EXHIBIT 10.18
RESCISSION AND REFORMATION AGREEMENT
This Rescission and Reformation Agreement is entered into
effective as of November 1, 1996 (the "Effective Date") by and among
EMCON, a California corporation ("EMCON"); Organic Waste Technologies,
Inc., a Delaware corporation (the "Company"); and the undersigned
former holders of the Company's common stock and options to acquire
the Company's common stock (individually a "Management Stakeholder,"
and collectively the "Management Stakeholders").
RECITALS
A. Pursuant to a Stock Purchase Agreement entered into as of
January 30, 1996 (the "Stock Purchase Agreement"), the Company
purchased (the "Purchase") from the Management Stakeholders some or
all of the shares of the Company's common stock (the "Shares at
Issue") and options to purchase shares of the Company's common stock
(the "Options at Issue") held by each such Management Stakeholder as
set forth opposite such Management Stakeholder's name on Exhibit A in
exchange for a convertible promissory note executed by the Company, a
copy of which is set forth on Exhibit B (individually a "Note" and
collectively the "Notes").
B. EMCON guaranteed payment of the Notes and entered into a
note agreement in the form set forth as Exhibit C (the "Note
Agreement"), pursuant to which, among other obligations, EMCON agreed
to (i) exchange each Note for shares of EMCON common stock if the Note
had not been converted into the Company's common stock in accordance
with the terms of the Note prior to the fifth anniversary of the date
of the Note Agreement and (ii) loan each Management Stakeholder,
pursuant to the terms of a loan agreement set forth as Exhibit A to
the Note Agreement (the "Loan Agreement"), an amount equal to any
federal, state and local income taxes required to be paid by each
Management Stakeholder as a result of the Purchase. None of the
obligations set forth in the Note Agreement has arisen and EMCON has
not executed any Loan Agreement.
C. The purchase of the Options at Issue by the Company
resulted in cancellation of the Options at Issue. The parties intended
that the portion of the principal amount of the Notes representing
payment for the Options at Issue, plus interest related thereto
(collectively the "Option Payment Amounts"), be a mere unfunded,
unsecured promise of the Company, guaranteed by EMCON, to pay the
Option Payment Amounts in the future, when due.
D. The parties desire to rescind the Purchase ab initio so
that the Management Stakeholders shall own the Shares at Issue and
Options at Issue held by each of them immediately prior to
consummation of the Purchase.
E. The Management Stakeholders desire to sell their Shares at
Issue and the Company desires to acquire the Shares at Issue in
exchange for new promissory notes (the "New Notes") in the same form
set forth in the Notes, but in the amounts set forth in Exhibit D. The
Management Stakeholders desire to have their Options at Issue
canceled, and the Company desires to cancel such Options at Issue,
pursuant to the terms of this Agreement.
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F. Capitalized terms not defined herein have the same meaning as set
forth in the Stock Purchase Agreement.
AGREEMENT
1. RESCISSION. EMCON, the Company and Management Stakeholders hereby
rescind the Purchase ab initio, and thereby undo such Purchase so as to place
the parties for all purposes with respect to the Shares at Issue and the Options
at Issue in the same position as of the Effective Date in which they would have
been had such Purchase never occurred. To effect such rescission, the parties
agree that:
(a) STOCK PURCHASE AGREEMENT. With respect to the Purchase, the
Stock Purchase Agreement is of no force and effect, except as otherwise set
forth herein. All of the parties to the Stock Purchase Agreement remain bound by
the Stock Purchase Agreement for all other purposes, including, by way of
example but not by way of limitation, (i) all representations, warranties,
covenants, agreements, objections and rights other than with respect to the
Purchase, and (ii) all representations, warranties, covenants, agreements,
obligations, rights and actions of any person who is a Management Stakeholder in
any capacity other than as a Management Stakeholder. In addition, Sections 12.1
to 12.8 of the Stock Purchase Agreement apply with full force and effect to the
transactions contemplated by this Agreement.
(b) OPTIONS AT ISSUE AND SHARES AT ISSUe. Pursuant to this Section
1, the Management Stakeholders own the Shares at Issue and Options at Issue as
of the Effective Date, and the assignment of the Options at Issue executed by
each of the Management Stakeholders pursuant to the Stock Purchase Agreement and
the cancellation thereof is null and void.
(c) NOTES. The Management Stakeholders have marked the Notes
canceled and have returned the original, executed Notes to the Company.
(d) NOTE AGREEMENT. The Note Agreement is null and void.
2. SALE OF SHARES AT ISSUE. The Management Stakeholders hereby sell
their Shares at Issue to the Company and the Company hereby buys the Shares at
Issue of each of the Management Stakeholders in exchange for a New Note in the
amount and form set forth as Exhibit D. The parties hereto agree that as a
result of the sale pursuant to this Agreement, it shall not be necessary for the
Company to reissue certificates for the Shares at Issue to effect the rescission
set forth in Section 1.
3. CANCELLATION OF OPTIONS AT ISSUE. The Options at Issue are hereby
canceled in exchange for the Company's unfunded, unsecured promise to pay to
Management Stakeholders the amounts set forth on Exhibit D (the "Option
Cancellation Amounts"), on the dates set forth on Exhibit D. The Company shall
have no right to prepay the Option Cancellation Amounts.
(a) ISSUANCE OF COMPANY STOCK. If the Company consummates a sale of
the Company's common stock (the "OWT Common Stock") to the public pursuant to a
firm commitment underwritten public offering in an amount of at least Ten
Million Dollars ($10,000,000) or any lesser amount as may be approved in writing
by Mark H. Shipps, (the "Initial Public Offering") at any time prior to the
expiration of the term hereof, upon the consummation of the Initial Public
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Offering, the Option Base Amount as set forth on Exhibit D shall be
automatically converted (the "Conversion") into shares of OWT Common Stock,
pursuant to the terms of this Section 3. In such event, a pro-rata portion of
the unpaid Option Cancellation Amounts for each of the first through fifth
periods set forth on Exhibit D shall be immediately due and payable by the
Company to the Management Stakeholders, based on the Option Cancellation Amount
for each such period multiplied by the ratio of (i) the number of days within
such period which have elapsed prior to the Conversion divided by (ii) the total
number of days in such period (the "Period Ratio"); provided, however, that if
the Option Cancellation Amount for the first period has not been paid in full,
the amount paid shall include the First Period Acceleration Penalty plus the
product of (x) the Remainder set forth on Exhibit D, multiplied by (y) the
Period Ratio for the first period.
(1) CONVERSION PRICE. The number of shares of OWT Common Stock
into which the Option Base Amount shall be converted shall be the amount of the
Option Base Amount, divided by the OWT Conversion Price. The OWT Conversion
Price shall initially be Four Dollars and Eighty Cents ($4.80), and shall be
adjusted as set forth in Section 3(a)(2) hereof.
