<PAGE>
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
ENVIRONMENTAL SERVICES OF AMERICA, INC.
(Name of Subject Company)
ERD WASTE CORP.
ENSA ACQUISITION CORP.
(Bidders)
------------------------------
COMMON STOCK, PAR VALUE $.02 PER SHARE
(Title of class of securities)
294080-40-3
(CUSIP number of class of securities)
------------------------------
JOSEPH WISNESKI, PRESIDENT
ERD WASTE CORP.
356 Veterans Memorial Highway
Commack, New York 11725
(516) 543-0606
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of bidders)
WITH A COPY TO:
Richard Marlin, Esq.
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
Telephone: (212) 715-9100
------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
<S> <C>
$6,358,717.98 $1,271.75
</TABLE>
* For purposes of calculating fee only. Assumes purchase of 3,830,553 shares
of Common Stock, $.02 par value per share, of Environmental Services of
America, Inc. at $1.66 per share.
** 1/50th of 1% of Transaction valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: None Filing party: Not applicable.
Form or registration no.: Not Date filed: Not applicable.
applicable.
</TABLE>
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Page 1 of pages
Exhibit Index is located on page
<PAGE>
CUSIP No. 294080-40-3 14D-1 Page 2 of Pages
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ERD Waste Corp. (11-3121813)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
BK, WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000*
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
11.5%
10 TYPE OF REPORTING PERSON
CO
- ------------------------
*Reference is made to Section 9 ("Certain Information Concerning ERD and the
Purchaser") of the Offer to Purchase.
<PAGE>
CUSIP No. 294080-40-3 14D-1 Page 3 of Pages
1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
ENSA Acquisition Corp. (11-3313110)
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) OR 2(f) / /
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0
10 TYPE OF REPORTING PERSON
CO
<PAGE>
This Statement relates to the offer by ENSA Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of ERD Waste Corp.,
a Delaware corporation ("ERD"), to purchase all outstanding shares (the
"Shares") of common stock, par value $.02 per share (the "Common Stock"), of
Environmental Services of America, Inc., a Delaware corporation (the "Company"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated April 4, 1996 annexed hereto as Exhibit (a)(1) (the "Offer to Purchase"),
and in the related Letter of Transmittal (which, together with any amendments or
supplements thereto, constitute the "Offer"), at a purchase price of $1.66 per
Share, net to each tendering stockholder in cash. The item numbers below and
responses thereto are in accordance with the requirements of Schedule 14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Environmental Services of America,
Inc., a Delaware corporation. The address of the Company's principal executive
offices is 937 East Hazelwood Avenue, Building #2, Rahway, N.J. 07065.
(b) The securities to which this statement relates are the Common Stock. The
information set forth in the Introduction of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(g) This Statement is being filed by the Purchaser and ERD
(collectively, the "Reporting Persons"). The Purchaser is a wholly owned
subsidiary of ERD.
The information set forth in Section 9 ("Certain Information Concerning ERD
and the Purchaser") and in Annex I of the Offer to Purchase is incorporated
herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 9 ("Certain
Information Concerning ERD and the Purchaser"), Section 11 ("Contacts with the
Company; Background of the Offer") and Section 13 ("Certain Agreements") of the
Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Sections 7
("Effects of the Offer on the Market for Shares; Stock Quotations; Registration
Under the Exchange Act") and 12 ("Purpose of the Offer; Short Form Merger; Plans
for the Company; Dissenters' Rights; Going Private Transactions") of the Offer
to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
The information set forth in the Introduction and Section 9 ("Certain
Information Concerning ERD and the Purchaser") of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 9 ("Certain
Information Concerning ERD and the Purchaser"), 11 ("Contacts with the Company;
Background of the Offer"), 12 ("Purpose of the Offer; Short Form Merger; Plans
for the Company; Dissenters' Rights; Going Private Transactions") and 13
("Certain Agreements"), of the Offer to Purchase is incorporated herein by
reference.
Page 4 of Pages
<PAGE>
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Sections 17 ("Fees and Expenses") and 18
("Miscellaneous") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning ERD
and the Purchaser") of the Offer to Purchase is incorporated herein by
reference. The incorporation by reference herein of such financial information
does not constitute an admission that such information is material to a decision
by a stockholder of the Company whether to sell, tender or hold the Shares being
sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Contacts with the Company;
Background of the Offer"), Section 13 ("Certain Agreements") and Section 16
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(b)-(c) The information set forth in Section 16 ("Certain Legal Matters")
of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Sections 7 ("Effects of the Offer on the
Market for Shares; Stock Quotations; Registration Under the Exchange Act") and
16 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(e) None
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, to the extent not otherwise set forth herein, is
incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated April 4, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(4) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Text of Joint Press Release issued April 4, 1996.
(a)(7) Form of Summary Advertisement, dated April 4, 1996.
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(b)(1) Loan Agreement, dated March 29, 1996, between the Purchaser and
Chemical Bank.
(c)(1) Amended and Restated Agreement and Plan of Merger, dated April 3,
1996, among the Purchaser, ERD and the Company.
(c)(2) Securities Purchase Agreement, dated January 25, 1996, between ERD
and the Company.
(c)(3) Stock Purchase Agreement, dated April 3, 1996, among ERD, Argentum
Capital Partners, L.P., Environmental Venture Fund, L.P. and those holders of
Series B Preferred Stock of the Company listed on Schedule 1 thereto who
executed such schedule.
(c)(4) Form of Colin Employment Agreement, to be entered into between the
Purchaser and Jon Colin.
(c)(5) Form of Jacobsen Employment Agreement, to be entered into between
the Purchaser and Joseph Jacobsen.
(d)-(f) Not applicable.
Page 5 of Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: April 4, 1996
ERD WASTE CORP.
By: /s/ JOSEPH WISNESKI
-----------------------------------
Name: Joseph Wisneski
Title: President
Page 6 of Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: April 4, 1996
ENSA ACQUISITION CORP.
By: /s/ JOSEPH WISNESKI
-----------------------------------
Name: Joseph Wisneski
Title: President
Page 7 of Pages
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NUMBERED PAGE
- --------- ---------------------------------------------------------------------------------------- -------------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated April 4, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(4) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Text of Joint Press Release issued April 4, 1996.
(a)(7) Form of Summary Advertisement, dated April 4, 1996.
(a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(b)(1) Loan Agreement, dated March 29, 1996, between the Purchaser and Chemical Bank.
(c)(1) Amended and Restated Agreement and Plan of Merger, dated April 3, 1996, among the
Purchaser, ERD and the Company.
(c)(2) Securities Purchase Agreement, dated January 25, 1996, between ERD and the Company.
(c)(3) Stock Purchase Agreement, dated April 3, 1996, among ERD, Argentum Capital Partners,
L.P., Environmental Venture Fund, L.P. and those holders of Series B Preferred Stock of
the Company listed on Schedule 1 thereto who executed such schedule.
