employees, or increase the salaries,
wage rates, or fringe benefits of its officers or employees other than pursuant
to scheduled reviews under such Company's normal compensation review cycle, in
all cases consistent with such Company's existing policies and past practice,
except that the Companies owned by the Razore Shareholders may pay bonuses to
certain of their employees and consultants with such amount to be included in
the calculation for Funded Debt.
5.1.9 Claims. No Company shall, and no Company shall permit
any of its Subsidiaries to, settle any claim, action, or proceeding, except in
the ordinary course of business or in amounts that are not material,
individually or in the aggregate, to the Business Condition of such Company.
5.1.10 Agreement. No Company shall, and no Company shall
permit any of its Subsidiaries to, agree to take any of the actions prohibited
by this Section 5.1.
5.2 Breach of Representation and Warranties. No Company will take any
action that would cause or constitute a breach of any of the representations and
warranties set forth in Section 2.1 or that would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event that would cause or constitute such a
breach or inaccuracy, the Companies will give detailed notice thereof to Parent
and will use reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
5.3 Consents. Each Company will promptly apply for or otherwise seek,
and use reasonable efforts to obtain, all consents and approvals, and make all
filings, required with respect to such Company for the consummation of the
Mergers, except such consents and approvals as Parent and the Companies agree
that such Company shall not seek to obtain.
5.4 Reasonable Efforts. The Companies will use reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement, provided that the
Companies shall in no event be required to agree to the imposition of, or comply
with, any condition, obligation, or restriction on the Companies or any of the
Subsidiaries or on the Surviving Corporations of the type referred to in Section
8.1.3 hereof.
5.5 Tax Returns. The Companies shall promptly provide Parent with
copies of all tax returns, reports, and information statements after their
filing.
5.6 Pooling. The Companies and the Shareholders shall not knowingly
take or cause to be taken any action, whether before or after the Effective
Time, that will disqualify the entire business combination to be effected by the
Mergers as a pooling of interests for accounting purposes.
5.7 Auditor's Consent. The Shareholders and the Companies shall use
reasonable efforts to cause ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to cooperate with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
in connection with the audit of the Financial Statements of the Companies and to
provide to Parent any consents requested by Parent in connection with any filing
on Form 8-K or other filing with the Securities and Exchange Commission required
to be made by Parent in connection with the transactions contemplated by this
Agreement.
5.8 Acquisition of Essential Assets. Prior to the Effective Time, the
Razore Shareholders shall or shall cause one or more of the Companies to acquire
the property located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ currently owned by
JR Land Company and the property located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ currently owned by Razore Enterprises, substantially according to the terms
of the agreement attached hereto as Exhibit 5.8.
ARTICLE VI
COVENANTS OF PARENT
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, Parent
agrees (except as expressly contemplated by this Agreement or with the
Companies' prior written consent, which will not be unreasonably withheld) that:
6.1 Breach of Representations and Warranties. Parent will not take any
action which would cause or constitute a breach of any of the representations
and warranties set forth in Article IV or which would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the pending
or threatened occurrence of any event which would cause or constitute such a
breach or inaccuracy, Parent will give detailed notice thereof to Company and
will use reasonable efforts to prevent or promptly remedy such breach or
inaccuracy.
6.2 Consents. Parent will promptly apply for or otherwise seek, and use
reasonable efforts to obtain, all consents, approvals, and waivers, and make all
filings, required for the consummation of the Mergers.
6.3 Reasonable Efforts. Parent will use its reasonable efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement, provided that Parent
shall in no event be required to agree to the imposition of, or to comply with,
any condition, obligation or restriction on Parent or on the Surviving
Corporations of the type referred to in Section 8.1.3 hereof.
6.4 Pooling. Parent shall not knowingly take or cause to be taken any
action, whether before or after the Effective Time, that will disqualify the
entire business combination to be effected by the Mergers as a pooling of
interests for accounting purposes.
6.5 Change in Control Payments. Parent shall assume the obligations of
the Companies to pay any necessary change in control payments as set forth in
the Change in Control Agreements between Rabanco Companies and the employees
listed on Schedule 6.5.
6.6 Combined Financial Results. Parent covenants and agrees that, as
promptly as practicable following the Effective Time and in any event no later
than the earlier of: (i) 51 days after the end of the calendar month in which
the Effective Time occurs, or (ii) 60 days after the Effective Time, it will
publicly release the combined financial results of Parent and the Companies for
the 30-day period following the Effective Time.
ARTICLE VII
ADDITIONAL AGREEMENTS
In addition to the foregoing, Parent and each of the Companies agree to
take the following actions after the execution of this Agreement.
7.1 Access to Information. Subject to the terms of the Confidentiality
Agreement, the Companies and Parent shall, subject to applicable law, each
afford the other and their respective accountants, counsel, and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (a) all of their and their respective
subsidiaries' properties, books, contracts, commitments, and records, and (b)
all other information concerning the business, properties and personnel of the
Companies and Parent and their respective subsidiaries, as the other party may
reasonably request and as is necessary to complete the transaction and prepare
for an orderly transition to operations after the Effective Time. The Companies
and Parent agree to provide to the other and their respective accountants,
counsel, and representatives copies of internal financial statements promptly
upon the request therefore. No information or knowledge obtained in any
investigation pursuant to this Section 7.1 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Mergers.