(2) ADJUSTMENTS TO OWT CONVERSION PRICE. The OWT Conversion
Price shall be adjusted as set forth in this section 3(a)(2):
(i) SUBDIVISIONS. If the Company shall at any time
subdivide the outstanding shares of OWT Common Stock, the OWT Conversion Price
in effect immediately prior to such subdivision shall be proportionately
decreased, and in case the Company shall at any time combine the outstanding
shares of OWT Common Stock, the OWT Conversion Price in effect immediately prior
to such combination shall be proportionately increased, effective at the close
of business on the date of such subdivision or combination, as the case may be.
(ii) STOCK DIVIDENDS. If the Company shall at any time pay
a dividend with respect to OWT Common Stock payable in OWT Common Stock, then
the OWT Conversion Price in effect immediately prior to the record date for
distribution of such dividend shall be adjusted to that price determined by
multiplying the OWT Conversion Price in effect immediately prior to such record
date by a fraction (i) the numerator of which shall be the total number of
shares of OWT Common Stock outstanding immediately prior to such dividend and
(ii) the denominator of which shall be the total number of shares of OWT Common
Stock outstanding immediately after such dividend.
(iii) RECLASSIFICATION OR MERGER. If any reclassification,
change or conversion of the OWT Common Stock occurs (other than as a result of a
subdivision or combination described above and other than upon any Acceleration
Event, as defined below), the Management Stakeholders shall have the right to
receive, the kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change or conversion by a holder
of the number of shares of OWT Common Stock into which the Option Base Amount
could then be exchanged in the event that an Initial Public Offering had
occurred. The provisions of this subparagraph (iii) shall similarly apply to
successive reclassifications, changes, and conversions.
(iv) ANTI-DILUTION PROTECTion. If the Company issues and
sells shares of OWT Common Stock to EMCON or affiliated companies of EMCON, at a
price per share that is less than the OWT Conversion Price then in effect, then
the OWT Conversion Price shall be adjusted to equal such per share price.
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(3) Participation in Initial Public Offering. If the Company
undertakes an Initial Public Offering or any other public registered
underwritten offering pursuant to the Securities Act of 1933, as amended (the
"Act"), each Management Stakeholder may, at his option, sell the shares of OWT
Common Stock into which the Option Base Amount may be converted pursuant to
Section 3 hereof on a pro rata basis with EMCON and the other holders of OWT
Common Stock participating in such offering, subject to the approval of the
managing underwriters for such offering. This right shall expire at such time as
Management Stakeholder may sell all shares of OWT Common Stock into which the
Option Base Amount may be converted in any three month period pursuant to Rule
144 under the Act. The procedures and terms of such registration rights shall be
as set forth in Sections 4 to 7 of the Agreement Note (as defined below).
(b) OFFSET.
(1) The Option Cancellation Amounts due hereunder may be
reduced by any amounts due from the Management Stakeholder to EMCON pursuant to
Section 12.2 of the Stock Purchase Agreement, which section remains in full
force and effect.
(2) In addition, the Option Cancellation Amounts may be reduced
by any amount outstanding from the Management Stakeholders under the Loan Note
(as defined in the Note Agreement) which the Management Stakeholders then owes
to OWT or EMCON.
(c) ACCELERATION.
(1) Notwithstanding anything to the contrary herein, if any of
the events set forth in paragraphs (a) through (h) of this Section 3(c) (each,
an "Acceleration Event") shall occur at any time after the date hereof, then, at
the option of the Management Stakeholders, the Option Base Amount, plus a
pro-rata portion of the unpaid Option Cancellation Amounts for each of the first
through fifth periods set forth on Exhibit D shall be immediately due and
payable by the Company to the Management Stakeholders. The pro-rata portion of
the unpaid Option Cancellation Amounts for each period shall be based on the
Option Cancellation Amount for each such period multiplied by the Period Ratio;
provided, however, that if the Option Cancellation Amount for the first period
has not been paid in full, the amount paid shall include the First Period
Acceleration Penalty plus the product of (x) the Remainder set forth on Exhibit
D, multiplied by (y) the Period Ratio for the first period. An Acceleration
Event includes the following:
(i) upon a consolidation or merger of EMCON with or into
any other corporation or corporations (other than a wholly-owned subsidiary of
EMCON and other than a merger in which EMCON is the surviving corporation), or
the sale, transfer or other disposition of all or substantially all of the
assets of EMCON;
(ii) upon a change in ownership of Fifty Percent (50%) or
more, in a single transaction, of the stock of the Company, other than to an
affiliate or affiliates of EMCON which does not materially alter EMCON's direct
or indirect ownership of the Company;
(iii) upon a change in ownership of Fifty Percent (50%) or
more, in a series of two (2) or more transactions, of the outstanding stock of
the Company, other than to an affiliate or affiliates of the Company and a
substantial diminution in the responsibilities of Mark H. Shipps with respect to
the Company in his capacity as an employee of EMCON;
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(iv) upon a change in ownership of Thirty-Five Percent
(35%) or more of the stock of EMCON to a single buyer or an affiliated group of
buyers, resulting in a change in the majority of the board of directors of EMCON
from the board of directors as it existed immediately prior to such change in
ownership, or upon a change in ownership of Fifty Percent (50%) or more, in a
single transaction, of the stock of EMCON;
(v) upon the liquidation, dissolution or winding up of the
Company or the consolidation or merger of the Company with and into another
corporation (other than a merger in which the Company is the surviving
corporation);Error! Bookmark not defined.
(vi) upon the occurrence of any transaction, without the
consent of Mark H. Shipps, in which Twenty Percent (20%) or more of the
outstanding stock of the Company becomes owned by persons other than EMCON or an
affiliate or affiliates of EMCON;
(vii) upon the death of the Management Stakeholders or
termination of the Management Stakeholders' employment by the Company, other
than a Termination for Cause. "Termination for Cause" is intended to embrace
intentionally or grossly negligent conduct on the part of the Management
Stakeholders which is materially detrimental to the operations and/or reputation
of the Company or EMCON. By way of illustration such actions would include (but
would not be limited to) a material breach of the Management Stakeholders'
obligations under any employment agreement between the Management Stakeholders
and OWT and/or conviction of a crime (other than minor infractions such as
parking or similar traffic violations), moral turpitude and revocation by the
applicable licensing authority of professional licenses (if any) material to the
Management Stakeholders' ability to perform the Management Stakeholders'
employment obligations;
(viii) upon a fundamental change in EMCON's current
strategy of focussing a material amount of EMCON's resources on services
relating to the design, construction, ownership, operation and maintenance of
infrastructure; provided, however, that upon any Acceleration Event, no amount
shall be due and payable hereunder in the event that the Management Stakeholder
has exchanged this Note for common stock of EMCON, pursuant to the Note
Agreement.
