1
ASSET PURCHASE AGREEMENT
by and among
KTI NEW JERSEY FIBERS, INC.,
PGC CORPORATION
and
▇▇▇▇▇▇▇▇ BROS. & CO., INC.
Dated as of August 21, 1998
2
Table of Contents
of
Asset Purchase Agreement
Section and Heading Page
Page
----
1. PURCHASE AND SALE........................................................................................1
1.1. Purchase and Sale of Assets.....................................................................1
1.2. Excluded Assets.................................................................................2
1.3. Method of Conveyance............................................................................3
1.4. Assumed Obligations.............................................................................4
2. PURCHASE PRICE AND CLOSING...............................................................................4
2.1. Purchase Price..................................................................................4
2.2. Allocation of Purchase Price....................................................................6
2.3. Closing.........................................................................................6
2.4. Payment of Purchase Price.......................................................................6
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER.............................................................7
3.1. Corporate Organization..........................................................................7
3.2. Authorization...................................................................................7
3.3. No Violation....................................................................................8
3.4. Financial Statements............................................................................8
3.5. No Undisclosed Liabilities......................................................................9
3.6. Accounts Receivable.............................................................................9
3.7. Inventories.....................................................................................9
3.8. Interim Operations.............................................................................10
3.9. Compliance with Law; Necessary Authorizations..................................................11
3.10. Title to Assets................................................................................13
3.11. Plant and Equipment............................................................................14
3.12. Patents, Trademarks and Trade Names............................................................14
3.13. Leases.........................................................................................15
3.14. Taxes..........................................................................................15
3.15. Contracts and Commitments......................................................................16
3.16. Customers and Suppliers........................................................................18
3.17. Agreements in Full Force and Effect............................................................18
3.18. Insurance......................................................................................19
3.19. Labor..........................................................................................19
3.20. Litigation, Judgments, Decrees.................................................................20
3.21. No Condemnation or Expropriation...............................................................20
3.22. Consents and Approvals of Governmental Authorities and Others..................................21
3.23. Employee Benefit Plans; Pension Plans..........................................................21
i
3
3.24. Brokers and Finders............................................................................22
3.25. Personnel......................................................................................22
3.26. Accuracy of Representations and Documents......................................................22
3.27. Distinct Entity................................................................................22
3.28. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇..............................................................................22
3.29. Books and Records..............................................................................23
3.30. Small Business Set-Asides......................................................................23
3.31. Waste Treatment, Storage.......................................................................23
3.32. Remedial Action Notices Received...............................................................23
3.33. Investment Representations.....................................................................23
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.............................................................24
4.1. Corporate Organization, Etc....................................................................24
4.2. Authorization, Etc.............................................................................24
4.3. No Violation...................................................................................25
4.4. Securities Exchange Act of 1934................................................................25
5. CERTAIN COVENANTS AND AGREEMENTS........................................................................25
5.1. Full Access....................................................................................25
5.2. Consents.......................................................................................25
5.3. Licenses and Permits...........................................................................26
5.4. Notice of Claims and Investigations............................................................26
5.5. No Solicitation or Negotiation of Other Offers.................................................26
5.6. Press Releases.................................................................................26
5.7. Consummation of Transactions...................................................................26
5.8. Post-Closing Cooperation.......................................................................27
5.9. Risk of Loss...................................................................................27
5.10. Outstanding Checks and Accrued Employee Benefits...............................................27
5.11. Post-Closing Authority.........................................................................27
5.12. Non-Competition and Nondisclosure..............................................................27
5.13. Change of Name.................................................................................28
5.14. Income Taxes...................................................................................28
5.15. Employees......................................................................................28
5.16. Supplements to Disclosure Schedule; Notice and Cure............................................29
6. CONDUCT OF THE SELLER'S BUSINESS PENDING THE CLOSING....................................................29
6.1. Regular Course of Business.....................................................................29
6.2. Subsidiaries...................................................................................29
6.3. Organization...................................................................................29
6.4. Certain Changes................................................................................30
6.5. Insurance; Property............................................................................31
6.6. No Default.....................................................................................31
6.7. Compliance with Laws...........................................................................31
6.8. Representations and Warranties.................................................................31
ii
4
7. CONDITIONS TO THE OBLIGATIONS OF THE SELLER.............................................................31
7.1. Representations and Warranties True............................................................31
7.2. Performance....................................................................................31
7.3. No Proceeding, Litigation, Injunction..........................................................32
7.4. Buyer's Officer's Certificates.................................................................32
7.5. Employment Agreements..........................................................................32
7.6. Registration Rights Agreement..................................................................32
7.7. Note and Guarantee. The Buyer shall have executed and delivered the Note and KTI
shall have executed and delivered the Guarantee................................................32
7.8. Additional Documents...........................................................................33
8. CONDITIONS TO THE OBLIGATIONS OF BUYER..................................................................33
8.1. Representations and Warranties True............................................................33
8.2. Performance....................................................................................33
8.3. No Proceeding..................................................................................33
8.4. Seller's Officer's' Certificates...............................................................33
8.5. Material Change................................................................................34
8.6. Certification of Non-Foreign Status............................................................34
8.7. Due Diligence..................................................................................34
8.8. Proxy Statement and Shareholders' Meeting......................................................34
8.9. Employment Agreements..........................................................................34
8.10. Additional Documents...........................................................................34
8.11. Atlantic.......................................................................................35
8.12. Assignment of Insurance Policies...............................................................35
8.13. Amendment to 401(k) Plan.......................................................................35
8.14. Termination of Security Interests..............................................................35
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.............................................35
9.1. Survival of Representations....................................................................35
9.2. Statements as Representations and Warranties...................................................35
9.3. Remedies Cumulative............................................................................35
9.4. Buyer's Indemnity..............................................................................35
9.5. The Seller's Indemnity.........................................................................36
9.6. Successors to the Seller.......................................................................37
9.7. Indemnity Procedure............................................................................37
10. TERMINATION.............................................................................................37
10.1. Methods of Termination.........................................................................37
10.2. Procedure Upon Termination.....................................................................38
10.3. Effect of Termination..........................................................................38
11. MISCELLANEOUS PROVISIONS................................................................................38
iii
5
11.1. Amendment and Modification.....................................................................38
11.2. Waiver of Compliance...........................................................................38
11.3. Expenses.......................................................................................38
11.4. Notices........................................................................................38
11.5. Binding Effect; Assignment.....................................................................39
11.6. Governing Law..................................................................................39
11.7. Counterparts...................................................................................39
11.8. Headings.......................................................................................39
11.9. Entire Agreement...............................................................................39
11.10. Third Parties..................................................................................40
11.11. Severability...................................................................................40
Exhibit A Promissory Note
Exhibit B Instruments of Conveyance - Seller
Exhibit C Registration Rights Agreement
Exhibit D Employment Agreement - ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit E Employment Agreement - ▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit F Employment Agreement - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit G Employment Agreement - ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Exhibit H Employment Agreement - ▇▇▇▇ ▇▇▇▇▇▇▇
Exhibit I Certificate of Non-foreign Status
Exhibit J Guarantee
iv
6
ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated as of August 21, 1998, by and among ▇▇▇▇▇▇▇▇ Bros. & Co.,
Inc. and PGC Corporation, both New Jersey corporations ("▇▇▇▇▇▇▇▇ Bros." and
"PGC", respectively, or, collectively, the "Seller") and KTI New Jersey Fibers,
Inc., a Delaware corporation (the "Buyer") and a wholly-owned subsidiary of KTI,
Inc., a New Jersey corporation ("KTI"). KTI's stock is traded on the NASDAQ
National Market System under the symbol "KTIE".
The Buyer desires to purchase from the Seller, and the Seller desire to sell,
assign and transfer to the Buyer, all of the Seller's business and substantially
all of the assets relating thereto, but excluding certain real estate occupied
by ▇▇▇▇▇▇▇▇ Bros., including all improvements thereon, all on the terms and
conditions hereinafter set forth.
As part of the transaction, the Buyer intends to move the business operations of
the Seller to real estate and improvements thereon, commonly known as ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Real Estate") pursuant to a lease (the
"Passaic Lease"). The business operations and assets of the Seller and the
business operations and assets of Atlantic (as hereinafter defined), when
located at the Real Estate collectively constitute the "Facility".
Accordingly, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements herein contained, the parties agree
as follows:
1. Purchase and Sale.
1.1. Purchase and Sale of Assets. On the terms and subject to the
conditions herein set forth, at the Closing (as such term is hereinafter
defined), the Seller shall sell, transfer, convey, assign and deliver to Buyer,
and the Buyer shall purchase and accept delivery of, all of the tangible and
intangible assets and properties of every kind and description, wherever
located, of and in any way related to, the Seller's business, as of the Closing
Date (as such term is hereinafter defined), owned by the Seller or in which the
Seller has an interest, other than those assets specifically excluded pursuant
to Section 1.2 of this Agreement, such as the real estate subject to the Passaic
Lease. Such assets and properties of the Seller to be purchased by the Buyer as
herein provided shall include, without limiting the generality of the foregoing,
the following:
(a) all cash, accounts receivable, inventories of materials
and products, supplies, spare parts, shipping materials, packaging, advance
payments, deposits and other prepaid items, security deposits and credits;
(b) all of the Seller's interest as lessor and as lessee in
the Leases (as such term is defined in Section 3.13(a) hereof);
(c) all furniture, fixtures, computer hardware and software,
machinery, tools, parts, office equipment, automobiles, trucks and vehicles;
7
(d) any and all patents of the Seller, including without
limitation, the patents described in Section 3.12(a) of the Disclosure Schedule
which is attached hereto and forms a part of this Agreement (the "Disclosure
Schedule"), trademarks, trade names (including, but not limited to, the name of
the Seller, service marks and copyrights and all registrations, applications and
other rights associated with the foregoing, including the right to ▇▇▇ for past
infringement;
(e) all books and operations records, including but not
limited to, all personnel files;
(f) all designs, plans, trade secrets, inventions, procedures,
research, records, processes know-how, and similar information wherever located
(collectively, the "Know-How");
(g) all of the Seller's interest in and to the Seller's
telephone, facsimile and telex (if any) numbers and telephone and other
directory listings;
(h) all stationery, purchase order and other forms, labels,
shipping materials, catalogs, brochures, art work, photographs, sales
literature, promotional literature, marketing materials and advertising
material;
(i) all performance bonds of the Seller;
(j) all of the Seller's rights under all contracts and
agreements, including insurance policies;
(k) that certain promissory note from ACA Realty Company
payable to the Seller dated April 26, 1996 in the original principal amount of
$600,000, together with interest accrued thereon (the "Promissory Note"); and
(l) all other tangible and intangible personal property and
assets of the Seller, including without limitation, the Seller's goodwill,
franchises (other than the Seller's franchises as a corporation), permits and
licenses, including a license to use any and all patents owned or used by the
Seller which are used by the Seller in its business, customer lists, rights of
offset, causes of action, defenses, judgments, claims and demands of any nature,
benefits due to the Seller under its policies of insurance and fidelity bonds
with respect to all events and periods prior to the Closing Date, in respect of
which any third party may seek to impose liability on Buyer, restrictive
covenants, confidentiality obligations and similar obligations of present and
former shareholders, officers and employees, all books, files, papers, records
and other data of the Seller (or, at the Seller's election and expense, accurate
and complete copies thereof) and all other property and rights of every kind or
nature of the Seller whether or not specifically referred to in this Agreement
and whether or not carried on the books of the Seller as an asset.
The aforesaid assets and properties to be transferred to the Buyer hereunder are
collectively referred to herein as the "Assets," and the Assets as of the date
of the Unaudited Financial Statements (as hereinafter defined) are listed in
Section 1.1 of the Disclosure Schedule.
1.2. Excluded Assets. It is specifically understood and agreed by the
parties hereto that the Seller is not selling, and the Buyer is not purchasing
the following assets (the "Excluded Assets"):
2
8
(a) the Seller's franchises as a corporation and any prepaid
taxes or expenses or deferred charges in connection therewith;
(b) the Seller's minute books, corporate seals and stock
books;
(c) the consideration to be paid by the Buyer to the Seller
pursuant to this Agreement;
(d) the shares of capital stock of the Seller;
(e) those items set forth in Section 1.2 of the Disclosure
Schedule: and
(f) The Seller's interest in the real estate and improvements
thereon commonly known as ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
1.3. Method of Conveyance.
(a) The sale, transfer, conveyance, assignment and delivery by
the Seller of the Assets to the Buyer in accordance with Section 1.1 hereof
shall be effected on the Closing Date by the Seller's execution and delivery of
assignments of leases, bills of sale and other instruments of conveyance and
transfer as applicable substantially in the forms attached hereto as Exhibit B
(collectively, the "Instruments of Conveyance").
