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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
for the Quarterly Period Ended
June 30, 1995
-----------------------
Commission File Number 0-16379
Clean Harbors, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2997780
(State of Incorporation) (IRS Employer Identification No.)
325 Wood Road, Braintree, MA 02184
(Address of Principal Executive Offices) (Zip Code)
(617) 849-1800 ext. 4454
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value 9,436,838
---------------------------- -------------------------------
(Class) (Outstanding at August 8, 1995)
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CLEAN HARBORS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS Pages
-----
Consolidated Statements of Income 1
Consolidated Balance Sheets 2-3
Consolidated Statements of Cash Flows 4-5
Consolidated Statement of Stockholders' Equity 6
Notes to Consolidated Financial Statements 7-8
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9-15
PART II: OTHER INFORMATION
Items No. 1 through 6 16
Signatures 17
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(in thousands except for earnings per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Revenues $54,899 $49,683 $102,049 $100,968
Cost of revenues 39,367 33,392 74,219 69,306
Selling, general and
administrative expenses 10,471 9,645 19,481 19,528
Depreciation and amortization 2,512 2,563 4,985 5,126
------- ------- -------- --------
Income from operations 2,549 4,083 3,364 7,008
Interest expense, net 2,162 1,767 4,134 3,586
------- ------- -------- --------
Income (loss) before provision
for income taxes 387 2,316 (770) 3,422
Provision (benefit) for income taxes 184 1,065 (383) 1,574
------- ------- -------- --------
Net income (loss) $203 $1,251 $(387) $1,848
======= ======= ======== ========
Net income (loss) per common and
common equivalent share $.01 $.12 $(.06) $.17
======= ======= ======== ========
Weighted average common and
common equivalent shares
outstanding 9,448 9,654 9,447 9,680
======= ======= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
(1)
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1995 1994
(Unaudited)
----------- ------------
ASSETS
Current Assets:
Cash $ 365 $ 1,000
Restricted investments 2,306 1,542
Accounts receivable, net of
allowance for doubtful accounts 47,222 44,834
Prepaid expenses 2,643 1,894
Supplies inventories 2,924 2,670
Income tax receivable 1,211 178
-------- --------
Total current assets 56,671 52,118
Property, plant and equipment:
Land 8,285 8,209
Buildings and improvements 37,172 31,535
Vehicles and equipment 76,740 72,494
Furniture and fixtures 2,155 2,129
Construction in progress 3,015 3,118
-------- --------
127,367 117,485
Less - Accumulated depreciation
and amortization 51,768 47,713
-------- --------
Net property, plant and equipment 75,599 69,772
-------- --------
Other Assets:
Restricted investments 5,027 ---
Goodwill, net 22,564 22,926
Permits, net 13,834 14,244
Other 2,552 815
-------- --------
Total Other Assets 43,977 37,985
-------- --------
Total Assets $176,247 $159,875
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
(2)
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1995 1994
(Unaudited)
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $ 3,594 $ 1,715
Accounts payable 11,986 10,686
Accrued disposal costs 7,805 6,179
Other accrued expenses 16,776 12,724
-------- --------
Total current liabilities 40,161 31,304
-------- --------
Long-term obligations, less current maturities 68,248 60,465
Deferred income taxes 1,042 780
Stockholders' equity:
Preferred Stock, $.01 par value:
Series A Convertible;
Authorized-2,000,000 shares; Issued and
outstanding - none --- ---
Series B Convertible;
Authorized-156,416 shares; Issued and
outstanding 112,000 shares at June 30,
1995 (liquidation preference of $5.6 million) 1 1
Common Stock, $.01 par value
Authorized - 20,000,000 shares;
Issued and outstanding - 9,431,282 shares
at June 30, 1995 and 9,431,282 shares
at December 31, 1994 95 95
Additional paid-in capital 58,590 58,590
Unrealized loss on restricted investments,
net of tax (33) (113)
Retained earnings 8,143 8,753
-------- --------
Total stockholders' equity 66,796 67,326
-------- --------
Total liabilities and stockholders' equity $176,247 $159,875
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
(3)
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
SIX MONTHS ENDING
JUNE 30,
-------------------
1995 1994
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (387) $ 1,848
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 4,985 5,126
Deferred taxes payable 209 6
Allowance for doubtful accounts 118 344
Amortization of deferred financing costs 205 210
Gain on sale of fixed assets (6) (92)
Changes in assets and liabilities:
Accounts receivable (2,507) 3,629
Refundable income taxes (1,033) 566
Prepaid expenses (749) 381
Supplies inventories (254) (118)
Accounts payable 1,300 (1,928)
Accrued disposal costs 1,626 (1,792)
Other accrued expenses 2,253 1,248
Taxes payable --- 102
-------- -------
Net cash provided by operating activities 5,760 9,530
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,208) (1,636)
Additions to permits (38) ---
Proceeds from sale and maturities of restricted
investments 22 159
Cost of restricted investments acquired (5,656) ---
Increase in other assets (1,764) (66)
Proceeds from sale of fixed assets 15 104
-------- -------
Net cash used in investing activities (15,629) (1,439)
-------- -------
The accompanying notes are an integral part of these consolidated financial
statements.
(4)
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Unaudited
(in thousands)
SIX MONTHS ENDING
JUNE 30,
-------------------
1995 1994
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividend distribution (223) (205)
Issuance of long-term debt 10,000 ---
Net borrowings under long-term revolver 789 858
Payments on long-term obligations (562) (8,215)
Proceeds from exercise of stock options --- 28
Additions to deferred financing costs (770) (198)
-------- -------
Net cash (used in) financing activities 9,234 (7,732)
-------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (635) 359
Cash and equivalents, beginning of year 1,000 816
-------- -------
Cash and equivalents, end of period $365 $1,175
======== =======
Supplemental Information:
There were $1,799,000 of accrued liabilities assumed as a result of the
acquisition of the incinerator in Kimball, Nebraska on May 12, 1995.
The accompanying notes are an integral part of these consolidated financial
statements.
(5)
CLEAN HARBORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unaudited
(in thousands)
Series B
Preferred Stock Common Stock
--------------- --------------
Number $0.01 Number $0.01 Additional Unrealized Loss Total
of Par of Par Paid-In on Restricted Retained Stockholders'
Shares Value Shares Value Capital Investments Earnings Equity
------ ----- ------ ----- ---------- --------------- -------- -------------
Balance at December 31, 1994 112 $ 1 9,431 $95 $58,590 $(113) $8,753 $67,326
Preferred stock dividends:
Series B --- --- --- -- --- --- (223) (223)
Change in unrealized loss on
restricted investments --- --- --- -- --- 80 --- 80
Net loss --- --- --- -- --- --- (387) (387)
--- --- ----- --- ------- ----- ------ -------
Balance at June 30, 1995 112 $ 1 9,431 $95 $58,590 $(33) $8,143 $66,796
=== === ===== === ======= ===== ====== =======
The accompanying notes are an integral part of these consolidated financial
statements.
(6)
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 Basis of Presentation
The consolidated interim financial statements included herein have
been prepared by the Company, pursuant to the rules and regulations of
the Securities and Exchange Commission, and include, in the opinion of
management, all adjustments (consisting of only normal recurring
accruals) necessary for the fair presentation of interim period
results. The operating results for the six months ended June 30, 1995
are not necessarily indicative of those to be expected for the full
fiscal year. Reference is made to the audited consolidated financial
statements and notes thereto included in Clean Harbors' Report on Form
10-K for the year ended December 31, 1994 as filed with the Securities
and Exchange Commission.
NOTE 2 Significant Accounting Policies
(A) Net Income Per Common and Common Equivalent Share
Net income per common and common equivalent share is based on net
income less preferred stock dividend requirements divided by the
weighted average number of common and common equivalent shares
outstanding during each of the respective periods. Fully diluted net
income per common share has not been presented as the amount would not
differ significantly from that presented.
(B) Reclassifications
Certain reclassifications have been reflected in the prior year
financial statements to conform the presentation to that as of June
30, 1995.
NOTE 3 Acquisition of Incinerator
On May 12, 1995, the Company acquired a newly constructed
hazardous waste incinerator in Kimball, Nebraska from Ecova
Corporation, a wholly-owned affiliate of Amoco Oil Company. The
incinerator is subject to the final permit requirements under the
federal Resource Conservation and Recovery Act of 1976, as amended
("RCRA"), and has a RCRA "Part B" license issued by the Nebraska
Department of Environmental Quality ("NDEQ"). The Company acquired the
incinerator for $5,549,000.
Under RCRA, an owner or operator of a "Part B" licensed
incinerator must establish financial assurance for closure of the
incinerator. An owner or operator may satisfy the requirements for
financial assurance by using one of several mechanisms allowed under
RCRA: a trust fund, surety bond, letter of credit, insurance,
financial test, or corporate guarantee. The mechanism chosen by the
Company is insurance, which has been approved by NDEQ. The insurance
policy has a 30 year term. Policy premiums through the year 2025 have
been paid by the Company, as required by NDEQ, to eliminate the risk
that the policy might be canceled for failure to pay premiums some time
in the future. The Company has also deposited funds into an escrow
account as collateral for the insurance policy, which is restricted for
future payment of insurance claims. Funds in the escrow account remain
the property of the Company and are invested in long-term, fixed-rate
interest bearing securities held as restricted investments.
(7)
CLEAN HARBORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
The Company paid $6,805,000 for the insurance coverage. The
Company also delivered to the insurance company a letter of credit in
the amount of $500,000, which will increase by $250,000 each quarter
until the balance of the letter of credit is $3,000,000, to provide
additional collateral security under the insurance policy. The
incinerator is located on a 600 acre site, which includes a landfill
for disposal of the ash from the incinerator. The landfill is
constructed, and ready for use upon completion of certain requirements.
The NDEQ requires the Company to establish financial assurance for
closure of the landfill before it may be used. The Company expects to
spend approximately $1,725,000 during the second half of 1995 to obtain
insurance coverage for the landfill.
NOTE 4 New Financing Arrangements
At December 31, 1994, the Company had a $35,000,000 revolving
credit facility with three banks. In connection with the acquisition
of the Kimball incinerator, the Company on May 8, 1995 entered into a
new $45,000,000 revolving credit and term loan agreement (the "Loan
Agreement") with another financial institution, which replaced the bank
credit facility. The Company also decided to finance part of the cost
of the incinerator insurance coverage using a $4,000,000 financing
arrangement, payable over two years at an interest rate of 9.38%.
The Loan Agreement provides for a $35,000,000 revolving credit
portion (the "Revolver") and a $10,000,000 term promissory note (the
"Term Note"). The Term Note is payable in 60 monthly installments,
commencing June 1, 1995. Monthly principal payments are $166,667. The
Revolver allows the Company to borrow $35,000,000 in cash, and allows
the Company to have up to $20,000,000 in letters of credit outstanding.
The combination of cash and letters of credit may not exceed
$35,000,000 at any one time. The Revolver requires the Company to pay
a line fee of one half of one percent on the unused portion of the
line. The Revolver has a three-year term with an option to renew
annually.
The Loan Agreement allows for up to 80% of the outstanding balance
of the combined Revolver and Term Note to bear interest at the
Eurodollar rate plus three percent; the remaining balance bears
interest at a rate equal to the "prime" rate plus one and one-half
percent. The Loan Agreement provides for certain covenants including,
among others, limitations on working capital and adjusted net worth.
The Company must also meet certain tests in order to make dividend
payments and incur additional debt. The Loan Agreement is
collateralized by substantially all of the Company's assets. The fees
for letters of credit and the interest rates under the Loan Agreement
are one-half of 1% higher than the terms under the former bank credit
facility.