(c)(4) Form of Colin Employment Agreement, to be entered into between the Purchaser and Jon
Colin.
(c)(5) Form of Jacobsen Employment Agreement, to be entered into between the Purchaser and
Joseph Jacobsen.
</TABLE>
Page 8 of Pages
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
AT
$1.66 NET PER SHARE
BY
ENSA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES (AS HEREINAFTER DEFINED) REPRESENTING AT LEAST A MAJORITY OF THE TOTAL
NUMBER OF OUTSTANDING SHARES OF ENVIRONMENTAL SERVICES OF AMERICA, INC. (THE
"COMPANY"), OTHER THAN THOSE SHARES HELD BY ERD WASTE CORP., ON A FULLY DILUTED
BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER.
THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN
SECTION 15 OF THIS OFFER TO PURCHASE.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
------------------------
IMPORTANT
ANY STOCKHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH STOCKHOLDER'S
SHARES SHOULD EITHER (1) COMPLETE AND SIGN THE LETTER OF TRANSMITTAL (OR A
FACSIMILE THEREOF) IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL, MAIL OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO THE
DEPOSITARY AND EITHER DELIVER THE CERTIFICATE(S) FOR SUCH TENDERED SHARES TO THE
DEPOSITARY ALONG WITH THE LETTER OF TRANSMITTAL OR TENDER SUCH SHARES PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER SET FORTH IN SECTION 2 OF THIS OFFER
TO PURCHASE, OR (2) REQUEST SUCH STOCKHOLDER'S BROKER, DEALER, COMMERCIAL BANK,
TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR THE STOCKHOLDER.
STOCKHOLDERS HAVING SHARES REGISTERED IN THE NAME OF A BROKER, DEALER,
COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT SUCH BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IF THEY DESIRE TO TENDER
SUCH SHARES.
A STOCKHOLDER WHO DESIRES TO TENDER SHARES AND WHOSE CERTIFICATE(S) FOR
SHARES ARE NOT IMMEDIATELY AVAILABLE, OR WHO CANNOT COMPLY WITH THE PROCEDURES
FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS, MAY TENDER SUCH SHARES BY FOLLOWING
THE PROCEDURES FOR GUARANTEED DELIVERY SET FORTH IN SECTION 2 OF THIS OFFER TO
PURCHASE.
QUESTIONS AND REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT AT ITS ADDRESS AND TELEPHONE NUMBERS SET FORTH ON THE BACK COVER OF THIS
OFFER TO PURCHASE. REQUESTS FOR ADDITIONAL COPIES OF THIS OFFER TO PURCHASE, THE
LETTER OF TRANSMITTAL AND THE NOTICE OF GUARANTEED DELIVERY MAY BE DIRECTED TO
THE INFORMATION AGENT OR TO THE BROKERS, DEALERS, COMMERCIAL BANKS OR TRUST
COMPANIES.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
abcdef
April 4, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
Introduction............................................................................................... 1
The Tender Offer........................................................................................... 3
1. Terms of the Offer; Extension of Tender Period; Termination; Amendments........................ 3
2. Procedure for Tendering Shares................................................................. 4
3. Withdrawal Rights.............................................................................. 7
4. Acceptance for Payment and Payment of Purchase Price........................................... 8
5. Certain Federal Income Tax Consequences........................................................ 9
6. Price Range of Shares; Dividends............................................................... 9
7. Effects of the Offer on the Market for Shares; Stock Quotations; Registration Under the
Exchange Act.................................................................................. 10
8. Certain Information Concerning the Company..................................................... 11
9. Certain Information Concerning ERD and the Purchaser........................................... 12
10. Source and Amount of Funds..................................................................... 14
11. Contacts with the Company; Background of the Offer............................................. 16
12. Purpose of the Offer; Short Form Merger; Plans for the Company; Dissenters' Rights; Going
Private Transactions.......................................................................... 17
13. Certain Agreements............................................................................. 19
14. Distributions.................................................................................. 25
15. Certain Conditions of the Offer................................................................ 26
16. Certain Legal Matters.......................................................................... 28
17. Fees and Expenses.............................................................................. 29
18. Miscellaneous.................................................................................. 29
Annex I Certain Information Concerning the Directors and Executive Officers of ERD Waste Corp. and the
Purchaser..................................................................................... 30
</TABLE>
i
<PAGE>
To the Holders of Common Stock of
Environmental Services of America, Inc.:
INTRODUCTION
ENSA Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of ERD Waste Corp., a Delaware corporation ("ERD"),
hereby offers to purchase all outstanding shares of common stock, par value $.02
per share (the "Shares"), of Environmental Services of America, Inc., a Delaware
corporation (the "Company"), at $1.66 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer.
However, any tendering stockholder or other payee who fails to complete and sign
the Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the gross
proceeds payable to such stockholder or other payee pursuant to the Offer. See
Section 2. The Purchaser will pay all charges and expenses of MacKenzie
Partners, Inc., as Information Agent (the "Information Agent"), and Chemical
Mellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), incurred
in connection with the Offer. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING
SHARES OF THE COMPANY, OTHER THAN THOSE SHARES HELD BY ERD, ON A FULLY DILUTED
BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER.
THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS SET FORTH IN
SECTION 15.
The Offer is being made pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of April 3, 1996 (the "Merger Agreement"), among ERD,
the Purchaser and the Company. The Merger Agreement provides, among other
things, that upon the terms and subject to the conditions therein, as soon as
practicable after the consummation of the Offer, the Purchaser will be merged
with and into the Company (the "Merger"), with the Company being the corporation
surviving the Merger (the "Surviving Corporation"). The Company has also entered
into a Stock Purchase Agreement (the "Stock Purchase Agreement") with the
holders of at least 93.2% of the outstanding shares of Series B Preferred Stock,
par value $.01 per share (the "Series B Preferred Stock"), and the holders of
all of the outstanding shares of Series C Preferred Stock, par value $.01 per
share (the "Series C Preferred Stock"), to purchase the Series B Preferred Stock
and Series C Preferred Stock at $98.22 per share. The closing of the Stock
Purchase Agreement is conditioned upon the purchase of Shares pursuant to the
Offer. At the effective time of the Merger (the "Effective Time of the Merger"),
each outstanding Share and each outstanding share of Series B Preferred Stock
and Series C Preferred Stock of the Company (other than Shares with respect to
which appraisal rights are properly exercised under the Delaware General
Corporation Law ("DGCL") ("Dissenting Shares")), not held by ERD immediately
prior to the Effective Time of the Merger and not held by ERD or by the Company
as treasury stock, will be converted into and represent the right to receive (i)
$1.66 in cash or any higher price that may be paid per Share (the "Common Stock
Conversion Amount"), or (ii) $98.22 in cash or any higher price that may be paid
per share of Series B Preferred Stock or Series C Preferred Stock (the
"Preferred Stock Conversion Amount"), as the case may be, without interest. See
Sections 11 and 13.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
1
<PAGE>
The Company has informed the Purchaser that as of March 29, 1996 there were
4,330,553 Shares outstanding. Pursuant to a securities purchase agreement dated
as of January 25, 1996 (the "Securities Purchase Agreement"), ERD purchased
500,000 Shares representing approximately 11.5% of the total number of Shares
outstanding. Such Shares were placed by ERD in escrow and shall either be
delivered to ERD or returned to the Company depending on the occurrence of
certain events. Except as stated above, neither the Purchaser nor any of the
Purchaser's and ERD's affiliates beneficially owns any Shares. Based on the
foregoing, if the Purchaser acquires at least 2,165,277 Shares in the Offer, it
will own a majority of the outstanding Shares on a fully diluted basis.