4. NOTE AGREEMENT. The parties hereto shall enter into a note agreement
substantially in the form attached hereto as Exhibit E.
5. CONSISTENT TREATMENT. Each party shall treat the Purchase as
rescinded for all purposes and shall take no action inconsistent with such
treatment.
6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants, as of the Date of the Deposit, to EMCON that, except as
set forth on the Company Disclosure Schedule and without giving effect to the
Contemplated Transactions:
(a) CORPORATION ORGANIZATION.
(1) The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power to own, operate and lease its
properties and to conduct its business as now being conducted. The Company is
duly qualified or licensed to do business, and is in good standing as a foreign
corporation, in each state or other jurisdiction in which it owns or leases
49
properties or where the nature of its business or operations requires such
qualification or licensing, unless the failure to do so would not have a
material adverse effect on the Company's assets, business, operations or
financial condition. To the knowledge of the Company, the Company has obtained
all approvals, authorizations, consents, licenses, clearances and orders of, and
has currently effective all registrations with, all governmental and regulatory
authorities that are necessary to the conduct of its business or operations as
now being conducted, except where the failure to do so would not have a material
adverse effect on the Company.
(2) The only Subsidiaries of the Company are: Omni Gen
Technologies, Inc., an Ohio corporation ("Omni Gen"); Keystone Recovery, Inc.,
an Ohio corporation ("Keystone"); LFG Specialties, Inc., an Ohio corporation
("LFG"); O.W.T. Construction Company, an Ohio corporation ("OWT"); and American
Landfill Supply Co., an Iowa corporation ("ALS") (collectively, Omni Gen,
Keystone, LFG, OWT and ALS, the "Company Subsidiaries"). (Except where otherwise
indicated or, given the context otherwise appropriate, references herein to the
"Company" shall also include the Company Subsidiaries.) Except for a five
percent (5%) minority interest in Keystone, as of the Closing Date, the Company
will own all of the issued and outstanding capital stock of each of the Company
Subsidiaries. Each of the Company Subsidiaries is duly incorporated, validly
existing and in good standing in the state of its incorporation. Each of the
Company Subsidiaries has all requisite corporate power to own, operate and lease
its properties and to conduct its business as now being conducted. Each of the
Company Subsidiaries is duly qualified or licensed to do business, and is in
good standing as a foreign corporation in each state or other jurisdiction in
which it owns or leases properties or where the nature of its business or
operations requires such qualification or licensing, unless the failure to do so
would not have a material adverse effect on its assets, business, operations or
financial condition. To the knowledge of the Company, each of the Company
Subsidiaries has obtained all approvals, authorizations, consents, licenses,
clearances and orders of, and has currently effective all registrations with,
all governmental and regulatory authorities which are necessary to the conduct
of its business or operations as now being conducted, except where the failure
to do so would not have a material adverse effect on the Company.
(b) CAPITALIZATION.
(1) The authorized capital stock of the Company consists solely
of 7,500,000 shares of common stock, $0.01 par value, and 2,841,481 shares of
preferred stock, $0.01 par value, 1,360,000 of which are designated Series A
Preferred Stock, 740,740 of which are designated Series B Preferred Stock and
740,741 of which are designated Series C Preferred Stock. There are currently
issued and outstanding 712,000 shares of common stock, 1,360,000 shares of
Series A Preferred Stock, 740,740 shares of Series B Preferred Stock and 740,741
shares of Series C Preferred Stock. The Company Disclosure Schedule sets forth a
true and complete description of the authorized, issued and outstanding shares
of the capital stock of the Company and each of the Company Subsidiaries showing
all stockholders of the Company and each of the Company Subsidiaries as of the
date of this Agreement. All of the issued and outstanding shares of the Company
and the Company Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable except where failure to be so would not have a material adverse
effect on the business, financial position or operating results of the Company.
All such shares have been issued in accordance with federal and applicable state
securities laws concerning the issuance of securities. The Company Disclosure
Schedule accurately lists all holders of the Company's capital stock and each
such person's actual ownership interest. The rights, preferences and privileges
of the Company's capital stock are as stated in the Company's Certificate of
Incorporation, as heretofore amended.
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(2) Except for the Options and as otherwise set forth in the
Company Disclosure Schedule, no options, warrants, conversion privileges,
preemptive rights, rights to first refusal or other rights, agreements or
commitments written or otherwise by the Company or to the knowledge of the
Company by any Management Stakeholder are currently outstanding to purchase or
otherwise receive any of the capital stock of the Company or the Company
Subsidiaries.
(3) The Company has delivered to the Buyer complete and
accurate copies of the Certificates of Incorporation and Bylaws (including all
amendments thereto) of the Company and each of the Company Subsidiaries. Not
less than twenty (20) days before the Closing Date the Company will make
available to the Buyer the minute books of the Company and the Company
Subsidiaries containing minutes for all meetings of, and written consents issued
by the Company and executed by, each such corporation's stockholders, Board of
Directors and all committees of such Board since the date of organization of
such corporation.
(c) CORPORATE AUTHORITY. The Company has all requisite corporate
authority and power to execute and deliver this Agreement and the other
agreements referenced herein and to perform all of its obligations with respect
to the Contemplated Transactions. The execution, delivery and performance of
this Agreement and the other agreements referenced herein and the consummation
of the transactions contemplated hereby and thereby have been duly authorized,
or prior to the Closing will be duly authorized, by the Company's Board of
Directors and, if required, by its stockholders.
(d) DISSOLUTION; FORFEITURE. No action at law or in equity and to
the Knowledge of the Company no investigation or proceeding, whatsoever is now
pending or threatened to: (a) liquidate, dissolve or disincorporate the Company
or any of the Company Subsidiaries, (b) declare any of the corporate rights,
powers or privileges of the Company or any of the Company Subsidiaries, to be
null and void or otherwise than in full force and effect, (c) declare that the
Company or any of the Company Subsidiaries, or their respective Boards of
Directors or any of their respective officers, agents or employees has exceeded
or violated any of their respective corporate rights, powers or privileges, or
(d) obtain any decree, order, judgment or other judicial determination or
administrative or other ruling that would or might impede or detract from any of
the corporate rights, powers or privileges now vested in or claimed by the
Company or any of the Company Subsidiaries.
(e) THE COMPANY FINANCIAL STATEMENTS. The consolidated financial
statements of the Company for the fiscal years ended December 31, 1993 and
December 31, 1994 have been prepared and audited in accordance with GAAP (the
"Audited Financial Statements") and the consolidated financial statements of the
Company for year ended December 31, 1995 (the "Unaudited Financial Statements")
(collectively, the Audited Financial Statements and the Unaudited Financial
Statements being referred to as the "Company Financial Statements") have been
prepared in accordance with GAAP and fairly present the financial position of
the Company in accordance with GAAP as at the dates thereof; provided, however,
that the Unaudited Financial Statements do not contain the footnote disclosures
required by GAAP.