(b) At the Closing, good and valid title to all of the Assets
shall be transferred, conveyed, assigned and delivered by the Seller to the
Buyer pursuant to this Agreement and the Instruments of Conveyance, free and
clear of any and all Liens (as defined below) except as set forth in Section
3.10 of the Disclosure Schedule. For the purposes of this Agreement, the term
"Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind whatsoever (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of, or
agreement to give, any financing statement under the Uniform Commercial Code or
similar statute of any jurisdiction) including materialmen's, mechanics',
repairmen's, employees', operators' or other similar Liens arising in the
ordinary course of business incidental to construction, maintenance or operation
of any property of the Seller that have not as of the date hereof been filed
pursuant to law. No Lien or Liens may individually or in the aggregate interfere
materially with the use or operation by the Seller of the property affected
thereby for the purposes for which such property was acquired or is held by the
Seller.
(c) The Seller shall be responsible for and shall pay any
sales or use taxes, if applicable, payable by reason of the purchase and sale of
the Assets hereunder. The Buyer shall be entitled to pay the Seller's portion of
such taxes at the Closing and shall be entitled to deduct the same from the
amount otherwise payable to the Seller at the Closing pursuant to Section 2.4.
If any portion of such cash payment is needed to release any liens on Assets,
written pay-off letters must be delivered to the Buyer not less than five
business days prior to the Closing Date. To the extent that the exact amount of
liens has not been ascertained at the Closing Date, the Buyer may retain such
amounts as the Buyer and Seller estimate in good faith to be due. Such amounts
shall be adjusted promptly when the exact amounts due are ascertained.
3
9
(d) Notwithstanding any provision herein to the contrary, in
the period beginning on the date hereof through the Closing Date (the "Interim
Period") the Seller shall operate the business and preserve the Assets to be
transferred to the Buyer on the Closing Date, unless and until this Agreement is
terminated, prior to the Closing Date, pursuant to Article 10 hereof. In the
event that such termination occurs, the Seller and the Buyer shall not be
obligated to each other with respect to any actions or events occurring during
the Interim Period.
1.4. Assumed Obligations. Pursuant to this Agreement, the Buyer does
not assume any of the liabilities or obligations of the Seller, whether
absolute, accrued, contingent or otherwise, incurred prior to the Closing Date.
At the Closing, the Buyer shall not assume any of the liabilities or obligations
of the Seller, whether absolute, accrued, contingent or otherwise, except for
those obligations under the operating leases listed in Section 1.4 of the
Disclosure Schedule (the "Assumed Obligations").
2. Purchase Price and Closing.
2.1. Purchase Price. (a) The consideration for the Assets to be sold,
transferred and conveyed by the Seller to the Buyer pursuant to this Agreement
shall be (a) an initial payment in cash of the difference of Five Million Two
Hundred Thousand and no/100 Dollars ($5,200,000.00) and the Accrued Employee
Benefit Amount as of the Closing Date (the "Cash Payment"); (b) a promissory
note for One Million Eighty-Six Thousand Two Hundred Thirteen and no/100 Dollars
($1,086,213.00), in substantially the form of Exhibit A hereto (the "Note") and
guaranteed by KTI pursuant to a guarantee in substantially the form of Exhibit J
hereto (the "Guarantee"); (c) the Incentive Payment (as hereinafter defined);
and (d) an additional cash payment representing the Note Adjustment Amount (as
hereinafter defined).
(b) The Incentive Payment shall be computed on the basis of
earnings before interest, taxes, depreciation and amortization of the combined
businesses of Seller and Atlantic Coast Fibers, Inc. ("Atlantic") to be
conducted in the Real Estate (the "Combined Business"). Not later than 90 days
after the last day of the Annual Period (as hereinafter defined), KTI shall
prepare and deliver to the parties hereto and ▇▇▇▇▇▇▇▇ Bros. the following
financial statements (the "Combined Pool Financial Statements"): (i) a statement
of operations of the Combined Businesses for the twelve calendar month period,
beginning on the first day of the calendar month which is not less than 90 days
after the Closing Date but not more than 120 days after the Closing Date (the
"Annual Period"), as the same shall be determined by the mutual agreement of
Buyer, Seller and ▇▇▇▇▇▇▇▇ Bros. (the "Annual Period Statement of Operations")
and (ii) a statement calculating the earnings before interest, taxes,
depreciation and amortization of the Combined Business ("EBITDA") for the Annual
Period (the "EBITDA Statement"), derived from the Annual Period Statement of
Operations. Each of the Combined Pool Financial Statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied,
and those additional accounting principles set forth in Section 2.1(b) of the
Disclosure Schedule. The "Combined Pool" shall be equal to the sum of (a) EBITDA
during the Annual Period less Three Million and no/100 Dollars ($3,000,000.00),
multiplied by five (5.0) and (b) EBITDA during the Annual Period less Four
Million and no/100 Dollars ($4,000,000.00), multiplied by one-half (0.5). The
Incentive Payment due to the Seller shall be 50% of the Combined Pool. In the
event that additional businesses are purchased and are to be conducted at the
Real Estate during the Annual Period, upon the mutual agreement of the Seller
4
10
and Atlantic, such additional businesses may be considered part of the Combined
Business, in which event the calculation of EBITDA shall be reduced by the cost
of funds utilized to purchase such additional businesses, which cost of funds
shall be established as 15% per annum of the purchase price for such additional
businesses.
(c) The Seller shall have the right during the 45 days
following receipt of the Combined Pool Financial Statements to dispute the
calculation of EBITDA. The Seller shall have the reasonable right to examine the
books and records from which the calculation of EBITDA was made in connection
therewith. The Seller shall either deliver a written acceptance of such EBITDA
calculation or deliver a written notice of dispute, identifying the basis for
the dispute to the extent possible and the Seller's calculation of EBITDA
("Seller's EBITDA"). Upon receipt of the acceptance or notice of dispute (the
date of the receipt by the Buyer of such notice, the "Notice Date"), KTI shall
make payment of the Incentive Payment due in accordance with the calculation of
EBITDA set forth in the EBITDA Statement. The Seller's right to accept or
dispute the calculation of EBITDA is independent of the rights of Atlantic to
accept or dispute the calculations of EBITDA. If either the Seller or Atlantic
accept EBITDA as calculated, the EBITDA calculated shall be conclusive as to the
accepting party, but not to the non-accepting party. If the Seller fails to
deliver a notice of acceptance or dispute within the 45-day period, the Seller
shall be deemed conclusively to have accepted such calculation. Upon the earlier
to occur of the Notice Date or the expiration of the 45 day period, KTI shall
make payment of the Incentive Payment due in accordance with the EBITDA
Statement (the "Incentive Payment Date"). The Incentive Payment shall be made in
the form of shares of KTI common stock, no par value per share ("Common Stock")
and the amount to be issued shall be computed by dividing such Incentive Payment
amount by the average closing sale price per share of KTI's Common Stock for the
ten day period immediately preceding the Notice Date or the last day of the
45-day period, as the case may be.
(d) Any dispute concerning the calculation of EBITDA shall be
resolved pursuant to an agreed procedure process to be performed by a certified
public accounting firm of nationally recognized standing. KTI shall select the
certified public accounting firm, which shall be reasonably acceptable to the
non-accepting party. If the non-accepting party shall reject such certified
public accounting firm, such certified public accounting firm shall be deemed to
have been rejected by both the Seller and Atlantic. KTI shall then select a
second firm, which shall be used unless both the Seller and Atlantic shall
reject such firm. If KTI's first two choices are rejected, then KTI shall select
a third firm, which shall be used under all circumstances, and the Seller hereby
accepts such accounting firm. The written determination (the "EBITDA
Determination") by such accounting firm of the EBITDA, pursuant to the EBITDA
Statement after considering all written objections thereto in accordance with
the foregoing procedure, shall be conclusive and binding upon all parties. Any
fees and expenses payable to such accounting firm for services pursuant to this
Section 2.1(d) shall be borne by the Seller and the Buyer proportionately, based
on the difference between the EBITDA Determination, and, on the one hand with
respect to the Buyer, EBITDA as set forth in the EBITDA Statement, and on the
other hand with respect to the Seller, Seller's EBITDA. By way of example, if
EBITDA as set forth in the EBITDA Statement is lower than EBITDA as set forth in
the EBITDA Determination by $50,000 and if Seller's EBITDA is higher than EBITDA
as set forth in the EBITDA Determination by $100,000, then the Buyer shall bear
one-third of the fees and expenses payable to such accounting firm and the
Seller shall bear two-thirds of such fees and expenses.
5
11
Regardless of the party making the payment to the accounting firm, both Seller
and Buyer shall have full and equal access to the accounting firm, its records,
work papers and related documents.
(e) If the amount of the Incentive Payment, as determined in
accordance with Subsection (d) above, is less than the Incentive Payment
actually made by the Seller, no later than 10 business days after the delivery
of the EBITDA Determination, the Seller shall deliver to the Buyer the amount of
such overpayment in shares of KTI Common Stock (the amount being determined
utilizing the same price per share as was utilized in the calculation of the
number of shares to be delivered in making the Incentive Payment). If the amount
of the Incentive Payment, as determined in accordance with Subsection (d) above,
is greater than the Incentive Payment actually made by the Seller, no later than
10 business days after the delivery of the EBITDA Determination, the Buyer shall
deliver to the Seller such number of additional shares of KTI Common Stock as
would have been deliverable to the Seller at the time the Incentive Payment was
actually made had EBITDA equaled EBITDA as set forth in the EBITDA
Determination.
(f) The Note Adjustment Amount shall be computed by
subtracting the amount due under the Stockholders Notes set forth in Exhibit 1.4
of Section 1.4 of the Disclosure Schedules from the amount due under the
Promissory Note as of the Closing Date.
(g) The consideration set forth in this Section 2.1 is
hereinafter collectively referred to as the "Purchase Price".
2.2. Allocation of Purchase Price. The parties will agree subsequent to
the Closing Date on how the Purchase Price for federal income tax purposes will
be allocated among the Assets being purchased hereunder. Notwithstanding the
foregoing, the allocation of the Purchase Price shall in no event limit the
liability of the Seller to the Buyer with respect to damages, liabilities or
expenses incurred by the Buyer with respect to any breach of the Seller's
representations, warranties, covenants or agreements set forth herein.
2.3. Closing. Subject to the provisions contained herein, the closing
of the transactions provided for in this Agreement (the "Closing") shall take
place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M. (Eastern Prevailing Time) on August
20,1998 (or such other place, time and date, as the parties hereto may agree,
prior to the last of: (a) September 15, 1998; (b) the receipt by the Buyer of
all permits from the State of New Jersey necessary to enable it to continue to
conduct Seller's business as conducted by the Seller prior to the Closing; or
(c) the expiration of any waiting period required by any Federal or state law).
The date on which the Closing actually occurs is herein referred to as the
"Closing Date".
2.4. Payment of Purchase Price. The Buyer shall pay the Purchase Price
in the following manner:
(a) The Cash Payment and the Note Adjustment Amount shall be
paid on the Closing Date in cash. Any cash to be paid shall be sent by wire
transfer of immediately available funds to the Seller pursuant to the written
wire transfer instructions delivered by the Seller to the
6
12
Buyer not less than five business days prior to the scheduled Closing Date. If
the Seller desires to use a portion of such initial cash payment to release any
liens on the assets, written pay-off letters and appropriate wire transfer
instructions must be delivered to KTI not less than five business days prior to
the scheduled Closing Date. The Note and Guarantee shall be executed and
delivered to the Seller on the Closing Date. The Buyer shall cancel the
Stockholders Notes at the Closing.
(b) The Incentive Payment shall be paid to the Seller in the
manner and at the time specified in Section 2.1. KTI will execute and deliver a
registration rights agreement relating to such shares of Common Stock in
substantially the form of Exhibit C hereto (the "Registration Rights
Agreement"). The Seller shall provide written instructions as to the name in
which such shares are to be registered, the taxpayer identification number of
the proposed registered owner of the stock and such owner's address for
dividends. Instructions for registration must be in writing and delivered to the
Buyer not less than five business days prior to the scheduled payment date.
3. Representations and Warranties of the Seller.
The Seller hereby represents and warrants to the Buyer as follows:
3.1. Corporate Organization.
(a) Each of ▇▇▇▇▇▇▇▇ Bros. and PGC is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority to carry
on its business as it is now being conducted and to own, lease and operate its
properties and assets as and in the places where such business is now conducted
and where such properties and assets are now owned, leased or operated.
(b) ▇▇▇▇▇▇▇▇ Bros. has no direct or indirect subsidiaries,
other than PGC, or any direct or indirect interest by stock ownership or
otherwise in any corporation, other than PGC, or in any firm, association or
business enterprise. PGC has no direct or indirect subsidiaries, or any direct
or indirect interest by stock ownership or otherwise in any corporation, firm,
association or business enterprise.