NOTE 5 Employee Stock Purchase Plan
During the second quarter the stockholders of the Company approved
the Clean Harbors Employee Stock Purchase Plan (the "Plan") through
which employees of the Company will be given the opportunity to
purchase shares of common stock. According to the Plan, a total of one
million shares of common stock has been reserved for offering to
employees over a period of five years, in quarterly offerings of 50,000
shares each plus any shares not issued in any previous quarter,
commencing on July 1, 1995 and on the first day of each quarter
thereafter through April 1, 2000. Employees who elect to participate
in an offering may utilize up to 10% of their payroll for the purchase
of common stock at 85% of the closing price of the stock on the first
day of such quarterly offering or, if lower, 85% of the closing price
on the last day of the offering.
(8)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REVENUES
Revenues for the second quarter of 1995 set a new Company
record of $54,899,000, up 10.5% as compared to revenues of
$49,683,000 for the second quarter of the prior year. Revenues
for the first half of 1995 also set a new Company record of
$102,049,000, as compared to revenues of $100,968,000 for the
first half of the prior year. During the first quarter of 1994,
the Company received approximately $7,000,000 of revenue from its
leading role in the cleanup of a large oil spill from a barge off
the coast of Puerto Rico. Excluding the revenue from that event
last year, the Company's base business grew approximately 9% from
1994 to 1995.
The principal services provided by the Company fit within
three categories: treatment and disposal of industrial wastes;
field services provided at customer sites; and specialized
repackaging, treatment and disposal services for laboratory
chemicals and household hazardous wastes ("CleanPacks," formerly
referred to as LabPacks). The approximately $7,000,000 of revenue
from the Puerto Rico oil spill in the first quarter of 1994 is
classified as field service revenue.
Revenues By Product Line
(in thousands; unaudited)
Six Months Ended June 30,
--------------------------------------
Type of Service 1994 1995
-------------------- ---------------- ----------------
Treatment and Disposal $ 39,194 39% $ 45,489 45%
Field Services 47,226 47 41,260 40
CleanPacks 14,548 14 15,300 15
-------- --- -------- ---
$100,968 100% $102,049 100%
Treatment and disposal services revenue in the first half of
the year increased 16% from 1994 to 1995, reversing a two year
period of declining revenue in this product line. The decline was
due to a variety of secular trends impacting both price and volume:
competitive industry pricing; continuing efforts by generators of
hazardous waste to reduce the amount of hazardous waste they
produce; and shipment by generators of waste direct to the ultimate
treatment or disposal location.
(9)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company has responded to these industry trends in several
ways, primarily by modernizing the Company's facilities to offer
more technologically advanced waste treatment alternatives, such as
the Clean Extraction System in Baltimore and by acquiring treatment
and disposal facilities that expand the Company's product lines.
For example, during the first quarter of 1995, the Company
completed the installation of an automated fuels blending operation
at its Cincinnati waste treatment plant, which establishes the
Company in the fuels blending business for the first time.
During the second quarter of 1995, the Company completed the
acquisition of the newly constructed hazardous waste incinerator in
Kimball, Nebraska. The incinerator is subject to the final permit
requirements under the federal Resource Conservation and Recovery
Act of 1976, as amended ("RCRA"), and has a RCRA "Part B" license
issued by the Nebraska Department of Environmental Quality
("NDEQ"). Kimball is the only commercial incinerator in the United
States to produce "delisted" ash, meaning the ash will not be
regulated as a hazardous waste under federal and state laws. The
acquisition of this facility responds to a developing trend within
the hazardous waste management industry: generators of industrial
waste prefer to treat hazardous waste, rather than bury it, because
of concerns about the long-term liability associated with landfill
disposal of the residue which results from incineration of the
generator's hazardous waste. Conventional incinerators produce a
"slag" which is regulated as a hazardous waste. The residue from
the Kimball treatment facility, in contrast, is ash rather than
slag. The ash meets the standards set by NDEQ for "delisting" and
is therefore deemed to be non-hazardous.
Since the incinerator is a new facility, many of the
Company's customers will visit the facility for a comprehensive
audit of its operations before they will approve the site for
disposal of their hazardous waste. As a result, considerable time
is needed to complete the audit and approval process before the
Company can begin shipping waste to the facility, and since the
acquisition was completed on May 12, 1995, the incinerator made a
minimal incremental contribution to the Company's revenues during
the first half of 1995.
Another recent major accomplishment during the second quarter
was the receipt of a modified RCRA "Part B" license for the
Company's expanded Chicago waste treatment facility, which brings
together the people, technology, and capacity to satisfy customers'
recycling, waste treatment, and field service needs in one
integrated complex. The Company expects to commence waste
treatment operations at the expanded facility during the third
quarter of 1995.
Field services revenue in the first half of the year
increased 2.6% from 1994 to 1995, excluding the Puerto Rico oil
spill revenue. The Company continued to dominate this segment of
the environmental business in the Northeast, gained market share in
the Central and Midwest regions, and developed new relationships
with customers in the southern and western regions of the United
States.
(10)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CleanPack revenue in the first half of the year increased
5.2% from 1994 to 1995, as a result of increased market share in
existing regions and established new business relationships in the
new regions. In addition, the Kimball incinerator has enabled this
product line to be more competitive in the area of agricultural
pesticide collections and household waste collections where a
majority of the collected waste needs to be incinerated.
At June 30, 1995, the Company had service centers and sales
offices located in 24 states and Puerto Rico, and operated 12 waste
management facilities, as compared to June 30, 1994, when the
Company operated 10 waste management facilities and had service
centers and sales offices located in 22 states and Puerto Rico.
Service Center Revenues By Region
For The Six Quarters Ended June 30, 1995
(in thousands; unaudited)
3/31/94 6/30/94 9/30/94 12/31/94 3/31/95 6/30/95
------- ------- ------- -------- ------- -------
Northeast $17,216 $20,703 $23,012 $21,460 $19,693 $21,449
Mid-Atlantic 21,382* 16,602 15,689 17,188 15,367 16,817
Central 6,413 6,678 8,084 8,672 7,138 9,450
Midwest 6,274 5,700 6,473 5,527 4,952 7,183
------- ------- ------- -------- ------- -------
Total $51,285 $49,683 $53,258 $52,847 $47,150 $54,899
-----------------
* The Mid-Atlantic region includes the Company's service center in
Puerto Rico, and the approximately $7,000,000 of revenue from the
1994 oil spill cleanup.
The Company expects to expand its service capabilities in
Georgia, Kentucky, and Texas during 1995, by adding staff and
equipment to support the increasing level of business in the Gulf
Coast and South. The Company expects to introduce new waste
management capabilities in the Midwest region with the significant
expansion of its Chicago facility, which is expected to be placed
in service during the third quarter. The Company also expects its
revenues in all four regions and all three product lines to benefit
from the acquisition of the Kimball incinerator.
(11)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated
certain operating data associated with the Company's results of
operations.
Percentage Of Total Revenues
----------------------------------------
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
------ ------ ------ ------
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues:
Disposal costs paid to third parties 15.4 13.0 15.9 12.0
Other costs 56.3 54.2 56.8 56.6
----- ----- ----- -----
Total cost of revenues 71.7 67.2 72.7 68.6
Selling, general and administrative
expenses 19.1 19.4 19.1 19.3
Depreciation and amortization
of intangible assets 4.6 5.2 4.9 5.1
Income from operations 4.6 8.2 3.3 6.9
Other Data:
----------
Earnings Before Interest, Taxes,
Depreciation and Amortization
(in thousands) $5,061 $6,646 $8,349 $12,134
COST OF REVENUES
One of the largest components of cost of revenues is the cost
of sending waste to other companies for disposal. The Company's
outside disposal costs increased to 15.9% of revenue in the first
half of 1995 from 12.0% of revenue in the first half of 1994
(calculated excluding revenue from the Puerto Rico oil spill,
which had no outside disposal costs). The Company believes that
price increases by disposal vendors, primarily incinerators and
cement kilns, indicate that the pricing environment may be
changing as a result of recent consolidation among incineration
companies and decisions by a few cement kilns to stop burning
hazardous waste. This was a factor which supports the Company's
decision to acquire the Kimball incinerator, in order to reduce
the Company's reliance on third-party disposal outlets, and
capture the gross margin being paid to vendors.
(12)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Since the Kimball incinerator is a new facility, and a recent
entrant to the incineration marketplace, volumes are growing
slowly due to the time required for customers to audit and approve
the facility and begin shipping waste to it. As a result, the
incinerator experienced a $573,000 loss from operations during the
second quarter of 1995. The Company expects the volumes of waste
processed to increase during the remainder of 1995 as more customers
approve the incinerator.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
During the first half of 1995, the Company established a
sales presence in Alabama, California, Colorado, and Florida.
During the second quarter of 1995, the Company completed the
acquisition of the Kimball hazardous waste incinerator, and spent
considerable sums of money on building a marketing campaign and
traveling with customers who have audited and approved this
state-of-the-art operation. In addition, the Company also
incurred costs in relocating experienced employees to its new
locations.
The Company is also in the process of developing a marketing
campaign for the expanded Chicago waste treatment facility. As a
result of the Company's strategy to expand geographically, by
adding sales offices and service centers in the southern and
western parts of the United States, and to add product lines, such
as the Kimball incinerator, its selling, general and
administrative costs during the remainder of 1995 are expected to
increase from the second quarter level.
INTEREST EXPENSE
Interest expense increased during the second quarter of 1995
as a result of an increase in the Company's average cost of
capital, due to its decision last year to reduce its reliance on
floating rate bank debt through the issuance of $50,000,000 of
12.50% Senior Notes in August of 1994, and an increase in total
long-term debt, due to the costs of the acquisition of the Kimball
incinerator. There was no interest capitalized during the first half of
1995 or 1994.
INCOME TAXES
The effective income tax rate for the three and six months
ended June 30, 1995 was 48% and 50% respectively, as compared to
46% for the comparable periods of 1994. The Company expects its
effective income tax rate for the year 1995 to be approximately
49%. The rate fluctuates depending on the amount of income before
taxes, as compared to the fixed amount of goodwill and other
non-deductible items.
(13)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future operating results may be affected by a
number of factors, including the Company's ability to: implement
the treatment and disposal reengineering program during 1995;
utilize its facilities and workforce profitably, in the face of
intense price competition; successfully increase market share in
its existing service territory while expanding its product
offerings into other markets; integrate additional hazardous waste
management facilities, such as the Kimball incinerator and the
expanded Chicago facility; and generate incremental volumes of
waste to be handled through such facilities from existing sales
offices and service centers and others which may be opened in the
future.
As a result of the Company's acquisition of the Kimball
incinerator, its future operating results may be affected by
factors such as its ability to: obtain sufficient volumes of
waste at prices which produce revenue sufficient to offset the
operating costs of the facility; minimize downtime and disruptions
of operations; and compete successfully against other incinerators
which have an established share of the incineration market.
The Company's operations may be affected by the commencement
and completion of major site remediation projects; seasonal
fluctuations due to weather and budgetary cycles influencing the
timing of customers' spending for remedial activities; the timing
of regulatory decisions relating to hazardous waste management
projects; secular changes in the process waste industry towards
waste minimization and the propensity for delays in the remedial
market; suspension of governmental permits; and fines and
penalties for noncompliance with the myriad regulations governing
the Company's diverse operations. As a result of these factors,
the Company's revenue and income could vary significantly from
quarter to quarter, and past financial performance should not be
considered a reliable indicator of future performance.
