***Indicates
material has been omitted pursuant to a Confidential Treatment
Request filed with the Securities and Exchange Commission. A
complete copy of this Agreement has been filed with the Securities
and Exchange Commission.
EQUITY INTEREST PURCHASE
AGREEMENT
ROY TAYLOR YOKLEY and TROY
WILLIAM YOKLEY
AMERICAN WASTE, INC.,
N.E. LAND FILL, INC.
PAULS VALLEY LANDFILL, INC., and
SOONER WASTE, L.L.C.,
EQUITY INTEREST PURCHASE
AGREEMENT
THIS EQUITY
INTEREST PURCHASE AGREEMENT (this “ Agreement
”) is made effective the 21st day of February, 2007, between
WCA of Oklahoma, LLC, a Delaware limited liability company (“
Buyer ”), as buyer, Roy Taylor Yokley, an individual
(“Roy”), and Troy William Yokley, an individual
(“Troy”, and collectively with Roy, the
“Sellers”), as sellers, and American Waste, Inc., an
Oklahoma corporation (“AW”), N.E. Land Fill, Inc., an
Oklahoma corporation (“NE”), Pauls Valley Landfill,
Inc., an Oklahoma corporation (“PV”), and Sooner Waste,
L.L.C., an Oklahoma limited liability company (“SW”)
(each of AW, NE, PV and SW are hereinafter referred to individually
as a “ Company ” and collectively as the “
Companies ”). Buyer, Sellers and the Companies are
sometimes hereinafter referred to individually as a “
Party ” and collectively as the “ Parties
.”
WHEREAS ,
Sellers are the sole record and beneficial owners of all of the
issued and outstanding capital stock of each of AW, NE, and PV (all
such capital stock collectively referred to hereinafter as the
“Shares”), and are the record and beneficial owner of
all of the issued and outstanding membership interests of SW (the
“Membership Interests”, and collectively with the
Stock, the “Equity Interests”); and
WHEREAS ,
AW is in the waste collection and hauling business in and around
Oklahoma City, Oklahoma; and
WHEREAS ,
NE, PV and SW are in the waste disposal business in and around
Oklahoma City, Oklahoma (collectively, the businesses of AW, SW, NE
and PV are hereinafter referred to as the “ Business
”); and
WHEREAS ,
Sellers wish to sell and Buyer wishes to purchase all of the issued
and outstanding Equity Interests of the Companies.
NOW,
THEREFORE , in consideration of the premises and of the mutual
agreements set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto do hereby agree as
follows:
1. PURCHASE
OF EQUITY INTERESTS
Subject to the
terms and conditions of this Agreement, Buyer will purchase from
Sellers, and Sellers will sell, deliver and assign to Buyer, all of
the Equity Interests for the consideration specified
below.
2.1
Purchase Price . Subject to the terms and conditions set
forth in this Agreement, the aggregate purchase price to be paid
for the Equity Interests shall be the sum of (i) THIRTY-NINE
MILLION AND NO/100 DOLLARS ($39,000,000.00) (the “Fixed
Purchase Price”), and (ii) the Variable Purchase Price,
as set forth in Section 2.2 hereinbelow, (collectively the
“ Purchase Price ”), as adjusted by: (a) a
reduction equal to the amount required to fully pay off,
release and
satisfy all debt (or similar payment obligations) underlying any
and all of the assets of the Companies, including, without
limitation, all unpaid purchase price financing and/or equipment
lease obligations relating to any assets of any of the Companies,
together with any early payoff penalties and other associated
charges, provided, however, that the Purchase Price shall not be
reduced by the outstanding indebtedness of the Companies to the
Sellers which amount shall be deemed fully paid and satisfied in
connection with the Closing, (b) the Working Capital
Adjustment set forth in Section 2.3 herein; and (c) the
Fixed Capital Adjustment set forth in Section 2.4 (as so
adjusted, the “ Adjusted Cash Purchase Price ”).
The Fixed Purchase Price shall be allocated between the purchase of
the Equity Interests of the Companies as set forth on
Exhibit 2.1 attached hereto and made a part hereof.
2.2
Variable Purchase Price . As a part of the consideration
set forth in Section 2.1, Buyer, its successors and assigns,
will pay to Sellers, their heirs, successors and assigns, the
aggregate sum of $1.00 per ton of waste delivered to and disposed
at the landfills currently owned by NE, SW and PV, and pursuant to
each of the Oklahoma Department of Environmental Quality
(“ODEQ”) permits and any renewals, amendments, and
expansions (whether vertical or horizontal) adjacent or contiguous
to the footprint of such landfill existing as of Closing (the
“Variable Purchase Price”). The Variable Purchase Price
will be paid quarterly, on an installment basis, based upon the
waste delivered in the immediately preceding calendar quarter (or
partial quarter in the case of the first calendar quarter of 2007).
Payments will be made to Sellers or their heirs, successors and
assigns, within thirty (30) days of the close of each calendar
quarter and shall not be subject to any set off for claims which
Buyer may have against Sellers except as set forth in
Section 7.6 hereinbelow. Buyer and Sellers agree that a
memorandum of agreement (the “Memorandum of Agreement”)
in substantially the same form as Exhibit 2.2 attached hereto
will be filed of record in each county or counties where such
landfills are located. The Memorandum of Agreement provides notice
of the binding agreement between Sellers, Buyer, Companies, their
successors and assigns. Sellers, their heirs, successors and
assigns shall have the right to audit the Variable Purchase Price
to be paid on each separate landfill by giving written notice to
the Buyer and Companies. Buyer and Companies, their successors and
assigns shall reasonably cooperate to provide documentation to show
that the installment payment of the Variable Purchase Price has
been properly calculated and paid as set forth herein.