Accordingly, in such event, the Purchaser would have sufficient voting power to
approve the Merger without the affirmative vote of any other stockholder. If the
Purchaser acquires 90% or more of the outstanding Shares in the Offer, as well
as 90% of the Series B Preferred Stock and Series C Preferred Stock pursuant to
the Stock Purchase Agreement, the Purchaser would be able to effect the Merger
pursuant to the short form merger provisions of the DGCL, without prior notice
to, or any action of, any other stockholder of the Company.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
2
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION;
AMENDMENTS. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and conditions of any
such extension or amendment), the Purchaser will accept for payment and pay for
all Shares which are validly tendered on or prior to the Expiration Date (as
hereinafter defined) and not theretofore withdrawn as permitted by Section 3.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, May 1, 1996, unless and until the Purchaser (subject to the terms and
conditions of the Merger Agreement) shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition (as defined in Section 15). The Purchaser reserves the right
(but shall not be obligated) to waive or reduce the Minimum Condition or to
waive any or all of the other conditions of the Offer. If, by 12:00 Midnight,
New York City time, on Wednesday, May 1, 1996, or any subsequent Expiration
Date, any or all of such conditions have not been satisfied or waived, subject
to the provisions of the Merger Agreement, the Purchaser may elect to (i)
terminate the Offer and return all tendered Shares to tendering stockholders,
(ii) waive all of the unsatisfied conditions and, subject to any required
extension, purchase all Shares validly tendered by the Expiration Date and not
withdrawn, (iii) extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered until the expiration of the Offer as extended, or (iv) delay acceptance
for payment of, or payment for, Shares, subject to complying with applicable
law, until the satisfaction or waiver of the conditions of the Offer. Under the
terms of the Merger Agreement, the Purchaser may not (except as described in the
next sentence), without prior written consent of the Company, waive or amend the
Minimum Condition, continue the Offer if the Merger Agreement is terminated
(except in the event that the Merger is terminated in connection with a
competing offer (see Section 13 -- "Certain Agreements" -- "The Merger
Agreement" -- "Termination")), reduce the number of Shares subject to the Offer,
reduce the price per Share to be paid pursuant to the Offer, extend the Offer if
all of the conditions to the Offer are satisfied or waived, change the form of
consideration payable in the Offer, or add, modify or amend any condition of the
Offer in any manner that would adversely affect the stockholders of the Company.
Notwithstanding the foregoing, the Purchaser may, without consent of the
Company, extend the Offer (i) if, at the then scheduled Expiration Date of the
Offer any of the conditions to the Purchaser's obligation to accept for payment
and pay for Shares shall not have been satisfied or waived, until such time as
such conditions are satisfied or waived, (ii) for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the "Commission") or the Commission staff applicable to the Offer or
(iii) if all Offer Conditions are satisfied or waived but the number of Shares
tendered is less than 90% of the then outstanding number of Shares for an
aggregate period of not more than 10 business days (for all such extensions)
beyond the latest expiration date that would be permitted under clause (i) or
(ii) of this sentence.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right (subject to the provisions of the Merger
Agreement), in its sole discretion, at any time or from time to time, to (i)
delay acceptance for payment of or, regardless of whether such Shares were
theretofore accepted for payment, payment for any Shares, (ii) terminate the
Offer (whether or not any Shares have theretofore been accepted for payment) if
any of the conditions referred to in Section 15 have not been satisfied or upon
the occurrence of any of the events specified in Section 15, and (iii) waive any
condition (except for the condition set forth in paragraph (c) of Section 15,
which requires the consent of ENSA) or otherwise amend the Offer in any respect,
in each case by giving oral or written notice of such delay, termination, waiver
or amendment to the Depositary and by making a public announcement thereof. If
the Purchaser accepts for payment any Shares pursuant to the terms of the Offer,
it will accept for payment all Shares validly tendered prior to the Expiration
Date and not withdrawn and, subject to clause (i) above, will promptly pay for
all Shares so accepted for payment.
3
<PAGE>
The Purchaser acknowledges that its reservation of the right to delay payment
for Shares that it has accepted for payment is limited by (a) Rule 14e-l(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which requires the Purchaser to pay the consideration offered or return the
Shares tendered promptly after the termination or withdrawal of the Offer, and
(b) the requirement that the Purchaser may not delay acceptance for payment of,
or payment for, any Shares upon the occurrence of any of the events specified in
Section 15 without extending the period of time during which the Offer is open.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 15. Any extension, delay,
termination or amendment of the Offer will be followed as promptly as
practicable by public announcement thereof, such announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirements of Rule 14e-1(d) under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change) and without limiting the manner in which the
Purchaser may choose to make any public announcement, the Purchaser shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including the Minimum Condition), the Purchaser will disseminate
additional tender offer materials (including by public announcement as set forth
above) and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act. The minimum period during which an offer must
remain open following material changes in the terms of the offer, other than a
change in price, percentage of securities sought or revisions of or change to a
dealer's soliciting fee, will depend upon the facts and circumstances, including
the materiality, of the changes. In the Commission's view, an offer should
remain open for a minimum of five business days from the date the material
change is first published, sent or given to stockholders, and, if material
changes are made with respect to information that approaches the significance of
price and share levels, a minimum of ten business days may be required to allow
for adequate dissemination and investor response. With respect to a change in
price or, subject to certain limitations, a change in the percentage of
securities sought or revisions of or change to a dealer's soliciting fee, a
minimum ten business day period from the date of such change is generally
required to allow for adequate dissemination to stockholders. Accordingly, if,
prior to the Expiration Date, the Purchaser decreases the number of Shares being
sought or increases or decreases the consideration offered pursuant to the
Offer, and if the Offer is scheduled to expire at any time earlier than the
period ending on the tenth business day from the date that notice of such
increase or decrease is first published, sent or given to holders of Shares, the
Offer will be extended at least until the expiration of such ten business day
period. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
The Company has provided or will provide the Purchaser with the Company's
stockholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. This Offer to Purchase, the related Letter of
Transmittal and other relevant materials will be mailed to registered holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES. Except as set forth below, in order for
Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, together with
any required signature guarantees, or an Agent's Message (as
4
<PAGE>
hereinafter defined) in connection with a book-entry transfer of Shares, and any
other documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase on or prior to the Expiration Date, and either (i) certificates
representing tendered Shares must be received by the Depositary, or such Shares
must be tendered pursuant to the procedure for book-entry transfer set forth
below (and confirmation of receipt of such delivery must be received by the
Depositary), in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (i) if such Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith, unless such holder has completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
Payment Instructions" in the Letter of Transmittal, or (ii) if Shares are
tendered for the account of a firm that is a member in good standing of the
Security Transfer Agent's Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program (each being
hereinafter referred to as an "Eligible Institution"). See Instruction 1 of the
Letter of Transmittal.