(14)
CLEAN HARBORS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company has financed its operations and capital
expenditures primarily by cash flow from operations and additions
to long-term debt. Cash provided by operations, before changes in
current assets and current liabilities, was $5,124,000 for the six
months ended June 30, 1995, as compared to $7,442,000 for the six
months ended June 30, 1994.
During the six months ended June 30, 1995, the Company spent
$4,458,000 on additions to plant and equipment and construction in
progress, and $5,549,000 on the acquisition of the Kimball incinerator,
as compared to the same period of the prior year when its capital
expenditures were $1,636,000. In addition, the Company spent $6,805,000
for financial assurance associated with this acquisition. See Note 3 to
the Consolidated Financial Statements in this report for a description of
the costs of the incinerator acquisition.
During the six months ended June 30, 1995, net additions to long-
term debt were $9,622,000, as compared to the same period of the prior
year when net reductions in long-term debt were $7,345,000. The Company
expects to spend approximately $1,725,000 during the second half of 1995
to obtain insurance coverage for closure of the Kimball landfill, and
anticipates that its capital expenditures for the remainder of 1995 will
be approximately $3,000,000, including improvements expected to be made
at the Kimball facility. The Company expects to finance these
requirements through cash flow from operations and funds drawn under its
$45,000,000 revolving credit and term loan agreement (the "Loan
Agreement") described in Note 4 to the Consolidated Financial Statements.
The Loan Agreement terms include a borrowing limit, which
fluctuates depending on the level of accounts receivable which
secure the Loan Agreement. The borrowing availability each month
will depend on the level of business activity and the resulting
amount of accounts receivable, and the usage of letters of credit. At
August 11, 1995, the indebtedness outstanding under the Loan Agreement
was $19,619,665, letters of credit outstanding were $7,594,732, and the
Company had borrowing availability of $8,364,835.
The Company is taking steps to obtain tax-exempt revenue bond
financing through the State of Nebraska to pay for a portion of the costs
of the Kimball incinerator and landfill, including the prepaid closure
insurance premiums, as well as the costs of improvements to the facility.
The Company anticipates that approximately $8,000,000 of the proceeds of
the planned tax-exempt bond issue will be used to reimburse the Company
for costs of the Kimball facility, and applied to repay or refund
existing indebtedness.
The Company continues to investigate the possibility of acquiring
additional hazardous waste treatment, storage and disposal facilities,
which would be financed by a variety of sources. The Company believes it
has adequate resources available to fund its future operations and
anticipated capital expenditures.
(15)
CLEAN HARBORS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
--------------------------
No reportable events have occurred which would require
modification of the discussion under Item 3 - Legal Proceedings
contained in the Company's Report on Form 10-K for the Year Ended
December 31, 1994.
Item 2 - Changes in Securities
------------------------------
None
Item 3 - Defaults Upon Senior Debt
----------------------------------
None
Item 4 - Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
None
Item 5 - Other Information
--------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
A) Exhibit 4.2 - Loan and Security Agreement dated May 8, 1995
by and between Congress Financial Corporation (New England) and
the Company's Subsidiaries as Borrowers.
Exhibit 4.3 - Term Promissory Note dated May 8, 1995 from the
Company's Subsidiaries as Debtors to Congress Financial
Corporation (New England) in the amount of $10,000,000.
Exhibit 4.4 - Guarantee dated May 8, 1995 by Clean Harbors,
Inc. to Congress Financial Corporation (New England) of the
obligations of the Company's Subsidiaries under the Financing
Agreements.
Exhibit 4.5 - General Security Agreement dated May 8, 1995 by
Clean Harbors, Inc. in favor of Congress Financial Corporation
(New England).
Exhibit 10.40 - Asset Purchase Agreement among Clean Harbors
Technology Corporation, Clean Harbors Inc. and Ecova Corporation
dated as of March 31, 1995.
Exhibit 11 - Computation of Net Income per Share.
Exhibit 27 - Financial Data Schedule
B) Reports on Form 8-K - None
(16)
CLEAN HARBORS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Clean Harbors, Inc.
-------------------------
Registrant
Dated: August 11, 1995 By: /s/ ALAN S. MCKIM
---------------------------------
Alan S. McKim
President and
Chief Executive Officer
Dated: August 11, 1995 By: /s/ JAMES A. PITTS
-------------------------------
James A. Pitts
Executive Vice President and
Chief Financial Officer
(17)
EXHIBIT 10.4
ASSET PURCHASE AGREEMENT
Agreement entered into as of March 31, 1995, but retroactive in certain
respects as from December 31, 1994, by and among Clean Harbors Technology
Corporation, a Massachusetts corporation (the "Buyer"), Clean Harbors, Inc., a
Massachusetts corporation ("CHI"), and Ecova Corporation, a Nevada corporation
(the "Seller"). The Buyer, CHI, and the Seller are referred to herein
individually as a "Party" and collectively as the "Parties."
This Agreement contemplates a transaction in which: (i) the Buyer will
acquire from the Seller the fluidized bed incinerator, together with the related
real and personal property, which is now owned by the Seller and located in
Kimball, Nebraska; (ii) the Buyer will acquire from the Seller the patent rights
and other intellectual property related to such incinerator which are now owned
by the Seller, subject to the retention by the Seller and Amoco Oil Company and
their respective affiliates of a nonexclusive right to use such patent rights
and other intellectual property in the future; (iii) the Buyer will pay to the
Seller, in consideration for such incinerator, patent rights and other
intellectual property, $1,240,528.00 and certain additional amounts based upon
working capital shortfall between the close of business on April 30, 1995 and
the closing date; (iv) the Buyer will also pay to the Seller certain future
royalties based upon the total tons of waste processed in the future by such
incinerator; and (v) the Parties will agree to certain other matters as set
forth in this Agreement.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
"Adverse Consequences" means all damages, penalties, fines, costs, amounts
paid in settlement, Liabilities, obligations, Taxes, liens, losses and expenses
(including court costs and reasonable attorneys' fees and expenses), including,
without limitation, all such consequences arising from suits, proceedings,
hearings, investigations, inspections, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, and rulings.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Amoco" means Amoco Oil Company, a Maryland corporation.
"Applicable Rate" means the corporate base rate of interest announced from
time to time by The First National Bank of Boston, plus two percent (2%) per
annum.
"Approval for Commercial Operations" means the issuance on December 16,
1994, by the Director of the NDEQ of written approval authorizing the operation
of the Incinerator on a commercial basis at not more than seventy-five (75%)
percent of capacity.
"Approvals" means all the permits, licenses, and related authorizations and
approvals necessary for the Buyer to operate the Incinerator as a facility for
the treatment and disposal of hazardous wastes in accordance with applicable
laws and regulations including, without limitation, the Environmental, Health
and Safety Laws. The Approvals shall include, without limitation, the permits,
licenses, and related approvals necessary for the future operation of the
Incinerator and the financial assurance mechanisms to be provided by the Buyer
and CHI which are described in Exhibit A hereto.
"Buyer" has the meaning set forth in the preface above.
"Cash Disbursements" means all Third Party payments, internal labor costs
(including all directly related benefit costs), appropriate corporate overhead
allocations as stipulated in the letter dated January 5, 1995, from Barbara
Baumann of the Seller to Steve Moynihan of CHI, real or personal property, sales
and use taxes, hazardous waste disposal fees, consumables, utilities and other
operating and maintenance costs directly related to the operations and
maintenance of the Incinerator. "Cash Disbursements" does not include interest
or any other costs of capital invested in the Incinerator; any corporate
overhead allocations not specifically incurred as a result of the operation of
the Incinerator; depreciation, amortization or any other non-cash expenses; or
any costs of providing financial assurances relating to the Incinerator.
"CHI" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in (S)2(d) below.
"Closing Date" has the meaning set forth in (S)2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement of Commercial Operations" means the commencement on December
23, 1994, of commercial operations of the Incinerator after the receipt of
Approval for Commercial Operations.
"Confidential Information" means any information concerning the businesses
and affairs of the respective Parties and the Incinerator that is in existence
at the time of the Closing and is not already generally available to the public.
"Disclosure Schedule" has the meaning set forth in (S)4 below.
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, RCRA, and the
Occupational Safety and
-2-
Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, and codes under each of such specified laws and any such
other laws) of federal, state, local, and foreign governments (and all agencies
thereof) concerning pollution or protection of the environment, public health
and safety, or employee health and safety, including laws relating to emissions,
discharges, releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into ambient air,
surface water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes.
"EPA" means the United States Environmental Protection Agency.
"Existing Licenses" has the meaning set forth in (S)4(d) below.
"Final Trial Burn Test" has the meaning set forth in (S)2(g) below.
"Incinerator" means: (i) the fluidized bed incinerator, the Monofill, the
Personal Property and the Real Property; (ii) all of the following insofar as
they relate to such incinerator and only insofar as they are assignable by the
Seller to the Buyer in connection therewith: agreements, contracts, leases,
subleases, warranties (including, without limitation, all manufacturers
warranties), guaranties and similar arrangements and rights thereunder, claims,
deposits, prepayments, refunds, causes of action, franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and similar
rights obtained from governments and governmental agencies (including any unused
credits and future incentives allowable under the Nebraska Employment and
Investment Growth Act or the Agreement relating thereto between the State of
Nebraska and the Seller (formerly known as "Waste Tech Services, Inc."), except
for such credits and incentives allowed and used by the Seller for 1993 and
1994, which shall remain with the Seller); and (iii) at least one copy of all
related books, records, ledgers, files, documents, correspondence, lists,
architectural and engineering plans, drawings and specifications, environmental
and other studies, reports, operating and monitoring data, and other similar
printed or written materials, insofar as they are now owned by the Seller, but
exclusive of the Seller's corporate and financial records.
"Incremental Closure Costs" means those costs associated with transporting
and disposing of wastes received from the Buyer or its Affiliates and their
customers and ash from such wastes accumulated at the Incinerator.
"Indemnified Party" has the meaning set forth in (S)10 (f) below.
"Indemnifying Party" has the meaning set forth in (S)10 (f) below.
"Intellectual Property" means all of the following, if any, insofar as they
are relevant to the Incinerator: (i) all patents, patent applications and
patent disclosures together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof; (ii) all trade
secrets and confidential business information (including research and
-3-
development, know-how, formulas, compositions, production processes and
techniques, technical data, designs, drawings, specifications, supplier
information, pricing and cost information, business and marketing plans and
proposals); (iii) all computer software (including data and related
documentation); (iv) all other related proprietary rights including, without
limitation, all licenses and sublicenses granted or obtained with respect
thereto, and rights thereunder, remedies against infringements thereof, and
rights to protection therein under the laws of all jurisdictions; and (v) at
least one copy or other tangible embodiment thereof (in whatever form or
medium).
"Knowledge" means actual knowledge.
"Letter of Intent" means the letter of intent dated as of November 22,
1994, as amended by the supplemental letters dated January 16, 1995 (including
the Attachment thereto) and March 30, 1995, among the Parties with respect to
the transactions described in this Agreement.
"Letter of Credit" means the letter of credit drawn on The First National
Bank of Boston and supplied under (S) 2(k) below by the Buyer to secure its
reimbursement obligations under (S) 2(i) below.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
but not limited to any liability for Taxes.
"Monofill" means the landfill now located on the Real Property.
"NDEQ" means the Nebraska Department of Environmental Quality.
"Party" and "Parties" have the meanings set forth in the preface above.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Personal Property" means all personal property (other than corporate and
financial records) now owned or leased by the Seller which are located on the
Real Property including, without limitation, the items of equipment, spare parts
and other personal property described in (S) 4(a) of the Disclosure Schedule.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended.
"RCRA Permit" has the meaning set forth in (S) 2(g) below.