7.2 Legal Conditions to the Mergers. Each of Parent, Subs and the
Companies will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on any of them with respect to the
Mergers and will promptly cooperate with and furnish information to each other
in connection with any such requirements imposed upon the other. Each of Parent,
Subs, the Shareholders, and the Companies will take, and will cause its
respective subsidiaries to take, all reasonable actions to obtain (and to
cooperate with the other parties in obtaining) any consent, approval, order, or
authorization of, or any exemption by, any Governmental Entity, or other third
party, required to be obtained or made by the Companies or Parent or their
respective subsidiaries in connection with the Mergers or the taking of any
action contemplated thereby or by this Agreement. The foregoing shall not
require any party to agree to the imposition of, or to comply with, any
condition, obligation, or restriction on Parent or on the Surviving Corporations
of the type referred to in Section 8.1.3 hereof.
7.3 Affiliates. Within ten (10) days of the execution of this
Agreement, the Razore Shareholders will execute affiliate agreements (the
"Affiliate Agreements") substantially in the form attached as Exhibit 7.3.
Parent shall be entitled to place appropriate legends on the certificate
evidencing any shares of Parent Common Stock to be received by the Razore
Shareholders pursuant to the terms of this Agreement and to issue appropriate
stop transfer instructions to the transfer agent for shares of Parent Common
Stock consistent with the terms of the Affiliate Agreements.
7.4 HSR Act Filings.
(a) Each of Parent and the Companies shall (i) promptly make
or cause to be made the filings required of such party or any of its Affiliates
or subsidiaries under the HSR Act with respect to the Mergers and the other
transactions provided for in this Agreement, (ii) comply at the earliest
practicable date with any request under the HSR Act for additional information,
documents, or other material received by such party or any of its Affiliates or
subsidiaries from the Federal Trade Commission or the Department of Justice or
other Governmental Entity in respect of such filings, the Mergers, or such other
transactions, and (iii) cooperate with the other party in connection with any
such filing and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws with
respect to any such filing, the Mergers, or any such other transaction. Each
party shall promptly inform the other party of any material communication with,
and any proposed understanding, undertaking, or agreement with, any Governmental
Entity regarding any such filings, the Mergers, or any such other transactions.
Neither party shall participate in any meeting with any Governmental Entity in
respect of any such filings, investigation, or other inquiry without giving the
other party notice of the meeting and, to the extent permitted by such
Governmental Entity, the opportunity to attend and participate.
(b) Each of Parent and the Companies shall use its reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the Mergers or any other transactions
provided for in this Agreement under the Antitrust Laws. In connection
therewith, if any administrative or judicial action or proceeding is instituted
(or threatened to be instituted) challenging any or all of the Mergers as
violative of any Antitrust Law, and, if by mutual agreement, Parent and the
Companies decide that litigation is in their best interests, each of Parent and
the Companies shall cooperate at Parent's sole expense and use reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any Order, that is in effect and
that prohibits, prevents, or restricts consummation of any or all of the
Mergers. Each of Parent and the Companies shall use its reasonable efforts to
take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to the Mergers
and such other transactions as promptly as possible after the execution of this
Agreement. Notwithstanding anything to the contrary in this Section 7.4, (x)
Parent shall not be required to divest any of its businesses, product lines, or
assets, or to take or agree to take any other action or agree to any limitation
that would have a Material Adverse Effect on the Business Condition of Parent
combined with the Surviving Corporations after Closing, and (y) neither any
Company nor any Subsidiary shall be required to divest any of their respective
businesses, product lines, or assets, or to take or agree to take any other
action or agree to any limitation that would have a Material Adverse Effect on
the Business Condition of the Companies.
7.5 Employee Benefits. Parent and the Companies agree that the
Surviving Corporations will provide benefits for each Company's or Subsidiary's
employees that are in the aggregate substantially similar to the benefits
provided to Parent employees with prior service considerations as if such
Company employees had been employed by Parent for the period for which they were
employed by such Company; provided, however, that nothing contained herein shall
be considered as requiring Parent or the Surviving Corporations to continue any
specific plan or benefit or as precluding amendments to any specific plan or
benefit (other than for: (i) any change in control payments required under
Section 6.7; and (ii) the period ending eighteen (18) months after the Closing
Date, during which time the Surviving Corporations will continue, or Parent will
provide, salary, wage, and bonus schemes (whether by separate employment
agreement or otherwise) substantially equivalent to the Companies' existing
compensation plans as of the date of this Agreement, provided that in no case
shall Parent be required to continue any such scheme that violates applicable
law or the terms of Parent's Plans); and provided further, that nothing
expressed or implied in this Agreement shall confer upon any employee,
beneficiary, dependent, legal representative, or collective bargaining agent of
such employee any right or remedy of any nature or kind whatsoever under or by
reason of this Agreement, including without limitation any right to employment
or to continued employment for any specified period, at any specified location
or under any specified job category.
7.6 Officers and Directors. Parent agrees that all rights to
indemnification (including advancement of expenses) existing on the date hereof
in favor of the present or former partners, officers, and directors of the
Companies or the Subsidiaries with respect to actions taken in their capacities
as directors or officers of the Companies or the Subsidiaries prior to the
Effective Time as provided in such Company's or Subsidiary's Articles of
Incorporation or Bylaws and indemnification agreements shall survive the Mergers
and continue in full force and effect for a period of six (6) years following
the Effective Time and shall be guaranteed by Parent.
7.7 Expenses. Whether or not the Mergers are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expense; provided, however, that Parent shall bear the entire cost of the HSR
Act filing fees and any litigation pursuant to Section 7.4; and provided
further, that the aggregate usual and customary costs and expenses paid by the
Companies in connection with the transactions contemplated hereby will not
exceed Five Million Dollars ($5,000,000) (with any excess being borne by the
Shareholders).