If a certificate representing Shares is registered in the name of a person
other than the signer of the Letter of Transmittal (or a facsimile thereof), or
if payment is to be made, or Shares not accepted for payment or not tendered are
to be returned to a person other than the registered holder, the certificate
must be endorsed or accompanied by an appropriate stock power, in either case
signed exactly as the name(s) of the registered holder(s) appears on the
certificate, with the signature(s) on the certificate or stock power guaranteed
by an Eligible Institution. If the Letter of Transmittal or stock powers are
signed or any certificate is endorsed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and, unless waived by the Purchaser, proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted. See Instruction 5 of
the Letter of Transmittal.
BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company and the Philadelphia Depository Trust
Company (individually, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in any of the Book-Entry Transfer Facilities' systems may
make book-entry delivery of the Shares by causing any Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedure for such transfer. However,
although delivery of Shares may be effected through book-entry transfer at any
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message and any other required documents, must, in any case, be
transmitted to and be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date,
or the guaranteed delivery procedures described below must be complied with. The
term "Agent's Message" means a message transmitted through electronic means by a
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a book-entry confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares that such participant has
received, and agrees to be bound by, the terms of the Letter of Transmittal.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE
BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates representing Shares are not
immediately available (or the procedures for
5
<PAGE>
book-entry transfer cannot be completed on a timely basis) or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such Shares may nevertheless be tendered, provided that all of the
following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives, prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser; and
(c) the certificates representing all tendered Shares in proper form for
transfer (or confirmation of a book-entry transfer of such Shares
into the Depositary's account at one of the Book-Entry Transfer Facilities),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees (or, in
connection with a book-entry transfer, an Agent's Message) and any other
documents required by the Letter of Transmittal are received by the
Depositary within three Nasdaq Stock Market Inc.'s National Market ("The
Nasdaq National Market") trading days after the date of such Notice of
Guaranteed Delivery. A "trading day" is any day on which The Nasdaq National
Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, telex, facsimile transmission or mail, to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility), (ii) properly completed and duly executed Letter(s) of Transmittal
(or facsimile(s) thereof), together with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message), and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates
representing Shares or confirmations of book-entry transfers of such Shares are
actually received by the Depositary.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tendered Shares will be determined by the Purchaser in its sole
discretion, and its determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders of any Shares
that it determines are not in appropriate form or the acceptance for payment of
or payment for which may, in the opinion of the Purchaser's counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in any tender with respect
to any particular Shares or any particular stockholder, and the Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the Instructions thereto) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects or irregularities relating thereto have been cured or expressly waived
to the satisfaction of the Purchaser. None of the Purchaser, ERD, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders, nor shall any of
them incur any liability for failure to give any such notification.
OTHER REQUIREMENTS. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints a designee of the Purchaser as such
stockholder's proxy, in the manner set forth in the Letter of Transmittal, with
full power of substitution, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
the Purchaser
6
<PAGE>
(and any and all other Shares or other securities or rights issued or issuable
in respect of such Shares on or after March 29, 1996), effective if, when and to
the extent that the Purchaser accepts such Shares for payment pursuant to the
Offer. Upon such acceptance for payment, all prior proxies given by such
stockholder with respect to such Shares or other securities accepted for payment
will, without further action, be revoked, and no subsequent proxies may be given
by such stockholder nor any subsequent written consents executed (and, if given
or executed, will not be deemed effective). Such designee of the Purchaser will,
with respect to such Shares and other securities or rights issuable in respect
thereof, be empowered to exercise all voting and other rights of such
stockholder as he, in his sole discretion, may deem proper in respect of any
annual, special or adjourned meeting of the Company's stockholders, by written
consent in lieu of any such meeting or otherwise. The Purchaser reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting rights with respect to such
Shares.
The Purchaser's acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT FEDERAL INCOME TAX BACKUP WITHHOLDING ON PAYMENTS MADE TO
STOCKHOLDERS WITH RESPECT TO SHARES PURCHASED PURSUANT TO THE OFFER, EACH
STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH HIS CORRECT TAXPAYER IDENTIFICATION
NUMBER AND CERTIFY THAT HE IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID BACKUP
WITHHOLDING. THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 10
AND 11 OF THE LETTER OF TRANSMITTAL.
3. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer will be
irrevocable, except that Shares tendered may be withdrawn at any time prior to
the Expiration Date, and, unless theretofore accepted for payment by the
Purchaser as provided herein, may also be withdrawn on or after June 3, 1996.
For a withdrawal of Shares tendered to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name(s) in which the certificate(s) representing such Shares are registered,
if different from that of the person who tendered such Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, the name of the registered holder and the serial numbers shown on
the particular certificates evidencing such Shares to be withdrawn must also be
furnished to the Depositary prior to the physical release of the Shares to be
withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been tendered pursuant to the procedures for
book-entry transfer set forth in Section 2, any notice of withdrawal must
specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with such withdrawn Shares and must otherwise
comply with such Book-Entry Transfer Facility's procedures.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of any Shares tendered, or is unable to accept for payment or pay for Shares
tendered pursuant to the Offer, for any reason whatsoever, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that the tendering stockholder
is entitled to and duly exercises withdrawal rights as described in this Section
3. Any such delay will be accompanied by an extension of the Offer to the extent
required by law.
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<PAGE>
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described in Section 2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, and its determination will be final and binding on all parties. None
of the Purchaser, ERD, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal, nor shall any of them incur any liability for failure
to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT OF PURCHASE PRICE. Upon the terms
and subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any extension or amendment), the
Purchaser will accept for payment and will pay for all Shares validly tendered
prior to the Expiration Date (and not properly withdrawn in accordance with
Section 3 above) as soon as practicable after the later to occur of (a) the
Expiration Date, and (b) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions of the Offer set
forth in Section 15. Any determination concerning the satisfaction of such terms
and conditions shall be within the sole discretion of the Purchaser, and such
determination shall be final and binding on all tendering stockholders. See
Section 15.