(c) Section 3.1 of the Disclosure Schedule sets forth the
names of all corporations, associations, partnerships or other entities in any
way related to the Seller's business, other than the Seller, in which and any
officer, director or 10% stockholder of the Seller directly or indirectly, has
any ownership interest and describes such interest.
3.2. Authorization. Each of ▇▇▇▇▇▇▇▇ Bros. and PGC has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement. The Seller has taken all action required by law or otherwise to be
taken to authorize the Seller's execution and delivery of this Agreement and the
Seller's consummation of the transactions contemplated hereby. This Agreement
is, and when executed and delivered, the Instruments of Conveyance will be, the
legal, valid and binding obligation of the Seller, enforceable in accordance
with their respective terms.
7
13
3.3. No Violation. Neither the execution and delivery of this Agreement
by the Seller nor the consummation of the transactions contemplated hereby will
(i) violate any provision of the Certificates of Incorporation or By-Laws of
▇▇▇▇▇▇▇▇ Bros. or PGC or, (ii) be in conflict with, or constitute a default (or
an event which, with or without notice, lapse of time or both, would constitute
a default) under, or result in the termination or invalidity of, or accelerate
the performance required by, or cause the acceleration of the maturity of any
debt or obligation pursuant to any agreement or commitment to which the Seller
in a party or by which it is bound, or result in the creation or imposition of
any Lien upon any of the Assets, or (iii) violate any statute or law or any
judgment, decree, order, regulation or rule of any domestic or foreign court or
governmental authority.
3.4. Financial Statements.
(a) Section 3.4 of the Disclosure Schedule sets forth the
balance sheet, and the related consolidated statements of income, retained
earnings and cash flows for the last complete fiscal year, together with the
related notes thereto (collectively, the "Annual Financial Statements"), in each
case compiled by the independent public accountants of the Seller. The Seller
makes and keeps books, records and accounts which, in reasonable detail,
accurately and fairly reflect its transactions and dispositions of its assets,
and maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary to maintain accountability for Assets and (iii) the recorded
accountability for Assets is compared with the existing Assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(b) Except as set forth in Section 3.4 of the Disclosure
Schedule, the Annual Financial Statements are complete and accurate in all
material respects taking the Seller's business as a whole and fairly present the
assets, liabilities and financial condition of the Seller as at the date
thereof, and fairly present the results of operations and changes in financial
position of the Seller for the period referred to therein, in all cases in
accordance with generally accepted accounting principles consistently applied.
(c) Section 3.4 of the Disclosure Schedule sets forth the
unaudited financial statements for the Seller as of and for the three month
period ended March 31, 1998, containing an unaudited balance sheet (the "Balance
Sheet") and the related unaudited statements of income, retained earnings and
cash flow (collectively, the "Unaudited Financial Statements"). The Unaudited
Financial Statements are substantially complete and accurate in all material
respects taking the Seller's business as a whole and are historically consistent
with unaudited financial statements of the Seller for the same periods in each
fiscal year from 1993 to the present. The Annual Financial Statements and the
Unaudited Financial Statements are collectively referred to hereinafter as the
"Financial Statements".
(d) Without limiting the generality of the foregoing, except
as set forth in Section 3.5 of the Disclosure Schedule, the Annual Financial
Statements reflect all appropriate accruals, in accordance with generally
accepted accounting principles consistently applied, for vacation pay, bonuses,
medical benefits (including post-retirement medical benefits, if any), accrued
sick days and profit sharing to employees ("Accrued Employee Benefits").
8
14
3.5. No Undisclosed Liabilities. Except as set forth in Section 3.5 of
the Disclosure Schedule, the Seller had at December 31, 1997, no liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), in any
way relating to the Seller, which were not fully disclosed or reserved against
in the Annual Financial Statements, which liabilities and obligations were
required to be disclosed or reserved against therein in accordance with
generally accepted accounting principles consistently applied, and the reserves
reflected in such Annual Financial Statements were adequate, appropriate and
reasonable in accordance with generally accepted accounting principles
consistently applied. Since December 31, 1997 except as set forth in Section 3.5
of the Disclosure Schedule, the Seller has not incurred any liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) in any
way relating the Seller, except those which are in the ordinary and usual course
of business and consistent with past practice.
3.6. Accounts Receivable. Except as set forth in Section 3.6 of the
Disclosure Schedule, all of the accounts receivable of the Seller which are
reflected in the Financial Statements and all of the accounts receivable of the
Seller which are presently outstanding:
(a) represent (and as of the Closing Date will represent)
sales actually made in the ordinary and usual course of business and in bona
fide transactions with unaffiliated third parties;
(b) have been collected or are current, net of reserves (for
purposes of this Agreement "current" shall mean 60 days), except as set forth in
the accounts receivable aging schedule as at March 31, 1998 which is included in
Section 3.6 of the Disclosure Schedule and is correct and complete;
(c) have not been extended or rolled over in order to make
them current;
(d) will be fully collectible, net of any applicable reserve
for bad debts set forth on the Balance Sheet, within 90 days from the Closing
Date; and
(e) are not disputed as to amount and validity, other than for
disputes in an aggregate amount not exceeding $10,000.00.
The reserve for the Seller's bad debts as of March 31, 1998, , both as a
percentage of total accounts receivable and in number of dollars, is set forth
in Section 3.6 of the Disclosure Schedule. All of the Seller's notes receivable,
as of March 31, 1998, are described in Section 3.6 of the Disclosure Schedule.
3.7. Inventories. Except as set forth in Section 3.7 of the Disclosure
Schedule, (i) all items of inventory are of a quality and quantity useable and
salable after the Closing Date in the ordinary and usual course of business;
(ii) all inventories not written off have been priced at the lower of cost
(using the FIFO method) or market; (iii) any unsaleable inventory has been
written off and is not reflected in the Financial Statements or considered part
of the Seller's present inventory; and (iv) the quantities of each type of
inventory are not excessive, but are reasonable, adequate and appropriate for
sale in the ordinary and usual course of business.
9
15
3.8. Interim Operations. Since March 31, 1998 the business of the
Seller has been conducted only in the ordinary and usual course of business,
consistent with past practice. Without limiting the generality of the foregoing,
except as set forth in Section 3.8 of the Disclosure Schedule, the Seller has
not, since March 31, 1998 with respect to the Seller's business:
(a) suffered any material adverse change in financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
accounts receivable, inventories, reserves, business, operations or prospects;
(b) borrowed or agreed to borrow any funds or incurred,
assumed or become subject to, whether directly or by way of guarantee or
otherwise, any liabilities or obligations (absolute, accrued, contingent or
otherwise), including claims or liabilities for returns or allowances, other
than returns or allowances in the ordinary and usual course of business and
consistent with past practice;
(c) increased, or experienced any change in any assumptions
underlying, or methods of calculating, any bad debt, contingency or any other
reserve;
(d) paid, discharged or satisfied any claim, liability or
obligation (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction of liabilities and obligations which were reflected or
reserved against in the Financial Statements or were incurred in the ordinary
and usual course of business and consistent with past practice;
(e) prepaid any obligation having a fixed maturity of more
than 90 days from the date such obligation was issued or incurred, or not paid,
when due, any account payable, or sought the extension of the due date of any
account payable other than any account payable which was being contested in good
faith by the Seller;
(f) permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Liens except
for Liens set forth in Section 3.10 of the Disclosure Schedule;
(g) written down the value of any inventory (including
write-downs by reason of shrinkage or markdown) or written off as uncollectible
any notes or accounts receivable, except for (1) immaterial write-downs and
write-offs in the ordinary and usual course of business and consistent with past
practice and (2) unsaleable inventory written down in the ordinary course of
business;
(h) canceled any debts or waived any claims or rights of
substantial value;
(i) sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
in the ordinary and usual course business and consistent with past practice;
(j) disposed of or permitted to lapse any rights to the use of
any patent, trademark, trade name, service ▇▇▇▇ or copyright used in the conduct
of the Seller's business, or disposed of or disclosed, or permitted to be
disclosed (except as necessary in the conduct of the
10
16
Seller's business), to any person other than representatives of the Buyer, any
trade secret, formula, process or similar information not theretofore a matter
of public knowledge;
(k) excluding items, which have been expensed prior to March
31, 1998, made capital expenditures or commitments, in excess of $25,000.00 in
the aggregate for repairs or additions to property, plant, machinery, equipment
or tangible capital assets;
(l) made any change in any method of accounting or accounting
principle;
(m) failed to maintain its books, accounts and records in the
usual, regular and ordinary manner and in accordance with generally accepted
accounting principles consistently applied;
(n) granted or committed to any increase in the compensation
of any employee including, without limitation, any increase pursuant to any
bonus, pension, profit-sharing or other plan or commitment or made any loans or
advances to any such person;
(o) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets (real, personal or mixed,
tangible or intangible) to, or entered into any agreement or arrangement with,
any of its officers, directors, key employees, stockholders or any "affiliate"
or "associate" (as such terms are defined in Rule 405 under the Securities Act
of 1933, as amended) or any immediate or extended family member of any of such
persons (collectively, the "Related Persons" and, individually, a "Related
Person"), except for compensation to such persons at rates not exceeding the
rates of compensation paid as of March 31, 1998 and advances to or reimbursement
of such persons for routine business expenses;
(p) declared, paid or set aside for payment any dividend or
other distribution (other than in cash,) in respect of its capital stock or
other ownership interests or redeemed, purchased or otherwise acquired, directly
or indirectly, any shares of its capital stock or other ownership interests; or
(q) agreed, whether in writing or otherwise, to take any
action described in this Section 3.8, except as otherwise expressly permitted in
this Agreement.
3.9. Compliance with Law; Necessary Authorizations.
(a) Except as set forth in Section 3.9(a) of the Disclosure
Schedule, the Seller has duly complied and is presently duly complying, in all
material respects, in respect of its business, operations and properties,
including the Assets, with all applicable laws (whether statutory or otherwise),
rules, regulations, orders, building and other codes, zoning and other
ordinances, permits, licenses, authorizations, judgments and decrees of all
Federal, state, local, foreign or other governmental authorities, including, but
not limited to, all applicable domestic and foreign laws, rules and regulations
relating to the safe conduct of business, employment discrimination, wages and
hours, employment of illegal aliens, antitrust, consumer protection, product
labeling, environmental protection, hazardous waste, currency exchange, and,
securities.
(b) The Seller is not aware of and has not received any
written or oral notification from any third party (including but not limited to
employees and government
11
17
agencies) of any present or past failure so to comply or of any present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may materially interfere with or prevent continued
compliance with any laws, rules or regulations or which may give rise to any
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing or investigation.
(c) The Seller has duly obtained all material permits, concessions,
grants, licenses and other governmental authorizations and approvals necessary
for the conduct of the Seller's business; each of which is set forth in Section
3.9 of the Disclosure Schedule and is in full force and effect; there are no
proceedings pending or, to the knowledge of the Seller, threatened, which may
result in the revocation, cancellation, suspension or modification thereof; and
the consummation of the transactions contemplated hereby will not result in any
such revocation, cancellation, suspension or modification. The Seller is not
aware of, and has not received notice of, any past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent continued compliance, or which may give rise
to any liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste in connection with the Seller's business.
(d) Without limiting the generality of the foregoing, the Seller has
not transported, stored, treated or disposed, nor has it allowed or arranged for
any third persons to transport, store, treat or dispose waste to or at: (i) any
location other than a site lawfully permitted to receive such waste for such
purposes or (ii) any location designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any similar federal or state statute; nor has it
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of any laws or regulations or in any
other manner which may result in liability for contamination of the environment.
The Seller has not disposed, nor has it allowed or arranged for any third
parties to dispose, of waste upon property owned or leased by it, except as
permitted by law.
(e) The Seller has not received notification of any past or present
failure by the Seller to comply with any laws, regulations, permits, franchises,
licenses or orders applicable to it or the Assets. Without limiting the
generality of the foregoing, the Seller has not received any notification
(including requests for information directed to the Seller) from any
governmental agency asserting that Seller is or may be a "potentially
responsible person" for a remedial action at a waste storage, treatment or
disposal facility, pursuant to the provisions of CERCLA, or any similar federal
or state statute assigning responsibility for the costs of investigating or
remediating releases of contaminants into the environment.
(f) Section 3.09(f) of the Disclosure Schedule is a complete and
accurate list covering the period prior to the date hereof, as well as, to the
best of Seller's knowledge, the period prior to such (identified by address,
owner/operator, type of facility, type and form of waste, estimated volume of
waste and period of time the facility was used) to which the Seller has ever
transported, or ever caused to be transported, allowed or arranged for any third
party to
12
18
transport, any type of waste material generated by the Seller's customers or the
Seller, for storage, treatment, burning, recycling or disposal and (b) storage,
treatment, burning, recycling or disposal activities which the Seller has
undertaken, at any time, at locations then or presently owned or occupied by the
Seller (such list to include property address, nature of the Seller's interest
in the property, current owner of the property, nature of the activity conducted
at such location, type and form of waste, estimated volume of waste disposal on
or in ground and period of time the activity was conducted).