(f) Absence of Unaccrued or Undisclosed Liabilities. Except for
claims, liabilities or obligations:
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(1) which were properly reflected or adequately reserved
against in the balance sheet included as part of the Unaudited Financial
Statements;
(2) which were incurred in the Ordinary Course of Business
since December 31, 1995;
(3) which are listed on the Company Disclosure Schedule;
(4) which are less than $25,000 in any single case; or
(5) which result from any failure to properly account for any
of the Company's estimated project costs and/or project revenue recognized in
the Audited Financial Statements or Unaudited Financial Statements and which,
taken in the aggregate with all other accrued project and related costs and/or
revenue recognized as of December 31, 1995, do not result in a net reduction in
the aggregate profit recognized by the Company on all projects subsequent to
December 31, 1995,the Company does not have any material liabilities whether
absolute, accrued, unaccrued, contingent or otherwise whether due or to become
due.
Except as set forth in paragraphs (1) through (5) of this
Section 6(f), the Company does not have knowledge of and has no reasonable
grounds to know of any basis for any assertion against the Company of any
material claims, liabilities or obligations of any nature required by GAAP to be
reflected in a corporate balance sheet which have not been fully reflected or
reserved against in the December 31, 1995 balance sheet included as part of the
Unaudited Financial Statements, provided, however, that no limitation set forth
in this Section 6(f) shall in any way affect any other representation or
warranty contained in this Agreement.
(g) ABSENCE OF CERTAIN CHANGES. Since December 31, 1995 there
has not been any: (1) material adverse change in the business, financial
condition or operations of the Company and the Company Subsidiaries taken as a
whole, (2) recapitalization, amendment to the Certificate of Incorporation or
Bylaws or any change in, authorization, creation, issuance or agreement for
issuance of, the capital stock or any securities convertible into, or options,
warrants or other rights to subscribe to any shares of capital stock of the
Company or the Company Subsidiaries, or any declaration setting aside or payment
of any dividend or distribution (whether in cash, securities or property) with
respect thereto, except as contemplated hereby, (3) increase in the
compensation, direct or indirect, payable to any of the officers or employees of
the Company or the Company Subsidiaries, including adoption of or increase in
any bonus, insurance, pension or other employee benefit plan, payment or
arrangement, or any other agreement or arrangement with its officers, employees
or stockholders, except as contemplated hereby, (4) unwaived default in respect
of any Material Contracts (as defined in Section 6(n), except for such defaults,
if any, which do not have a material adverse effect on the financial position,
business or operating results of the Company, (5) material change in the methods
and procedures employed in keeping the books and records of the Company or the
Company Subsidiaries or (6) strike or material labor dispute.
(h) TAXES. All tax returns of the Company required by law
(including, without limitation, all income, unemployment compensation, worker's
compensation, Social Security, excise, privilege and franchise tax laws of the
United States or any state or municipal subdivision thereof) to be filed through
the Closing Date (true and complete copies of which have been made available to
the Buyer) have been or will be duly and timely filed, and all taxes,
assessments, contributions, fees and governmental charges or impositions shown
on said returns or reports (other than those not yet due and payable or payable
without penalty or interest) have been paid, except where any failure to so file
52
or pay would, individually or in the aggregate, have a material adverse effect
on the Company and the Company subsidiaries, taken as a whole. The Company has
not received any notice of assessment of any federal, state, municipal or other
tax upon or measured by its income and, to the Company's knowledge, there is no
basis for an additional assessment of any such tax, except for those for which
the Company has established adequate reserves. The Company has not knowingly
waived any law or regulation fixing, or consented to the extension of, any
period of time for the assessment of any tax or other governmental imposition,
or become committed so to do. There are no audits of the Company pending and
there are no matters under discussion with any federal, state, local or foreign
authorities with regard to the payment of any taxes by the Company. There are no
issues that have been raised by the IRS or other taxing authority in connection
with an examination or otherwise which by application of similar principles
could reasonably be expected to result in a proposed deficiency for any period
not examined.
(i) TITLE TO PROPERTIES; ACCOUNTS RECEIVABLE
(1) Except for property and assets that the Company has
disposed of in the Ordinary Course of Business, the Company has, and will have
at the Closing Date, good and marketable title to all properties and assets
shown or represented on the balance sheet included as part of the Unaudited
Financial Statements or acquired since December 31, 1995, free and clear of all
mortgages, pledges, liens, defects in title, conditional sale agreements and
other encumbrances, except for liens, encumbrances and defects in title in
respect of property or assets of the Company which: (i) are incidental to the
conduct of the Company's business; (ii) have arisen in the Company's Ordinary
Course of Business; (iii) were not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than credit arrangements
related to purchase money liens); and (iv) do not in the aggregate materially
detract from the property and assets of the Company. The Company has performed
all the obligations required to be performed by it with respect to all assets
leased by it through the date hereof, except where the failure to perform would
not have a material adverse effect on the business or financial condition of the
Company. The Company enjoys peaceful and undisturbed possession of all of its
offices, warehouses, buildings and all other real property and related
facilities, whether owned, leased or operated (collectively, the "Facilities"),
and such Facilities are not subject to any claims, liens, pledges, options,
charges, easements, security interests, rights-of-way, encumbrances or other
rights, or any encroachments, building or use restrictions, exceptions,
reservations or limitations which in any material respect interfere with or
impair the present and continued use thereof in the usual and normal conduct of
its business. There are no pending or threatened condemnation proceedings
relating to any of the Facilities. The Facilities and the real property
improvements (including leasehold improvements), equipment and other tangible
assets owned or used by the Company at the Facilities are insured in amounts
believed by the Company to be adequate and, to the Knowledge of the Company, are
structurally sound with no material defects. Said items are not subject to any
commitment or other arrangement for their sale by the Company or use by third
parties other than commitments or arrangements entered into in the Ordinary
Course of Business. The assets are valued at or below the lower of fair market
value or actual cost less an adequate and proper depreciation charge. For tax
purposes, the Company has not depreciated any of the assets in any manner
inconsistent with applicable IRS guidelines, if any.
(2) All tangible property, real and personal, owned or
leased by the Company is in good operating condition and repair, except for
ordinary wear and tear and any defects the cost of repairing which, singly or in
53
the aggregate, would not be material or are accrued for on the Company Financial
Statements. To the knowledge of the Company, such property is in conformity with
all applicable laws, ordinances, orders, regulations, rules and other
requirements (including applicable zoning, environmental, motor vehicle safety
or standards, occupational safety and health laws and regulations) currently in
effect and relating thereto, except where the failure to conform would not have
a material adverse effect on the business, operations or financial condition of
the Company.