2.3 Working
Capital Adjustment . If the Companies’ ratio of
Current Assets to Current Liabilities (each as defined in
Article 11) is not 1.0 to 1.0 as of the Closing Date, then the
Purchase Price will be adjusted as follows:
(a) the Sellers
shall estimate the Current Assets and Current Liabilities of the
Companies as of the Closing Date. In connection therewith, Sellers
shall develop a worksheet and the basis for making the computations
of Current Assets and Current Liabilities (the “
Worksheet ”) that will also be used to determine the
Actual Working Capital Adjustment pursuant to Section 2.3(b).
If the estimated Current Liabilities exceed the estimated Current
Assets, the amount of such excess shall be deducted on a
dollar-for-dollar basis from the Purchase Price. If the estimated
Current Assets exceed the estimated Current Liabilities, the amount
of such excess shall be added on a dollar-for-dollar basis to the
Purchase Price. Any such adjustment is referred to as the “
Working Capital Adjustment .”
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(b) Within ninety
(90) days of Closing, the Buyer may, but shall not be required
to, deliver to the Sellers a statement (the “ Closing
Statement ”) setting forth what Buyer believes are the
actual Current Assets and Current Liabilities as of the Closing
Date, together with (a) any adjustment Buyer determines is
required to be made to those receivables for which Sellers were
paid on a dollar-for-dollar basis, and (b) the amount of the
proposed Actual Working Capital Adjustment. In the event that the
Buyer fails to deliver the Closing Statement within ninety
(90) days of Closing, no adjustment to the Purchase Price will
be made pursuant to this Subsection 2.2(b) or otherwise. In the
event the Buyer shall prepare a Closing Statement, the Buyer will
prepare the Closing Statement using the worksheet in the form of
Exhibit 2.2 and it will be prepared in accordance with the
provisions of this Agreement. The Closing Statement shall contain a
supporting schedule detailing the proposed Actual Working Capital
Adjustment, and be accompanied with copies of the work papers and
back up materials used by Buyer in preparing the Closing Statement.
Buyer will then present the Closing Statement to the Sellers.
Sellers shall have the opportunity to review and object to any
entry on the Closing Statement for a reasonable period of time not
to exceed ten (10) days (“Seller Review Period”).
Following the Seller Review Period the Parties agree to meet within
ten (10) business days thereafter for the purpose of resolving
in good faith any dispute regarding any proposed Actual Working
Capital Adjustment contained on the Closing Statement. If the
proposed Actual Working Capital Adjustment is a positive amount,
the Buyer shall pay to the Sellers, an amount equal to such
positive amount within fifteen (15) days from the date of the
Parties meeting to resolve any good faith dispute regarding the
proposed Actual Working Capital Adjustment. If the Actual Working
Capital Adjustment is a negative amount, Sellers shall pay to the
Buyer an amount equal to such negative amount within fifteen
(15) days from the date of the Parties meeting to resolve any
good faith dispute regarding the proposed Actual Working Capital
Adjustment. Seller and Buyer agree that any Actual Working Capital
Adjustment will be an addition to or reduction of the Adjusted Cash
Purchase Price set forth in Section 2.1
hereinabove.
2.4 Fixed
Capital Adjustment . Seller has agreed to make capital
expenditures in the amount of $2,000,000 for a variety of capital
items, including expenditures for the purpose of completing the
Phase 2 new cell at the Pauls Valley landfill (collectively
“Fixed Capital Expenditures”). On or before Closing,
Seller shall deliver to Buyer Schedule 2.4 which
contains a detail of the all Fixed Capital Expenditures made by
Companies (by date, type and amount) between September 1, 2006
and the Closing Date. The Fixed Capital Adjustment will be equal to
the difference between (a) $2,000,000, and (b) the Fixed
Capital Expenditures. The Purchase Price shall be decreased by an
amount equal to the Fixed Capital Adjustment.
3.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers make
the following representations and warranties jointly and severally.
For purposes of this Agreement, disclosure of a fact, event or
condition on one Schedule, statement, document, Financial Statement
or item of information delivered by Seller to Buyer at or prior to
Closing (whether as a part of Buyer’s due diligence or
otherwise) shall be considered a disclosure for all Schedules,
statement, documents, Financial Statements or items of information
provided hereunder. No additional written disclosure shall be
required to effectuate the notice required in these
provisions.
4
The Sellers
represent and warrant that all of the following representations and
warranties are true as of the date of this Agreement and shall be
true on the Closing Date:
(a) Each of AW, NE
and PV is a corporation, duly incorporated, validly existing and in
good standing under the laws of its state of incorporation, and is
duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry
on its business in the places and in the manner as now conducted.
Copies of the Certificates of Incorporation (certified by the
Secretary of State of each such Company’s state of
incorporation) and Bylaws (certified by the Secretary of each such
Company), as amended, of each such Company are all attached hereto
as Schedule 3.1(a) . The company records and minutes books
of AW, NE and PV, as heretofore made available to Buyer, are
correct and complete, and will be delivered to Buyer at
Closing.
(b) SW is a
limited liability company duly organized, validly existing and in
good standing under the laws of its state of organization, and is
duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry
on its business in the places and in the manner as now conducted or
as proposed to be conducted. Copies of the Articles of Organization
(certified by the Secretary of State of SW’s state of
organization) and Operating Agreement (certified by the Secretary
of SW), as amended, of SW, are attached hereto as
Schedule 3.1(b) . The company records and minutes books
of each Company and each of the Companies’ respective
subsidiaries, as heretofore made available to Buyer, are correct
and complete, and will be delivered to Buyer at Closing.