3.10. Title to Assets.
(a) Section 3.10(a) of the Disclosure Schedule contains an
accurate and complete list of all real property used, or owned, by the Seller .
(b) Section 3.10(b) of the Disclosure Schedule contains an
accurate and complete list of all tangible personal property reflected in the
Financial Statements of the Seller or acquired by the Seller (for use in the
Seller's business) after March 31, 1998 (except to the extent disposed of in the
ordinary course of business). Section 3.10 of the Disclosure Schedule also
contains an accurate and complete list of all property in the possession of the
Seller on the date hereof, as bailee or otherwise, which is owned by any third
party and the identity of any such third party.
(c) The Seller has, and will have at the Closing, good and
valid title to the Assets being conveyed by it hereunder.
(d) Except as set forth in Section 3.10(d) of the Disclosure
Schedule, all of the Assets are free and clear of all title defects or
objections, Liens or other encumbrances or restrictions of any nature
whatsoever.
(e) Except as set forth in Section 3.10(e) of the Disclosure
Schedule, the Assets include all rights, properties and other assets necessary
to permit the Seller to continue to conduct its business after the date hereof
to the Closing, and to permit the Buyer to conduct the Seller's business as is
being acquired hereunder after the Closing, in substantially the same manner as
the Seller's business has been and is now being conducted.
(f) Set forth in Section 3.10(f) of the Disclosure Schedule
is:
(i) As of May 31, 1998, the number and size of
containers, stationary compactors, bailers and other processing
equipment, and any other equipment owned or leased by the Seller; and
(ii) As of May 31, 1998, the number of vehicles used
by the Seller in its business together with information as to the make,
description of body and chassis, model number, serial number and year
of each such vehicle.
Such schedule is complete and correct. All Assets have been well
maintained, are fit for the purposes for which they are used and were intended,
are in good operating condition and repair, ordinary wear and tear excepted, and
are fully licensed for operation in the jurisdiction where they are operated in
the normal course of business, if such licensing is required.
13
19
3.11. Plant and Equipment.
(a) Except as set forth in Section 3.11(a) of the Disclosure
Schedule, none of the Seller's equipment has any material defects. All such
equipment is in good operating condition repair and is adequate for the uses to
which it is being put, ordinary wear and tear excepted.
(b) Except as set forth in Section 3.11(b) of the Disclosure
Schedule, the Seller has not received any written or oral notification that it
is in violation of any applicable anti-pollution, health or other law, ordinance
or regulation in respect of the Seller's equipment or any of the Seller's
operations and no such violation exists.
3.12. Patents, Trademarks and Trade Names.
(a) Section 3.12(a) of the Disclosure Schedule lists:
(i) all patents held by the Seller for use in or
which are otherwise used in the Seller's business, and all reissues,
divisions, continuations and extensions thereof and all pending patent
applications by or for the Seller's benefit, including for each such
patent the serial or patent number, country, filing and expiration date
and title;
(ii) all registered and unregistered trademarks,
trade names and service marks owned by the Seller for use in or which
are otherwise used in the Seller's business, and all pending
registrations of trademarks, trade names and service marks which are or
were intended to be used in the Seller's business, including for each
such trademark, trade name or service ▇▇▇▇ the registration number,
country, filing and expiration date, ▇▇▇▇ and class, and date of
application; and
(iii) all registered copyrights of the Seller or
which are used by the Seller in the Seller's business, and applications
for registration of copyrights, which are or were intended to be used
in the Seller's business, including the registration number, country,
filing and expiration date of each such copyright.
(b) Section 3.12(b) of the Disclosure Schedule identifies all
licenses (whether as licensor, licensee or otherwise) and other contracts or
commitments to which the Seller is a party or to which the Seller or any of the
Seller's assets is otherwise subject relating to any trademarks, trade names,
service marks or copyrights (or applications for any thereof), trade secrets or
other proprietary Know-How, processes or technology which are or have been used
in or cover products that are under development or were under development in
connection with the Seller's business.
(c) Except as set forth in Section 3.12(c) of the Disclosure
Schedule, (i) no claims have been asserted by any person to the use of any such
patents, trademarks, trade names, service marks, copyrights or to any trade
secrets, technology, Know-How or processes used by the Seller or challenging or
questioning the validity or effectiveness of any license or agreement referred
to in this Section 3.12, and there is no valid basis for any such claim; (ii)
the Seller has not, nor has been alleged to have, infringed upon any patent,
trademark, trade name, service ▇▇▇▇ or copyright or misappropriated or misused
any invention, trade secret or other proprietary
14
20
information entitled to legal protection; (iii) the Seller has not asserted any
claim of infringement, misappropriation or misuse against any person; and (iv)
the Seller has good and valid title to, or otherwise possesses adequate and
exclusive rights to use, all patents, trademarks, trade names, service marks,
copyrights, inventions, trade secrets and other proprietary information
necessary to permit the Buyer, after the Closing, to conduct the business being
acquired hereunder in the same manner as such business has been conducted.
(d) Each license agreement, contract or commitment identified
in Section 3.12(b) of the Disclosure Schedule is a valid, legally binding
obligation of all parties thereto, enforceable against each party thereto in
accordance with its terms, and with respect to each such item there is no
default (or event which with the giving of notice or lapse of time or both would
constitute a default) by any party thereto.
3.13. Leases.
(a) Section 3.13(a) of the Disclosure Schedule constitutes a
complete and accurate list of all personal property leases, subleases,
concessions, occupancy agreements, conditional sales agreements or other title
retention agreements (collectively the "Leases" and individually a "Lease") to
which the Seller is a party, as lessor or lessee, in connection with the
Seller's business.
(b) All Leases are valid and binding on all parties thereto
and enforceable against such parties in accordance with their terms, and are in
full force and effect; and with respect to each such Lease, there are no
existing defaults thereunder (whether or not waived by lessor) and no event has
occurred which (whether with or without notice, lapse of time or both, or the
happening of any other event) would constitute default thereunder.
(c) Except as set forth in Section 3.13(c) of the Disclosure
Schedule, all Leases are free and clear of all Liens or other restrictions of
any nature whatsoever.
3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule:
(a) The Seller has duly and accurately filed or caused to be
filed all tax reports and returns (including information returns) required to be
filed in connection with the Seller's business for all periods ending on the
date hereof and will make all such filings required to be made prior to the
Closing Date. The Seller has duly paid, or provided for in accordance with
generally accepted accounting principles, consistently applied, all taxes and
other charges due or claimed to be due from it to any federal, state, local or
foreign taxing authority (including, without limitation, those due in respect of
properties, income, franchises, licenses, sales or payrolls), except for taxes
being contested in good faith for which adequate reserves have been established.
(b) There are no tax liens upon any of the Assets except liens
for current taxes not yet due and payable.
(c) The Seller has made, for all periods ending on or before
the Closing Date, all required declarations of estimated Federal, state, local
and foreign income taxes (including,
15
21
without limitation, those due in respect of properties, income, franchises,
licenses, sales or payrolls) and has paid or provided for all taxes as shown on
such declarations.
(d) There are no facts which exist or have existed which would
constitute grounds for the assessment of any tax liability against the Seller or
any of the Assets and neither the Internal Revenue Service nor any other taxing
authority is now asserting against any of the Assets, nor to the knowledge of
the Seller is there threatened, any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith. Seller has not been
audited within the past five (5) taxable years.
(e) There are no outstanding agreements or waivers binding on
the Seller (or the filer of any return of any consolidated group in which the
Seller is a member) which extend the statutory period of limitations applicable
to any tax return for any period.
(f) All taxes and other assessments and levies required to be
withheld by the Seller from customers, with respect to sales of goods, or from
employees for income taxes, social security taxes, unemployment insurance taxes
and the like have been collected or withheld, and either paid to the respective
governmental agencies or set aside in accounts and held for such purpose, or for
which the Seller has or will have adequate cash with which to pay the same.
3.15. Contracts and Commitments. Except as set forth in Section 3.15 of
the Disclosure Schedule:
(a) the Seller has no agreements, contracts or commitments,
written or oral, which may be material to the Seller's business.
(b) no purchase contract or commitment of the Seller with
respect to the Seller's business, whether for raw materials, packaging or
otherwise, (i) continues for a period of more than three (3) months from the
date hereof, (ii) is in excess of the normal, ordinary and usual requirements of
the Seller's business, or (iii) is on other than arm's-length terms.
(c) the Seller has no outstanding sales contracts, sales
commitments or written or binding oral bids with respect to the Seller's
business which (i) continue for a period of more than 3 (three) months from the
date hereof or (ii) are at prices materially below or above the Seller's usual
prices for the same or similar products.
(d) the Seller has no outstanding contracts, agreements or
arrangements, with respect to the Seller's business which will be binding on
Buyer, (i) with any Federal, state, local or foreign government, or any
governmental or quasi-governmental agency, board, bureau, authority or
commission, or any utility company (other than agreements with utility companies
which are common to all comparable users of such utilities), (ii) with any
charitable organization, (iii) with any Related Person that are not cancelable
by the Seller on notice of not more than thirty (30) days and without liability,
penalty or premium, or (iv) providing for the payment of any bonus or commission
based on sales or earnings.
(e) the Seller is not a party to or bound by any employment
agreement or non-competition agreement with respect to the Seller's business
which will be binding on Buyer, or
16
22
any other agreement with respect to the Seller's business which will be binding
on the Buyer that contains any severance or termination pay liabilities or
obligations.
(f) the Seller is not a party to or bound by any collective
bargaining or union contracts or agreements or any practices or understandings
with any employees which are not embodied in a written collective bargaining or
union contract or agreement, complete and accurate copies of which the Seller
has heretofore delivered to Buyer.
(g) the Seller is not in default nor is there any basis for
any valid claim of default under any contract, agreement, commitment or
restriction to which it is a party by which any of the Assets or the Seller is
bound and no event of default has occurred which (whether with or without the
giving of notice, lapse of time, or both, or the happening or occurrence of any
other event) would constitute a default thereunder.
(h) the Seller has not engaged any consultants.
(i) the Seller is not restricted by any agreement, which at
any time after the Closing will be binding on the Buyer, from carrying on the
Seller's business.
(j) the Seller is not obligated to or bound by any agreement
with respect to the return of inventory or goods in the possession of
wholesalers, distributors, retailers or other customers by reason of alleged
overshipments; and, following the Closing, the Buyer will not have any liability
with respect to the return of any inventory sold prior to the Closing.
(k) the Seller has no debt obligation for borrowed money and
at no time after the Closing will any debt obligation be binding on the Buyer or
encumber any of the Assets.
(l) the Seller has no outstanding loans in connection with the
Seller's business to any person.
(m) there are no credit cards issued to the Seller or for
which the Seller is liable.
(n) the Seller has no powers of attorney outstanding
(including but not limited to powers of attorney in favor of customs brokers) or
any obligations or liabilities (whether absolute, accrued, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of any obligation of the Seller with respect to the
Seller's business or which will be binding on the Buyer or to which any of the
Assets is or will be subject, or in respect of any other person, corporation,
partnership, joint venture, association, organization or other entity (including
but not limited to customs brokers) with respect to the Seller's business or
which will be binding on the Buyer or to which any of the Assets is or will be
subject.
(o) the Seller is not a party to any barter or countertrade
agreement with respect to the Seller's business.
(p) the Seller is not a party to any cooperative advertising
arrangement with respect to the Seller's business.
17
23
(q) the Seller has no other contract relating to the Seller's
business or the operation thereof which is material to the Seller's business or
under which it has any material obligation in respect of the Seller's business.
3.16. Customers and Suppliers.
(a) Section 3.16(a) of the Disclosure Schedule sets forth:
(i) an accurate and complete list of the ten largest
customers of the Seller, in terms of sales (A) during the fiscal year
ended December 31, 1997, and (B) the three months ended March 31, 1998,
showing the approximate total sales in dollars to each such customer
during each such period;
(ii) an accurate and complete list of the ten largest
suppliers to the Seller, in terms of purchases during (A) the fiscal
year ended December 31, 1997, and (B) the three months ended March 31,
1998, showing the approximate total purchases in dollars from each such
supplier during each such period; and
(b) Except to the extent set forth in Section 3.16(b) of the
Disclosure Schedule, there has not been any material change and there are no
facts known to the Seller which indicate that any material adverse change may
occur in the business relationship of the Seller with any customer or supplier
named in Section 3.16(a) of the Disclosure Schedule, except for any changes
which might occur as a result of the Seller selling its business.