The Purchaser expressly reserves the right to delay acceptance for payment
of, or payment for, Shares in order to comply in whole or in part with any
applicable law. If the Purchaser desires to delay payment for Shares accepted
for payment pursuant to the Offer, and such delay would otherwise be in
contravention of Rule 14e-1(c) of the Exchange Act, the Purchaser will formally
extend the Offer. In all cases, payment for Shares accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities, as described in Section 2), (ii) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in connection with a book-entry transfer, an Agent's
Message), and (iii) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, tendered Shares when, as and if the Purchaser
gives oral or written notice to the Depositary, as agent for the tendering
stockholders, of the Purchaser's acceptance for payment of such Shares. Payment
for Shares so accepted for payment will be made by the deposit of the purchase
price therefor with the Depositary, which will act as agent for the tendering
stockholders for the purpose of receiving such payment from the Purchaser and
transmitting such payment to tendering stockholders. If, for any reason
whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer
is delayed, or the Purchaser is unable to accept for payment Shares tendered
pursuant to the Offer, then, without prejudice to the Purchaser's rights under
Section 1, the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares, and such Shares may not be withdrawn, except to the extent that
the tendering stockholders are entitled to withdrawal rights as described in
Section 3 and as otherwise required by Rule 14e-1(c) under the Exchange Act.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE BY REASON OF
ANY DELAY IN MAKING SUCH PAYMENTS.
If any tendered Shares are not accepted for payment and paid for,
certificates representing such Shares will be returned (or, in the case of
Shares delivered by book-entry transfer with any Book-Entry Transfer Facility as
permitted by Section 2, such Shares will be credited to an account maintained
with such Book-Entry Transfer Facility) without expense to the tendering
stockholder as promptly as practicable following the expiration or termination
of the Offer.
8
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If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid for Shares pursuant to the Offer, the Purchaser will pay such
increased consideration for all Shares accepted for payment pursuant to the
Offer, whether or not such Shares have been tendered or accepted for payment
prior to such increase in the consideration.
The Purchaser reserves the right to transfer or assign in whole or in part
to one or more affiliates of the Purchaser or ERD the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve the Purchaser of its obligations under the Offer
and will in no way prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer (or in the Merger) will be a taxable transaction for
federal income tax purposes (and may also be a taxable transaction under
applicable state, local or other tax laws). In general, a stockholder will
recognize gain or loss for such purposes equal to the difference between such
stockholder's adjusted tax basis for the Shares such stockholder sells in such
transaction and the amount of cash received therefor. Gain or loss must be
determined separately for each block of Shares (I.E., Shares acquired at the
same cost in a single transaction) sold pursuant to the Offer or converted to
cash in the Merger. Such gain or loss will be capital gain or loss if the Shares
are held as a capital asset, and will be long-term gain or loss if the Shares
were held for more than one year on the date of sale (in the case of the Offer)
or the Effective Time of the Merger (in the case of the Merger). The receipt of
cash for Shares pursuant to the exercise of appraisal rights will generally be
taxed in the manner described above. Individuals currently are taxed on
long-term capital gains at a maximum federal tax rate of 28%. Legislative
proposals are pending that would require the basis of Shares to be determined on
an average cost basis, and that would decrease the federal tax rate applicable
to an individual's long-term capital gains. It is not known whether any such
proposal will be enacted, and, if enacted, what the new rate (if changed) will
be and when any such new rate will become effective.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" of federal income tax at a rate of 31%. Backup withholding
generally applies if the stockholder (a) fails to furnish his taxpayer
identification number (TIN), (b) furnishes an incorrect TIN, or (c) under
certain circumstances, fails to provide a certified statement, signed under
penalties of perjury, that the TIN provided is correct and that he is not
subject to backup withholding. Backup withholding is not an additional tax but
merely an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons, including corporations and financial
institutions, generally are entitled to exemption from backup withholding.
Certain penalties apply to failures to furnish correct information and to
failures to include reportable payments in income. Each stockholder should
consult with his own tax advisor as to his qualification for exemption from
backup withholding and the procedure for obtaining such exemption. Tendering
stockholders may be able to prevent backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal.
The foregoing discussion may not be applicable to a stockholder who acquired
Shares pursuant to the exercise of employee stock options or otherwise as
compensation, or to an individual stockholder who is not a citizen or resident
of the United States or who is otherwise subject to special tax treatment under
the Internal Revenue Code.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE
ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are traded on The Nasdaq
National Market under the symbol "ENSA." The following table sets forth, for the
periods indicated, the highest and lowest sale prices of the Shares as reported
by the Company in its Annual Report on Form 10-K for the year ended December 31,
1994 (the "1994 Annual Report") with respect to 1994, and as reported by
published financial sources with respect to periods after December 31, 1994. The
quotations represent
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prices between dealers and do not reflect retail mark-ups, mark-downs or
commissions and may not represent actual transactions. The Company has not
declared or paid any cash dividends with respect to the Shares for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1994:
First Quarter......................... $2 7/8 $1 7/8
Second Quarter........................ 2 3/4 1 1/2
Third Quarter......................... 2 3/4 1 7/8
Fourth Quarter........................ 2 7/16 1 7/16
YEAR ENDED DECEMBER 31, 1995:
First Quarter......................... $2 $1 3/16
Second Quarter........................ 1 1/2 1 1/16
Third Quarter......................... 2 1/8 1 1/8
Fourth Quarter........................ 1 9/16 1
YEAR ENDED DECEMBER 31, 1996:
First Quarter......................... $1 1/2 $1 3/16
Second Quarter (through April 3,
1996)................................ $1 1/2 $1 13/32
</TABLE>
On April 3, 1996, the last full trading day prior to the public announcement
of the terms of the Offer and the Merger and the commencement of the Offer, the
last reported bid price on The Nasdaq National Market was $1 1/2 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; STOCK QUOTATIONS;
REGISTRATION UNDER THE EXCHANGE ACT. According to the Company, as of March 29,
1995, there were approximately 305 holders of record of Shares. The purchase of
Shares pursuant to the Offer will reduce the number of holders of Shares and the
number of Shares that might otherwise trade publicly. Consequently, depending
upon the number of Shares purchased and the number of remaining holders of
Shares, the purchase of Shares pursuant to the Offer may adversely affect the
liquidity and market value of the remaining Shares held by the public. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether it would cause
future market prices to be greater or less than the Offer price.
Depending upon the aggregate market value and the number of Shares not
purchased pursuant to the Offer, the Shares may no longer meet the quantitative
maintenance criteria of the National Association of Securities Dealers, Inc.