(3) All accounts receivable of the Company shown on the
Company Financial Statements are valid, genuine and subsisting, arose in the
Ordinary Course of Business, and the aggregate amount thereof less the reserve
for doubtful accounts with respect thereto set forth in the Company Financial
Statements, are, to the best knowledge of the Company after due inquiry, current
and collectible within customary payment terms.
(j) Proprietary Rights.
(1) The Company owns the rights to use all trademarks,
trade secrets, trade names, copyrights, processes, designs, formulas, know-how,
inventions, licenses and intellectual property rights used in connection with
its business and the same are believed by the Company to be sufficient to
conduct such business as it is now or heretofore has been conducted with no
known or asserted conflict with or infringement of the asserted or actual rights
of others. The Company has no Knowledge of any infringement by any third party
in connection with any of the foregoing and the Company has not taken or omitted
to take any action which would have the effect of waiving any of its rights
thereunder, in each case except where such infringement or waiver would not have
a material adverse effect on the business, prospects, condition (financial or
otherwise) or results of operations of the Company. To the Knowledge of the
Company, no third party has filed or been issued or granted any applications for
patents, trademarks, trade names or registered copyrights relating to the
Company's assets.
(2) The Company Disclosure Schedule lists all patents,
patent applications, trademarks, trade names and registered copyrights owned by
the Company. Except as set forth in the Company Disclosure Schedule, the Company
is not required to pay any royalty, license fee or similar type of compensation
in connection with the conduct of its business as it is now or heretofore has
been conducted.
(3) The Company has obtained written agreements from all
required parties and entities assigning to the Company any material proprietary
rights relating to the Company's assets. Such agreements are currently valid and
in full force and effect and except as set forth in the Company Disclosure
Schedule, do not contain any provisions or restrictions with regard to the
rights granted to the Buyer under this Agreement. Except as set forth on the
Company Disclosure Schedule, each of the Company's employees and any other
Person who, either alone or in concert with others, developed, invented,
discovered, derived, programmed, or designed any trade secrets of the Company,
or who have knowledge of or access to information related to them, have entered
into appropriate confidentiality agreements, copies of which will, at least
twenty (20) days prior to the Closing Date, have been provided to the Buyer. All
material trade secrets of the Company are currently protectable and are not part
of the public knowledge or literature, nor have they been used, divulged, or
appropriated for the benefit of any past or present employees or other persons,
or to the detriment of, the Company.
(k) CUSTOMER LISTS. The Company has provided the Buyer access
to a complete and accurate list of each of the material customers of the
54
Company. The relationships between the Company and its active customers and
suppliers are, in the aggregate, in good standing, and since December 31, 1994,
no material customer or supplier has canceled or terminated, or, to the
Knowledge of the Company, threatened to cancel, terminate or change its
relationship with the Company in any manner adverse to the Company.
(l) BENEFIT PLANS AND ARRANGEMENTS.
(1) Except as set forth in the Company Disclosure
Schedule, or as otherwise contemplated by this Agreement, the consummation of
the Contemplated Transactions will not result in any payment (whether of
severance pay or otherwise) becoming due from the Company to any employee,
consultant or other third party.
(2) The Company Disclosure Schedule lists all pension,
retirement, stock purchase, stock option, stock bonus, savings or profit sharing
plan, individual employment agreement, bonus or incentive compensation programs,
deferred compensation agreements, severance pay plans, consultant, bonus, or
group insurance contracts, or any other material incentive, welfare or employee
benefit plan, or similar arrangement, understanding or course of dealing,
including all employee benefit plans and employee pension benefit plans as
defined in Section 3(3) of ERISA (the "Employee Plans").
(3) With respect to the Employee Plans, the Company will,
at least twenty (20) days prior to the Closing Date, have delivered or made
available to the Buyer copies of any: (1) plans and related trust documents and
amendments thereto; (ii) the most recent summary plan descriptions and the most
recent annual report; (iii) annual reports on Form 5500 which were filed in each
of the most recent three (3) plan years, including, without limitation, all
schedules thereto and all financial statements with attached opinions of
independent accountants; (iv) Form PBGC-1 which was filed in each of the most
recent three (3) plan years; (v) the most recent actuarial valuation; and (vi)
the most recent determination letter received from the IRS. Such financial
statements fairly present the financial condition of each Employee Plan in
accordance with United States generally accepted accounting principles applied
on a consistent basis. All Employee Plans have been administered in substantial
compliance with their terms, ERISA to the extent applicable, and, where
applicable, Section 401 of the Code.
(4) No event of the type set forth in Section 4043(b) of
ERISA has occurred and is continuing with respect to Employee Plans except
insofar as such an event may arise as a result of the consummation of the
Contemplated Transactions or would not have a material adverse effect upon the
Company's business, financial position or operating results. There exists no
material violation of ERISA with respect to the filing of reports, documents,
and notices regarding the Employee Plan participants or beneficiaries. No
action, suit, or proceeding is pending, nor, to the Knowledge of the Company, is
any threatened or imminent, with respect to the assets of any of the trusts
under any Employee Plan. All amendments required to bring an Employee Plan into
conformity, in all applicable and material respects, with ERISA have been made.
Any bonding with respect to an Employee Plan required under ERISA is in full
force and effect. To the Knowledge of the Company, the Company has not incurred
any liability, pursuant to Subtitle A of Title IV of ERISA, to the Pension
Benefit Guaranty Corporation.
(5) No breach of fiduciary responsibility has occurred
with respect to any of the Employee Plans other than such breach, if any, which
would not have a material adverse effect on the Company's business, financial
position or operating results. There is no suit, litigation or claim (other than
55
routine benefit claims) pending or, to the Knowledge of the Company, threatened
against the Company or any fiduciary of any Employee Plan involving any Employee
Plan or against any such plan or its assets by any employee or former employee
(or beneficiary thereof) of the Company which individually or in the aggregate
would adversely affect the financial condition of any such Employee Plan.
(m) Compliance with Laws; Legal Proceedings.
(1) The Company is not in violation of, or in default with
respect to, any term or provision of (i) its Certificate of Incorporation or
Bylaws, or (ii) any judgment, writ, order, injunction, or decree of any court or
of any federal, state, or municipal agency or authority in any case or
proceeding expressly naming the Company.
(2) To the Knowledge of the Company, the Company and its
operations are in compliance with applicable statutes, ordinances, regulations,
requirements and orders of the federal government and of all states,
municipalities, and agencies thereof, and of all other authorities having
jurisdiction in respect of any of its assets or operations (including any
applicable foreign government or agency or subdivision thereof), except where
the failure to do so would not have a material adverse effect on the Company.