(c) Except for the customers and suppliers identified by name
in Section 3.16(a) of the Disclosure Schedule, the Seller's business has had no
customer which accounted for more than 5% of its sales for (i) its fiscal year
ended December 31, 1997, or (ii) the three months ended March 31, 1998, or any
supplier from which the Seller purchased more than 5% of the goods and services
which the Seller's business purchased during each such period. To the best
knowledge of the Seller, no supplier had indicated that it intends to cease
doing business with the Buyer or materially alter the amount and pricing of the
goods delivered to the Buyer as compared to the goods delivered to the Seller,
as and when the Buyer becomes the successor in interest of the Seller under
their respective agreements.
(d) The Seller has not violated any copyright or trademark of
any supplier named in Section 3.16(a) of the Disclosure Schedule.
3.17. Agreements in Full Force and Effect. All contracts, involving
potential monthly consideration of more than $10,000 for any one contract or
$50,000 in the aggregate for all such contracts, which are required to be
disclosed pursuant to Section 3.15 hereof, agreements, plans, leases and
licenses which are or will be assumed by or binding on the Buyer or to which any
of the Assets is or will be subject, and all insurance policies referred to in
Section 3.18 hereof, are valid and in full force and effect, and the Seller has
no reason to believe that any of the same will not continue to be so on the
terms and conditions following the Closing except to the extent otherwise
expressly provided in this Agreement, without need for any action by the Seller
or the Buyer as a result of the Closing, and accurate and complete copies
thereof, including amendments thereto, have been heretofore delivered by the
Seller to the Buyer.
18
24
3.18. Insurance.
(a) Section 3.18(a) of the Disclosure Schedule contains an
accurate and complete list of all policies of fire, disability, workers'
compensation, products liability, performance bonds and other instruments
supporting the performance of the Seller and other forms of insurance owned or
held by or beneficially for the Seller which relate to or provide coverage for
the Seller's business and the Assets.
(b) All such policies are in full force and effect, all
premiums with respect thereto covering all periods through the Closing have been
or will be paid by the Seller, and no notice of cancellation or termination has
been received with respect to any such policy.
(c) Such policies are sufficient for compliance with all
requirements of law and of all agreements to which the Seller is a party; are
valid, outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of the Seller's business; and, with respect to
periods prior to the Closing will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement.
(d) Section 3.18(d) of the Disclosure Schedule describes, with
respect to the Seller's business, (i) all risks for which the Seller is
self-insured, retentions, umbrella and other insurance coverage and reserves
with respect thereto, and the manner in which claims relating thereto are
processed and paid, and (ii) the Seller's workers' compensation and unemployment
insurance ratings.
(e) Except as set forth in Section 3.18(e) of the Disclosure
Schedule, (i) the Seller has not been refused any insurance for which it has
applied, nor has its coverage for the Seller's business been limited by any
insurance carrier to which it has applied for any insurance or with which it has
carried such insurance; (ii) since March 31, 1998, neither the amount nor scope
of any insurance referred to in Section 3.18(a) of the Disclosure Schedule or
premiums therefore has been materially changed; and (iii) the Seller has not
been notified of any material adverse change or proposed change in its workers'
compensation or unemployment insurance ratings.
3.19. Labor.
(a) Except to the extent set forth in Section 3.19(a) of the Disclosure
Schedule:
(i) there is no labor strike, dispute, grievance, arbitration
proceeding, slowdown or stoppage, or charge of unfair labor practice
actually pending or, to the Seller's knowledge, threatened against or
affecting the Seller's business;
(ii) no labor union representation question exists respecting
employees of the Seller or respecting the performance of work for the
Seller;
(iii) the Seller has not, during the five-year period prior to
the date hereof, experienced any material work stoppage or other
material labor difficulty;
19
25
(iv) there are no charges or complaints of discrimination
pending before the Equal Employment Opportunity Commission or any state
or local agency with respect to the Seller's business;
(v) the Seller is not engaged in any material unfair labor
practice, nor at any time during the past five years has any material
unfair labor practice complaint against the Seller been filed with or,
to the Seller's knowledge, threatened to be filed by any employee with,
the National Labor Relations Board, the Equal Employment Opportunity
Commission, the Department of Labor or any agency or instrumentality of
any state or local government; and
(vi) no collective bargaining agreement covering employees of
the Seller restricts the Seller or any successor to the Seller's
business from relocating or closing any of the facilities or operations
of the Seller's business.
(b) As of the date hereof, to the knowledge of the Seller, no
current employee of the Seller having management or significant operational
responsibilities, and no other employees of the Seller constituting in the
aggregate more than 10% of the Seller's current workforce, has or have indicated
an intention to not be available for employment by the Buyer after the Closing
on substantially the same terms as those pertaining to his or her current
employment.
(c) The Seller is not party to any agreement with any employee
(i) the benefits of which (including, without limitation, severance benefits)
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Seller of the nature of any of the
transactions contemplated by this Agreement or (ii) providing severance benefits
in excess of those generally available under the Seller's severance policies as
in effect on the date hereof, or which are conditioned upon a change of control,
after the termination of employment of such employees regardless of the reason
for such termination of employment.
3.20. Litigation, Judgments, Decrees. Except as set forth in Section
3.20 of the Disclosure Schedule, there has not been at any time, nor is there
currently, any claim, action, suit, inquiry, proceeding or investigation of any
nature whatsoever (including, but not limited to, products liability), at law or
in equity or both, by or before any domestic or foreign court or governmental or
other regulatory or administrative agency, arbitration tribunal, board, bureau,
authority or commission pending or, to the best knowledge, after due inquiry, of
the Seller, threatened against or involving the Seller or any of the Assets, or
which questions or challenges the validity of this Agreement or any action taken
or to be taken by the Seller pursuant to this Agreement or in connection with
the transactions contemplated hereby; and, there is no valid basis for any such
action, suit, inquiry, proceeding or investigation. The Seller is not subject to
any judgment, order or decree (i) which may have an adverse effect on the
Seller's business practices or on the Seller's ability to acquire any property
or conduct its business in any area or (ii) is or will be binding on Buyer.
3.21. No Condemnation or Expropriation. Neither the whole nor any
portion of the Assets is subject to any governmental decree or order to be sold
or is being condemned, expropriated or otherwise taken by any domestic or
foreign public authority with or without
20
26
payment of compensation therefor, nor has any such condemnation, expropriation
or taking, to the Seller's knowledge, been proposed.
3.22. Consents and Approvals of Governmental Authorities and Others.
Except as set forth in Section 3.22 of the Disclosure Schedule, no consent,
approval, authorization, order or other action of, or declaration, filing or
registration with, or the giving of notice to, any domestic or foreign
governmental or regulatory authority or any other person or entity is required
in connection with the execution, delivery and performance by the Seller of this
Agreement or the consummation by the Seller of the transactions contemplated
hereby.
3.23. Employee Benefit Plans; Pension Plans.
(a) Except as set forth in Section 3.23(a) of the Disclosure
Schedule, the Seller has no bonus, deferred compensation, pension,
profit-sharing, retirement, stock purchase, stock option, phantom stock,
medical, post-retirement medical or any other employee benefit plan, arrangement
or practice, whether written or unwritten (an "Employee Benefit Plan"). True
copies of each written Employee Benefit Plan and an accurate and complete
written description of each oral Employee Benefit Plan have been heretofore
delivered by the Seller to Buyer. Section 3.23(a) of the Disclosure Schedule
sets forth the annual amounts paid or accrued in connection with each Employee
Benefit Plan since December 31, 1995, and an estimate of the amounts payable or
accruable in connection therewith through March 31, 1998, to the extent such
amounts are presently fixed or determinable. The Annual Financial Statements
accurately and completely reflect accruals of all amounts accrued but unpaid
under the Employee Benefit Plans as of the respective dates thereof. The Seller
has made no commitment, whether formal or informal and whether legally binding
or not, to create any additional such plan or arrangement.
(b) Included in Section 3.23(b) of the Disclosure Schedule is
a list of each "employee pension benefit plan" in the meaning of the Employee
Retirement Income Security Act of 1974 and the regulations thereunder ("ERISA"),
maintained or contributed to by the Seller (the "Pension Plans") and, no Pension
Plan is a "multi-employer plan" within the meaning of ERISA. There has been no
"prohibited transaction," to which the Seller or any of the Seller's officers
have been a party, within the meaning of Section 4975 of the Internal Revenue
Code of 1986 (the "Code"), or Section 406 of ERISA, with respect to any Pension
Plan which might subject any such plan or related trust, or any trustee or
administrator thereof, or the Seller to the tax or penalty imposed by Section
4975 of the Code or to a civil penalty imposed by Section 502 of ERISA. Except
as set forth in Section 3.24(b) of the Disclosure Schedule, each of the Pension
Plans is and has been in material compliance with the applicable provisions of
ERISA and the Code.
The present value of all accrued benefits, whether vested or not, under
the Pension Plans subject to Title IV of ERISA do not exceed the value of the
assets of such plans allocable to such accrued benefits. Except as set forth in
Section 3.23(b) of the Disclosure Schedule, none of the Pension Plans subject to
Title IV of ERISA has, since December 31, 1995, been completely or partially
terminated, nor has there been any "reportable event," as such term is defined
in Section 4043(b) of ERISA, with respect to any such plan since the effective
date of said Section 4043(b). None of the Pension Plans or trusts have incurred
any "accumulated funding deficiency," as such
21
27
term is defined in Section 412 of the Code, whether or not waived, since the
effective date of said Section 412.
(c) Section 3.23(c) of the Disclosure Schedule is a list of
all "employee welfare benefit plans," within the meaning of ERISA, whether or
not insured, maintained by either the Seller ("Welfare Plans"). Except as set
forth in Section 3.23(c) of the Disclosure Schedule, each Welfare Plan is and
has been in material compliance with the applicable provisions of ERISA and the
Code. The Seller has complied in all material respects with all of its
respective obligations, if any, including the making of all required
contributions, under each of the Welfare Plans.
3.24. Brokers and Finders. No person has been authorized by the Seller,
or by anyone acting on its behalf, or its respective shareholders, officers,
directors or employees, to act as a broker, finder or in any other similar
capacity in connection with the transactions contemplated by this Agreement.
3.25. Personnel. Section 3.25 of the Disclosure Schedule sets forth an
accurate and complete list of:
(a) the names and current salaries of each of the Seller's
employees; and
(b) the customary increases on a periodic basis in the
compensation of each of the foregoing or any increases required by any agreement
or understanding with each of the foregoing.
3.26. Accuracy of Representations and Documents. No representation or
warranty made by the Seller in this Agreement or in the Disclosure Schedule
hereto (which is an integral part hereof) nor any statement, certificate or
other document furnished as an exhibit hereto, or any other document furnished
by the Seller to the Buyer or any of its representatives in connection with this
Agreement is, or will be when so furnished, false or misleading in any material
respect or contains any material misstatement of fact or omits to state any fact
necessary to be stated make the statements made in any such representation or
warranty false or misleading in any material respect; provided, that with
respect to financial statements or other data which speaks as of a specific
date, the foregoing shall relate as to the specified date thereof (for example,
a balance sheet dated as of a specified date shall not be false or misleading in
any material respect or contain any material misstatement of fact or omit to
state a necessary fact as of such specified date).
3.27. Distinct Entity. Other than as set forth in Section 3.27 of the
Disclosure Schedule, the Seller does not share any personnel or assets with
affiliates of any third party.
3.28. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. The Seller shall deliver a certificate of an
officer of the Seller certifying the revenue of the Seller in calendar year 1997
("1997 Revenue") and the assets and liabilities of the Seller as of the date of
the Seller's most recent regularly prepared balance sheet (the "Recent Asset
Value"). There is no single stockholder of the Seller that holds more than 50%
of the Seller's outstanding equity or equity with general voting rights. Neither
the 1997 Revenue nor the Recent Asset Value are of such a level as to require a
filing under the ▇▇▇▇-▇▇▇▇▇
22
28
▇▇▇▇▇▇ Anti-Trust Improvement Act of 1976, as amended (the "HSR Act") or any
other similar laws as a result of the transactions contemplated by this
Agreement.
3.29. Books and Records. The books and records pertaining to the
business of the Seller delivered or made available to the Buyer and its
representatives for review are complete and correct in all material respects and
have been maintained in a manner that is adequate to the needs of the business
of the Seller and customary in the industry in which the Seller operates.
3.30. Small Business Set-Asides. Listed on Section 3.30 of the
Disclosure Schedule are those customer accounts of the Seller which have been
designated by an appropriate governmental authority as a "small business
set-aside" contract (as such term is defined in 15 U.S.C.A. 644, Commerce and
Trade).