-4-
"Real Property" means the approximately 600 acres of land located in
Kimball, Nebraska now owned by the Seller and on which the Incinerator is now
located.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, charge, or other
security interest, other than (a) mechanic's, materialmen's, and similar liens,
(b) liens for Taxes not yet due and payable, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the ordinary course of business and not incurred in connection with
the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Successful Completion of the Final Trial Burn Test" has the meaning set
forth in (S) 2(g) below.
"Survey" has the meaning set forth in (S)5(i) below.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, treatment or disposal fees (including taxes
under Code (S)59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Third Party" means any Person other than the Seller, the Buyer, CHI and
all of their Affiliates.
"Third Party Claim" has the meaning set forth in (S)10(f) below.
"Transferable Licenses" has the meaning set forth in (S)4(d) below.
"Working Capital Shortfall" means Cash Disbursements net of cash receipts
(but excluding costs associated with the Final Trial Burn Test and costs of
processing and disposal of any wastes on the site of the Incinerator on December
31, 1994, both of which shall be the sole responsibility of the Seller).
2. Purchase and Sale of the Incinerator and the Intellectual Property.
(a) Basic Transaction. On and subject to the terms and conditions of this
-----------------
Agreement, the Buyer agrees to purchase from the Seller, and the Seller agrees
to sell to the Buyer:(i) the
-5-
Incinerator, and (ii) all of the Seller's right, title and interest in and to
the Intellectual Property required for the operation of the Incinerator, but
only insofar as such Intellectual Property is assignable by the Seller, or by an
Affiliate of the Seller, to the Buyer. Following such purchase and sale, the
Seller and all other Affiliates of the Seller and Amoco shall, however, retain a
perpetual, nonexclusive license to use the Intellectual Property without payment
of royalties, provided that such license may not be assigned except to the
respective Affiliates of the Seller and Amoco or to transferees of all or a
portion of the assets or business of the Seller, Amoco or any such Affiliate to
which the license relates, without the prior written consent of the Buyer and
CHI.
(b) Payment. In consideration for the Incinerator and the Intellectual
-------
Property, the Buyer agrees: (i) to pay $1,240,528.00 in cash to the Seller at
or prior to the Closing, and (ii) to pay in cash to the Seller (or its assignee)
within sixty (60) days after the Closing Date an amount equal to one hundred
(100%) percent of all Working Capital Shortfall and other costs and liabilities
(including risk of loss, casualty, and tort) that are associated with the
operation of the Incinerator from the close of business on April 30, 1995
through the Closing Date. As soon as possible following the Closing, the Seller
shall provide the Buyer with a calculation showing in detail the amount of such
Working Capital Shortfall and other costs and liabilities, together with a
certificate from the Seller's treasurer stating that the amounts shown on such
calculation are accurate. In the event that during the period from January 1,
1995 through April 30, 1995, there were any costs, liabilities or receipts
associated with the operation of the Incinerator which were not previously
reflected accurately in the information supplied by the respective Parties to
each other, then the amount of cash payable by the Buyer for the Incinerator
pursuant to this (S)2(b) shall be adjusted to reflect such additional costs,
obligations or receipts. To the extent (if any) that the Seller shall have
previously drawn or shall draw upon the deposit made by the Buyer under (S) 2
(h)(iv) hereof, the Buyer shall be given a credit equal to the aggregate amount
of such draws for the purposes of calculating the amount payable by the Buyer to
the Seller under this (S) 2(b). In the event the aggregate amount of such
deposits made by the Buyer exceed the amount of the Working Capital Shortfall
then payable by the Buyer, the Seller shall remit such excess to the Buyer
concurrently with the delivery by the Seller of the calculation and certificate
described above.
(c) Royalty. In addition to the amounts payable under (S) 2(b) above, the
-------
Buyer agrees to pay in cash to the Seller (or its assignee) for each calendar
year commencing with the year ending December 31, 1995 through the year ending
December 31, 2004, an annual royalty for each incremental ton of waste
(excluding process waste water and other site-generated waste) in excess of
15,000 tons per year (up to a maximum of 45,000 tons per year) processed through
the Incinerator on and after the Commencement of Commercial Operations. The
royalty will be calculated as follows:
Total Royalty Per Incremental Royalty Per Incremental
Tons Processed Ton for the Years 1995-1997 Ton for the Years 1998-2004
------------------- --------------------------- ---------------------------
0 to 15,000 $ 0 $ 0
15,001 to 20,000 $20 $20
-6-
20,001 to 25,000 $25 $30
25,001 to 30,000 $30 $40
30,001 to 35,000 $35 $50
35,001 to 40,000 $40 $50
40,001 to 45,000 $45 $50
The royalty for each year shall be calculated on an incremental basis based upon
the respective numbers of tons processed in excess of the base numbers shown in
the above table. Accordingly, if there are a total of 37,000 tons processed
during the year ended December 31, 1995, the total royalty for that year shall
be $630,000 (namely $0 for the first 15,000 tons, $100,000 for the next 5,000
tons, $125,000 for the next 5,000 tons, $150,000 for the next 5,000 tons,
$175,000 for the next 5,000 tons, and $80,000 for the last 2,000 tons).
Pursuant to the above table, the maximum royalty payable for any year shall be
$975,000 for each of the years 1995 through 1997, and $1,200,000 for each of the
years 1998 through 2004. The royalty for each year described above shall be
payable in one payment by February 28 of the following year and forwarded to
Ecova Corporation, Colorado National Bank - Golden Branch, Account No. 1204-
0432-1842, Golden, Colorado 80401, or such other account as the Seller (or its
assignee) shall specify. Any payment not made by February 28 of the appropriate
year shall be subject to interest at the Applicable Rate. The royalty for each
year shall be accompanied by a written statement from the Buyer's treasurer
certifying the total number of tons of waste processed through the Incinerator
during the preceding year and showing the calculation of the royalty for such
year. If the Buyer shall sell the Incinerator prior to December 31, 2004, the
Buyer shall remain liable for its obligations under this (S)2(c) to pay
royalties and to provide statements certifying the number of tons of waste
processed, except that if the Seller (or its assignee) shall so agree in
writing, the purchaser of the Incinerator from the Buyer shall assume the
Buyer's future obligations to make such payments and reports and the Buyer shall
thereupon be released from such future obligations.
(d) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of the Seller, 800
Jefferson County Parkway, Golden, Colorado 80401, commencing at 9:00 a.m. local
time on May 12, 1995 (or on such other date as shall be agreed in writing by all
of the Parties), provided that all of the conditions precedent for the Closing
set forth in (S) 7 hereof shall have been satisfied (the "Closing Date").
(e) Accounts Receivable and Payable. Subject to the provisions of (S)
-------------------------------
2(b) hereof (which shall control in the event of any conflict between the
provisions of (S) 2(b) and this (S) 2(e)), the Seller shall be responsible for
all costs, Liabilities and expenses related to the Incinerator, and shall be
entitled to receive the benefit of all revenues generated by the Incinerator,
through the Closing Date. The Buyer shall be responsible for all Liabilities,
costs and expenses related to the Incinerator, and shall be entitled to receive
the benefit of all revenues generated by the Incinerator, after the Closing
Date. However, nothing contained in this (S) 2(e) shall be deemed to affect
either (i) the right of the Seller to seek reimbursement in accordance with (S)
2(b) hereof for any costs or liabilities associated with the operation of the
Incinerator from the close of
-7-
business on April 30, 1995 through the Closing Date, or (ii) the right of any
Party to seek indemnification for any costs, Liabilities or expenses to the
extent that such indemnification is provided for under (S) 10 of this Agreement.
(f) Deliveries at the Closing. At the Closing, (i) the Seller will
-------------------------
deliver to the Buyer and CHI the various certificates, instruments, and
documents referred to in (S)7(a) below, and one or more deeds, assignments,
bills of sale and other instruments of transfer which shall be sufficient to
vest in the Buyer good and marketable title free of Security Interests to the
Incinerator and the Intellectual Property specified in (S)2(a) above; and (ii)
the Buyer will deliver to the Seller a check equal to the difference between the
$1,240,528.00 payable by the Buyer at the Closing pursuant to (S)2(b)(i) hereof
and the payments made in respect thereof by the Buyer prior to the Closing
(excluding the deposits made under (S)2(h)(iv) below), and the various
certificates, instruments, and documents referred to in (S)7(b) below.
(g) Final Trial Burn Test. The Seller completed on December 17, 1994, a
---------------------
final trial burn test of the Incinerator (the "Final Trial Burn Test") in
accordance with (S) 1, Part V of the Hazardous Waste Treatment and Storage
Facility Permit dated November 17, 1993, as heretofore amended (the "RCRA
Permit") which the Seller has previously been issued for the Incinerator by the
NDEQ. Within three months after the Closing, the Seller at its expense shall
purchase and shall pay related installation costs for a permanent carbon
injection dioxin control system for the Incinerator approved by the NDEQ which
shall be similar to that used in the Final Trial Burn Test. The Seller has
permitted and shall permit representatives and consultants selected by the
Buyer, at the Buyer's expense, to be present during the Final Trial Burn Test
and to review the results thereof and all related data as soon as available. In
the joint opinion of the consultants for the Seller and the Buyer, the
Incinerator has satisfied during the Final Trial Burn Test all of the
performance criteria set forth in Section I, Part V of the RCRA Permit
(including, without limitation, the performance criteria for destruction and
removal efficiency (DRE), HCL removal, particulate emissions and dioxin
emissions). Accordingly, the "Successful Completion of the Final Trial Burn
Test" is deemed to have occurred. The Seller and its consultants will be
responsible for submitting to the NDEQ the data required by the RCRA Permit
relating to the Final Trial Burn Test, irrespective of whether or not the
Closing shall have occurred prior to the date of such submission.
(h) Interim Operations. On and after the close of business on December
------------------
31, 1994, the Seller shall operate the Incinerator in accordance with the
following interim procedures until the Closing shall occur or this Agreement
shall be terminated prior to the Closing in accordance with (S) 11 hereof:
(i) The Buyer shall be responsible for all sales and marketing
activities for the Incinerator; provided, however, such
responsibility shall cease if this Agreement shall be terminated
prior to the Closing Date in accordance with (S) 11 hereof.
-8-
(ii) CHI and its Affiliates may ship wastes to the Incinerator for
processing only on a COD basis. Commencing April 3, 1995, the
Buyer will deposit with the Seller by wire transfer $200,000 on
each Monday, which shall constitute payment on account for waste
disposal services. The charges for such services will reflect the
pricing agreed upon in the Attachment to the Letter of Intent,
adjusted by other applicable charges based on the actual volume
and special handling requirements of the wastes as received at
the Incinerator. If CHI or its Affiliates fail to make a wire
transfer as described above, the Seller may, at its option, (A)
accept no further waste deliveries, (B) terminate this Agreement
subject to the reimbursement obligations set forth in (S) 2(i)
below in accordance with (S) 11(a)(ii)(A) below, (C) draw on the
deposit described in (S)2(h)(iv) below, and/or (D) collect all
remaining amounts owed by the Buyer and CHI for any obligations
covered by this Agreement.
(iii) The Seller will retain control over scheduling all waste
shipments to the Incinerator, and will accept only those wastes
which conform to approved waste data sheets acceptable to the
Seller. Pricing will be specified at the time of scheduling in
accordance with the Attachment to the Letter of Intent, which
also outlines scheduling procedures.