(the "NASD") for continued inclusion on The Nasdaq National Market, which
require that an issuer have at least 200,000 publicly held shares, held either
by at least 400 stockholders or 300 stockholders of round lots, with a market
value of at least $1 million and must have net tangible assets of at least
either $1 million, $2 million or $4 million depending on profitability levels
during the issuer's four most recent fiscal years. If these standards are not
met, the Shares might nevertheless continue to be included in The Nasdaq Stock
Market with quotations published in The Nasdaq Stock Market's "additional list"
or in one of the "local lists", but if the number of holders of Shares were to
fall below 300, or if the number of publicly held Shares were to fall below
100,000 or there were not at least two registered and active market makers for
the Shares, the NASD's rules provide that the Shares would no longer be
"qualified" for reporting by The Nasdaq Stock Market and The Nasdaq Stock Market
would cease to provide any quotations. Shares held directly or indirectly by
officers, directors or beneficial owners of more than 10% of the Shares will not
be considered as being publicly held for this purpose. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NASD for continued inclusion in The Nasdaq National
Market or in any other tier of The Nasdaq Stock Market, and the Shares are no
longer included in The Nasdaq National Market or in any other tier of The Nasdaq
Stock Market, the market for Shares could be adversely affected.
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In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of The Nasdaq Stock Market, it is possible that
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interest in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if such Shares are not listed on a national exchange and there are fewer than
300 holders of record of the Shares. The termination of the registration of the
Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and to the
Commission, and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with stockholders'
meetings and the related requirement of an annual report to stockholders, and
the requirements of Rule 13e-3 with respect to going private transactions, no
longer applicable with respect to the Shares or to the Company. Furthermore, if
a substantial number of Shares are acquired by the Purchaser, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended, may be impaired or, with respect to certain
persons, eliminated.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on such Shares as collateral. Depending on factors similar to those described
above regarding listing and market quotations, it is possible the Shares would
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations and therefore could no longer be used as collateral
for loans made by brokers. If registration of Shares under the Exchange Act were
terminated, the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Although neither the
Purchaser nor the Company has any knowledge that would indicate that the
statements contained herein based on such documents are untrue, neither the
Purchaser nor ERD takes any responsibility for the accuracy or completeness of
the information concerning the Company furnished by the Company or contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to the Purchaser or ERD.
The Company is a Delaware corporation organized in 1981 and its principal
offices are located at 937 East Hazelwood Avenue, Building #2, Rahway, New
Jersey 07065. The following description of the Company's business has been taken
from the Company's 1994 Annual Report:
The Company is a diversified environmental services company specializing in
the identification, management, treatment, transportation and disposal of
hazardous and non-hazardous wastes; remediation of hazardous waste sites; air
quality testing and monitoring services and equipment; and consulting and
technical support services related to all of the foregoing.
Set forth below is a summary of certain consolidated financial information
with respect to the Company and its consolidated subsidiaries, excerpted or
derived from the information contained in the Company's 1994 Annual Report and
the Company's most recent Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission. The
financial information summary set forth below is qualified in its entirety by
reference to such reports and other
11
<PAGE>
documents filed with the Commission and all of the financial information and
related notes contained therein. Such reports and other documents may be
inspected and copies may be obtained from the offices of the Commission or the
NASD in the manner set forth below.
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1993 1992
NINE MONTHS ENDED ------------ ------------ ------------
----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT:
Net Sales............................ $ 27,922 $ 22,608 $ 32,784 $ 23,766 $ 22,951
Income From Operations............... 118 544 821 151 833
Income (Loss) Before Provision of
Income Taxes........................ (1,094) 298 530 87 725
Net Income (Loss).................... (635) 172 293 32 390
Earnings (Loss) Per Common Share..... $ (0.14) $ 0.04 $ 0.07 $ 0.01 $ 0.10
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
SEPTEMBER 30, ------------ ------------
1995
-------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET:
Current Assets..................................................... $ 11,760 $ 12,541 $ 9,503
Total Assets....................................................... 21,298 22,313 15,050
Current Liabilities................................................ 10,662 11,067 7,214
Long Term Debt..................................................... 2,485 2,459 565
Stockholders' Equity............................................... 7,879 8,514 7,271
</TABLE>
OTHER INFORMATION. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, is obligated to file periodic
reports, proxy statements and other information with the Commission relating to
its business, financial condition and other matters. Information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in such proxy statements and
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities at the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549.
9. CERTAIN INFORMATION CONCERNING ERD AND THE PURCHASER. The Purchaser is
a newly formed Delaware corporation and a wholly owned subsidiary of ERD. To
date, the Purchaser has not conducted any business other than incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer.
ERD, a Delaware corporation, is a diversified waste management company
specializing in the management and disposal of municipal solid waste, industrial
and commercial non-hazardous solid waste, and hazardous waste. ERD incinerates
municipal solid waste and industrial and commercial non-hazardous solid waste,
utilizes the steam produced thereby to cogenerate electricity, and provides
12
<PAGE>
brokerage, advisory, consulting, and technical services to generators of waste.
The principal executive offices of ERD and the Purchaser are located at 356
Veterans Memorial Highway, Commack, New York 11725.
Until immediately prior to the time that the Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer, the Merger and the Stock Purchase Agreement. Since the Purchaser
is newly formed and has minimal assets and capitalization, no meaningful
financial information is available.
Set forth below is certain selected historical consolidated financial
information with respect to ERD excerpted or derived from financial information
contained in ERD's Prospectus dated May 17, 1995 and ERD's Quarterly Report on
Form 10-Q for the quarter ended October 31, 1995 (which reports are hereby
incorporated by reference herein). More comprehensive financial information is
included in such reports and other documents filed by ERD with the Commission,
and the following summary is qualified in its entirety by reference to such
reports and such other documents and all the financial information (including
any related notes) contained therein. Such reports and other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth in Section 8.
SELECTED CONSOLIDATED FINANCIAL DATA OF ERD WASTE CORP.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------
JANUARY 31, JANUARY 31,
1995 1994
NINE MONTHS ENDED ----------- -----------
------------------------
OCTOBER 31, OCTOBER 31,
1995 1994
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT:
Total Revenues............................................. $ 9,191 $ 4,504 $ 6,708 $ 747
Income before Income Taxes................................. 3,359 833 1,318 76
Net Income................................................. 2,083 523 791 70
Net Income Per Share....................................... $ 0.38 $ 0.14 $ 0.20 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
JANUARY 31, JANUARY 31,
1995 1994
OCTOBER 31, ----------- -------------
1995
-----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET:
Current Assets........................................................... $ 7,577 $ 1,409 $ 430
Total Assets............................................................. 20,231 12,935 606
Current Liabilities...................................................... 3,119 11,328 641
Long-term Debt........................................................... 2,959 685 3
Stockholders' Equity..................................................... 13,435 922 (38)
</TABLE>
The name, citizenship, business address, present principal occupation or
employment and five year employment history of each of the directors and
executive officers of ERD and the Purchaser are set forth in Annex I hereto.
Neither the Purchaser nor, to the best of its knowledge, any of the persons
listed on Annex I hereto, or any associate or majority-owned subsidiary of ERD,
the Purchaser or any of the persons so listed, owns or has the right to acquire
any Shares or has effected any transaction in the Shares during the past 60
days. Pursuant to the Securities Purchase Agreement, ERD purchased 500,000
Shares representing approximately 11.5% of the total number of Shares
outstanding. Such Shares were placed by ERD in escrow and shall either be
delivered to the Company or returned to ERD depending on the occurrence of
certain events.