7.8 Additional Agreements. In case at any time after the Effective Time
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporations with full title
to all properties, assets, rights, approvals, immunities, and franchises of Subs
or the Companies, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
7.9 Public Announcements. Parent and the Companies shall cooperate with
each other in releasing information concerning this Agreement and the
transactions contemplated herein. Each party shall consult with and shall
furnish to the other drafts of all press releases, SEC filings, or other public
statements with respect to this Agreement or the transactions contemplated
hereby and shall provide such other party a reasonable opportunity to comment
thereon prior to publication. Nothing contained herein shall prevent either
party at any time from furnishing any information to any Governmental Entity or
from issuing any release when it believes it is legally required to do so,
provided such party gives the other party prompt notice of such Order and
complies with any protective order (or equivalent) imposed on such disclosure.
7.10 Taxes. The Shareholders and Parent and Subs covenant
with each other regarding Taxes as follows:
(a) Immediately prior to the Closing, the Razore Shareholders
shall cause each Company owned by the Razore Shareholders to make a cash
distribution to such Company's shareholders in an amount equal to the Razore
Shareholders' best estimate of their respective liability for Income Taxes
attributable to their ownership of the stock of such companies for the S
Corporation Taxable Period ending at the close of business on the day before the
Closing Date.
(b) The parties agree as follows with respect to the
consequences of the Mergers on the S corporation status of the Companies for
federal income tax purposes:
(i) The Mergers of each of the Companies with its
corresponding Sub will result in the termination of each Company's status as
an S corporation for federal income tax purposes as of the Closing.
(ii) Each Company's current taxable year will
constitute an "S termination year"
within the meaning of Section 1362(e)(4) of the Code.
(iii) Each Company will experience an "Short S year",
within the meaning of Section
1362(e)(1)(A) of the Code, for that portion of its S termination year beginning
on the first day of its current taxable year and ending on the close of business
on the day before Closing, and each Company will experience a "Short C year",
within the meaning of Section 1362(e)(1)(B) of the Code, for that portion of its
S termination year beginning on the day of Closing and ending on the last day of
the termination year.
(iv) Each Company shall, in accordance with Section
1362(e)(3)(A) of the Code, timely
elect to refrain from having the general rules of Section 1362(e)(2) of the Code
apply to the S termination year of such Company, but shall have items of income,
loss, deduction or credit assigned to the Short S year of each Company under
normal accounting rules (a "closing of the books"). Such election shall be in
the form set out in Exhibit 7.10(b)(iv).
(v) The Shareholders (and the spouses of such
Shareholders, if appropriate) of each
Company (being the persons who owned stock of such Company during the Short S
year), and Parent, and any appropriate affiliate of Parent (being the person who
owns stock of such Company on the first day of the Short C year) shall timely
elect to refrain from having the general rules of Section 1362(e)(2)(A) of the
Code apply to the S termination year of each Company, but shall have items of
income, loss, deduction or credit assigned to the Short S year of each Company
under normal accounting rules (a "closing of the books"). Such election shall be
in the form set out in Exhibit 7.10(b)(v).
(vi) As a result of the election described in
subsections (iv) and (v) of this
subparagraph 7.10(b) and pursuant to Treasury Regulations ss.1.1362-3(c)(1),
solely for purposes of Section 706(c) of the Code, the termination of the S
status of a Company shall be treated as a sale or exchange of such Company's
entire interest in any partnership held by the such Company, resulting in the
close of the taxable year for each Company in each such partnership as required
by Section 706(c) and Treasury Regulations ss. 1.706-1(c)(2). For purposes of
closing the taxable year for each Company in such partnership, each partnership
shall close its books as of the close of each Company's Short S year, and shall
prepare appropriate Tax Returns based on such closing of the taxable year.
(c) The Shareholders shall be liable for any and all Income
Taxes imposed on the Shareholders and attributable to the Shareholders'
ownership of Company Shares for each Company's S Corporation Taxable Period.
Parent shall be liable for any and all state and local sales, use, transfer,
documentary, or similar types of Taxes arising from the transactions
contemplated by this Agreement, including without limitation any Washington
excise tax on real estate sales (RCW 82.45-82.46).
(d) The Shareholders shall cause to be prepared and filed all
Tax Returns for each Company and each Subsidiary for all periods ending on or
prior to the Closing Date, including the Short S year of each Company, taking
into account the effect of the elections described in Section 7.10(b)(iv) and
(v), above. Each Company shall bear the cost of preparing its Tax Returns
described in the preceding sentence. The Shareholders shall permit Parent to
review and comment on each such Tax Returns prior to filing. Parent shall cause
to be prepared and filed all Tax Returns of the Companies, other than those Tax
Returns that are the responsibility of the Shareholders under this Section
7.10(d), including taxable periods beginning prior to but ending after the
Closing Date. The Tax Returns relating to the partnerships in which the
Companies have an interest shall be prepared and filed by the party indicated in
Exhibit 7.10(d). Such partnership Tax Return shall be prepared taking into
account the provisions of subparagraph 7.10(b)(vi), above, and the preparing
party shall permit the other affected parties to review and comments on such Tax
Returns.