3.31. Waste Treatment, Storage. Set forth in Section 3.31 of the
Disclosure Schedule, is a complete and accurate list of (a) locations
(identified by address, owner/operator, type of facility, type of waste, and
period of time the facility was used) to which the Seller transported, or caused
to be transported, allowed or arranged for any third party to transport during
the three years preceding the date hereof, any type of waste material, generated
by the Seller's customers or the Seller, for storage, treatment, burning,
recycling or disposal, and (b) storage, treatment, burning, recycling or
disposal activities which the Seller has undertaken during the three years
preceding the date hereof, at locations then or presently owned or occupied by
the Seller (such list to include property address, nature of the Seller's
interest in property, current owner of the property, nature of the activity
conducted at such location, type and form of waste, estimated volume of waste
disposal on or in ground, and period of time the activity was conducted). There
are no liabilities or obligations of, or claim or proceeding asserted against,
the Seller or the Assets that would constitute environmental liabilities, and
there exist no facts or circumstances that would form the basis for any
liability or obligation of, or claim or proceeding which may be asserted
against, the Seller or the Assets and would constitute an environmental
liability.
3.32. Remedial Action Notices Received. The Seller has not received,
actually or constructively, any written or, to the knowledge of the Seller, oral
notification (including requests for information directed to the Seller) from
any governmental agency or any other person claiming to be a past or present
owner or operator of a waste storage, treatment or disposal facility or
otherwise liable for such response costs at such a facility, asserting that any
Seller is or may be a "potentially responsible person" or otherwise liable with
respect to a remedial action or the payment of response costs at such a
facility, pursuant to the provisions of CERCLA.
3.33. Investment Representations. (a) The Seller has (i) received from
the Buyer copies of (a) the Annual Report to shareholders of KTI for the fiscal
year ended December 31, 1997, (b) KTI's definitive proxy statement dated March
28, 1998 for its 1998 meeting of shareholders, and (c) KTI's Quarterly Reports
on Form 10-Q for the quarter ended March 31, 1998 and (ii) had the opportunity
to ask questions of and receive answers from the Buyer and KTI concerning the
terms and conditions of this Agreement and to obtain from the Buyer and KTI any
additional information that the Buyer or KTI possesses or can acquire without
unreasonable effort or expense necessary to verify the accuracy of the
information described in the preceding clause (i).
23
29
(b) The Seller will hold the shares of KTI Common Stock and
the Note received by it hereunder for investment only and not with a view
toward, or for offer or sale in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended (the "1933 Act"), or any
applicable state securities laws. The Seller acknowledges that the shares of KTI
Common Stock and the Note are not presently registered under the 1933 Act or
under any state securities laws.
(c) The Seller is an "accredited investor" as that term is
defined under Regulation D under the 1933 Act and has such knowledge or
experience in financial and business matters that it is capable of evaluating
the merits and risks of engaging in the transactions described in this
Agreement, including without limitation its acquisition of KTI Common Stock and
the Note.
(d) The Seller represents and warrants that the KTI Common
Stock and the Note being acquired will be acquired for the Seller's own account
and will not be sold or otherwise disposed of except pursuant to (i) an
exemption from the registration requirements under the 1933 Act, which does not
require the filing by KTI with the Securities and Exchange Commission (the
"Commission") of any registration statement, offering circular or other
document, in which case the Seller shall first supply to KTI an opinion of
counsel (which opinion and counsel shall be satisfactory to KTI) that such
exemption or exclusion is available, or (ii) a registration statement filed by
KTI with the Commission under the 1933 Act pursuant to the terms of the
Registration Rights Agreement.
(e) The Seller agrees that the certificates for the KTI Common
Stock and the Note received shall bear the following legend:
The Securities represented by this certificate have
not been registered under the Securities Act of 1933
or any state securities laws, and may not be
transferred or disposed of by the holder without
compliance with said registration requirements or an
exemption from such registration requirements.
and that KTI may place stop transfer orders with its transfer agents with
respect to such certificates for the purpose of enforcing such restrictions on
transfer.
4. Representations and Warranties of the Buyer.
The Buyer represents and warrants to the Seller as follows:
4.1. Corporate Organization, Etc. The Buyer is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to carry on its business as
it is now being conducted and to own, lease and operate its properties and
assets as and in the places where such business is now conducted and where such
properties and assets are now owned, leased or operated.
4.2. Authorization, Etc. The Buyer has all requisite power and
authority to execute, deliver and perform its obligations under this Agreement.
This Agreement is valid and binding upon the Buyer, enforceable in accordance
with its terms.
24
30
4.3. No Violation. Neither the execution and delivery of this Agreement
by the Buyer nor the consummation of the transactions contemplated hereby by the
Buyer will violate any provisions of the Certificate of Incorporation of the
Buyer, or be in conflict with, or constitute a default (or an event which, with
or without notice, lapse of time or both, would constitute a default) under, or
result in the termination or invalidity of, or accelerate the performance
required by, or cause the acceleration of the maturity of any debt or obligation
pursuant to, any agreement or commitment to which the Buyer is a party or by
which the Buyer is bound, or violate any statute or law or any judgment, decree,
order, regulation or rule of any court or governmental authority.
4.4. Securities Exchange Act of 1934. KTI has previously furnished the
Seller with true and complete copies of (i) the KTI 1998 Annual Report (the "KTI
1998 Annual Report"), as filed with the Securities and Exchange Commission (the
"Commission"), (ii) the annual report to shareholders of KTI for the year ended
December 31, 1997, (iii) the KTI Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 (the "KTI Quarterly Report"), (iv) all of its Current
Reports on Form 8-K filed subsequent to December 31, 1997, and (v) proxy
statements relating to all meetings of its stockholders (whether annual or
special) since December 31, 1997 (collectively, the "KTI SEC Filings"). As of
their respective dates, the KTI SEC Filings did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of KTI included or
incorporated by reference in the KTI 1998 Annual Report and the KTI Quarterly
Report, respectively, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
KTI and its subsidiaries as at the dates thereof and the results of their
operations and changes in financial position for the periods then ended.
5. Certain Covenants and Agreements.
5.1. Full Access. The Seller agrees, without in any way detracting from
its representations, warranties and agreements set forth in this Agreement, to
afford the Buyer and its counsel, accountants and other representatives, after
the date hereof, full access during normal business hours to its plants,
offices, warehouses, properties, employees (with the prior approval of any of
Messrs. ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇), counsel, accountants
and other representatives, books and records, including accountant's workpapers,
in order that the Buyer may have full opportunity to make such investigations as
it shall desire to make of the affairs of the Seller. The Seller agrees to
furnish to the Buyer additional financial and operating data and other
information, including that portion of the Seller's tax returns that relate to
the Seller's business, as the Buyer shall from time to time reasonably request.
In addition to the foregoing, the Seller shall provide all authorizations
requested by the Buyer to permit Olympic Insurance Associates, Inc. to contact
the carriers of the insurance policies to be assigned to the Buyer pursuant to
this Agreement to obtain all necessary assurances that such insurance carriers
will accept the assignment of such policies to the Buyer pursuant to the terms
of this Agreement.
5.2. Consents. The Seller agrees to obtain, at the Seller's expense,
prior to the Closing, all consents necessary to consummate the transactions
contemplated hereby in
25
31
accordance with the terms hereof including, without limitation, the consents set
forth in Section 3.22 of the Disclosure Schedule. All such consents will be in
writing and executed counterparts thereof will be delivered to the Buyer at or
prior to the Closing. The Buyer agrees to cooperate with the Seller in its
efforts to obtain such consents.
5.3. Licenses and Permits. At the Closing the Seller shall assign any
and all Federal, state, county and local licenses and permits necessary for the
operation of the Seller's business to the extent the same may be assigned, and
shall cooperate with the Buyer and assist the Buyer in obtaining any other
licenses or permits that are not assignable or that are necessary for the Buyer
to continue to operate the Seller's business, including, without limitation, an
application to the State of New Jersey for a transfer of the Seller's permit to
operate the Facility] The Buyer and the Seller shall prepare an application for
the transfer of such permit and shall file such application immediately upon the
execution of this Agreement.
5.4. Notice of Claims and Investigations. Each party will immediately
give notice to the other of, and confer with the other with respect to, any
claims, investigations by governmental authorities or threatened litigation
relating to the transactions contemplated by this Agreement.
5.5. No Solicitation or Negotiation of Other Offers. The Seller agrees
that from the date hereof through the Closing Date neither it nor any of its
officers, directors, employees, representatives or agents, acting on behalf of
the Seller, shall pursue, encourage or solicit any inquiries or proposals by, or
engage in any discussions or negotiations with, any person concerning any merger
with the Seller, any purchase of shares of stock of the Seller, or any other
exchange, consolidation, assets or stock acquisition or disposition or tender
offer or any other takeover or change in control transaction involving the
Seller, and the Seller will promptly communicate to the Buyer the substance of
any inquiry or proposal concerning any such transaction which it may receive.
5.6. Press Releases. Without the written consent of the other party,
which shall not be unreasonably withheld, each of the parties hereto agrees not
to make any public announcements or press releases regarding the transactions
contemplated hereby until such transactions are consummated; provided that,
notwithstanding the foregoing, KTI shall have the right to issue a press release
and file a report on Form 8-K disclosing the transaction contemplated by this
Agreement to the extent that it believes such disclosure is required by law.
5.7. Consummation of Transactions. Each of the parties agrees to use
its best efforts to bring about the satisfaction of the conditions required to
be performed, fulfilled or complied with by it hereunder and to take or cause to
be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
appropriate party will take all such necessary action, including without
limitation, the execution and delivery of such further instruments and documents
as may be reasonably requested by the other party or parties for such purposes
or otherwise to complete or perfect the transactions contemplated hereby.
26
32
5.8. Post-Closing Cooperation. After the Closing, the Buyer and the
Seller shall cooperate fully with each other and shall make available to each
other and to any taxing authority all information, records or documents
reasonably requested in connection with the preparation of any tax returns or in
connection with any tax liability of the Seller with respect to any period prior
to the Closing, and otherwise in connection with matters, such as but not
limited to litigation and personnel matters, involved in the transition of the
ownership and operation of the Seller's business from the Seller to the Buyer.
5.9. Risk of Loss. Prior to the Closing, the risk of loss or damage to,
or destruction of, any or all of the Seller's business or any or all of the
Assets shall remain with the Seller.
5.10. Outstanding Checks and Accrued Employee Benefits. The Seller
represents, warrants and agrees that it has or will have sufficient cash in
banks to cover all of its unpaid checks which shall have been issued to third
parties on or prior to the Closing Date. The Seller agrees that it will prepare
a schedule of all Accrued Employee Benefits, listing the name of each employee
entitled to such benefits, the type of benefits to which such employee is
entitled and the dollar amount of such benefits (as updated through and
including the Closing Date, the aggregate amount thereof, the "Accrued Employee
Benefits Amount"). The Seller hereby agrees to continually update such schedule
through and including the Closing Date.
5.11. Post-Closing Authority. The Seller hereby constitutes and
appoints the Buyer, its successors and assigns, effective as of the Closing, the
true and lawful attorney or attorneys of the Seller, with full power of
substitution, in the name of the Buyer or in the name of the Seller, but by and
on behalf of and for the sole benefit of Buyer, its successors and assigns, to
demand and receive from time to time any and all of the Assets, and from time to
time to institute and prosecute, in the name of the Seller or otherwise, any and
all proceedings at law, in equity or otherwise which the Buyer or its successors
or assigns may deem necessary or desirable in order to receive, collect, assert
or enforce any right, title, benefit or interest of any kind in or to the
Assets, and to defend and compromise any and all actions, suits or proceedings
in respect thereof and to do all such acts and things and execute any
instruments in relation thereto as the Buyer or its successors or assigns shall
deem advisable. Without limiting the foregoing, the Seller hereby authorizes any
officer of the Buyer to endorse or assign any instrument, contract or chattel
paper relating to the Assets. The Seller agrees that the foregoing appointment
made and the powers hereby granted are coupled with an interest and shall, if
the Closing occurs, be irrevocable by the Seller and such appointment and powers
will not be revoked by its dissolution or in any manner or for any reason.
5.12. Non-Competition and Nondisclosure.
(a) For a period of six years from the Closing Date (the
"Term"), the Seller will not, directly or indirectly, without the prior written
consent of the Buyer, become associated with, render services to, become a
partner in, become the proprietor of, invest in, represent, advise or otherwise
participate in (other than stock interests in each case not in excess of 5 %, in
securities of publicly held and traded companies), any business, firm,
partnership, individual, corporation, joint venture or other entity which
engages in any business similar to that heretofore engaged in by the Seller
within 600 miles of the Seller's principal place of business.
27
33
(b) The Seller agrees and will cause its officers and
principal shareholders to agree that, unless duly authorized in writing by the
Buyer, or required by law, it and they will not at any time reveal, divulge or
make known to any person (other than the Buyer or any affiliate of the Buyer)
any confidential or proprietary data or information relating to the Seller's
business for the period commencing on the Closing Date and terminating on the
six year anniversary of the Closing Date. The term "confidential or proprietary
data or information" as used in this Agreement shall include, without
limitation, personnel information, customer lists, supplier lists, trade
secrets, computer data and programs, and costing and advertising data and all
Know-How.