(3) The Company has not been threatened with, nor is it a
party to, directly or indirectly, nor, to the Knowledge of the Company, is there
any set of facts that is likely to give rise to, any material legal action,
governmental investigation, or other proceeding (governmental or private),
including investigations, inquiries, citations, complaints, orders or
stipulations by any federal, state or local agency or governmental unit, and
there are no judgments, orders, restrictions or decrees of a continuing nature
outstanding against the Company. The Company has not been threatened with, nor,
to the Knowledge of the Company is there any set of facts that is likely to give
rise to, a charge of any material violation of any provision of any federal,
state, local or other law (including common law), or administrative regulations
in respect of its business or property.
(n) Contracts and Obligations. The Company Disclosure Schedule
sets forth a true and complete list of the following agreements and instruments
to which the Company is a party: (a) all executory contracts, agreements and
instruments having a total contract price in excess of $50,000; (b) all
contracts, agreements or instruments which are in the nature of teaming
agreements, joint venture agreements, non-compete agreements, franchise
agreements, exclusive license agreements or other similar agreements restricting
access to any business opportunity of the Company; (c) all loan or debt
agreements, guarantees, indemnities and bonding commitments; (d) all license or
technology transfer agreements; (e) all leases, subleases and equipment leases,
having a total contract price in excess of $50,000; (f) all agreements between
the Company, on the one hand, and any of the officers, directors or
stockholders; (g) all material agreements between the Company, on the one hand,
and any other employees of the Company on the other hand; (h) all material
licenses or permits issued by any government agency or authority for the benefit
of the Company and/or one or more of the Company Subsidiaries; (i) any
management or consultation agreement not terminable at will without liability;
(j) any contracts or agreements requiring the payment of fees or commissions in
connection with any sale of all or substantially all of the Company's stock or
assets or any sale of a substantial interest in the Company; and (k) any other
agreement which materially affects the Company's business, financial position or
56
operating results or which was entered into other than in the Ordinary Course of
Business (collectively, the "Material Contracts"). The Company has delivered to
the Buyer true and complete copies of each of the Material Contracts. The
Company is not in material violation of, or in default with respect to, any
Material Contract and the Material Contracts are valid, binding and enforceable,
subject only to applicable bankruptcy, insolvency and similar laws affecting
creditors rights generally and subject, as to enforceability, to general
principles of equity. To the Knowledge of the Company, the relationships between
the Company and the other parties to each of the Material Contacts are in good
standing, and no such other contract party has canceled or terminated, or
threatened to cancel, terminate or change in any manner adverse to the Company
such relationship or the terms of any Material Contract.
(o) EMPLOYEE RELATIONS.
(1) The Company has no union or collective bargaining
agreement, any contract or other agreement with any labor organization or with
any employee or consultant which is not terminable at will by the Company,
without liability, and no such contract or agreement is under discussion by
management of the Company with any employee or consultant. There are no pending
or threatened (i) strikes, work stoppages, slowdowns or picketing respecting
employees of the Company, (ii) unfair labor practice complaints against the
Company, or (iii) statutes, contracts or agreements, domestic or foreign, which
will obligate the Company to make any severance payments as a consequence of the
execution of this Agreement or the consummation of the Contemplated
Transactions.
(2) The Company has not received notice that there is any
key employee who intends to leave the Company's employ as a result of, or at the
conclusion of, the Contemplated Transactions. The Company's relationship with
its employees is good.
(p) INSURANCE. The properties and risks of the Company are
covered by valid and currently effective insurance policies issued in favor of
the Company, which policies are set forth on the Company Disclosure Schedule,
and the Company is included as an insured party under such policies, with full
rights as loss payee. The Company Disclosure Schedule contains a list and brief
description of each insurance policy (copies of which have been previously
provided to the Buyer) maintained with respect to the Company (or such
corporation's assets or operations), which provides continuing coverage as of
the date hereof. The Company Disclosure Schedule also includes a list and brief
description of individual claims in excess of $10,000 now pending or made during
the 36-month period immediately preceding the date of this Agreement, by or on
behalf of the Company under any insurance policies.
(q) ENVIRONMENTAL COMPLIANCE.
(1) The Company has all material permits, licenses and
other authorizations required under applicable laws and regulations relating to
pollution control and protection of the environment necessary for the operation
of its Facilities. The Company is not in material violation of any of the terms
or conditions of any such permits, licenses, leases, or authorizations. To the
Knowledge of the Company, the Company has not acted or failed to act in
violation of any law or regulation, order or other requirement of governmental
authorities with respect to the pollution or the atmosphere, surface water,
groundwater and noise, the handling of toxic or hazardous waste material or
other matters related to the environment. There are no pending or, to the
Knowledge of the Company, threatened civil or criminal actions, notices of
violations or administrative proceedings relating to pollution control or
protection of the environment that would have a material adverse effect on the
business or financial condition of the Company.
57
(2) To the Knowledge of the Company, there are no material
conditions, circumstances, activities, practices, incidents, actions or plans
which would be reasonably likely to interfere with or prevent compliance or
continued compliance by the Company with any environmental laws currently in
force or with any existing regulation, code, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, or which may give rise to any common law or other legal liability,
including without limitation, liability under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or similar state, foreign or
local laws, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, notice of violation, study or investigation of or against
the Company, 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 workplace or the environment,
of any pollutant, contaminant, chemical, or industrial, toxic or hazardous
material, substance or waste on any properties owned or leased by, or under the
direct control of, the Company. Without in any way limiting the foregoing, no
release, emission or discharge to the environment of any hazardous substance (as
that term is currently defined under CERCLA or under any applicable analogous
state law ("Hazardous Substance")) has occurred or is currently occurring in
connection with any action or failure to act on any properties owned or leased
by, or under the direct control of, the Company which has or could give rise to
any liability of the Company.
15
(r) ADVANCES; RELATED PARTY TRANSACTIONS
(1) There are no receivables of the Company owing by any
directors, officers, employees or consultants of the Company or to any affiliate
of any such Company person or entity, other than advances by the Company in the
ordinary course of business to officers and employees for reimbursable business
expenses.
(2) No stockholder, officer, director or employee of the
Company, nor any member of the Family of any such stockholder, officer, director
or employee owns, or since December 31, 1993, has owned, directly or indirectly,
any interest exceeding five percent (5%) in (a) any business, corporate or
other, which is material party to any material business arrangement with the
Company or (b) any material property or rights, tangible or intangible, used in
the business of the Company. No stockholder, officer, or director of the
Company, owns, directly or indirectly, any interest in, or is an officer or
director of, any business, corporate or other (other than as a stockholder of a
public company), which competes with the Company.