(e) In the event Parent or a Company or any of their
affiliates receives notice of any examination, claim, adjustment, or other
proceeding (a "Proceeding Notice") with respect to the liability for Income
Taxes for any S Corporation Taxable Period of a Company for which the
Shareholders are or may be liable under Section 7.10(c), Parent shall notify the
Shareholders in writing thereof (the "Parent Notice") no later than the earlier
of (i) thirty (30) days after the receipt by Parent or any of its affiliates of
the Proceeding Notice, or (ii) ten (10) days prior to the deadline for
responding to the Proceeding Notice. As to any such Income Taxes for which the
Shareholders are solely liable under Section 7.10(c), the Shareholders shall be
entitled at their sole expense to control the contest of such examination,
claim, adjustment, or other proceeding, provided that : (a) the Shareholders
notify Parent in writing that they desire to do so no later than the earlier of
(i) thirty (30) days after receipt of the Parent Notice, or (ii) five (5) days
prior to the deadline for responding to the Proceeding Notice, and (b) the
Shareholders may not, without the consent of Parent, agree to any settlement
that could result in an increase in the amount of Taxes for which Parent is
liable under Section 7.10(c) (including any current or potential increase due to
an adjustment of any tax attributes of any Company or Subsidiary). The parties
shall cooperate with each other and with their respective affiliates, and will
consult with each other, in the negotiation and settlement of any proceeding
described in this Section 7.10(e). Parent will provide, or cause to be provided,
to the Shareholders necessary authorizations, including powers of attorney, to
control any proceedings that the Shareholders are entitled to control pursuant
to this Section 7.10(e). With respect to any examination, claim, adjustment, or
other proceeding with respect to Taxes for any period for which Parent is solely
liable under Section 7.10(c), Parent shall control the contest of such
examination, claim, adjustment, or other proceeding, provided that Parent may
not, without the prior consent of the Shareholders, agree to any settlement that
could result in an increase in the amount of Taxes for which the Shareholders
are liable under Section 7.10(c).
(f) Parent, on the one hand, and the Shareholders, on the
other hand, will provide, or cause to be provided, to the other party copies of
all correspondence received from any taxing authority by such party or any of
its affiliates in connection with the liability of the Companies and
Subsidiaries for Taxes for any period for which such other party is or may be
liable under Section 7.10(c). The Shareholders shall assist each Company to
enable it to file with the Internal Revenue Service notification of termination
of such Company's S corporation status. The parties will provide each other with
such cooperation and information as they may reasonably request of each other in
preparing or filing any return, amended return, or claim for refund, in
determining a liability or a right of refund, or in conducting any audit or
other proceeding, in respect of Taxes imposed on each Company and each
Subsidiary. Parent, on the one hand, and the Shareholders, on the other hand,
and their affiliates will (i) preserve and retain all returns, schedules, work
papers, and all material records or other documents relating to any such
returns, claims, audits, or other proceedings until the expiration of the
statutory period of limitations (including extensions) of the taxable periods to
which such documents relate and until the final determination of any payments
that may be required with respect to such periods under this Agreement, (ii)
shall make such documents available at the then current administrative
headquarters of such party to the other party or any affiliate thereof, and
their respective officers, employees, and agents, upon reasonable notice and at
reasonable times, it being understood that such representatives shall be
entitled to make copies of any such books and records relating to each Company
and each Subsidiary as they shall deem necessary, and (iii) to give the other
parties reasonable written notice prior to transferring, destroying or
discarding any such documents and, if another party so requests, shall allow
that party to take possession of such documents. Parent, on the one hand, and
the Shareholders on the other hand, further agree to permit representatives of
the other party or any affiliate thereof to meet with employees of such party on
a mutually convenient basis in order to enable such representatives to obtain
additional information and explanations of any documents provided pursuant to
this Section 7.10(f). Parent, on the one hand, and the Shareholders on the other
hand, shall make available to the representatives of the other party or any
affiliate thereof sufficient work space and facilities to perform the activities
described in the two preceding sentences. Any information obtained pursuant to
this Section 7.10(f) shall be kept confidential, except as may be otherwise
necessary in connection with the filing of returns or claims for refund or in
conducting any audit or other proceeding. Each party shall provide the
cooperation and information required by this Section 7.10(f) at its own expense.
7.11 Certain Insurance Policies. The parties acknowledge that ▇▇▇▇▇
▇▇▇▇▇▇ has made claims with regard to Losses arising from the operations of JR
Land Company and its predecessors under certain insurance policies (the
"Insurance Policies") under which certain Razore Shareholders, Companies,
Subsidiaries and other entities not involved in the transactions contemplated by
this Agreement are named insureds. The parties covenant and agree that
notwithstanding the Mergers, ▇▇▇▇▇ ▇▇▇▇▇▇, for so long as he fulfills his
indemnification obligation under Article IX hereof, may continue to make claims
under and receive proceeds from any such Insurance Policy with respect to any
Losses arising from the operations of JR Land Company and its predecessors, up
to the full value of such Insurance Policies; provided, however, that in no
event shall the Companies' and Subsidiaries' right to make claims unrelated to
JR Land Company under the Insurance Policies be limited. Notwithstanding any
other provision of this Agreement, ▇▇▇▇▇ ▇▇▇▇▇▇ shall have the sole right to
conduct the prosecution of any such claims.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligation of each party to effect the Mergers shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
8.1.1 Consents. Other than the filing of the Merger Documents
with the Secretary of State of the State of Washington, all Consents required
for the consummation of the Mergers and the transactions contemplated by this
Agreement, including all Consents to assignment of Contracts, and to the
transfer of environmental permits and all other environmental regulatory
Consents shall have been filed, occurred, or been obtained, other than such
Consents for non-revenue producing contracts, the failure of which to obtain
would not have a Material Adverse Effect on the consummation of the Mergers or
the other transactions contemplated hereby or on the Business Condition of
Parent or the Companies; provided, however, that in the event that any such
Consents required to be obtained pursuant to this Section 8.1.1 have not been
obtained prior to Closing, the parties shall mutually agree on a method for
obtaining such Consents following Closing and the remedy, if any, for the
failure to obtain such Consents.
8.1.2 No Restraints. No statute, rule, regulation, or Order
shall have been enacted, entered, promulgated, or enforced by any United States
court or Governmental Entity of competent jurisdiction that enjoins or prohibits
the consummation of the Mergers and shall then be in effect.