3.2
Authorization, Validity and Effect of Agreements
.
(a) This Agreement
constitutes, and all agreements and documents contemplated hereby
when executed and delivered pursuant hereto for value received will
constitute, the valid and legally binding obligations of Sellers
enforceable in accordance with their terms, subject to
(i) applicable bankruptcy, insolvency or other similar laws
relating to creditor’s rights generally and (ii) general
principles of equity, regardless of whether considered in a
proceeding in equity or at law.
(b) The execution
and delivery of this Agreement by Sellers does not, and the
consummation of the transactions contemplated hereby by Sellers
will not (i) except as set forth on Schedule 3.2
hereof, require the consent, approval or authorization of, or
declaration, filing or registration with, any governmental or
regulatory authority or any third party; (ii) result in the
breach of any term or provision of, or constitute a default under,
or result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or the lapse of time or both)
any obligation under, or result in the creation or imposition of
any Lien upon any part of the property of Sellers or any of the
Companies pursuant to any provision of, any order, judgment,
arbitration award, injunction, decree, indenture, mortgage, lease,
license, lien, or other agreement or instrument to which any Seller
or any Company is a party or by which it or he is bound; or
(iii) violate or conflict with any provision of the
Certificate of Incorporation, Articles of Organization, Bylaws
or
5
Operating
Agreement, each as amended to the date hereof and as applicable, of
the Companies.
3.3 Equity
Interests of the Companies .
(a) The authorized
capital stock of each of AW, NE and PV is shown on Schedule
3.3(a) . All of such Company’s issued and outstanding
capital stock have been duly authorized and validly issued, are
fully paid and nonassessable, are owned of record and beneficially
by Sellers in the amounts set forth in Schedule 3.3(b)
, and are free and clear of all liens, encumbrances and claims of
every kind. All such capital stock was offered, issued, sold and
delivered in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, no such capital
stock was issued in violation of the preemptive rights of any past
or present shareholder .
(b) The authorized
membership interests of SW is shown on Schedule 3.3(b)
. All of SW’s issued and outstanding membership interests
have been duly authorized and validly issued, are fully paid and
nonassessable, are owned of record and beneficially by Sellers and
in the amounts set forth in Schedule 3.3(b) , and are
free and clear of all liens, encumbrances and claims of every kind.
All such membership interests were offered, issued, sold and
delivered in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, no such membership
interests were issued in violation of the preemptive rights of any
past or present member .
3.4
Obligations to Issue or Sell Equity Interests . No right
of first refusal, option, warrant, call, conversion right or
commitment of any kind exists which obligates any Company to issue
any of its authorized but unissued capital stock, membership
interests or other securities or equity interests. In addition,
there are no (a) outstanding securities or obligations which
are convertible into or exchangeable for any capital stock or
membership interests or other securities of any Company, or
(b) contracts, arrangements or commitments, written or
otherwise, under which any Company is or may become bound to sell
or otherwise issue any of its capital stock, membership interests
or other securities or equity interests. Without limiting the
generality of the foregoing, there is no valid basis upon which any
person (other than Sellers) may claim to be in any way the record
or beneficial owner of, or to be entitled to acquire (of record or
beneficially), any capital stock, membership interest or other
security or equity interest of any Company, and no person has made
or, to either Seller’s knowledge, threatened to make any such
claim. In addition, no Company has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its
capital stock, membership interests or other securities or equity
interests therein or, except as set forth in
Schedule 3.4 , to pay any dividend or make any
distribution in respect thereof.
3.5
Subsidiaries . Except as set forth on
Schedule 3.5 , no Company (a) presently owns, of record
or beneficially, or controls, directly or indirectly, any capital
stock, securities convertible into capital stock, membership
interest or any other equity interest in any corporation, limited
liability company, partnership, association or business entity; or
(b) is, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity. As of the date
of this Agreement, Sooner Land Management, Inc., a wholly-owned
subsidiary of SW, has transferred all of its right, title and
interest in and to any assets to SW.
6
3.6
Predecessor Status; etc . Set forth on
Schedule 3.6 is a list of all of the names of all
predecessors of each Company, including the names of any entities
from whom each Company previously acquired significant assets.
Except as disclosed in Schedule 3.6 , no Company has
ever been a subsidiary or division of another company nor been a
part of an acquisition which was later rescinded.
3.7
Financial Statements .
(a) Sellers have
furnished to Buyer (and copies of which are attached hereto as
Schedule 3.7(a) ): (i) the balance sheets of the
Companies as of December 31, 2004, December 31, 2005 and
December 31, 2006; and (ii) the statements of operations
of the Companies for the years ending December 31, 2004,
December 31, 2005 and December 31, 2006. The financial
statements referred to in this subsection are herein collectively
referred to as the “ Financial Statements
.”
(b) Sellers have
furnished to Buyer (and copies of which are attached hereto as
Schedule 3.7(b) ): (i) the balance sheets of the
Companies as of January 31, 2007; and (ii) the statements
of operations of the Companies for the period beginning
January 1, 2007 and ending January 31, 2007. The
financial statements referred to in this subsection are herein
collectively referred to as the “ Interim Financial
Statements .”
(c) The Financial
Statements and the Interim Financial Statements, collectively, in
all material respects fairly set forth the financial condition of
the Companies as of the dates indicated, and the results of its
operations for the periods indicated, and are in accordance with
generally accepted accounting principles consistently applied,
except as otherwise stated therein or in any attachment to
Schedules 3.7(a) and 3.7(b) attached hereto.