(c) The Seller agrees that it will not and will cause its
officers and principal shareholders to agree that they will not, during the
Term, whether for its own account or for the account of any other person,
interfere with Buyer's relationship with any supplier to or customer (other than
the Seller or the Seller's affiliates) of the Seller's business or any employee
who shall be employed by the Buyer in connection with the Seller's business.
(d) The Seller recognizes that its breach or threatened breach
of any of the provisions of this Section would cause irreparable injury and that
the remedy at law may be inadequate. The Seller agrees and will cause its
officers and principal shareholders to agree that in the event of any such
breach or threatened breach the Buyer or any of its affiliates, in addition to
all other rights and remedies at law or in equity as may exist in its favor,
shall have the right to obtain temporary and permanent injunctive relief,
without the necessity of proving actual damage, restraining the Seller, and any
business, firm, partnership, individual, corporation or entity with which it is
associated, from any act which would violate any of the above provisions. To the
extent permissible under the applicable statutes and rules of procedure, a
temporary injunction may be granted immediately upon the commencement of any
such suit and without notice.
(e) If any of the covenants contained in this Section is held
to be invalid or unenforceable because of the duration of such provision or the
area covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration or area of such provision to the
extent necessary to render such provision valid and enforceable and, in its
reduced form, said provision shall then be valid and enforceable.
5.13. Change of Name. Within ten (10) days following the date hereof,
each of ▇▇▇▇▇▇▇▇ Bros. and PGC shall file an amendment to their certificate of
incorporation changing their names to a name which is not confusingly similar to
their present names and thereafter, shall cease and desist from using such names
or any names confusingly similar thereto in connection with their ongoing
business, if any.
5.14. Income Taxes. The Buyer does not assume any liability or
obligations for income taxes accrued and not paid for any period prior to the
Closing Date or any penalties or interest in relation thereto.
5.15. Employees. The Buyer shall have the right to offer employment to
all or any portion of the employees of the Seller that are employed exclusively
in connection with the Seller's business prior to, on, or after the date hereof,
on such terms and conditions determined by the Buyer in its sole discretion.
28
34
5.16. Supplements to Disclosure Schedule; Notice and Cure. (a) From
time to time prior to the Closing, the Seller and the Buyer will promptly
supplement or amend the Disclosure Schedule relating to their respective
representations and warranties in this Agreement with respect to any matter,
condition or occurrence hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
their respective Disclosure Schedule or would otherwise have given rise to a
breach of any representations or warranties herein. No supplement or amendment
by either party shall be deemed to cure (or affect the rights of any party with
respect to) any breach of any representation or warranty made in this Agreement
or have any effect for the purpose of determining satisfaction of the conditions
set forth in Article 7 or Article 8 hereof.
(b) Each of the Seller and the Buyer shall inform the other in
writing of, and contemporaneously with such notice will provide to the other
reasonable details (and other information reasonably requested) concerning, any
event, transaction or circumstances occurring after the date hereof that causes
any of its covenants or agreements under this Agreement to be breached.
6. Conduct of the Seller's Business Pending the Closing. From the date hereof
until the Closing, and except as otherwise expressly consented to or approved by
the Buyer in writing:
6.1. Regular Course of Business.
(a) The Seller agrees to carry on the Seller's business in
substantially the same manner as heretofore conducted, and the Seller will not
institute or effect any new methods of manufacture, management, accounting or
operation or engage in any transaction or activity, enter into any lease or
other agreement or make any purchase, sale or commitment of any nature, except
in the ordinary and usual course of business and consistent with past practice.
The Seller agrees to use all reasonable efforts, consistent with its past
practices, to promote the Seller's business, to maintain the goodwill and
reputation associated with the Seller's business and shall not take or omit to
take any action which causes, or which in the Seller's reasonable judgment is
likely to cause, any deterioration of the Seller's present business or
relationships with suppliers or customers.
(b) The Seller agrees to maintain the Assets in substantially
the same condition and repair as such Assets are maintained as of the date
hereof, ordinary wear and tear excepted, and to take all reasonable steps
necessary to maintain and protect the intangible assets included in the Assets.
(c) The Seller will not, without the Buyer's prior written
consent, modify or amend any material contract.
6.2. Subsidiaries. The Seller agrees not to organize any subsidiary,
acquire any capital stock or other securities of any corporation or acquire any
equity, ownership or other interest in any business that in any way might
significantly and adversely impact on the Seller's business.
6.3. Organization. The Seller agrees to use its best efforts to keep
available to the Buyer all of its employees and preserve for the Buyer its
relationships with licensors, suppliers, distributors, customers and others
having business relations with the Seller.
29
35
6.4. Certain Changes. The Seller agrees that it will not, after the
date of this Agreement:
(a) except as set forth in Section 6.4 of the Disclosure
Schedule, borrow or agree to borrow any funds or incur or assume or become
subject to, whether directly or by way of guarantee or otherwise, any obligation
or liability (absolute, accrued, contingent or otherwise);
(b) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction of such liabilities or obligations incurred in the
ordinary and usual course of business and consistent with past practice;
(c) permit or allow any of the Assets to be subjected to any
Lien, except for those Liens set forth in Section 3.10 of the Disclosure
Schedule;
(d) except in accordance with past practice and in the
ordinary and usual course of business, write down the value of any inventory;
(e) waive any claims or rights of substantial value or sell,
transfer, or otherwise dispose of any of the Assets, except in the ordinary and
usual course of business and consistent with past practice;
(f) dispose of or permit to lapse any rights to the use of any
patent, trademark, trade name, service ▇▇▇▇ or copyright used in the conduct of
the Seller's business, or dispose of or disclose to any person other than the
Buyer or its representatives, any designs in process or similar information not
theretofore a matter of public knowledge;
(g) grant any increase in the compensation of any key employee
(other than any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment disclosed herein);
(h) make any capital expenditures or commitment for repairs or
additions to property, plant, equipment or intangible capital assets in excess
of $25,000.00 without the prior written consent of the Buyer;
(i) pay, loan, distribute or advance any amount to, or sell,
transfer or lease any properties or assets to, or enter into any agreement or
arrangement with any Related Person, except for compensation and payments due
pursuant to the terms of agreements scheduled in Section 6.4 of the Disclosure
Schedule, at rates not exceeding the rates of compensation paid as of the date
hereof;
(j) declare or pay any dividend or other distribution on, or
incur any liability to make any other payment in respect of, capital stock of
any shareholder of the Seller;
(k) make any payment or distribution on account of the
purchase, redemption, defeasance (including in-substance or legal defeasance) or
other retirement of any capital stock of any shareholder of the Seller, or of
any warrant, option or other right to acquire such capital stock, or any other
payment or distribution made in respect thereof;
30
36
(l) fail to maintain its books, accounts and records in the
usual, regular and ordinary manner and in accordance with generally accepted
accounting principles consistently applied;
(m) except for endorsement for payment of checks made payable
to the Seller, grant or extend any power of attorney or act as guarantor,
surety, cosigner, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any person, corporation, partnership, joint venture, association,
organization or other entity;
(n) maintain the Seller's assets and the quality of the
Seller's services to the Seller's customers to the same extent to which such
assets and services have been maintained to date; and
(o) conduct its business other than in the ordinary and usual
course consistent with past practice, except as otherwise contemplated by this
Agreement.
6.5. Insurance; Property. The Seller will continue to insure all of its
property, real, personal and mixed, tangible and intangible, which is owned or
leased by it, against all ordinary and insurable risks in the amounts and
coverages applicable to such property as in effect on the date hereof.
6.6. No Default. The Seller will not do any act or omit to do any act,
or permit any act or omission to act, which will cause a breach of any material
contract or commitment with respect to its business.
6.7. Compliance with Laws. The Seller will duly comply in all material
respects with all laws applicable to it and its properties, operations, business
and employees.
6.8. Representations and Warranties. The Seller will not take any
actions or allow anything to occur which would cause any of the representations
or warranties made herein to be untrue on, at, and as of the Closing Date or
during the Interim Period.
7. Conditions to the Obligations of the Seller.
The obligation of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction, on or before the Closing, of
each of the following conditions, unless waived in writing by the Seller:
7.1. Representations and Warranties True. The representations and
warranties of the Buyer contained in this Agreement shall be true, complete and
accurate in all material respects as of the date when made and at and as of the
Closing as though such representations and warranties were being made at and as
of the Closing Date, and except for changes expressly permitted or contemplated
by the terms of this Agreement.
7.2. Performance. The Buyer shall have performed, fulfilled and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be performed, fulfilled or complied
with by it on or prior to the Closing Date.
31
37
7.3. No Proceeding, Litigation, Injunction. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person shall have been instituted which arises out of or relates to this
Agreement or the transactions contemplated hereby or seeks to obtain substantial
damages in respect thereof, and, on the Closing Date, there shall be no
effective permanent or preliminary injunction, writ, temporary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein not be consummated as so provided.
7.4. Buyer's Officer's Certificates.
(a) The Buyer shall have furnished the Seller with
certificates dated the Closing Date (i) confirming its performance of and
compliance with all agreements, obligations and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing, and
(ii) confirming that, except for changes expressly permitted by this Agreement,
the representations and warranties made by it in this Agreement are true,
complete and accurate in all material respects at and as of the date of the
Closing as though such representations and warranties were made at and as of
such date.
(b) The Buyer shall have furnished the Seller with (i) a copy
of its Certificate of Incorporation, certified by the Secretary of State of
Delaware, (ii) a certified copy of resolutions adopted by the Board of Directors
of the Buyer approving the execution and delivery of this Agreement and related
documents and the consummation of the transaction contemplated hereunder; and
(iii) a Certificate of Incumbency setting forth the officers of the Buyer.
7.5. Employment Agreements.
(a) The Buyer shall have executed and delivered employment
agreements with each of Messrs. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ in
substantially the form of Exhibits D and E, respectively, attached hereto.
(b) The Buyer shall have executed and delivered employment
agreement with each of Messrs. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. in
substantially the form of Exhibits F and G, respectively, attached hereto.
(c) The Buyer shall have executed and delivered an employment
agreement with ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇ in substantially the form of Exhibits H,
attached hereto.
7.6. Registration Rights Agreement. KTI shall have executed and
delivered the Registration Rights Agreement.
7.7. Note and Guarantee. The Buyer shall have executed and delivered
the Note and KTI shall have executed and delivered the Guarantee.
32
38
7.8. Additional Documents. The Buyer shall have delivered to the Seller
such other documents, instruments and certificates as shall be reasonably
requested by the Seller for the purpose of effecting the transactions provided
for and contemplated by this Agreement.
8. Conditions to the Obligations of Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, on or before the Closing, of each of the following conditions,
unless waived in writing by the Buyer:
8.1. Representations and Warranties True. The representations and
warranties of the Seller contained in this Agreement including the Disclosure
Schedule attached hereto, shall be true, complete and accurate in all material
respects as of the date when made and at and as of the Closing Date as though
such representations and warranties were being made at and as of the Closing
Date (except that representations and warranties which refer to conditions
existing on a specific date, such as representations and warranties regarding
the Financial Statements, shall continue to refer to that date) and except for
changes expressly permitted or contemplated by the terms of this Agreement.
8.2. Performance.
(a) The Seller shall have performed, fulfilled and complied in
all material respects with all agreements, obligations and conditions required
by this Agreement to be performed, fulfilled or complied with by them on or
prior to the Closing, including delivery to the Buyer of all of the Assets
through appropriate instruments of conveyance and, for any assets which have
title documents or are registered, the necessary transfer of title or
registration documents executed by all parties necessary to the transfer of such
title or registration with all necessary transfer stamps attached.
(b) All of the consents of third parties listed on Section
3.24 of the Disclosure Schedule hereto shall have been obtained.
8.3. No Proceeding. No suit, action, investigation, inquiry or other
proceeding by any governmental body or other person shall have been instituted
or threatened which arises out of or relates to this Agreement or the
transactions contemplated hereby or seeks to obtain substantial damages in
respect thereof, and, on the Closing Date, there shall be no effective permanent
or preliminary injunction, writ, temporary restraining order or any order of any
nature issued by a court of competent jurisdiction directing that the
transactions provided for herein not be consummated as so provided.