8.1.3 No Burdensome Condition. There shall not be any action
taken, or any statute, rule, regulation, or Order enacted, entered, enforced, or
deemed applicable to the Mergers by any Governmental Entity which, in connection
with the grant of any Required Statutory Approval, imposes any restriction,
condition or obligation upon Parent other than as provided in Section 7.4,
Companies or the Surviving Corporations which would have a Material Adverse
Effect on the economic or business benefits of the transactions contemplated by
this Agreement.
8.2 Conditions of Obligations of Parent and Subs. The obligations of
Parent and Subs to effect the Mergers are subject to the satisfaction of the
following conditions, unless waived by Parent and Subs:
8.2.1 Representations and Warranties of Companies. The
representations and warranties of the Companies set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement, or (ii) in respects that do not have a Material
Adverse Effect on the Companies' Business Condition or on the benefits of the
transactions provided for in this Agreement. Parent shall have received a
certificate signed on behalf of each Company by an authorized officer of such
Company to such effect on the Closing Date.
8.2.2 Performance of Obligations of Companies. Each Company
shall have performed all agreements and covenants required to be performed by it
under this Agreement prior to the Closing Date, except for breaches that do not
have a Material Adverse Effect on the Business Condition of the Companies or on
the benefits of the transactions provided for in this Agreement. Parent shall
have received a certificate signed on behalf of each Company by an authorized
officer of such Company to such effect.
8.2.3 Affiliates. Parent shall have received from each person
or entity who may be deemed pursuant to Section 7.3 hereof to be an Affiliate of
the Companies a duly executed Affiliate Agreement substantially in the form
attached hereto as Exhibit 7.3.
8.2.4 Pooling of Interests. The Companies shall not have
breached their representation in Section 3.21 or their covenant in Section 5.6
with the result that the entire business combination to be effected by the
Mergers will not qualify for pooling of interest accounting treatment. Parent
shall have received a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP addressed to the Companies
to the effect that the entire business combination to be effected by the Mergers
will qualify for pooling of interest accounting treatment, dated as of a date
within two business days prior to Closing.
8.2.5 Opinion of Companies' Counsel. Parent shall have
received an opinion dated the Closing Date of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel
to the Companies owned by the Razore Shareholders, in substantially the form
attached as Exhibit 8.2.5(a). Parent shall have received an opinion dated the
Closing Date of Ater ▇▇▇▇▇ ▇▇▇▇▇▇ Dodsen & ▇▇▇▇▇▇▇▇ LLP, counsel to the
Companies owned by the Non-Razore Shareholders, in substantially the form
attached as Exhibit 8.2.5(b).
8.3 Conditions of Obligations of Companies. The obligation of the
Companies to effect the Mergers is subject to the satisfaction of the following
conditions unless waived by the Companies:
8.3.1 Representations and Warranties of Parent and Subs. The
representations and warranties of Parent and Subs set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date, except: (i) as otherwise
contemplated by this Agreement, or (ii) in respects that do not have a Material
Adverse Effect on the Parent's Business Condition or on the benefits of the
transactions provided for in this Agreement. The Companies shall have received a
certificate signed on behalf of Parent by an authorized officer of Parent to
such effect on the Closing Date.
8.3.2 Performance of Obligations of Parent and Subs. Parent
and Subs shall have performed all agreements and covenants required to be
performed by them under this Agreement prior to the Closing Date except for
breaches that do not have a Material Adverse Effect on Parent's Business
Condition or on the benefits of the transactions provided for in this Agreement,
and the Companies shall have received a certificate signed on behalf of Parent
by an authorized officer of Parent to such effect.
8.3.3 Pooling of Interests. Parent shall not have breached its
representation in Section 4.8 or its covenant in Section 6.4 with the result
that the entire business combination to be effected by the Mergers will not
qualify for pooling of interest accounting treatment. Companies shall have
received a letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP addressed to Parent to the effect
that the entire business combination to be effected by the Mergers will qualify
for pooling of interest accounting treatment (without regard to any action or
conduct by the Companies), dated as of a date within two business days prior to
the Closing.
8.3.4 Opinion of Parent Counsel. Company shall have received
an opinion dated the Closing Date of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C., counsel to Parent
and Subs, substantially in the form of Exhibit 8.3.4.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Shareholders.
(a) Subject to Sections 9.5, 9.6, and 9.8, the Shareholders
shall, severally, defend, indemnify, and hold Parent and Subs harmless from and
against, and reimburse Parent and Subs with respect to, any and all Losses
incurred by Parent or Subs by reason of or arising out of or in connection with
(i) any breach, or any claim (including claims by parties other than Parent or
Subs) that if true, would constitute a breach, by the Shareholders or the
Companies of any representation or warranty of the Shareholders or the Companies
contained in this Agreement or in any certificate delivered to Parent or Subs
pursuant to the provisions of this Agreement, and (ii) the failure, partial or
total, of the Companies or the Shareholders to perform any agreement or covenant
required by this Agreement to be performed by them. There shall be no right of
contribution from any Company or any successor to the Companies.
(b) ▇▇▇▇▇ ▇▇▇▇▇▇ shall defend, indemnify, and hold Parent and
Subs harmless from and against, and reimburse Parent with respect to, any and
all Losses incurred by Parent or Subs by reason of or arising out of or in
connection with the operations of JR Land Company and its predecessors prior to
the formation of Rabanco Companies on November 25, 1985, including without
limitation the first four claims listed in Schedule 3.12 (Brouhard, Anderson,
▇▇▇▇▇▇▇▇▇, and Tulalip) and with respect to any and all Losses, including but
not limited to environmental liabilities, incurred by Parent or Subs by reason
of or arising out of or in connection with ▇▇▇▇▇ ▇▇▇▇▇▇'▇ past or present
ownership or other interest in any companies unrelated to the Companies and the
Subsidiaries.