(s) POWERS OF ATTORNEY. The Company Disclosure Schedule
contains a complete list of all powers of attorney (or similar instruments or
authorizations) granted by the Company to any person or entity. All such powers
of attorney (or similar instruments or authorizations) are subject to
termination or revocation by the Company at any time, without notice to any
other person or entity and without penalty.
(t) NO BROKERS. The Company has not entered into and will not
enter into any contract, agreement or understanding with any Person, except for
Raymond James & Associates, Inc. (a copy of which contract has been provided to
Buyer), which may result in the obligation of the Company or the Buyer to pay
any finder's fee, brokerage commission or similar payment in connection with the
Contemplated Transactions.
(u) OTHER AGREEMENTS TO SELL THE COMPANY. Except as set forth
herein, the Company has no legal obligation, absolute or contingent, to any
person or firm to sell any capital stock of the Company or to effect any merger,
58
consolidation or other reorganization, or disposition of all or substantially
all the assets, of the Company.
(v) BANKING RELATIONSHIPS. The Company Disclosure Schedule
correctly and completely lists all banks and accounts in such banks, with which
the Company has deposits, indicating the names of those authorized to sign
documents with respect to such accounts as of the date of the most recently
approved banking resolution with respect to each.
(w) INFORMATION SUPPLIED. Neither this Agreement, the Company
Financial Statements, the Company Disclosure Schedule, the Exhibits attached to
this Agreement, nor any other certificate, statement or document furnished or to
be furnished by the Company or the Sellers pursuant to the terms of this
Agreement, contains or will contain any untrue statement of a material fact
known to the Company or the Sellers, respectively, or omits or will omit to
state a material fact known by the Company or the Sellers respectively necessary
to make the statements contained in such information not misleading in light of
the circumstances under which such statements were made.
7. REPRESENTATIONS AND WARRANTIES OF MANAGEMENT STAKEHOLDERS. Each
Management Stakeholder, as to himself, herself or itself only, represents and
warrants, as of the Date of the Deposit, and except as set forth on the Company
Disclosure Schedule, to the Company and EMCON as follows:
(a) OWNERSHIP OF SHARES AT ISSUE AND OPTIONS AT ISSUE. Except as
set forth in the Company Disclosure Schedule, after giving effect to the
rescission provided for in Section 1 hereof, the Management Stakeholder owns of
record and beneficially the number of Shares at Issue and Options at Issue,
indicated opposite such Management Stakeholder's name in Exhibit B to the Stock
Purchase Agreement, with full right and authority to exchange such Shares at
Issue hereunder and to assign such Options at Issue hereunder, and upon delivery
of such Shares at Issue and/or Options at Issue hereunder, the Company will
receive good title thereto, free and clear of all mortgages, pledges or security
interests and not subject to any agreements or understandings among any Persons
with respect to the voting or transfer of such securities other than those
arising under agreements to which Buyer is a party.
(b) EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; NO
VIOLATION. This Agreement has been duly executed and delivered by or on behalf
of the Management Stakeholder and any other documents required hereunder to be
executed and delivered by or on behalf of the Management Stakeholders will have
been duly executed and delivered. This Agreement constitutes the legal, valid
and binding obligation of the Management Stakeholder, enforceable against such
Management Stakeholder in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally. Any
other agreements or documents required hereunder to be executed and delivered by
the Management Stakeholder hereunder constitute the legal, valid and binding
agreements of the Management Stakeholder executing the same, enforceable against
such Management Stakeholder in accordance with their respective terms, except as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other laws affecting creditor's rights
generally. Neither the execution of this Agreement nor the consummation of the
transactions contemplated hereby by the Management Stakeholder will violate, or
59
constitute a default under, or permit the acceleration of maturity of, except to
the extent waived, any indentures, mortgages, promissory notes, contracts or
agreements to which such Management Stakeholder is a party or by which such
Management Stakeholder or such Management Stakeholder's properties are bound.
(c) INFORMATION SUPPLIED. To the Knowledge of such Management
Stakeholder, neither this Agreement, the Stock Purchase Agreement, the Company
Financial Statements, the Company Disclosure Schedule, the Exhibits attached to
this Agreement, or the Stock Purchase Agreement, nor any other certificate or
document furnished or to be furnished by the Company or the Management
Stakeholders pursuant to the terms of this Agreement or the Stock Purchase
Agreement contains or will contain any untrue statement of a material fact known
to the Management Stakeholder or the Company, respectively, or omits or will
omit to state a material fact necessary to make the statements contained in such
information not misleading in light of the circumstances under which such
statements were made.
(d) RESIDENCE AND DOMICILE. The Management Stakeholder is a
resident of, and domiciled in, the State indicated on Exhibit B to the Stock
Purchase Agreement as being the residence of such Management Stakeholder.
(e) BROKERS OR FINDERS. Except as set forth in Section 3.20 of the
Stock Purchase Agreement, neither the Management Stakeholder or any of such
Management Stakeholder's agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement or the transactions
contemplated hereby.
8. REPRESENTATIONS AND WARRANTIES OF EMCON. EMCON represents and
warrants to Management Stakeholders and the Company, as of the date hereof and
except as set forth in the Buyer Disclosure Schedule, as follows:
(a) ORGANIZATION AND GOOD STANDING. EMCON is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
California.
(b) EXECUTION, DELIVERY AND ENFORCEABILITY OF AGREEMENT; NO
VIOLATION. This Agreement has been duly executed and delivered by or on behalf
of EMCON, and any other documents required hereunder to be executed and
delivered by or on behalf of EMCON will have been duly executed and delivered.
This Agreement constitutes the legal, valid and binding obligation of EMCON,
enforceable against EMCON in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally. Any
other agreements required hereunder to be executed and delivered by EMCON
constitute the legal, valid and binding agreements of EMCON, enforceable against
EMCON in accordance with its respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditor's rights generally.
Neither the execution of this Agreement nor the consummation of the transactions
provided for herein by EMCON will violate, or constitute a default under, or
permit the acceleration of maturity of, except to the extent waived, any
indentures, mortgages, promissory notes, contracts or agreements to which EMCON
is a party or by which EMCON or its properties are bound. Except as set forth in
the Buyer Disclosure Schedule, EMCON is not and will not be required to obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the transactions
contemplated hereby.
60
(c) CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against EMCON that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby. To EMCON's Knowledge, no such Proceeding has
been threatened.
(d) BROKERS OR FINDERS. EMCON and its officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
(e) INFORMATION SUPPLIED. Neither EMCON's Annual Report on Form
10-K for the fiscal year ending December 31, 1994, nor Quarterly Reports on Form
10-Q for the quarters ending March 31, 1995, June 30, 1995 or September 30, 1995
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein not misleading in light
of the circumstances under which such statements were made.
(f) NO MATERIAL CHANGE. Since September 30, 1995, there has been no
material adverse change in EMCON's business, financial position or operations.