13
<PAGE>
Except as set forth in this Offer to Purchase, none of ERD or the Purchaser
or, to the best of their knowledge, any of the persons listed in Annex I hereto,
(a) has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any securities of the Company, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss, or the giving or withholding of proxies; (b) has engaged in contacts,
negotiations or transactions with the Company or its affiliates concerning a
merger, consolidation, acquisition, tender offer or other acquisition of
securities, election of directors or a sale or other transfer of a material
amount of assets; or (c) has had any other transaction with the Company or any
of its executive officers, directors or affiliates that would require disclosure
under the rules and regulations of the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares (excluding the Shares held in
escrow pursuant to the Securities Purchase Agreement) pursuant to the Offer and
all of the outstanding shares of Series B Preferred Stock and Series C Preferred
Stock pursuant to the Stock Purchase Agreement and to pay fees and expenses
related to the Offer, the Stock Purchase Agreement and the Merger is estimated
to be approximately $8 million. The Purchaser plans to obtain $7.5 million of
such funds pursuant to a loan agreement (the "Loan Agreement") entered into on
March 29, 1996 with Chemical Bank ("Chemical").
Pursuant to the Loan Agreement, Chemical will provide to ERD a secured
revolving credit facility up to $7.5 million (the "Revolving Facility"). Loans
under the Revolving Facility (the "Revolving Loans") will be available on and
after the consummation of the Offer and may be incurred (i) to partially finance
the acquisition of the Company; (ii) for working capital purposes; and (iii) for
advances to ERD Waste Corp. (Indiana), Absorbent Manufacturing & Technology, the
Purchaser, ERD Waste Corp. of Illinois, Environmental Waste Incineration, Inc.,
ERD Management Corp., C&J Enterprises, Inc. and Long Beach Recycling and
Recovery Corp., each of whom are guarantors of the loans made pursuant to the
Loan Agreement (each, individually, a "Guarantor" and, collectively, the
"Guarantors").
The Loan Agreement provides, among other things, for the payment by ERD of a
commitment fee, payable monthly, computed at the rate of one quarter of one
percent (1/4%) per annum (computed on the basis of the actual number of days
elapsed over 360 days) on the average daily unused amount of Chemical's $7.5
million commitment.
The Loan Agreement provides that the Revolving Loans in respect of the
Revolving Facility shall be, at ERD's request, either (i) an Alternate Base Rate
Loan (as defined) which bears interest calculated at the Alternate Base Rate
plus one half of one percent (1/2%) or (ii) a Eurodollar Loan (as defined) which
bears interest calculated at the Adjusted LIBOR Rate plus three and one half
percent (3 1/2%) (or a combination thereof).
"Alternate Base Rate" for any day is defined in the Loan Agreement as the
higher of (a) the prime rate of Chemical in effect at its primary office
(computed on the basis of the actual number of days elapsed over a year of 360
days) in effect on such day, (b) the Base CD Rate (as defined) in effect on such
day plus one percent (1%) (computed on the basis of the actual number of days
elapsed over a year of 360 days), or (c) the Federal Funds Effective Rate (as
defined) in effect on such day plus one half of one percent (1/2%) (computed on
the basis of the actual number of days elapsed over a year of 360 days).
"Adjusted LIBOR Rate" for any interest is defined in the Loan Agreement as
an interest rate per annum (rounded, if not already a whole multiple of 1/100th
of one percent (.01%) to the nearest 1/100th of one percent (.01%)) equal to the
product of (a) the LIBOR Rate (as defined) and (b) Statutory Reserves (as
defined).
14
<PAGE>
Subject to the terms of the Loan Agreement, the Revolving Facility will be
available until April 1, 1998 (the "Conversion Date"), at which time all
outstanding principal and accrued interest under the Revolving Facility shall be
due and payable.
The Loan Agreement provides that on the Conversion Date (provided no event
of default exists) for the grant of a term loan (the "Term Loan") to ERD in an
amount equal to the lesser of Chemical's Commitment (as defined) or the
aggregate principal amount of Revolving Loans then outstanding. The bank will
make the Term Loan by crediting the amount thereof towards the repayment of the
amounts outstanding under the Revolving Facility. The proceeds of the Term Loan
are to be used by ERD exclusively to satisfy obligations to the bank under
Revolving Loans existing at the Conversion Date. The principal balance of the
Term Loan will be payable in 36 monthly installments. The Term Loan shall at the
option of ERD, be an Alternate Base Rate Loan or a Eurodollar Loan (or a
combination thereof). If the Term Loan is an Alternate Base Rate Loan, it will
bear interest at the Alternate Base Rate plus one percent (1%). If the Term Loan
is a Eurodollar Loan, it will bear interest at the Adjusted LIBOR Rate plus
three and one half percent (3 1/2%).
The Loan Agreement provides that ERD shall have the right on or after the
Conversion Date, subject to the terms of the Loan Agreement, to (i) continue any
Eurodollar Loan or portion thereof into a subsequent Interest Period (as
defined) or (ii) convert an Alternate Base Rate Loan into a Eurodollar Loan.
The Loan Agreement provides for the granting by ERD and each of the
Guarantors listed above of a first priority security interest in all present and
future accounts, contract rights, chattel paper, general intangibles,
instruments and documents of ERD and such guarantors then owned or thereafter
acquired, and in all machinery and equipment acquired by ERD and such guarantors
after the date of the Loan Agreement.
The obligations of Chemical to make each Revolving Loan under the Revolving
Facility are conditioned on certain conditions, including the following: (i)
delivery of a certificate from ERD and each of the Guarantors stating the
representations and warranties contained in the Loan Agreement are true and
correct; (ii) no default or material adverse change in ERD or any Guarantor has
occurred; and (iii) the purpose for which the proceeds of such Revolving Loan is
being made.
The Loan Agreement contains traditional and customary representations,
warranties and events of default.
ERD has agreed to indemnify Chemical against any loss or expense which
Chemical may sustain or incur as a consequence of any default in payment or
prepayment of the principal amount of any Loan (as defined) or any part thereof
or interest accrued thereon, as and due and payable on the occurrence of any
Event of Default (as defined).
Subject to the terms of the Loan Agreement, ERD has the right at any time
and from time to time to prepay any Alternate Base Rate Loan, in whole or in
part, without premium or penalty, on the same day that telephonic notice is
given to Chemical advising it of prepayment. In addition, ERD has the right to
prepay any Eurodollar Loan, in whole or in part, on three Business Days' prior
irrevocable notice, provided, however, that such prepayment may only be made on
an Interest Determination Date (as defined).