3.8
Liabilities and Obligations . For each Company, the
Sellers have delivered to Buyer on Schedule 3.8(a) an
accurate list, as of the Closing Date, of all of the liabilities of
any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, together with, in
the case of those liabilities which are not fixed, an estimate of
the maximum amount which may be payable. For each such liability
for which the amount is not fixed or is contested, Sellers have
provided a summary description of the liability.
Schedule 3.8(b) lists all liabilities that are not
Current Liabilities, which shall be assumed by the Sellers at
Closing, including but not limited to any fees due to any person or
entity disclosed or who should have been disclosed, on
Schedule 3.30 (all such liabilities, together with all
liabilities not disclosed to Buyer on Schedule 3.8(a) ,
if any, shall be referred to herein as the “ Retained
Liabilities ”).
3.9
Approvals . Except as set forth on
Schedule 3.9 , no authorization, consent or approval
of, or registration or filing with, any governmental authority or
any other person is or was required to be obtained or made by
Sellers or any Company in connection with the execution, delivery
or performance of this Agreement. All authorizations, consents and
approvals set forth on Schedule 3.9 have been obtained,
and all registrations and filings have been
accomplished.
7
3.10
Accounts and Notes Receivable . The Sellers have
delivered to Buyer on Schedule 3.10 an accurate list of
the Companies’ accounts and notes receivable as of
January 31, 2007 and as of the Closing Date, including
receivables from and advances to their respective employees and
Sellers and amounts which are not reflected in the most recent
available balance sheet. Sellers shall provide Buyer with an aging
of all accounts and notes receivable showing amounts due in 30-day
aging categories for each Company. Such accounts and notes of the
Companies are collectible in the amounts shown on
Schedule 3.10 .
3.11
Permits and Intangibles . The Sellers have delivered to
Buyer on Schedule 3.11 an accurate list and summary
description as of the Closing Date of all of the certificates of
need, permits, titles (including motor vehicle titles and current
registrations), fuel permits, licenses, orders, approvals,
franchises, certificates, trademarks, trade names, patents, patent
applications, copyrights and similar rights of approvals owned or
held by each Company, all of which are now valid, in good standing
and in full force and effect. Except as set forth on
Schedule 3.11 , such permits, titles, fuel permits,
licenses, orders, approvals, franchises, certificates, trademarks,
trade names, patents, patent applications, copyrights and similar
rights of approvals are adequate for the operation of the Business,
as presently constituted. Except as set forth on
Schedule 3.11 , the Sellers have delivered to Buyer a
description and copies as of the date of this Agreement, of all of
the Companies’ material records, reports, notifications,
certificates of need, permits, pending permit applications,
engineering studies, environmental impact studies filed or
submitted or required to be filed or submitted to governmental
agencies, other governmental approvals or applications for approval
and of all material notifications from such governmental
agencies.
3.12
Personal Property, Options and Leases . The Sellers have
delivered to Buyer on Schedule 3.12 an accurate list
and a complete description as of the Balance Sheet Date of all of
the personal property, leases for equipment and real properties on
which are situated buildings, warehouses, workshops, garages and
other structures used in the operation of the Business, and any
option to purchase real property and including an indication as to
which assets were formerly owned by business or personal Affiliates
of each Company. All leases set forth on Schedule 3.12
are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in
accordance with their respective terms. All fixed assets used by
the Companies in the operation of the Business are either owned by
a Company or leased under an agreement indicated on
Schedule 3.12 . The Sellers have also included on
Schedule 3.12 a summary description of all plans or
projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real or personal
property or existing business, to which management of the Business
has devoted any significant effort or expenditure in the two year
period prior to the date of this Agreement, which if pursued by the
Business would require additional expenditures of significant
efforts or capital. Except as described on
Schedule 3.12 , the Companies own all of the assets and
properties used in their respective businesses. Except as described
on Schedule 3.12 , there are no liens, mortgages,
charges, restrictions, pledges, security interests, options,
leases, claims, easements, encroachments or encumbrances on any
property or assets owned or used by any Company. Notwithstanding
anything to the contrary contained in this Agreement, the assets
set forth in Schedule 3.12A (the “ Excluded
Assets ”) shall not be deemed a part of the assets of the
Companies and shall not be deemed to have been sold, transferred,
assigned, conveyed or delivered to Buyer in connection with the
Closing of the sale and purchase of the Equity Interests. Prior to
the Closing, Sellers shall cause the Companies to distribute any of
the
8
Excluded Assets
owned by such Company to Sellers, and the Excluded Assets shall
remain the property of Sellers after the Closing. Buyer has had the
opportunity, prior to Closing, to review Schedule 3.12 and the
assets listed thereon. Buyers represent and warrant to Sellers that
there are no claims which Buyer has against Seller, as of Closing,
of the existence, condition or operating capability of such
assets.
3.13
Customers; Contracts and Commitments .
(a)
Schedule 3.13(a) sets forth the names and addresses of
all of the Business’ customers as of the date hereof, and
sets forth monthly billing information related to such customers.
None of the customers, to the knowledge of Sellers, intends to
terminate or change significantly, its relationship as presently
existing, and Sellers have received notice to such
effect.
(b)
Schedule 3.13(b) sets forth a true and complete list of
all of the Business’ contracts, agreements and other
instruments and arrangements (whether written or oral) (a) by
which any Company is bound or affected or (b) to which any
Company is a party or by which any Company is bound (the “
Contracts ”), including but not limited to:
(i) arrangements relating to providing solid waste collection,
transportation or disposal services to any person or entity;
(ii) licenses, permits, insurance policies and other
arrangements concerning or relating to real estate;
(iii) employment, consulting, collective bargaining or other
similar arrangements relating to or for the benefit of current,
future or former employees, agents, and independent contractors or
consultants; (iv) agreements and instruments relating to the
borrowing of money or obtaining of or extension of credit, (v)
brokerage or finder’s agreements; (vi) contracts
involving a sharing of profits or expenses; (vii) acquisition
or divestiture agreements; (viii) service or operating
agreements, manufacturer’s representative agreements or
distributorship agreements; (ix) arrangements limiting or
restraining any Company with respect to the Business from engaging
or competing in any lines of business or with any person;
(x) documents granting a power of attorney; and (xi) any
other agreements or arrangements that are material to the operation
of the Business.