(iv) In addition to the other financial obligations of the Buyer and
CHI under this Agreement, the Buyer has deposited with the Seller
in cash the amount of $800,000 to secure the Buyer's obligations
as described in (S)2(b) (ii) above and reimbursement obligations
under (S) 2(i) below. The Buyer has also deposited with the
Seller from time to time certain additional amounts to secure
such obligations. If the Seller believes that any additional
deposit is required to cover the expected Working Capital
Shortfall relating to the operation of the Incinerator prior to
the Closing, the Seller shall so notify the Buyer and the Buyer
shall wire transfer the additional deposit on the next business
day in order to continue waste shipments. Prior to the Closing,
the Seller may draw upon such deposit without prior notification
up to the full amount of the deposit if at any time the Buyer or
CHI fails to satisfy any of their financial obligations to the
Seller under this Agreement. Following the Closing, at the time
the Buyer makes payment to the Seller under (S)2(b)(ii) hereof,
the Seller shall draw the full amount of the deposit then held,
and the amount of such draw (together with any previous draws)
shall be credited against the amount then payable by the Buyer in
accordance with (S)2(b).
(i) Special Allocation of Costs. If the Buyer and CHI elect for any
---------------------------
reason (other than a default by the Seller under this Agreement) not to proceed
with the Closing, then the Buyer shall reimburse the Seller for: (i) fifty
(50%) percent of the Working Capital Shortfall incurred by the
-9-
Seller to operate the Incinerator and to conduct the Final Trial Burn Test from
November 22, 1994 through the close of business on December 31, 1994; (ii) one
hundred (100%) percent of the Working Capital Shortfall incurred by the Seller
to operate the Incinerator from the close of business on December 31, 1994 and
ending on the date this Agreement is terminated in accordance with (S) 11
hereof; and (iii) one hundred (100%) percent of any Incremental Closure Costs
arising on and after the close of business on December 31, 1994 and ending on
the date this Agreement is terminated in accordance with (S) 11 hereof. In
addition, the Seller would retain ownership of the Incinerator and the Buyer
would cooperate in every way with the Seller to accomplish that result.
(j) Financial Assurance. The Seller agrees to keep all closure,
-------------------
postclosure, and corrective or remedial action financial assurances and
hazardous waste liability financial assurances required by its permits or other
applicable laws, rules or regulations in place until the Closing. The Buyer and
CHI shall obtain NDEQ approval of the Buyer's financial assurances prior to the
Closing. In addition, a condition for the Closing will be receipt by the Seller
of releases from the NDEQ of all of the Seller's financial assurances relating
to closure, post-closure and corrective or remedial action with respect to the
Incinerator and the Monofill.
(k) Letter of Credit. To secure its reimbursement obligations under
----------------
(S) 2(i) hereof, the Buyer has previously provided to the Seller a Letter of
Credit in the amount of $1,200,000. The Seller agrees to draw upon such Letter
of Credit only to the extent that such reimbursement obligations are not paid in
cash by the Buyer to the Seller within thirty (30) days after delivery of a
written notice from the Seller to the Buyer and CHI stating in detail the amount
of such reimbursement obligations, together with a certificate from the Seller's
treasurer stating that the amounts shown on such calculation are accurate.
(l) Insurance. CHI has provided the Seller with a certificate of
---------
insurance for hazardous waste facility liability insurance as required by 40 CFR
264.147. The certificate of insurance specifies that the policy(ies) shall
include a waiver of subrogation in favor of the Seller and Amoco, shall name
each of the Seller and Amoco as an additional insured, shall include a
severability of interests clause, and shall include an endorsement designating
the policy as primary with respect to any policies of the Seller or Amoco. The
severability of interests clause shall read substantially as follows: "Except
with respect to the Limits of Insurance, and any rights or duties specifically
assigned in this Coverage Part to the first Named Insured, this insurance
applies: (1) as if each Named Insured were the only Named Insured, and (2)
separately to each Named Insured against whom claim is made or suit is brought."
3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties Concerning the Seller. The Seller
----------------------------------------------------
represents and warrants to the Buyer and CHI that the statements contained in
this (S)3(a) are correct and complete in all material respects (as defined in
(S)10(i) below) as of the date of this Agreement and will be
-10-
correct and complete in all material respects as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this (S)3(a)).
(i) Organization of the Seller. The Seller is duly organized, validly
--------------------------
existing, and in good standing under the laws of the State of Nevada. The
Seller is duly qualified to conduct business and in good standing as a foreign
corporation in the State of Nebraska.
(ii) Authorization of Transaction. The Seller has full power and authority
----------------------------
(including full corporate power and authority) to execute and deliver this
Agreement and each of the other agreements and documents specified in this
Agreement and to perform its respective obligations hereunder and thereunder.
This Agreement constitutes, and when executed and delivered at the Closing such
other agreements and documents (including, without limitation, the Guarantee of
Amoco) will constitute, the valid and legally binding obligations of the Seller
and/or of Amoco, as specified herein and therein, enforceable in accordance with
their respective terms and conditions. Except as made or obtained or to be made
or obtained by the Seller in connection with the Approvals, the Seller need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency which is required of the
Seller in order to consummate the transactions contemplated by this Agreement,
except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a materially adverse effect
on the Incinerator or on the ability of the Parties to consummate substantially
all of the transactions contemplated by this Agreement.
(iii) Noncontravention. Provided the conditions to the Closing set forth
----------------
in (S) 7 hereof are satisfied, neither the execution and the delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (A)
violate any statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Seller is subject or any provision of its charter or by-laws
or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, or create in any party the right to accelerate,
terminate, modify, or cancel, any material agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which it
is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Seller has no Liability or obligation to pay any
-------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer or CHI could
become liable or obligated.
(v) Outstanding Shares of the Seller. Amoco Oil Holding Company, an
--------------------------------
Affiliate of the Seller and Amoco, holds of record and owns beneficially all of
the outstanding shares of the Seller's capital stock.
-11-
(b) Representations and Warranties Concerning the Buyer and CHI. The
-----------------------------------------------------------
Buyer and CHI represent and warrant to the Seller that the statements contained
in this (S)3(b) are correct and complete in all material respects (as defined in
(S) 10(i) below) as of the date of this Agreement and will be correct and
complete in all material respects as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this (S)3(b)).
(i) Organization of the Buyer and CHI. Each of the Buyer and CHI is a
---------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of The Commonwealth of Massachusetts. The Buyer is duly qualified to
conduct business and in good standing as a foreign corporation in the State
of Nebraska.
(ii) Authorization of Transaction. Each of the Buyer and CHI has full
----------------------------
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and each of the other agreements and
documents specified in this Agreement and to perform its respective
obligations hereunder and thereunder. This Agreement constitutes, and when
executed and delivered at the Closing such other agreements and documents
will constitute, the valid and legally binding obligations of the Buyer
and/or of CHI, as specified herein or therein, enforceable in accordance
with their respective terms and conditions. Except as made or obtained or to
be made or obtained by the Buyer and CHI in connection with the Approvals,
the Buyer and CHI need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency which is required of the Buyer or CHI in order to
consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a materially adverse effect on the financial
condition to the Buyer or CHI or on the ability of the Parties to consummate
substantially all of the transactions contemplated by this Agreement.
(iii) Noncontravention. Provided the conditions to the Closing set
----------------
forth in (S) 7 hereof are satisfied, neither the execution and the delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (A) violate any statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer or CHI is subject or any
provision of its charter or by-laws or (B) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, or create in
any party the right to accelerate, terminate, modify, or cancel, any
material agreement, contract, lease, license, instrument, or other
arrangement to which the Buyer or CHI is a party or by which it is bound or
to which any of its assets is subject.
(iv) Brokers' Fees. Neither the Buyer nor CHI has any Liability or
-------------
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Seller could become liable or obligated.
-12-
(v) Outstanding Shares of the Buyer. CHI holds of record and owns
-------------------------------
beneficially all of the outstanding shares of the Buyer's capital stock.
(vi) Disclosure. The Buyer and CHI have been given full access to the
----------
Incinerator, the personnel currently employed by the Seller to operator the
Incinerator, and the related books, records, ledgers, files, documents,
correspondence, lists, architectural and engineering plans, drawings and
specifications, environmental and other studies, reports, and operating and
monitoring data which were owned by the Seller and located at the
Incinerator at the time representatives of the Buyer visited the
Incinerator.
(vii) Knowledge Concerning Seller Representations. Neither the Buyer,
--------------------------------------------
CHI nor any of their counsel or other representatives has Knowledge that any
of the Seller's representations and warranties in (S)(S)3(a) and 4 hereof is
untrue, incorrect or misleading in any material respect. The Buyer and CHI
agree that any such Knowledge would operate to amend the Disclosure Schedule
of the Seller, to qualify the relevant representations and warranties, and
to cure any misrepresentation or breach of warranty by the Seller that
otherwise might have existed hereunder.
4. Representations and Warranties Concerning the Incinerator and the
Intellectual Property. The Seller represents and warrants to the Buyer and CHI
that, except as set forth in the disclosure schedule delivered by the Seller to
the Buyer and CHI and initialed by the Parties (the "Disclosure Schedule"), the
statements contained in this (S) 4 and in the Disclosure Schedule are correct
and complete in all material respects (as defined in (S)10(i) below) as of the
date of this Agreement and will be correct and complete in all material respects
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this (S)4). To the extent,
if any, that such statements need to be modified in order to reflect changes
which occur between the date of this Agreement and the Closing Date, the Seller
shall describe such changes in the certificate to be delivered by the Seller at
the Closing as provided in (S) 7(a)(iii) below and, if the Buyer and CHI shall
elect to proceed with the Closing notwithstanding such changes, the statements
contained in this (S) 4 and in the Disclosure Schedule shall be deemed to have
been modified to the extent appropriate in order to incorporate such changes,
the relevant representations and warranties shall be thereby qualified, and any
misrepresentation or breach of warranty by the Seller that otherwise might have
existed shall be cured thereby.
(a) Title to the Incinerator and the Intellectual Property. The Seller
------------------------------------------------------
has good and marketable title to the fluidized bed incinerator, the Monofill,
the Personal Property and the Real Property included in the Incinerator and, to
the Seller's Knowledge, the patent rights to U.S. Patents Nos. 4253824 and
4448134 included in the Intellectual Property, free and clear of all Security
Interests. The Personal Property includes the items described in (S) 4(a) of
the Disclosure Schedule.
-13-
(b) Real Property. Except installments of Taxes or special assessments
-------------
which are not yet delinquent, to the Seller's Knowledge, there are no easements,
building restrictions, zoning restrictions, or other restrictions which affect
materially and adversely the current use or occupancy of the Real Property.
To the Seller's Knowledge, there are no written leases, subleases, licenses,
concessions, or other agreements granting to any Person the right of use or
occupancy of any portion of the Real Property; there are no outstanding options
or rights of first refusal to purchase the Real Property, or any portion thereof
or interest therein; and there are no parties (other than the Seller or
contractors of the Seller on a temporary basis) in possession of the Real
Property.