9. GENERAL PROVISIONS.
(a) EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to the Agreement will bear his, her or its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement, the transactions contemplated hereby and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants.
(b) CONFIDENTIALITY. Between the date of this Agreement and January
30, 2001, EMCON and Management Stakeholders will maintain in confidence, and
will cause the directors, officers, employees, agents, and advisors of EMCON and
the Company to maintain in confidence, and not use to the detriment of another
party or the Company any written, oral, or other information obtained in
confidence from another party or the Company in connection with this Agreement,
the transactions contemplated hereby, or the Contemplated Transactions,
expressly including the reports of all consultants retained pursuant to the
terms of this Agreement and the Stock Purchase Agreement, unless (a) such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby or the Contemplated Transactions, or (c) the
furnishing or use of such information is required by legal proceedings.
(c) NOTICES All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed within three (3) business days by registered
mail, return receipt requested, (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), or (d)
three (3) business days after being sent by registered or certified mail, return
receipt requested, in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
61
Management Stakeholders: To each Management Stakeholder at the
address set forth on Exhibit B to the
Stock Purchase Agreement.
The Company: Organic Waste Technologies, Inc.
7550 Lucerne Drive, Suite 110
Cleveland, Ohio 44130
Attn: Mark H. Shipps, President
Fax No.: (216) 891-8288
with a copy to: Dale C. LaPorte, Esq.
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Fax No.: (216) 241-0816
EMCON: EMCON
400 S. El Camino Real, Suite 1200
San Mateo, California 94402
Attention: R. Michael Momboisse, Esq.
Fax No.: (415) 375-0763
with a copy to: Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attention: Eric J. Lapp, Esq.
Fax No.: (415) 327-3699
(d) BINDING ARBITRATION; SERVICE OF PROCESS. In the event of a
dispute between the parties related to or arising out of this Agreement, the
Agent and representatives of EMCON and the Company will meet promptly in an
effort to resolve the dispute amicably. If such parties cannot agree upon a
resolution within thirty (30) days of any such party requesting a meeting for
resolution of a dispute, then the matter will promptly be submitted to binding
arbitration in accordance with this Section 13.5.
(i) Arbitration will be held in San Francisco, California, in
accordance with the rules and regulations of the American Arbitration
Association. The number of arbitrators will be one and will be selected in
accordance with the rules and regulations of the American Arbitration
Association. The determination of the arbitrator will be conclusive and binding
upon the parties, and any determination by the arbitrator of an award may be
filed with the clerk of a court of competent jurisdiction as a final
adjudication of the claim involved, or application may be made to such court for
judicial acceptance of the award and an order of enforcement, as the case may
be. Except to the extent otherwise directed by the arbitrator, each party will
bear its own expenses, including legal and accounting fees, if any, with respect
to the arbitration, and one-half of the costs of the arbitrator and of the fees
imposed by the American Arbitration Association.
(ii) In any arbitration hereunder, the demand for arbitration
shall specifically delineate the claims asserted and the material issues with
respect thereto. Within thirty (30) days after filing a demand for arbitration,
claimant shall provide to respondent a list of all fact witnesses known to
62
claimant, the names and curriculum vitae of each expert witness anticipated to
be called by claimant, and a copy of relevant documents. Within thirty (30) days
after receipt of the foregoing information, respondent shall provide to claimant
a list of all fact witnesses known to respondent, the names and curriculum vitae
of each expert witness anticipated to be called by respondent, and a copy of
relevant documents known to respondent. Within ten (10) days after discovery has
been closed by the arbitrator (but in no event later than sixty (60) days prior
to the arbitration hearing), claimant shall present to respondent a list of all
fact and expert witnesses anticipated to be called by claimant, a summary of the
substance of each such witness' testimony, and a list of all documents
anticipated to be introduced by claimant (and a copy of such documents if not
previously provided to respondent). Within thirty (30) days after receipt of the
foregoing information, respondent shall present to claimant a list of all fact
and expert witnesses anticipated to be called by respondent, a summary of the
substance of each such witness' testimony, and a list of all documents
anticipated to be introduced by respondent (and a copy of such documents if not
previously provided to claimant). Any award by the arbitrator shall be subject
to all dollar and other limitations set forth in this Agreement.
(iii) A demand for arbitration may be served on EMCON or
Management Stakeholders by certified U.S. Mail, postage prepaid, or reliable
overnight delivery service, to the address set forth in Section 13.4 hereof.
(e) FURTHER ASSURANCES. The parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
(f) WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
(g) ENTIRE AGREEMENT AND MODIFICATION. Except as set forth in
Section 1 hereof, this Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
(h) ASSIGNMENTS, SUCCESSORS, AND NO THIRD PARTY RIGHTS Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, which will not be unreasonably withheld, except
that EMCON may assign any of its rights under this Agreement to any Subsidiary
63
of EMCON but EMCON will not be relieved of its obligations hereunder as a result
of such assignment. Subject to the preceding sentence, this Agreement will apply
to, be binding in all respects upon, and inure to the benefit of the successors
and permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy, or claim under or with respect
to this Agreement or any provision of this Agreement. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and assigns.
(i) SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
(j) SECTION HEADINGS, CONSTRUCTION. The headings of Sections in
this Agreement are provided for convenience only and will not affect its
construction or interpretation. Unless otherwise indicated, all references to
"Sections" refer to the corresponding Sections of this Agreement. All words used
in this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
(k) INTERPRETATION OF AGREEMENT. This Agreement has been submitted
to the scrutiny of all parties hereto and their respective counsel and shall be
given a fair and reasonable interpretation without consideration being given to
its having been drafted by either party or its counsel.
(l) TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
(m) GOVERNING LAW. This Agreement will be governed by and construed
under the laws of the State of Delaware without regard to conflicts of laws
principles.
(n) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EMCON THE COMPANY
EMCON, a California corporation ORGANIC WASTE TECHNOLOGIES,INC.,
a Delaware corporation
By: /s/R. Michael Momboisse By: /s/Mark H. Shipps
--------------------------- -----------------------
R. Michael Momboisse Mark H. Shipps
Its: CFO & Vice President Legal Its: President
--------------------------- -----------------------
64
THE MANAGEMENT STAKEHOLDERS
/s/Mark H. Shipps
-------------------------------
MARK H. SHIPPS
/s/Anthony A. Alexander
-------------------------------
ANTHONY A. ALEXANDER
/s/James Helmick
-------------------------------
JAMES HELMICK
/s/Raymond J. Nardelli
-------------------------------
RAYMOND J. NARDELLI
/s/Stephen Lingafelter
-------------------------------
STEPHEN LINGAFELTER
/s/Randall W. Chapman
-------------------------------
RANDALL W. CHAPMAN
65