(c) Except as set
forth on Schedule 3.13(c) : (i) this Agreement
will not give rise to the right of any Party to terminate or modify
any contract or agreement, (ii) no Company is a party to any
contract, agreement or other instrument or commitment which, singly
or in the aggregate, materially and adversely affects such
Company’s business, operations, properties, assets or
condition (financial or otherwise); and (iii) no Company is
bound by or subject to (and none of their respective assets or
properties is bound by or subject to) any arrangement with any
labor union.
3.14 Real
Property . Except as set forth on Schedule 3.14
attached hereto:
(a) The Companies
own good and marketable title to their respective real property
described on Schedule 3.14 (respectively, each
“Company ‘s Real Property ”), free and
clear of any lien, mortgage, charge, restriction, pledge, security
interest, option, lease, claim, easement, encroachment or
encumbrance (“ Lien ”), other than the Permitted
Title Encumbrances set forth in Schedule 3.14 , and no
person has an option to purchase all or any portion of such real
property;
9
(b) No
Company’s Real Property is subject to any pending or
threatened condemnation Proceedings against all or part
thereof;
(c) No Company has
ever granted any person or entity a lease, sublease, license,
concession, or other right, written or oral, to use or occupy such
Company’s Real Property, nor has any Company ever entered
into an option, right of first refusal, or other agreement that
would permit any person or entity to purchase all or part of such
Company’s Real Property; and
(d) No Company has
ever owned, occupied, or conducted operations on any lands, other
than that respective Company’s Real Property.
3.15
Insurance . The Sellers have delivered to Buyer on
Schedule 3.15 an accurate list of all of the insurance
policies of the Companies, as well as an accurate list of:
(a) all of their respective insurance loss runs and
worker’s compensation claims received for the past three
(3) policy years; (b) all open claims; and (c) all
known circumstances reasonably likely to result in a claim. Such
insurance policies are currently in full force and effect and shall
remain in full force and effect through the Closing Date. None of
any Company’s insurance has ever been canceled, and no
Company has ever been denied coverage.
3.16
Employment Matters . Schedule 3.16 contains
a list of all employees of the Business, including the annual
compensation, hourly wages, daily rate of pay, vacation, sick pay
and other benefits for all such employees. The Companies have paid
in full to all of their respective employees all wages, salaries,
commissions on jobs finished, bonuses and other direct compensation
for all services performed (including accrued vacation) by them
prior to the Closing and all amounts required to be reimbursed to
the employees, and Buyer will not, by reason of anything done prior
to the Closing, be liable to any employee for “severance
pay” or any other payment. The Companies are in material
compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms
and conditions of employment and wages and hours. Buyer
understands, represents and warrants that Companies will be liable
for the payment of any compensation, wages, vacation, sick pay and
other benefits for all such employees from and after Closing
(a) for periods after the Closing, and (b) which are
reflected in the Working Capital Adjustment.
3.17
Parachute Provisions . The Sellers have delivered to
Buyer on Schedule 3.17 an accurate schedule showing all of
the Companies’ employment agreements and any other agreements
containing “parachute” provisions, and deferred
compensation agreements (which shall be Retained Liabilities
pursuant to Section 3.8), together with copies of such plans,
agreements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date.
3.18
Benefit Plans; ERISA Compliance .
(a)
Schedule 3.18 contains a list of all “employee
pension benefit plans” (as defined in Section 3(2) of
Employee Retirement Income Security Act of 1974, as amended
(“ ERISA ”)) (sometimes referred to in this
Section 3.18 as “ Pension Plans ”),
“employee welfare benefit plans” (as defined in
Section 3(1) of ERISA) (sometimes referred to in this
Section 3.18 as “ Welfare Plans ”) and all
other Benefit Plans, as defined below, currently
10
maintained in
whole or in part, contributed to, or required to be contributed to
by the Companies for the benefit of any of their respective present
or former officers, employees or directors. The Sellers have
delivered to Buyer true, complete and correct copies of (a) the
Pension Plans, Welfare Plans and Benefit Plans (or, in the case of
any unwritten Benefit Plans, descriptions thereof) of the
Companies, (b) all material correspondence for the last three
(3) years prior to the Closing Date with the IRS or the United
States Department of Labor relating to plan qualification, filing
of required forms, pending, contemplated or announced plan audits
with respect to any such Pension Plan, Welfare Plan or Benefit
Plan, if any, and (c) all other information reasonably
requested by Buyer.
(b) No Company
maintains any Pension Plan or Benefit Plan intended to be a tax
qualified plan described Section 401(a) of the Code, and no such
plan is or has been subject to the minimum funding rules of Code
Section 412 or ERISA Section 302, or the plan termination
insurance provisions of Title IV of ERISA.