9.2 Indemnification By Parent. Parent shall defend, indemnify, and hold
the Shareholders, the Companies, and their employees, officers, directors and
agents harmless from and against, and reimburse the Shareholders and the
Companies and their employees, officers, directors and agents with respect to,
any and all Losses of every nature whatsoever incurred by the Shareholders, the
Companies, and employees, officers, and directors of the Companies by reason of
or arising out of or in connection with: (i) any breach, or any claim (including
claims by parties other than the Companies or the Shareholders) that if true,
would constitute a breach by Parent or Subs of any representation or warranty of
Parent or Subs contained in this Agreement or in any certificate delivered to
Company pursuant to the provisions of this Agreement and (ii) the failure,
partial or total, of Parent or Subs to perform any agreement or covenant
required by this Agreement to be performed by it. Parent shall also defend,
indemnify, and hold the Shareholders, the Companies, and their employees,
officers, directors and agents harmless from and against, and reimburse the
Shareholders and the Companies and their employees, officers, directors and
agents with respect to, any and all losses, damages, liabilities, claims,
judgments, settlements, fines, costs, and expenses (including reasonable
attorneys' fees) of any kind and of any nature whatsoever, including indirect
and/or consequential damages, incurred by the Shareholders, the Companies, and
employees, officers, directors and agents of the Companies by reason of or
arising out of or in connection with the Razore Shareholders' failure to comply
with and/or perform according to the terms of the rights of first offer
contained in that certain Splitoff Agreement dated effective as of July 1, 1991,
by and among ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and Limited, and
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and
Northwest Waste Industries, Inc.; or that certain Seattle Disposal Partnership
Interest Redemption Agreement dated effective as of July 1, 1991, by and between
Seattle Disposal Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. (collectively, the "Rights of
First Offer Claims").
9.3 Notice of Claims. All claims for indemnification under this
Agreement shall be resolved in accordance with the following procedures:
(a) If an indemnified party reasonably believes that it may
incur any Losses, it shall deliver a Claim Notice to the indemnifying party for
such Losses. If an indemnified party receives notice of a third-party claim for
which it intends to seek indemnification hereunder, it shall give the
indemnifying party prompt written notice of such claim, so that the indemnifying
party's defense of such claim under Section 9.4 hereunder may be timely
instituted.
(b) When Losses are actually incurred or paid by an
indemnified party or on an indemnified party's behalf or otherwise fixed or
determined, the indemnified party shall deliver a Payment Certificate to the
indemnifying party for such Losses. If a Claim Notice or Payment Certificate
refers to any claim, action, suit, or proceeding made or brought by a third
party, the Claim Notice or Payment Certificate shall include copies of the
claim, any process served, and all legal proceedings with respect thereto.
(c) If, after receiving a Payment Certificate, the
indemnifying party desires to dispute such claim or the amount claimed in the
Payment Certificate, it shall deliver to the indemnified party a Counternotice
as to such claim or amount. Such Counternotice shall be delivered within thirty
(30) days after the date the Payment Certificate to which it relates is received
by the indemnifying party. If no such Counternotice is received within the
aforementioned 30-day period, the indemnified party shall be entitled to prompt
payment for such Losses from the indemnifying party.
(d) If, within thirty (30) days after receipt by the
indemnified party of the Counternotice to a Payment Certificate, the parties
shall not have reached agreement as to the claim or amount in question, the
claim for indemnification shall be decided in accordance with the provisions of
Section 11.8.
(e) With respect to any Losses based upon an asserted
liability or obligation to a person or entity not a party to this Agreement for
which indemnification is being claimed, the obligations of the indemnifying
party hereunder shall not be reduced as a result of any action by the party
furnishing the notice of third party claim responding to such claim if such
action is reasonably required to minimize damages or to avoid a forfeiture or
penalty or to comply with a requirement imposed by law.
9.4 Defense of Third Party Claims. The indemnifying party under this
Article IX shall have the right to conduct and control, through counsel of its
own choosing, any third-party claim, action, or suit or compromise or settlement
thereof. The indemnified party may, at its election, participate in the defense
of any such claim, action, or suit through counsel of its choosing, but the fees
and expenses of such counsel shall be at the expense of the indemnified party,
unless the indemnified party shall have been advised by such counsel that there
may be one or more legal defenses available to it that are different from or in
addition to those available to the indemnifying party (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the indemnified party with respect to such defenses). If the indemnifying party
shall fail to defend any such third-party action, claim, or suit, then the
indemnified party may defend, through counsel of its own choosing, such action,
claim, or suit and may settle such action, claim, or suit and recover from the
indemnifying party the amount of such settlement or of any judgment and the
costs and expenses of such defense; provided, however, that the indemnifying
party shall not be liable to pay any such settlement unless the indemnified
party shall have given the indemnifying party written notice of the terms of the
proposed settlement and the indemnifying party shall have failed, within twenty
(20) days of receipt of such notice, to undertake the defense of such action,
claim, or suit. The indemnifying party shall not compromise or settle any
third-party action, claim, or suit which includes any term that shall require
any act or forbearance by the indemnified party from all liability in respect of
such claim, action, or suit without the prior written consent of the indemnified
party, which consent shall not be unreasonably withheld. Assumption by an
indemnifying party of control of any such defense, compromise, or settlement
shall not be deemed a waiver by it of its right to challenge its obligation to
indemnify the indemnified party. Parent and the Shareholders shall cooperate in
all reasonable respects with each other in connection with the defense,
negotiation, or settlement of any legal proceeding, claim, or demand referred to
in this Section 9.4.