(c) Intellectual Property. To the Knowledge of the Seller, neither the
---------------------
Seller nor any of its Affiliates has interfered with, infringed upon,
misappropriated, or violated any material Intellectual Property rights of any
Third Party in any material respect, and neither the Seller nor any of its
Affiliates has received since the commencement of construction of the
Incinerator any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that either the Seller or any of its Affiliates must license or refrain from
using any Intellectual Property rights of any Third Party). To the Seller's
Knowledge, Section 4(c) of the Disclosure Schedule identifies each patent or
registration, if any, which has been issued to either the Seller or any of its
Affiliates with respect to the Intellectual Property, identifies each pending
patent application or application for registration, if any, which either the
Seller or any of its Affiliates has made with respect to any of the Intellectual
Property, and identifies each material license, agreement, or other permission,
if any, which either the Seller or any of its Affiliates has granted to any
Third Party with respect to any of the Intellectual Property (together with any
exceptions). The Seller has delivered to the Buyer or made available to the
Buyer at the Incinerator correct and complete copies of any such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date). Section 4(c) of the Disclosure Schedule also identifies each material
item of the Intellectual Property that any Third Party owns and that the Seller
uses pursuant to license, sublicense, agreement, or permission. The Seller has
delivered to the Buyer or made available to the Buyer at the Incinerator correct
and complete copies of the agreements creating any such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each such
item of used Intellectual Property, to the Seller's Knowledge: (i) the license,
sublicense, agreement, or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (ii) the
Seller is not in material breach or default, and no event has occurred which
with notice or lapse of time would constitute a material breach or default by
the Seller or permit termination, modification, or acceleration thereunder;
(iii) no party to the license, sublicense, agreement, or permission has
repudiated any material provision thereof; (iv) neither the Seller nor any of
its Affiliates has assigned its rights with respect to the license, sublicense,
agreement or permission in such a manner as to adversely affect the Seller's
ability to own and operate the Incinerator; and (v) the license, sublicense,
agreement or permission is freely assignable by the Seller to the Buyer as part
of the Intellectual Property provided the Buyer shall agree to assume such
license, sublicense, agreement or permission.
-14-
(d) Licenses and Permits. Section 4(d) of the Disclosure Schedule
--------------------
accurately lists the type and current regulatory status (including, without
limitation, the current expiration dates) of all material governmental licenses,
ordinances, authorizations, permits and certificates now held by the Seller with
respect to the business or operations of the Incinerator, including, without
limitation, licenses granted and administered pursuant to RCRA (collectively,
the "Existing Licenses"). The Seller has heretofore delivered to the Buyer and
CHI or made available to the Buyer at the Incinerator true and complete copies
of the Existing Licenses. Section 4(d) of the Disclosure Schedule also
identifies certain of the Existing Licenses (collectively, the "Transferable
Licenses") which the Seller will transfer to the Buyer as part of the
Incinerator. To the Knowledge of the Seller, except as set forth on (S)4(d) of
the Disclosure Schedule: (i) the Transferable Licenses have been validly issued
and are in full force and effect; (ii) the permit applications filed in
connection with obtaining the Transferable Licenses (including any amendments
thereof) were true and complete in all material respects; (iii) the Seller is in
substantial compliance with the terms and conditions of all of the Transferable
Licenses; (iv) the Seller has not taken or failed to take any action that could
result in a substantial risk of forfeiture of any Transferable License; and (v)
there is not, as of the date hereof, pending or threatened any action by or
before any court or governmental agency to revoke, cancel, rescind, modify or
refuse to renew any of the Transferable Licenses.
(e) Contracts and Other Agreements. Section 4(e) of the Disclosure
------------------------------
Schedule lists all of the contracts and other agreements now in effect of the
types described below to which the Seller is a party and which are relevant to
the Incinerator:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments under
such agreement (or group of related agreements) in excess of $10,000 per
annum, or which relates to the operation of the fluidized bed incinerator;
(ii) any agreement (or group of related agreements) for the purchase
or sale of supplies, products, or other personal property, or for the
furnishing or receipt of services (including, without limitation,
incineration or other disposal services), the performance of which will
extend over a period of more than six months or involve consideration in
excess of $50,000;
(iii) any warranties (including, without limitation, manufacturers
warranties), guaranties and similar arrangements relating to any asset
having a purchase price to the Seller in excess of $50,000;
(iv) any agreement concerning a partnership or joint venture;
(v) any severance or similar plan or arrangement and any retention
bonus or retention agreements for the benefit of its current or former
employees;
-15-
(vi) any collective bargaining agreement; or
(vii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $25,000 or providing material severance benefits.
The Seller has made available to the Buyer at the Incinerator a correct and
complete copy of each written agreement (as amended to date) listed in (S) 4(e)
of the Disclosure Schedule.
(f) Plans, Studies and Other Documents. The Seller has made available to
----------------------------------
the Buyer at the Incinerator a correct and complete copy of all of the following
documents with respect to the Incinerator which are now in the possession of the
Seller: final architectural and engineering plans, drawings and specifications,
environmental and other studies, reports, operating and monitoring data, and
other similar printed or written materials.
(g) Litigation. Section 4(g) of the Disclosure Schedule sets forth any
----------
instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge which is relevant to the Incinerator,
the Seller's current or former employees at the Incinerator, or the Intellectual
Property, or (ii) is a party or, to the Knowledge of the Seller, is threatened
in writing to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator which is relevant to the Incinerator, the Seller's current or former
employees at the Incinerator, or the Intellectual Property.
(h) Environmental, Health and Safety Laws. To the Knowledge of the
-------------------------------------
Seller, in connection with its ownership and operation of the Incinerator, the
Seller as of January 1, 1995: (i) is in substantial compliance with the
applicable Environmental, Health and Safety Laws (and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against the Seller alleging any such failure to
comply); (ii) has obtained and been in substantial compliance with all of the
terms and conditions of all material permits, licenses, and other authorizations
which are required under the applicable Environmental, Health, and Safety Laws;
and (iii) is in substantial compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in the applicable Environmental, Health, and
Safety Laws.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
---------------------
period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use all commercially reasonable
-------
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement as promptly as practicable (including satisfaction, but not waiver,
of the closing conditions set forth in (S)7 below).
-16-
(b) Approvals. Each of the Parties will give any notices to, make any
---------
filings with, and use all commercially reasonable efforts to obtain all of the
Approvals.
(c) Operation of the Incinerator. The Seller will operate the Incinerator
----------------------------
in the manner contemplated by this Agreement, including the appropriate analysis
and reporting of the results of the Final Trial Burn Test and the Commencement
of Commercial Operations, and exercise in such operation the same level of care,
skill and expertise as is customary in the hazardous waste management industry.
The Seller may perform a baseline environmental study or utilize ongoing
environmental monitoring to establish baseline environmental conditions at the
Incinerator site as of the date of Approval for Commercial Operations.
(d) Preservation of Business. The Seller will keep the business and
------------------------
properties of the Incinerator substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, and suppliers. Notwithstanding the foregoing, the Buyer
acknowledges that certain suppliers were needed by the Seller only through
completion of the Final Trial Burn Test and that the Seller is now terminating
its relationship with such suppliers.
(e) Full Access. Upon reasonable notice, the Seller will permit
-----------
representatives of the Buyer and CHI to have full access during normal business
hours to all premises, properties, personnel, books, records (including Tax
records other than records which relate exclusively to income taxes of the
Seller and its Affiliates), contracts, and other documents of or pertaining to
the Incinerator, to the extent permitted by applicable laws and regulations.
(f) Notice of Developments. The Seller will give prompt written notice to
----------------------
the Buyer and CHI of any material adverse development causing a breach of any of
the representations and warranties in (S)4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of its own representations and warranties in (S)3 above. No
disclosure by any Party pursuant to this (S)5(f), however, shall be deemed to
amend or supplement (S) 3, (S) 4, or the Disclosure Schedule, or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant unless
otherwise specifically agreed to in writing by the Parties.
(g) Exclusivity. Unless and until this Agreement is terminated in
-----------
accordance with (S) 11 hereof, the Seller shall not (i) solicit, initiate, or
encourage, the submission of any proposal or offer from any Person relating to
the acquisition of any substantial portion of the Incinerator or the
Intellectual Property (including any acquisition structured as a merger,
consolidation, or share exchange) or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing.
(h) Title Insurance. The Buyer will obtain, at the Buyer's expense, in
---------------
preparation for the Closing, with respect to the Real Property, an ALTA Owner's
Policy of Title Insurance Form
-17-
B - 1987 issued by Chicago Title Insurance Company or another title insurer
satisfactory to the Buyer insuring title to the Real Property to be in the Buyer
as of the Closing (subject to the title exceptions described in (S)4(b) of the
Disclosure Schedule). The title insurance policy delivered under this (S)5(h)
shall (A) insure title to the Real Property and all recorded easements
benefitting such real property, (B) contain an "extended coverage endorsement"
insuring over the general exceptions contained customarily in such policies, (C)
contain an ALTA Zoning Endorsement 3.1 (or equivalent), (D) contain an
endorsement insuring that the Real Property described in the title insurance
policy is the same real estate as shown on the Survey delivered with respect to
such property, (E) contain an endorsement insuring that each street adjacent to
the Real Property is a public street and that there is direct and unencumbered
pedestrian and vehicular access to such street from the Real Property, (F) if
the Real Property consists of more than one record parcel, contain a
"contiguity" endorsement insuring that all of the record parcels are contiguous
to one another, and (G) contain a "non-imputation" endorsement to the effect
that the title defects known to the officers, directors, and stockholders of the
owner prior to the Closing shall not be deemed "facts known to the insured" for
the purposes of the policy. The Buyer agrees to provide to the Seller as soon as
practicable but not less than 15 business days prior to the anticipated Closing
Date a preliminary form of such title insurance policy in order that the Seller
shall have an opportunity to cure prior to the Closing any title defects
disclosed in such preliminary form.
(i) Survey. The Buyer will obtain, at the Buyer's expense, in preparation
------
for the Closing, with respect to the Real Property, a current survey certified
to the Buyer, prepared by a licensed surveyor and conforming to current ALTA
Minimum Detail Requirements for Land Title Surveys, disclosing the location of
all improvements, easements, party walls, sidewalks, roadways, utility lines,
and other matters shown customarily on such surveys, and showing access
affirmatively to public streets and roads (the "Survey"). Except as set forth
in (S)4(b) of the Disclosure Schedule, the Survey shall not disclose any
material survey defect or encroachment from or onto the Real Property which has
not been cured or insured over prior to the Closing. The Buyer agrees to provide
to the Seller as soon as practicable but not less than 15 business days prior to
the anticipated Closing Date a preliminary form of the Survey in order that the
Seller shall have an opportunity to cure prior to the Closing any survey defects
disclosed in such preliminary form.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
----------------------
period following the Closing:
(a) General. Each of the Parties covenants to comply with its respective
-------
agreements set forth elsewhere in this Agreement including, without limitation,
its respective agreements set forth in (S)2. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the Parties covenants to take such further action
(including the execution and delivery of such further instruments and documents)
as any other Party reasonably may request, all at the cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under (S)10 below).
-18-
(b) Litigation and Other Support. In the event and for so long as any
----------------------------
Party actively is reasonably contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand with a
Third Party, or requires assistance in preparing financial statements or reports
to be filed with any Third Party, in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date involving
the Incinerator or the Intellectual Property, each of the other Parties will,
upon receipt of written request, reasonably cooperate with such requesting Party
and its counsel in such contest, defense or preparation, reasonably make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest, or defense or
preparation, all at the cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under (S)10 below).
Notwithstanding the foregoing, no Party shall be obligated hereby to provide
such cooperation or access if the providing of such cooperation or access would
violate the terms of any agreement by which such Party is currently bound or any
applicable law or regulation then in effect, or would result in the loss of any
attorney-client or attorney work-product privilege by such Party.
(c) Confidentiality. From and after the Closing, the Seller will treat
---------------
and hold as such all of the Confidential Information, and refrain from using any
of the Confidential Information except in connection with or as permitted by
this Agreement and as may be necessary to respond to any Tax audits or to
enforce the terms of this Agreement.
(d) Continuing Financial Assurance Obligations. The Parties will comply in
------------------------------------------
full with their respective financial assurance obligations relating to the
Incinerator as set forth in (S)2(j) of this Agreement.