(c) Each of the
Pension Plans, Welfare Plans and Benefit Plans sponsored by, and
each of the benefit plans formerly sponsored by, the Companies:
(i) has been in material compliance with all reporting and
disclosure requirements of (A) Part 1 or Subtitle B of
Title I of ERISA, if applicable, or (B) other applicable law,
(ii) has had the appropriate required Form 5500 (or
equivalent annual report) filed timely with the appropriate
governmental entity for each year of its existence, (iii) has
at all times complied with the bonding requirements of
(A) Section 412 of ERISA, if applicable, or
(B) other applicable law, (iv) has no issue pending
(other than the payment of benefits in the normal course) nor any
issue resolved adversely to any Company or any of their respective
subsidiaries which may subject such Company or any of their
respective subsidiaries to the payment of any material penalty,
interest, tax or other obligation, nor is there any basis for any
imposition of any such liability, and (v) has been maintained
in all respects in material compliance with the applicable
requirements of ERISA, the Code and other applicable law not
otherwise covered hereunder so as not to give rise to any material
liabilities to any Company.
(d) There are no
voluntary employee benefit associations maintained by any Company
and intended to be exempt from federal income tax under
Section 501(c)(9) of the Code.
(e) Neither the
execution of this Agreement nor the consummation of the
transactions contemplated by this Agreement will give rise to, or
trigger, any change of control, severance or other similar
provisions in any Pension Plan, Welfare Plan or Benefit Plan
sponsored by any Company. The consummation of any transaction
contemplated by this Agreement will not result in any:
(i) payment (whether of severance pay or otherwise) becoming
due from the Companies to any of their respective officers,
employees, former employees or directors or to the trustee under
any “rabbi trust” or similar arrangement;
(ii) benefit under any Benefit Plan of the Companies being
established or becoming accelerated, vested or payable; or
(iii) payment or series of payments by any Company, directly
or indirectly, to any person that would constitute a
“parachute payment” within the meaning of
Section 280G of the Code.
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(f) No Company
provides any material post-retirement medical, health, disability
or death protection coverage or contribute to or maintain any
employee welfare benefit plan which provides for medical, health,
disability or death benefit coverage following termination of
employment by any officer, director or employee except as is
required by Section 4980B(f) of the Code or other applicable
statute, nor has any Company made any representations, agreements,
covenants or commitments to provide that coverage.
(g) With respect
to any Welfare Plan of the Companies, (i) each such Welfare
Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Code, complies in all material
respects with any applicable requirements of Part 6 of Title I
of ERISA and Section 4980B(f) of the Code and (ii) each
such Welfare Plan (including any such plan covering retirees or
other former employees) may be amended or terminated with respect
to health benefits without material liability to any Company on or
at any time after the Closing Date.
(h) All
contributions required by law or by a collective bargaining or
other agreement to be made under any Pension Plan, Welfare Plan or
Benefit Plan of any Company with respect to all periods through the
Closing Date, including a pro rata share of contributions due for
the current plan year, will have been made by such date or provided
for by adequate reserves by such Company. No changes in
contribution rates or benefit levels have been implemented or
negotiated (but not yet implemented), with respect to any Pension
Plan, Welfare Plan or Benefit Plan of any Company since the date on
which the information provided in the attached
Schedule 3.18 has been provided, and no such changes
are scheduled to occur.
(i) No Company
has, nor will any Company have, any liability or obligation for
taxes, penalties, contributions, losses, claims, damages,
judgments, settlement costs, expenses, costs, or any other
liability or liabilities of any nature whatsoever arising out of or
in any manner relating to any Pension Plan, Welfare Plan or Benefit
Plan (including but not limited to employee benefit plans such as
foreign plans which are not subject to ERISA), that has been, or
is, contributed to by any entity, whether or not incorporated,
which is deemed to be under common control (as defined in
Section 414 of the Code), with any such Company.
3.19
Conformity with Law .
(a) Each Company
has complied in all material respects with, and no Company is in
material default under, any law, rule, ordinance, ruling,
directive, or regulation or any order, award, judgment or decree of
any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction over such Company or any of their respective
assets or businesses; there are no claims, actions, suits or
Proceedings, pending or threatened, against or affecting any
Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over such
Company or their respective businesses; and no notice of any claim,
action, suit or Proceeding, whether pending or threatened, has been
received by any Company.
12
(b) The Companies
have conducted and are conducting the Business in material
compliance with the requirements, standards, criteria and
conditions set forth in applicable federal, state and local
statutes, ordinances, permits, licenses, orders, approvals,
variances, rules and regulations, including, without limitation,
all such laws, rules, ordinances, decrees and orders relating to
intellectual property protection, transportation, wage and hour,
antitrust matters, consumer protection, currency exchange,
environmental protection, equal employment opportunity, health and
occupational safety, pension and employee benefit matters,
securities and investor protection matters, labor and employment
matters, and trading-with-the-enemy matters.
(c) No Company has
received any notification of any asserted present or past
unremedied failure by it to comply with any of such laws, rules,
ordinances, decrees or orders.
(a) Each Company
has timely filed all requisite federal and other Tax Returns for
all fiscal periods ended on or before the Balance Sheet Date; there
are no open years, examinations in progress or claims against the
Company for federal and other Taxes (including penalties and
interest) for any period or periods prior to and including the
Balance Sheet Date; and, except as set forth on
Schedule 3.20 , no notice of any claim, whether pending
or threatened, for Taxes has been received. No Company is a party
to any Tax allocation or sharing agreement (i.e., any agreement or
arrangement for the payment of Tax liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Tax
Return which includes any such Company); there are no requests for
rulings in respect of any Tax pending by any Company with any tax
authority; except as set forth on Schedule 3.20 , no
penalty or deficiency in respect of any Taxes which has been
assessed against any Company remains unpaid; and, except as set
forth on Schedule 3.20 , all taxes (whether or not shown on
any Tax Return) for all fiscal years ending on or before the
Closing Date have been fully paid or appropriate deposits or
adequate accruals have been made therefore in the Financial
Statements of the Companies. The amounts shown as accruals for
Taxes on the Financial Statements of each Company as of the Balance
Sheet Date delivered to Buyer as a part of Schedule 3.7
are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on
or before the Closing Date, each Company has reserved an amount
sufficient to pay all such Taxes, and the working capital of each
Company is sufficient to pay any such Tax applicable to
it.