8.4. Seller's Officers' Certificates. The Seller will have furnished
the Buyer with the following certificates:
(a) a certificate of a duly authorized officer of the Seller
dated as of the Closing Date (i) confirming its performance of and compliance
with all agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing, and (ii) confirming
that, except for changes expressly permitted by this Agreement, the
representations and
33
39
warranties made by it in this Agreement are in all material respects true,
complete and accurate at and as of the Closing Date as though such
representations and warranties were made at and as of such date (except that
representations and warranties which refer to conditions existing on a specific
date shall continue to refer to that date);
(b) long-form certificates dated as of a date or dates
reasonably close to the Closing Date of the appropriate officials of the
jurisdictions set forth in Section 3.1 or listed in Section 3.1 of the
Disclosure Schedule, as to the good standing of the Seller in such jurisdictions
and its payment of taxes and filing of required reports in those jurisdictions;
and
(c) (i) a copy of the corporate charter of the Seller, with
all amendments, certified by the Secretary of State of New Jersey; (ii) a copy
of the By-Laws of the Seller, with all amendments, certified by the Secretary of
the Seller; (iii) certified copies of minutes of action taken by the Board of
Directors of the Seller, approving the execution and delivery of this Agreement
and related documents and the consummation of the transaction contemplated
hereunder; and (iv) a Certificate of Incumbency setting forth the officers and
directors of the Seller.
8.5. Material Change. The Seller shall not, after March 31, 1998, have
suffered any material and adverse change or damage or loss by theft, casualty or
otherwise, whether or not insured against by the Seller, in its business or in
its financial condition, the Assets (taken as a whole), liabilities (absolute,
accrued, contingent or otherwise) or operations.
8.6. Certification of Non-Foreign Status. The Seller shall have
delivered to the Buyer a certificate of non-foreign status in substantially the
form of Exhibit I annexed hereto.
8.7. Due Diligence. The due diligence performed by representatives of
the Buyer in connection with the transactions provided for and contemplated
hereby, shall be satisfactory to the Buyer in all material respects, including
satisfactory environmental audits. Buyer shall have received a Phase I
Environmental Report with respect to all real property owned or leased by the
Seller, which shall be satisfactory to the Buyer and Lender (as hereinafter
defined), in Buyer's sole discretion and which shall be at Buyer's cost.
8.8. Proxy Statement and Shareholders' Meeting. The Seller shall
deliver an opinion of legal counsel, satisfactory to the Buyer in form and
substance that the Seller has no obligation to obtain stockholder approval of
this Agreement and the sale of the Assets and all actions contemplated hereby
or, alternately, an officer's certificate stating that all necessary approvals
have been received.
8.9. Employment Agreements. Messrs. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and
delivered their employment agreements with the Buyer in substantially the form
of Exhibits D, E, F, G and H, respectively, attached hereto.
8.10. Additional Documents. The Seller shall have delivered to the
Buyer such other documents, instruments and certificates as shall be reasonably
requested by the Buyer for the purpose of effecting the transactions provided
for and contemplated by this Agreement.
34
40
8.11. Atlantic. The Buyer (or an affiliate thereof) shall have
consummated and closed the purchase of substantially all the assets of Atlantic.
8.12. Assignment of Insurance Policies. The Buyer shall have received a
"broker of record" designation naming Olympic Insurance Associates, Inc. as
agent of record for all Assigned Insurance Policies, and all such Assigned
Insurance Policies shall have been assigned to the Buyer.
8.13. Amendment to 401(k) Plan. The Seller shall have amended its
401(k) plan or plans, if any, which are to continue from and after the Closing
Date so that the provisions of such 401(k) plan or plans match the provisions of
KTI's 401(k) plan to the satisfaction of the Buyer.
8.14. Termination of Security Interests. The Buyer shall have received
a termination of any security agreement and related UCC-3 Termination Statements
with respect to each of the loans of the Seller described in Section 8.16 of the
Disclosure Schedule.
9. Survival of Representations and Warranties; Indemnification.
9.1. Survival of Representations. Notwithstanding any investigation at
any time made by or on behalf of any party hereto, all representations and
warranties contained in this Agreement shall survive the Closing and continue
thereafter until the earlier to occur of fifth anniversary of the date of this
Agreement or the applicable statute of limitations for the type of action
relating to such claim; provided, that in the event a claim has arisen which
would be indemnifiable under this Agreement prior to the expiration of the
appropriate statue of limitations or fifth anniversary of the last day of the
Annual Period as applicable, the appropriate representations and warranties
contained in this Agreement respecting, but only as respects, such claim shall
survive until the resolution of such claim.
9.2. Statements as Representations and Warranties. All statements
contained herein, in the Disclosure Schedule, or in any other schedule,
certificate, list or other document delivered or to be delivered pursuant to
this Agreement shall be deemed representations and warranties as such terms are
used in this Agreement and any material misstatement or omission in any thereof
shall be deemed a breach of a representation or warranty hereunder.
9.3. Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude assertion by any party of any other rights or
the seeking of any other remedies against any other party.
9.4. Buyer's Indemnity. The Buyer agrees to defend, indemnify and hold
harmless the Seller from, against and in respect of any and all demands, claims,
actions or causes of action, losses, liabilities, damages, assessments,
deficiencies, taxes, costs and expenses, including without limitation, interest,
penalties and reasonable attorneys' fees and expenses, asserted against, imposed
upon or paid, incurred or suffered by the Seller ("Seller's Adverse
Consequences") as a result of, arising from, in connection with or incident to
(i) any breach or inaccuracy of any representation or warranty of the Buyer
contained in this Agreement, (ii) any breach of any covenant or agreement of the
Buyer contained in this Agreement or (iii) any event which arises from the
operation of the business conducted by the Buyer from and after the Closing Date
which was caused by the action of the Buyer.
35
41
9.5. The Seller's Indemnity.
The Seller agrees to defend, indemnify and hold harmless the Buyer from, against
and in respect of any and all demands, claims, actions or causes of action,
losses, liabilities, damages, assessments, deficiencies, taxes, costs and
expenses, including without limitation, interest, penalties and reasonable
attorneys' fees and expenses, asserted against, imposed upon or paid, incurred
or suffered by Buyer ("Buyer's Adverse Consequences"):
(i) as a result of, arising from, in connection with or
incident to (A) any breach or inaccuracy of any representation or
warranty of the Seller in this Agreement or in any Instrument of
Conveyance, or (B) any breach of any covenant or agreement of the
Seller contained in this Agreement or in any Instrument of Conveyance;
(ii) as a result of, or with respect to, any and all
obligations or liabilities of the Seller, whether known or unknown,
asserted or unasserted, contingent or otherwise including, without
limitation of the foregoing, any Accrued Employee Benefits which were
not listed on the schedule of Accrued Employee Benefits as of the
Closing Date;
(iii) arising out of any acts, events or circumstances by the
Seller prior to Closing Date including, without limitation, any
environmental matters;
(iv) due to any failure to have obtained any certificate of
occupancy, building permit, land use permit and other similar
governmental permit or license required to have been obtained prior to
the Closing with respect to the property subject to the Passaic Lease;
(v) due to, with respect to any governmental permit or license
needed to conduct the business to be conducted by the Buyer with the
Assets in the manner such business was conducted by the Seller
immediately prior to Closing, including, without limitation, any such
permit or license not presently possessed by the Seller (collectively,
the "Required Permits"), any failure by the parties to have obtained
prior to Closing a consent to the transfer to the Buyer of such
Required Permit or, if any such Required Permit may not be transferred
to the Buyer, the failure by the Buyer to obtain or have on or after
the Closing a newly issued governmental permit or license in its own
name and covering the same properties or activities as are or would
have been covered by the Required Permit;
(vi) resulting from any liability of the Seller which is not
an Assumed Obligation; and
(vii) due to any failure of the Seller to have qualified to do
business in any state prior to the Closing Date.
Notwithstanding the foregoing, the Seller shall have no indemnification
obligation under this Section 9.5 until Buyer's Adverse Consequences are in
excess of $20,000.
36
42
9.6. Successors to the Seller. The merger, consolidation, liquidation,
dissolution or winding up of, or any similar transaction with respect to, the
Seller shall not affect in any manner the obligations of the Seller pursuant to
this Section or any other term or provision of this Agreement, and the Seller
covenants and agrees to make adequate provision for its liabilities and
obligations hereunder in the event of any such transaction.
9.7. Indemnity Procedure.
(a) A party agreeing to indemnify against any matter pursuant
to this Agreement is referred to herein as the "Indemnifying Party" and the
other party claiming indemnity is referred to herein as the "Indemnified Party".
(b) An Indemnified Party under this Agreement shall give
prompt written notice to the Indemnifying Party of any liability, which might
give rise to a claim for indemnity under this Agreement. As to any claim,
action, suit or proceeding by a third party, the Indemnifying Party shall have
the right, exercisable by notifying the Indemnified Party within twenty days
after receipt of such notice from the Indemnified Party, to assume the entire
control of the defense, compromise or settlement thereof, all at the
Indemnifying Party's expense including employment of counsel, and in connection
therewith the Indemnified Party shall cooperate fully to make available to the
Indemnifying Party all pertinent information under its control. The Indemnified
Party may at its expense, if it so elects, designate its own counsel to
participate with counsel designated by the Indemnifying Party in the conduct of
any such defense. If the defense of any such matter is tendered to the
Indemnifying Party by notice as set forth above and the Indemnified Party is
entitled to indemnification pursuant hereto with respect to such matter, and the
Indemnifying Party declines or otherwise fails to (1) promptly pay or settle the
same, or (2) vigorously investigate and defend the same, the Indemnified Party
may investigate and defend the same and the Indemnifying Party will reimburse
the Indemnified Party for all judgments, settlement payments and reasonable
expenses, including reasonable attorneys' fees, incurred and paid by it in
connection therewith.
(c) An Indemnified Party shall not make any settlement of any
claim without the written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld.
10. Termination.
10.1. Methods of Termination. Anything herein or elsewhere to the
contrary notwithstanding, the transactions contemplated hereby may be terminated
and abandoned at any time prior to the Closing:
(a) by mutual consent of the Buyer and the Seller; or
(b) by the Seller if, on the Closing Date, any of the
conditions set forth in Section 7 shall not have been met;
(c) by the Buyer if, on the Closing Date, any of the
conditions set forth in Section 8 shall not have been met; or
37
43
(d) by either party if, without fault of the terminating
party, the Closing shall not have occurred by September 30, 1998.
10.2. Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, written notice thereof shall
forthwith be given to the other parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned without
further action by the Buyer or the Seller.
10.3. Effect of Termination. In the event of termination of this
Agreement as expressly provided in Section 10.1 above, this Agreement shall
forthwith become void (except for Section 3.26) and neither the Buyer, on the
one hand, nor the Seller, on the other, shall have any liability to the other.
11. Miscellaneous Provisions.
11.1. Amendment and Modification. This Agreement may be amended,
modified and supplemented by the parties hereto only by written instrument
signed by or on behalf of the party to be charged thereunder.
11.2. Waiver of Compliance. Any failure of the Seller, on the one hand,
or the Buyer on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by an
authorized officer of the other party, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to any subsequent or other
failure.
11.3. Expenses. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. The Seller shall bear all
sales, use and transfer taxes arising out of this transaction as provided above
in Section 1.3(c).
11.4. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail,
with postage prepaid as follows:
If to ▇▇▇▇▇▇▇▇ Bros.: ▇▇▇▇▇▇▇▇ Bros. & Co., Inc.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Fax:
If to PGC: PGC Corporation
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Fax:
38
44
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, Lifland, Pearlman, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇
Park ▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Seller shall furnish to the Buyer in
writing.
If to the Buyer or KTI: c/o KTI, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as the Buyer shall furnish to the
Seller in writing.
11.5. Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, administrators, executors, legal
representatives, such successors and assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties;
provided, however, that the Buyer may freely assign this Agreement or all or any
rights it may have hereunder to any of its subsidiaries or affiliated companies,
but no such assignment shall relieve the Buyer of its obligations hereunder.
11.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
11.7. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute the same instrument.
11.8. Headings. The headings of the sections and articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
11.9. Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein, and supersedes all prior-agreements, promises, letters of
intent, covenants, arrangements, communications, representations or warranties,
whether oral or written, by any party hereto or by any Related Person of any
party hereto. All Exhibits attached hereto, the Disclosure Schedule, any
exhibits thereto and all certificates, documents and other instruments delivered
or to be
39
45
delivered pursuant to the terms hereof are hereby expressly made a part
of this Agreement as fully as though set forth herein, and all references herein
to the terms "this Agreement", "hereunder", "herein", "hereby" or "hereto" shall
be deemed to refer to this Agreement and to all such writings.
11.10. Third Parties. Except as specifically set forth or referred to
herein, nothing in this Agreement, expressed or implied, is intended or shall be
construed to confer upon or give to any person, firm, partnership, corporation
or other entity other than the parties hereto and their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
11.11. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
40
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
▇▇▇▇▇▇▇▇ Bros. & Co., Inc. PGC Corporation.
By:
-------------------------- --------------------------------
Name: Name:
Title: Title:
Solely to the extent of its
rights and obligations
under the provisions of
this Agreement:
KTI New Jersey Fibers, Inc. KTI, Inc.
By: By:
-------------------------- --------------------------------
Name: Name:
Title: Title:
41