7. Conditions to Obligation to Close.
---------------------------------
(a) Conditions to Obligation of the Buyer and CHI. The obligation of the
---------------------------------------------
Buyer and CHI to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties of the Seller set forth in
(S)3(a) and (S)4 above shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) the Seller shall have delivered to the Buyer and CHI a
certificate to the effect that each of the conditions specified above in
(S)7(a)(i)-(ii) is satisfied;
-19-
(iv) except for the proceedings described in (S) 4(g) of the Disclosure
Schedule, no action, suit, or proceeding shall be pending or threatened in
writing before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(C) affect adversely and materially the right of the Buyer to own the
Incinerator and the Intellectual Property or to operate the Incinerator (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Buyer and CHI shall have received from counsel to the Seller
and Amoco an opinion substantially in the form attached hereto as Exhibit B
addressed to the Buyer and CHI, and dated as of the Closing Date;
(vi) the Approval for Commercial Operations received from the
Director of the NDEQ shall not have been rescinded or otherwise adversely
modified;
(vii) the Buyer shall have received all of the Approvals;
(vii) the Buyer shall have received the title insurance policy and
riders specified in (S)5(h) above and the Survey specified in (S)5(i) above;
(viii) the Buyer and CHI shall have obtained from their lending
institutions, on terms and conditions reasonably satisfactory to them, all
of the waivers they need under their existing financing documents in order
to consummate the transactions contemplated hereby or, in the alternative,
the Buyer and CHI shall have obtained alternative financing arrangements
reasonably satisfactory to them which will allow them to close this
transaction;
(ix) the Buyer and CHI shall have received an executed Guarantee by
Amoco of the Seller's indemnification obligations pursuant to (S) 10(d)
hereof in the form attached hereto as Exhibit C; and
(x) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby, to the extent specifically described in
this Agreement, will be reasonably satisfactory in form and substance to the
Buyer and CHI.
The Buyer and CHI may waive any condition specified in this (S)7(a) if they
execute a writing so stating at or prior to the Closing.
-20-
(b) Conditions to Obligation of the Seller. The obligation of the Seller
--------------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties of the Buyer and CHI set forth
in (S)3(b) above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Buyer and CHI shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing;
(iii) the Buyer and CHI shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in
(S)7(b)(i)-(ii) is satisfied;
(iv) except for the proceedings described in (S) 4(g) of the
Disclosure Schedule, no action, suit, or proceeding shall be pending or
threatened in writing before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Seller shall have received from counsel to the Buyer and CHI
an opinion substantially in the form attached hereto as Exhibit D addressed
to the Seller, and dated as of the Closing Date;
(vi) the Seller shall have received from the NDEQ in accordance with
(S) 2(j) hereof the releases from the financial assurances which it has
provided with respect to the Incinerator and the Monofill; and
(vii) all actions to be taken by the Buyer and CHI in connection with
consummation of the transactions contemplated hereby, to the extent
specifically described in this Agreement, and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the Seller.
The Seller may waive any condition specified in this (S)7(b) if it executes a
writing so stating at or prior to the Closing.
8. Employee Matters.
(a) Offers of Employment. The Seller agrees to use its best efforts to
--------------------
retain personnel currently employed to operate the Incinerator. The Buyer shall
offer employment at the time of
-21-
Closing to at least seventy-five (75%) percent of the sum of (a) the individuals
currently employed by the Seller, and (b) those employees released by the Seller
on October 28, 1994 who have not subsequently been rehired. Such employees shall
be offered employment at comparable salaries and the Buyer and CHI shall provide
industry competitive medical, dental, and (S) 401(k) plans. The Buyer and CHI
agree to recognize the original hire date of all former employees of the Seller
who are hired by the Buyer for all purposes, including but not limited to the
Ecova Corporation Severance Program referred to in (S) 8(b) below. However,
neither the Buyer nor CHI shall have any Liability relating to or arising out of
the employment of employees or the engagement of independent contractors by the
Seller for periods prior to and including the Closing Date.
(b) Severance Benefits. The Buyer agrees to provide all former employees
-------------------
of the Seller who are hired by the Buyer comparable or better severance benefits
to those provided in the 1994 Ecova Severance Program, Amended as of September
29, 1994 (the "Ecova Corporation Severance Program"), plus an additional sixty
(60) calendar days on the payroll after any employee is released from work,
which is consistent with the Seller's current policy, for a period of one (1)
year from the Closing Date, except where any such employee is terminated for
cause. For purposes hereof, "cause" shall mean either (i) the failure of the
employee to perform his or her duties which failure amounts to an intentional,
extended, or gross neglect of such duties or (ii) the commission by the employee
of an act of fraud, embezzlement, violence, or other misconduct against the
Buyer or any of its employees or the employee having been convicted of a felony
involving moral turpitude. For purposes of the severance allowance in the Ecova
Corporation Severance Program, the Buyer can deduct from the severance allowance
any severance allowance the employee received from the Seller in connection with
employee's termination of employment by the Seller.
(c) Vacation. Between the Closing and the end of the calendar year 1995,
---------
the Buyer shall permit all of the Seller's employees who are hired by the Buyer
to take at least the same number of days paid vacation as they would have been
able to take as of the Closing Date under the vacation policies of the Seller
based upon the original hire date of such employees by the Seller.
(d) WARN Act. The Parties agree that the Seller shall be responsible for
---------
any obligations under the Worker Adjustment and Retraining Notification ("WARN")
Act (29 U.S.C. (S)2101, et seq.), or under similar provisions of state or local
law, arising prior to the Closing, and the Buyer shall be responsible for any
WARN Act (or similar state or local law) obligations arising after the Closing
as a consequence of this Agreement and the Incinerator and the Intellectual
Property being sold hereunder. Furthermore, for the first sixty (60) days
following the Closing Date, the Buyer shall not engage in any mass layoff, plant
closing or other action that might trigger obligations under the WARN Act or
under any similar provision of any state or local law.
-22-
9. Tax Matters.
(a) Liability for Taxes-General. Except as otherwise expressly provided
---------------------------
for in this (S) 9: (i) the Seller shall be liable for, and shall indemnify the
Buyer and CHI against, any Tax arising from or attributable to the operations
of the Incinerator through December 31, 1994; and (ii) the Buyer and CHI shall
be liable for, and shall indemnify the Seller against, any Tax arising from or
attributable to the operations of the Incinerator from and after January 1,
1995.
(b) State and Local Sales and Use Taxes. It is the mutual opinion of the
-----------------------------------
Parties that the transfer of tangible personal property pursuant to this
Agreement (except motor vehicles) qualifies as an "occasional sale" under
applicable Nebraska statutes and regulations and, as such, is exempt from state
and local sales and use taxes. The Seller agrees to provide to the Buyer and CHI
at the Closing an executed Nebraska Certificate of Exemption specifying the
transfer as an occasional sale. It is therefore agreed by and between the
Parties that state and local sales and use taxes will not be charged or
collected at the Closing. It is further agreed, however, that in the event
that the Seller shall become liable for state or local sales or use taxes
(including penalties and interest, if applicable) arising out of this transfer,
the Buyer and CHI shall be responsible for these taxes plus penalties and
interest. The Seller agrees to give timely notice to the Buyer and CHI of any
proposed assessment of these taxes, penalties and interest, and the Buyer and
CHI shall have the opportunity, at their own expense, to contest the imposition
of these taxes, penalties, and interest.
(c) Transfer Taxes on Motor Vehicles. The Buyer shall be responsible for
---------------------------------
any state or local sales or use tax imposed upon any motor vehicle transferred
by the Seller to the Buyer, and the Buyer shall pay this tax directly to the
proper authority.
(d) Transfer Fees on Conveyances. The Party responsible under applicable
----------------------------
law shall bear and pay, in their entirety, all registration or transfer fees, if
any, payable by reason of the sale and conveyance of the Incinerator, the Real
Property or the Personal Property.
(e) State and Local Property (Real and Personal) Tax Returns and Payments.
----------------------------------------------------------------------
(i) Returns for Periods Prior to the Closing. The Seller shall
----------------------------------------
prepare and file all property tax returns (whether related to real property
taxes or to personal property taxes) required to be filed with respect to
the Incinerator for all periods ending before the Closing. Subject to its
right to be indemnified pursuant to (S) 9(a) (ii) above, the Seller shall be
responsible for payment of the taxes shown to be due on such returns, shall
be entitled to any refunds of such taxes, and shall be responsible, at its
own expense, for all audits which may be conducted on such returns. The
Buyer and CHI shall provide reasonable access to books, records, and returns
and other information to the extent necessary to permit the Seller to timely
prepare and file such returns and pay such taxes.
-23-
(ii) Returns for Periods Ending On and After the Closing. The Buyer
---------------------------------------------------
or CHI shall prepare and file, or shall cause to be prepared and filed, all
property tax returns (whether related to real property taxes or to personal
property taxes) required to be filed with respect to the Incinerator for all
periods ending on or after the Closing. Subject to their right to be
indemnified pursuant to (S) 9(a) (i) above, the Buyer and CHI shall be
responsible for payment of the taxes shown to be due on such returns and
shall be entitled to any refunds of such taxes to the extent the payment or
refund of such taxes is attributable to the Incinerator on or after the
Closing. The Seller shall promptly reimburse the Buyer or CHI for the
portion of such taxes, and the Buyer or CHI shall promptly remit to the
Seller the portion of any refunds, to the extent the payment or refund of
such taxes is attributable to the Incinerator before January 1, 1995. The
Seller shall provide reasonable access to books, records, returns, and other
information to the extent necessary to permit the Buyer or CHI to timely
prepare and file such returns and pay such taxes.
(f) Cooperation and Exchange of Information. Following the Closing, each
---------------------------------------
Party will provide, or cause to be provided, upon written request to any other
Party copies of all correspondence received by such Party from any taxing
authority in connection with any potential liability of such other Party for Tax
under this (S)9. The Parties will also provide each other with such other
cooperation and information as they may reasonably request in writing of each
other in preparing or filing any return, amended return, or claim for refund, in
determining a liability or a right of refund, or in conducting any audit or
other proceeding, in respect of Tax imposed on the Parties or their respective
Affiliates as a result of the transactions provided for in this Agreement. Any
information obtained pursuant to this (S)9(f) shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting any audit or other proceeding. Each Party shall be
entitled to reimbursement for the actual costs incurred by such Party in
connection with providing the cooperation and information required by this
(S)9(f). Notwithstanding the foregoing, no Party shall be obligated hereby to
provide such cooperation or information if the providing of such cooperation or
information would violate the terms of any agreement by which such Party is
currently bound or any applicable law or regulation then in effect, or would
result in the loss of any attorney-client or attorney work-product privilege by
such Party.
(g) Survival of Obligations and Conflict. The obligations of the Parties
------------------------------------
set forth in this (S)9 shall be unconditional and shall remain in effect without
limitation as to time. In the event of a conflict between the provisions of
this (S)9 and any other provisions of this Agreement, the provisions of this
(S)9 shall control.
10. Remedies and Indemnification for Third Party Claims.
(a) Survival of Representations, Warranties and Covenants. The
--------------------------------------------------------
representations and warranties of the Parties contained in (S) 3 and (S) 4 of
this Agreement shall survive the Closing hereunder for a period of six months
thereafter (except to the extent that any breach of a representation or warranty
is formally waived in writing at or prior to Closing), and notice of any
-24-
alleged breach thereof must be given within such six-month period or be forever
barred. However, the covenants and other obligations of the Parties under this
Agreement shall survive the Closing and shall continue in full force and effect
thereafter.
(b) Indemnification by the Seller for the Benefit of the Buyer and CHI.