(b) Copies of
(i) any tax examinations, (ii) extensions of statutory
limitations, and (iii) the federal and local income tax
returns and franchise tax returns of the Companies for the last
three (3) fiscal years, or such shorter period of time as any
such Company has existed, are attached hereto as
Schedule 3.20 .
(c)
Schedule 3.20 also lists each of the Companies that is a
subchapter S corporation within the meaning of sections 1361 and
1362 of the Internal Revenue Code of 1986, as amended
(“Code”). Each of the Companies so identified have been
a qualified subchapter S corporation at all times since the date
shown on such schedule up to and including the Closing Date. Each
of the Companies and the Sellers will not
13
revoke any such
Company’s election to be taxed as an S corporation within the
meaning of Code §§1361 and 1362. Neither any Company nor
any Seller will take or allow any action that would result in the
termination of any such Company’s status as a validly
electing S corporation within the meaning of Code §§1361
and 1362.
(d)
Schedule 3.20 also lists any “qualified subchapter S
subsidiary” within the meaning of sections 1361(b)(3)(B) and
1362 of the Code. Each of the subsidiaries so identified have been
a qualified subchapter S subsidiary at all times since the date
shown on such schedule up to and including the Closing Date. Each
of the Companies and the Sellers will not revoke any such
Company’s election to be taxed as an S corporation within the
meaning of Code §§1361 and 1362. Neither any Company nor
any Seller will take or allow any action that would result in the
termination of any such Company’s status as a validly
electing S corporation within the meaning of Code §§1361
and 1362.
(e) For purposes
of this Section 3.20, “Tax” shall mean any United
States or other federal, state, provincial, local or foreign
income, gross receipts, property, sales, goods and services use,
license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority.
“Tax Return” shall mean any return, report or similar
statement required to be filed with respect to any Tax (including
any attached schedules), including, without limitation, any
information return, claim for refund, amended return and
declaration of estimated Tax.
3.21
Completeness . The certified copies of the Certificates
of Incorporation, Bylaws, Articles of Organization and Operating
Agreement, each as amended to date, of the Companies and the copies
of all leases, instruments, agreements, licenses, permits,
certificates or other documents which are included on schedules
attached hereto or which have been delivered to Buyer in connection
with the transactions contemplated hereby are complete and correct;
no Company nor any other Party hereto is in material default
thereunder; except as set forth in the schedules and documents
attached to this Agreement, the rights and benefits of each Company
thereunder will not be adversely affected by the transactions
contemplated hereby; and the execution of this Agreement and the
performance of the obligations hereunder will not violate or result
in a breach or constitute a default under any of the terms or
provisions thereof.
3.22
Government Contracts . Except as set forth on
Schedule 3.22 , no Company is now, and none has ever
been, a party to any governmental contract subject to price
redetermination or renegotiation.
3.23
Absence of Changes . Except as set forth in
Schedule 3.23 , since December 31, 2006, there has not
been:
(a) any material
adverse change in the financial condition, assets, liabilities
(contingent or otherwise), income or business of any
Company;
14
(b) any damage,
destruction or loss (whether or not covered by insurance), change
in zoning, or change in any law, rule, regulation, ordinance, or
permit condition, materially adversely affecting the properties or
business of any Company;
(c) any change in
the authorized or outstanding membership interests of any Company
or any grant of any options, warrants, calls, conversion rights or
commitments;
(d) any
declaration or payment of any dividend or distribution in respect
of the membership interests or any direct or indirect redemption,
purchase or other acquisition of any of the membership interests of
any Company;
(e) any bonus or
any increase in the compensation, sales commissions, fringe
benefits or fee arrangement payable or to become payable by any
Company to any of its officers, directors, employees, consultants
or agents or any change in the method by which sales commissions
are calculated and paid;
(f) any work
interruptions, labor grievances or claims filed or, to any
Company’s knowledge, any proposed law or regulation or any
event or condition of any character, materially adversely affecting
the business or future prospects of the Companies;
(g) any sale or
transfer, or any agreement to sell or transfer, any assets,
property or rights of any Company to any person;
(h) any
cancellation, or agreement to cancel, any indebtedness or other
obligation owing to any Company;
(i) any plan,
agreement or arrangement granting any preferential rights to
purchase or acquire any interest in the assets, property or rights
of any Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(j) any purchase
or acquisition, or agreement, plan or arrangement to purchase or
acquire, any property, rights or assets of any Company;
(k) any waiver of
any material rights or claims of any Company;
(l) any breach,
amendment or termination of any material contract, agreement,
license, permit or other right to which any Company is a party;
or
(m) any
transaction by any Company outside the ordinary course of its
business.
3.24
Deposit Accounts; Powers of Attorney . Each Company has delivered to Buyer on
Schedule 3.24 an accurate list as of the date of this
Agreement, of:
(a) the name of
each financial institution in which each such Company has accounts
or safe deposit boxes;
15
(b) the names in
which such accounts or boxes are held;
(c) the type of
accounts; and
(d) the name of
each person authorized to draw thereon or have access
thereto.
(e)
Schedule 3.24 also sets forth the name of each person,
corporation, firm or other entity holding a general or special
power of attorney from each such Company or any of its subsidiaries
and a description of the terms of such power. Each such power has
been or will be canceled on or before the Closing Date.