9.5 Time Limit. The provisions of this Article IX shall apply only to
Losses that are incurred or relate to claims, demands, or liabilities that are
asserted or threatened on or before the date thirty (30) days following the date
of issuance by Parent's independent certified public accountants of the first
audit of Parent's financial statements that contains the combined results of
Parent and the Companies or, to the extent they relate expressly or by
implication to items that would not reasonably be expected to be encountered in
the ordinary process of that audit conducted in accordance with GAAP, the
provisions of this Article IX shall apply only to Losses that are incurred or
relate to claims, demands, or liabilities that are asserted or threatened before
the first anniversary of the Closing Date and as to which Parent shall give the
Shareholders a Claim Notice within thirty (30) calendar days after such
anniversary date; provided, however, that (i) the obligation of the Shareholders
to indemnify Parent and Subs for such claims, demands, or liabilities for which
a Claim Notice is given within the applicable time periods set forth above shall
continue until the final resolution of each such claim; and (ii) the
indemnification obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ in Section 9.1(b) and of the
Shareholders with regard to disclosure (e) under the Klickitat County Disposal
Agreement exceptions contained in Schedule 3.14, shall not be subject to any
time limits.
9.6 Limitations. Notwithstanding any other provision in this Article IX
except for the indemnity obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ set forth in Section 9.1(b)
and except for the Rights of First Offer Claims, the indemnified party shall be
entitled to indemnification only if the aggregate Losses exceed Three Million
Dollars ($3,000,000) (the "Threshold Amount"), provided that at such time as the
amount to which such indemnified party is entitled to be indemnified exceeds the
Threshold Amount, such indemnified party shall be entitled to be indemnified up
to the full Losses including the Threshold Amount. The aggregate amount up to
which an indemnified party shall be entitled to be indemnified will be Thirty
Million Dollars ($30,000,000); provided, however that there shall be no cap on
the indemnification obligations of ▇▇▇▇▇ ▇▇▇▇▇▇ set forth in Section 9.1(b) or
the indemnification obligations of Parent with respect to any Rights of First
Offer Claims. The sole remedy of Parent and the Shareholders for breaches of
this Agreement shall be claims made in accordance with and subject to the
limitations of this Article IX.
9.7 Tax Consequences. As stated in Section 2.6, it is the intent of the
parties that each of the Mergers (except for the Mergers involving SSWI and
CCAI) is intended to be a "reorganization" within the meaning of Section 368 of
the Code, and no party shall take any position inconsistent with this
interpretation. However, except for any damages which may be caused by the
breach of a representation, warranty, or covenant set forth herein by a party
hereto, neither such party nor its counsel shall have any obligation, of
indemnification or otherwise, in the event it is determined that the tax
consequences differ from those intended.
9.8 Special Indemnity for Permit Matter The Shareholders shall
severally pay one half (1/2) of any fines or penalties paid to Governmental
Entities by Parent or Subs (but excluding any consequential or incidental
damages) during the two-year period immediately following the Closing that
result from any discrepancy between the number of trucks utilizing the disposal
facility's access road to support current volumes and the requirements of the
Klickitat County agreement; provided, however, that the obligation of the
Shareholders to indemnify Parent and Subs for such fines or penalties incurred
within the applicable time period set forth above shall continue until the final
resolution of each such claim. Following the Closing, Parent shall use
reasonable efforts to cause the applicable permit to be modified to resolve this
discrepancy. Any indemnification owing under this Section 9.8 shall be subject
to the limitations set forth in Section 9.6 hereof, but shall not be subject to
the limitations set forth in Section 9.5 hereof.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Mergers by the stockholders of the Companies or Subs:
(a) by mutual consent of Parent, the
Shareholders, and Companies;
(b) by either Parent or the Companies
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant, or agreement contained in this Agreement)
if there has been a breach of any representation, warranty, covenant, or
agreement that has a Material Adverse Effect on the Business Condition of
the Companies or Parent, as the case may be, or on the benefits of the
transaction provided for in this Agreement, and such breach has not been
cured, or reasonable efforts are not being employed to cure such breach,
within ten (10) days after notice thereof is given to the party
committing such breach;
(c) by Parent, the Shareholders, or the
Companies if the Mergers shall not have been consummated before December 31,
1998; provided, however, that if the parties have agreed to pursue litigation
pursuant to Section 7.4(b), such date shall be extended to April 1, 1999;
(d) by Parent, the Shareholders, or the
Companies if any permanent injunction or other Order of a court or other
competent authority preventing the Mergers shall have become final and
non-appealable; or
(e) by the Shareholders or the Companies in
the event that the rights of first offer described in Section 9.2 are
exercised by the holders of such rights and accepted by the Companies or the
Shareholders.
Where action is taken to terminate this Agreement pursuant to this
Section 10.1, it shall be sufficient for such action to be authorized, in the
case of Parent and the Companies, by the Board of Directors of the party taking
such action without any requirement to submit such action to the stockholders of
such party.
10.2 Effect of Termination. In the event of termination of this
Agreement by the Companies, the Shareholders, or Parent as provided in Section
10.1, this Agreement shall forthwith become void and have no effect, and there
shall be no liability or obligation on the part of the Shareholders, Parent,
Subs, or the Companies or their respective officers or directors, except that
(i) the provisions of Sections 7.7, 10.2, and 11.7 and the Confidentiality
Agreement shall survive any such termination and abandonment, and (ii) no party
shall be released or relieved from any liability arising from the willful breach
by such party of any of its representations, warranties, covenants, or
agreements as set forth in this Agreement.