------------------------------------------------------------------
In the event the Seller breaches any of its representations or warranties
contained in (S)3(a) or (S)4 of this Agreement and notice of the same is given
as provided in (S)10(a) above, then the Seller agrees to indemnify the Buyer and
CHI from and against the entirety of any Adverse Consequences the Buyer or CHI
may suffer through and after the date of the claim for indemnification resulting
from, arising out of, relating to, in the nature of, or caused by the breach,
subject to the limitations set forth in (S)10(i) below.
(c) Indemnification by the Buyer and CHI for the Benefit of the Seller.
------------------------------------------------------------------
In the event the Buyer or CHI breaches any of their representations or
warranties contained in (S)3(b) of this Agreement and notice of the same is
given as provided in (S)10(a) above, then the Buyer and CHI agree to indemnify
the Seller from and against the entirety of any Adverse Consequences which the
Seller may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach, subject to the limitations set forth in (S) 10(i) below.
(d) Indemnification by the Seller and Amoco for the Benefit of the Buyer
--------------------------------------------------------------------
and CHI. Except for the express representations and warranties made by the
--------
Seller in (S) 4 hereof, the Incinerator is being sold hereunder on an "as
is/where is" basis without any further representation, warranty or future
obligation whatsoever, express or implied, by the Seller or Amoco to the Buyer
or CHI. However, the Seller agrees to forever indemnify the Buyer and CHI from
and against the entirety of any Adverse Consequences suffered through and after
the date of the claim for indemnification resulting from any claim by a Third
Party against the Buyer or CHI for any cause of action relating to the
Incinerator and arising out of, or caused by, either (i) the Seller's ownership
and operation of the Incinerator prior to the close of business on December 31,
1994 (excluding the Seller's design and construction of the Incinerator), or
(ii) the transportation and disposal activities of the Seller prior to the
Commencement of Commercial Operations. The Seller's Affiliate, Amoco, shall
provide at the Closing to the Buyer and CHI a Guarantee of the Seller's
obligations contained in this (S)10(d) in the form attached hereto as Exhibit C.
(e) Indemnification by the Buyer and CHI for the Benefit of the Seller and
----------------------------------------------------------------------
its Affiliates. The Buyer and CHI agree to forever indemnify the Seller, Amoco
---------------
and other Affiliates from and against the entirety of any Adverse Consequences
suffered through and after the date of the claim for indemnification resulting
from any claim by a Third Party against the Seller, Amoco or any of their
Affiliates arising out of, or caused by, either (i) the operation of the
Incinerator after the close of business on December 31, 1994, or (ii) the
transportation and disposal activities of the Buyer or CHI after the
Commencement of Commercial Operations.
-25-
(f) Matters Involving Third Parties.
-------------------------------
(i) If any Third Party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this (S)10, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing, provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing with thirty (30) days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, and (C) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with (S)10(f)(ii) above, (A) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) at any time after
the commencement of the defense of any Third Party Claim, the Indemnifying Party
may request the Indemnified Party to agree in writing to the abandonment of such
contest or to the payment or compromise by the Indemnified Party of the asserted
Third Party Claim, whereupon such action shall be taken unless the Indemnified
Party determines that the contest should be continued, and so notifies the
Indemnifying Party in writing within thirty (30) days of such request from the
Indemnifying Party. If the Indemnifying Party determines that the contest
should be continued, the Indemnifying Party shall be liable hereunder only to
the extent of the amount that the other party to the contested Third Party Claim
had agreed to accept in payment or compromise as of the time the Indemnifying
Party made its request therefor to the Indemnified Party.
(iv) In the event any of the conditions in (S)10(f)(ii) above is or becomes
unsatisfied, however, (A) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith),
-26-
(B) the Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this (S)10.
(g) Determination of Adverse Consequences. The Parties shall take into
-------------------------------------
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this (S)10.
(h) Exclusive Remedies. The provisions of this (S) 10 are intended to be
------------------
the exclusive remedy between the Parties for the matters covered by such
provisions, and no Party shall seek recovery from any other Party or any of its
Affiliates with respect to such matters under theories of strict liability,
negligence or other theory of recovery, whether under contract (other than this
Agreement) or tort or at law or in equity.
(i) Limitation on Indemnification. The Seller shall not be liable to the
-----------------------------
Buyer or CHI, and the Buyer and CHI shall not be liable to the Seller, for
Adverse Consequences under this (S)10 (excluding claims pursuant to (S) 10(d) or
(S) 10(e)) unless the aggregate amount of Adverse Consequences for which such
Parties would, but for the provisions of this (S)10(i), be liable exceeds, on an
aggregate basis, $250,000, and then only to the extent of such excess. In
addition, the Seller shall not be liable to the Buyer or CHI, and the Buyer and
CHI shall not be liable to the Seller, for any single breach governed by
(S)10(b) or (S)10(c) unless the Adverse Consequences arising from such single
breach exceed $10,000 (which shall be the definition of "material" for purposes
of the first sentence of (S)3(a), (S)3(b), and (S)4 above), and then only to the
extent of such excess. The foregoing limitations shall not be applicable to
any breach governed by (S)10(d) or (S)10(e) hereof.
(j) Johnson Litigation. Anything in this (S)10 to the contrary
-------------------
notwithstanding, the Buyer and CHI agree to assume the responsibility (if any)
for the defense of and any consequences which may arise from the pending
litigation brought by Kenneth Johnson against the Nebraska Environmental Control
Council and the Nebraska Department of Environmental Control (currently known as
the "Nebraska Department of Environmental Quality"), in which the Seller
(formerly known as "Waste-Tech Services, Inc.") is an intervenor.
11. Termination
(a) Termination of Agreement. Certain of the Parties may terminate this
------------------------
Agreement as provided below:
-27-
(i) the Buyer or CHI may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A) in the event the
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Buyer or CHI has
notified the Seller of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach, or (B) if the
Closing shall not have occurred on or before May 15, 1995, by reason of the
failure of any condition precedent under (S)7(a) hereof (unless the failure
results primarily from the Buyer or CHI itself breaching any
representation, warranty, or covenant contained in this Agreement);
(ii) the Seller may terminate this Agreement by giving written notice
to the Buyer and CHI at any time prior to the Closing (A) in the event CHI
or its Affiliates have failed to pay any invoice for waste processing at
the Incinerator in accordance with (S)2(h)(ii) hereof, (B) in the event the
Buyer or CHI has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the Seller
has notified the Buyer and CHI of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach, (C) if at
any time prior to the Closing Date, the Seller is not satisfied for any
reason with the progress the Buyer and CHI have made toward securing
financial assurances or the financial obligations required of the Buyer or
CHI in order to complete the Closing, or (D) if the Closing shall not have
occurred on or before May 15, 1995, by reason of the failure of any
condition precedent under (S)7(b) hereof (unless the failure results
primarily from the Seller itself breaching any representation, warranty, or
covenant in this Agreement); and
(iii) in the event that by May 15, 1995, the Closing shall not have
occurred but this Agreement shall not have been terminated in accordance
with (i) or (ii) above, this Agreement shall terminate unless all of the
Parties shall thereupon mutually agree in writing to extend this Agreement.
(b) Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to (S)11(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party, except
for (i) any Liability of any Party or Parties then in breach, and (ii) the
reimbursement obligations of the Buyer and CHI under (S) 2(i) of this Agreement.
12. Miscellaneous
(a) Nature of Certain Obligations; Guaranties. The representations,
-----------------------------------------
warranties, and covenants in this Agreement are joint and several obligations of
the respective Parties. Any and all obligations of the Buyer under this
Agreement shall be unconditionally and irrevocably guaranteed by CHI.
-28-
(b) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Parties prior to making
the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns, except insofar as the indemnification
obligations hereunder may extend to any Affiliate of a Party.
(d) Entire Agreement. This Agreement (including the documents referred to
----------------
herein) constitutes the entire agreement among the Parties and supersedes the
Letter of Intent and any other prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided, however, that a Party may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the designating Party nonetheless shall remain
responsible for the performance of all of its and its assignee's obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by nationally recognized overnight carrier
or by registered or certified mail, return receipt requested, postage prepaid,
and addressed to the intended recipient as set forth below:
-29-
If to the Buyer: Copy to:
Clean Harbors Technology Corporation C. Michael Malm, Esq.
325 Wood Road Davis, Malm & D'Agostine, P.C.
Braintree, Massachusetts 02184 One Boston Place
Attn: Stephen H. Moynihan Boston, Massachusetts 02108
If to CHI: Copy to:
Clean Harbors, Inc. C. Michael Malm, Esq.
325 Wood Road Davis, Malm & D'Agostine, P.C.
Braintree, Massachusetts 02184 One Boston Place
Attn: Jonathan R. Black, Boston, Massachusetts 02108
General Counsel
If to the Seller: Copy to:
Ecova Corporation A.A. Kozinski
800 Jefferson County Parkway Amoco Corporation
Golden, Colorado 80401 Mail Code 1606B
Attn: Thomas E. Noel, President 200 East Randolph Drive
Chicago, IL 60601
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of Nebraska without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Nebraska or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Nebraska.
(j) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
-30-
(k) Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear its own costs and expenses
--------
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation." The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
CLEAN HARBORS TECHNOLOGY
CORPORATION
By:
------------------------------------
Title:
---------------------------------
CLEAN HARBORS, INC.
By:
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Title:
---------------------------------
ECOVA CORPORATION
By:
------------------------------------
Title:
---------------------------------
-31-
EXHIBITS AND SCHEDULES TO AGREEMENT
-----------------------------------
Document Section Reference
------------- -----------------
Exhibit A: Description of the Approvals (S)1
Exhibit B: Form of Opinion Addressed to the Buyer and CHI (S)7(a)(v)
Exhibit C: Form of Guarantee by Amoco (S)7(a)(x)
Exhibit D: Form of Opinion Addressed to the Seller (S)7(b)(v)
Disclosure Schedule (S)4
-32-
Exhibit 11
CLEAN HARBORS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
FOR THE SECOND QUARTER ENDED JUNE 30, 1995
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Net income (loss) $203 $1,251 $(387) $1,848
Less preferred dividends accrued 112 112 223 212
----- ------ ----- ------
Adjusted net income (loss) $ 91 $1,139 $(610) $1,636
===== ====== ===== ======
Earnings per common and common
equivalent share:
Weighted average number of
shares outstanding 9,431 9,429 9,431 9,428
Incremental shares for stock options
under treasury stock method 17 225 16 252
----- ------ ----- ------
Weighted average number of
common and common equivalent
shares outstanding 9,448 9,654 9,447 9,680
===== ====== ===== ======
Net earnings (loss) per common and common
equivalent share $.01 $.12 $(.06) $.17
===== ====== ===== ======
Earnings per common and common
equivalent share - assuming full
dilution:
Weighted average number of
shares outstanding 9,431 9,429 9,431 9,428
Incremental shares for stock options
under treasury stock method 18 256 16 255
----- ------ ----- ------
Weighted average number of common
and common equivalent shares outstanding -
assuming full dilution 9,449 9,685 9,447 9,683
===== ====== ===== ======
Net earnings (loss) per common and common
equivalent share - assuming full
dilution $.01 $.12 $(.06) $.17
===== ====== ===== ======
5
1,000
6-MOS
DEC-31-1995
JUN-30-1995
365
2,306
48,515
(1,293)
2,924
56,671
127,367
51,768
176,247
40,161
68,248
95
0
1
66,700
176,247
102,049
102,049
74,219
74,219
0
0
4,134
(770)
(383)
(387)
0
0
0
(387)
(.06)
0