3.25
Proprietary Rights . Except as set forth on
Schedule 3.25 , no Company owns or has any right or
interest in any Intellectual Property, or any license or assignment
with respect thereto. No Company has granted to any third party a
license or other authorization to use any Intellectual Property of
such Company (except to any other one or more of the Companies),
and no third party owns any ownership interest in or holds any
claim, lien or other encumbrance, on any Company’s
Intellectual Property. Neither any Company nor the Sellers have
received any notification that any Company has infringed upon or is
infringing upon, or has engaged in or is engaging in any
unauthorized use or misappropriation of, any Intellectual Property
owned by or belonging to any other person; and there is no pending
or threatened claim, and no basis for the assertion of any valid
claim, against any Company with respect to any such infringement,
unauthorized use or misappropriation. Except for software used in
connection with the operation of the Business, no Company has
entered into any licensing agreements to use the Intellectual
Property of third parties, and no Company owes to any third parties
royalties for the use of Intellectual Property.
3.26
Validity of Obligations . The execution and delivery of
this Agreement by each Company and the performance of the
transactions contemplated herein have been duly and validly
authorized by the members of each Company, and this Agreement has
been duly and validly authorized by all necessary limited liability
company action and is a legal, valid and binding obligation of each
Company and the Sellers.
3.27
Relations with Governments . Neither any Company, nor
any shareholder, member, manager, director, officer, agent,
employee or other person acting on behalf of any Company, has used
any funds of any Company for improper or unlawful contributions,
payments, gifts or entertainment, or made any improper or unlawful
expenditures relating to political activity to domestic or foreign
government officials or others. Each Company has adequate financial
controls to prevent such improper or unlawful contributions,
payments, gifts, entertainment or expenditures. Neither any
Company, nor any shareholder, member, manager, director, officer,
agent, employee or other person acting on behalf of any Company,
has accepted or received any improper or unlawful contributions,
payments, gifts or expenditures. The Companies have at all times
complied, and are in compliance, in all material respects, with the
Foreign Corrupt Practices Act and in all material respects with all
foreign laws and regulations relating to prevention of corrupt
practices.
3.28
Conflicts of Interest . To the best of Sellers’
knowledge, except as set forth on Schedule 3.28 ,
neither (i) any past or present director, officer, manager or
member of any Company, nor (ii) Sellers, nor (iii) any
relative of any past or present director, officer,
manager
16
or member of
any Company or Sellers, nor (iv) any corporation, limited
liability company, partnership, trust or other entity of which any
such past or present officer, director, manager or member of any
Company:
(a) has a direct
or indirect interest in, or has ever been a party, directly or
indirectly, to any transaction with any Company, including without
limitation any agreement or other arrangement providing for the
furnishing of services by or to any Company or the rental of any
property from or to any Company, or otherwise requiring or
contemplating any payments by or to any Company;
(b) owns directly
or indirectly any interest in any corporation, firm, partnership,
trust or other entity or business which is a competitor, potential
competitor, customer, client or supplier of the Company or any
related business. For purposes of this Section 3.28(b), competitors
shall include, without limitation, persons or entities engaged in
waste transportation, recycling, transfer and/or disposal
operations;
(c) owns any legal
or equitable interest in, nor is the holder of liens on, any real
property, equipment, fixtures, vehicles, Intellectual Property,
contract rights, permits, licenses, accounts, general intangibles,
or other assets utilized by any Company in the operation of its
businesses;
(d) has any claims
against, or is owed any amounts (including, without limitation any
bonuses, commissions, royalties, rentals or other payments) by, any
Company; nor
(e) has incurred
any liability, contingent or otherwise, to, nor is indebted to, any
Company.
3.29
Environmental Matters . The Companies and Sellers have
delivered to Buyer all of the correspondence, agreements, notices
or other documents related to the items set forth on
Schedule 3.29 . Schedule 3.29 also contains
a list of all disposal sites used by the Business since its
inception.
Except as set
forth in Schedule 3.29 :
(a) no Company nor
any property (whether real or personal) which is or was formerly
leased, used, operated, owned or managed in whole or in part in any
manner by any Company or any of its organizational predecessors
(individually, any “Business Facility”, and
collectively, the “Business Facilities”) and all
operations of the Companies and their respective Business
Facilities, are in material compliance and have been in material
compliance with all applicable Environmental Laws;
(b) each Company
and its Business Facilities has obtained and is in material
compliance with all permits, licenses, registrations, approvals and
other authorizations (including all applications for all of the
foregoing) required under any Environmental Law for the business of
such Company as currently conducted (collectively,
“Environmental
17
Permits”), and Schedule 3.29
contains an accurate and complete listing of all of the Business
Facilities and all of the Environmental Permits of each
Company;
(c) there is no
past or present event, condition or circumstance that may interfere
with the conduct of any Company’s business in the manner now
conducted relating to such Company’s compliance with
Environmental Laws or which constitutes a material violation
thereof, or which could have a material adverse effect upon such
Company’s business or financial condition;
(d) during the
term of each Company’s ownership of or control of its
Business Facilities (“Ownership Term”), each Company
and its respective Business Facilities, and any operations thereon,
have not been and are not currently subject to an Environmental
Claim;
(e) there are no
Environmental Claims or investigations pending or threatened,
involving the release or threat of release of any Polluting
Substances from or on (i) any Business Facility of any
Company, or (ii) any other property where Polluting Substances
generated by any Company or originating from any Business Facility
of any Company have been recycled, stored, treated, released or
disposed, or (iii) any property to which Polluting Substances
were transported by any Company or (iv) any property on which
any Company performs or performed or may be required to perform
Remediation;
(f) there are no
Polluting Substances on any Business Facility of any
Comp
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