10.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors (in the case of Parent and
the Companies), at any time before or after approval of matters presented in
connection with the Mergers by the stockholders of the Companies or Parent, but
after any such stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
10.4 Extension, Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors (in the case of Parent
and the Companies) may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements, covenants or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XI
GENERAL PROVISIONS
11.1 Nonsurvival of Representations, Warranties and Agreements. Except
as otherwise provided in Sections 9.5 and 9.8, all representations, warranties,
and agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall be deemed to be conditions to the Mergers and shall not survive
the Mergers, except for the agreements contained in Sections 7.5, 7.6, 7.7, 7.8,
7.10 and 7.11 and the agreements delivered pursuant to this Agreement.
11.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed sufficiently given and served for all purposes
when personally delivered or given by telex or machine-confirmed facsimile or
three business days after a writing is deposited in the United States mail,
first class postage or other charges prepaid and registered, return receipt
requested, addressed as follows (or at such other address for a party as shall
be specified by like notice):
(a) if to Parent or Subs, to:
Allied Waste Industries, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Companies prior to Closing, to:
Rabanco Companies
▇▇▇-▇▇▇▇▇ ▇▇▇. ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Office of the President
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
c) if to the Razore Shareholders, to:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇-▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Non-Razore Shareholders, to:
CCA, inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Sphere Solid Waste, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ater ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11.3 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include", "includes", and
"including" when used therein shall be deemed in each case to be followed by the
words "without limitation". The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. This Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section or
an Exhibit will mean a section in, or exhibit to, this Agreement unless
otherwise explicitly set forth.
11.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to each the other parties, it being understood that
all parties need not sign the same counterpart.
11.5 Miscellaneous. This Agreement, the Confidentiality Agreement, and
the documents referred to herein (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder (except as otherwise expressly
provided herein and except that Section 7.6 is for the benefit of Company's
directors and officers and is intended to confer rights on such persons); and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
11.6 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.7 Transactional Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, each of Parent and the Companies
shall pay its own fees and expenses incident to the negotiation, preparation,
execution, delivery and performance hereof, including, without limitation, the
fees and expenses of its counsel, accountants and other experts; provided that
the aggregate usual and customary costs and expenses paid by the Companies in
connection with the transactions contemplated hereby will not exceed Five
Million Dollars ($5,000,000) (with any excess being borne by the Shareholders).
11.8 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Washington. The parties agree that King County, Washington, shall be the
exclusive proper place of venue for any action, dispute, or controversy arising
from or in connection with this Agreement. The parties irrevocably agree that
any legal or equitable proceeding arising out of or in connection with this
Agreement shall be brought either in the King County Superior Court or in the
United States District Court Division in which King County is located. If any
legal action or any arbitration or other proceeding is brought for the
enforcement of this Agreement or because of an alleged dispute, breach, default
or misrepresentation in connection with any provision of this Agreement, the
successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
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SIGNATURE PAGES -
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, Parent, Subs and the Companies have caused this
Amended and Restated Agreement to be signed by their respective officers
thereunder duly authorized, and the Shareholders have duly executed this
Agreement, all as of the date first written above.
PARENT
ALLIED WASTE INDUSTRIES, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇
President and CEO
SUBS COMPANIES
RABANCO ACQUISITION COMPANY RABANCO, LTD.
RABANCO RECYCLING, INC.
UNITED WASTE CONTROL CORP.
By /s/ ▇▇▇▇▇ ▇▇▇▇ WJR ENVIRONMENTAL, INC.
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▇▇▇▇▇ ▇▇▇▇, Vice President
By /s/ ▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇, President
RABANCO ACQUISITION COMPANY TWO RABANCO INTERMODAL/B.C., INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇ ▇▇▇▇▇
-------------------------- ------------------------------
▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇ ▇▇▇▇▇, Executive Vice President
RABANCO ACQUISITION COMPANY THREE WASTE ASSOCIATES, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇ ▇▇▇▇▇
-------------------------- ----------------------
▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇ ▇▇▇▇▇, President
RABANCO ACQUISITION COMPANY FOUR PAPER FIBERS, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇▇▇ ▇▇▇▇▇▇, President
RABANCO ACQUISITION COMPANY FIVE MJS ASSOCIATES, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇▇ ▇▇▇▇▇▇▇, President
RABANCO ACQUISITION COMPANY SIX ALASKA STREET ASSOCIATES, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇ ▇▇▇▇▇, Vice President
RABANCO ACQUISITION COMPANY SEVEN S&L, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇ ▇▇▇▇▇
--------------------------- --------------------------
▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇ ▇▇▇▇▇, Vice President
RABANCO ACQUISITION COMPANY EIGHT SSWI, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇▇▇▇ ▇▇▇▇, President
RABANCO ACQUISITION COMPANY NINE CCAI, INC.
By /s/ ▇▇▇▇▇ ▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President ▇▇▇▇▇▇▇▇ ▇▇▇▇, President
RABANCO ACQUISITION COMPANY TEN
By /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President
RABANCO ACQUISITION COMPANY ELEVEN
By /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇, Vice President
RABANCO ACQUISITION COMPANY TWELVE
BY /s/ ▇▇▇▇▇ ▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇, Vice President
RAZORE SHAREHOLDERS NON-RAZORE SHAREHOLDERS
SPHERE SOLID WASTE, INC.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇▇▇▇
-----------------------
▇▇▇▇▇▇ ▇▇▇▇, President
CCA, INC.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇▇▇▇, President
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇ ▇▇▇▇▇▇
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ ▇▇▇ ▇▇▇▇▇
---------------------------
▇▇▇ ▇▇▇▇▇
CONSENT AND PARTICIPATION OF SPOUSE
I, the undersigned spouse of a Shareholder, do hereby approve and join
in the foregoing Amended and Restated Agreement and Plan of Reorganization (this
"Agreement") to the extent of any community property interest that I may have
under the laws of the State of Washington and, to the extent of my interest, if
any, agree to be bound by the provisions contained in this Agreement, including
the Exhibits made part of this Agreement.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
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