It is anticipated that the indebtedness incurred by ERD under the Revolving
Facility and Term Loan will be repaid from funds generated internally by ERD and
its subsidiaries and from other sources. No final decisions have been made
concerning the method ERD will employ to repay such indebtedness. Such decisions
will be based on ERD's review from time to time of the advisability of
particular actions, as well as on prevailing interest rates and financial and
other economic conditions.
The foregoing summary of the Loan Agreement is qualified in its entirety by
reference to the text of the Loan Agreement, which is filed as an exhibit to the
Purchaser's Tender Offer Statement in Schedule 14D-1. See Section 18.
15
<PAGE>
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER.
For approximately two years prior to the execution of an original merger
agreement among ERD, the Purchaser and the Company dated January 25, 1996 (the
"Original Merger Agreement"), the Company and ERD had limited business contacts
as a result of which Jon Colin, President of the Company, and Joseph Wisneski,
President of ERD, had met or spoken on a number of occasions to discuss general
business matters. In May 1995, following ERD's initial public offering, Messrs.
Wisneski and Colin agreed that it could be beneficial to ERD and the Company if
a business combination could be effected on mutually acceptable terms.
The Company and ERD exchanged public information and a meeting between Mr.
Colin and Robert Rubin, Chairman of ERD, was arranged later in May 1995 to
discuss the possibility of a business combination and the potential benefits to
ERD and the Company of such a combination. In June 1995, Mr. Colin and Walter
Barandiaran, a director of the Company, met with Mr. Rubin and Mr. Wisneski to
explore possible frameworks for a business combination. During the next six
months, various discussions were held which considered different possible
structures including the possible use of debt and equity securities to be issued
to ENSA stockholders.
On November 1, 1995, Messrs. Jacobsen and Colin met with Messrs. Rubin and
Wisneski at the Company's transfer, storage and disposal facility in Indiana. At
that time, Messrs. Rubin and Wisneski advised the Company that, in view of the
Company's negative position on restricting subsequent resales of ERD common
stock issued in any business combination between ERD and the Company, ERD was
prepared to make an all cash offer for the Company based upon a valuation of
$1.50 per share of the Company's Shares, and a price for the Company's Preferred
Stock based upon conversion of the Preferred Stock into Shares in accordance
with existing conversion ratios which represented a substantial discount from
the redemption value of the Preferred Stock. Messrs. Colin and Jacobsen informed
Mr. Rubin that, in their opinions, that offer was inadequate, and invited ERD to
reconsider its offer.
Following their meeting in Indiana, Mr. Colin and Mr. Rubin had a number of
telephone negotiations which resulted, on November 8, 1995, in ERD proposing a
letter of intent which established a $1.69 per share valuation for the Company's
Shares, established a valuation of Preferred Stock based upon the conversion of
the Preferred Stock into Shares valued at $1.69 per share, set forth proposed
terms for a pre-merger acquisition by ERD of the Shares and Series B and Series
C Preferred Stock owned by EVF and Argentum Capital Partners, L.P. ("ACP"), and
other terms and conditions of a proposed merger, including terms of the
post-merger employment of Mr. Colin by the surviving corporation. The Company's
Board of Directors met informally to discuss ERD's November 8, 1995 proposal,
and further negotiations, principally between Messrs. Colin and Barandiaran for
the Company, and Messrs. Wisneski and Rubin for ERD, took place over the next
several days. On November 13, 1995, the Company's Board met formally, with
counsel present, to consider a revised letter of intent from ERD dated November
10, 1995.
In the course of its deliberations on November 13, 1995, the Company's Board
contacted ERD by telephone to further negotiate and clarify the proposals set
forth in ERD's November 10, 1995, proposed letter of intent. At the same time,
the Board of ERD authorized a new letter of intent which was delivered to the
Company on November 14, 1995. The November 14, 1995 proposed letter of intent
provided that all holders of Preferred Stock other than EVF and ACP would be
paid the full redemption price for their shares. EVF and ACP were to receive a
lower cash price, based upon a pre-merger conversion of their Preferred Stock
into Shares valued at $1.69 per share, with the difference between the cash
price received by EVF and ACP and the price received by other Preferred
Stockholders to be made up through the issuance of ERD common stock purchase
warrants to EVF and ACP. Following these deliberations, the Company's Board
approved execution of the letter of intent dated November 14, 1995.
Following execution of the November 14, 1995 letter of intent, ERD and the
Company negotiated the terms of the Original Merger Agreement based upon the
November 14, 1995 letter of intent,
16
<PAGE>
except that all Series B Preferred Stock and Series C Preferred Stockholders
would receive a cash price equal to the redemption value of such shares upon
consummation of the Merger. In addition, the parties negotiated an interim
$500,000 financing for the Company from ERD (see Section 13 -- "Certain
Agreements" -- "ERD Bridge Loan"). During the second and third week of January,
the boards of both ERD and the Company considered various provisions of the
draft agreements and on January 25, 1996, the Original Merger Agreement, having
been approved by both boards, was executed.
Following execution of the Original Merger Agreement, ERD proceeded with its
due diligence review and the Company prepared and filed with the Commission its
preliminary proxy materials for a meeting of the Company's stockholders to
consider and act on the Merger. However, the parties concluded it would expedite
ERD's obtaining control of the Company and speed the delivery of cash to the
Company's stockholders if ERD commenced the Offer for the Shares. On February
16, 1996, counsel for ERD and the Company exchanged correspondence confirming
that if ERD commenced the Offer, the Company would recommend it to its
stockholders, and the price per Share and per share of Preferred Stock would be
slightly reduced from the Original Merger Agreement prices in order to partially
offset the additional costs to ERD of making the Offer. It was also confirmed
that ERD and the principal owners of the Series B Preferred Stock and Series C
Preferred Stock of the Company would enter into an agreement for the purchase
and sale of such Preferred Stock, and that all of the Company's preferred
stockholders would be invited to join in the same agreement. Following further
negotiations, on March 20, 1996 the Board of ERD approved, in principle, the
necessary changes to the Merger Agreement, the execution of the Stock Purchase
Agreement and the making of the Offer, and authorized officers of ERD to proceed
with these steps. On March 28, 1996 the Board of Directors of the Company also
approved the necessary changes to the Merger Agreement and authorized the
officers of the Company to proceed accordingly.
On April 3, 1996 the Company and ERD entered into the Merger Agreement,
which contemplated Offer of the Shares at a purchase price of $1.66 per share,
and the Company and the holders of 93.2% of the Series B Preferred Stock and the
holders of all of the Series C Preferred Stock of the Company entered into the
Stock Purchase Agreement providing for the Company to purchase such Preferred
Stock at $98.22 per share. The closing of the Stock Purchase Agreement is
conditioned upon, and will take place contemporaneously with, the purchase of
Shares pursuant to the Offer. The price per Share was lowered from $1.69 to
$1.66, and per share of Preferred Stock from $100 to $98.22, as had been
provided in the Original Merger Agreement, in order to partially offset
additional expenses incurred by ERD in connection with this tender offer.
Public disclosure of the Merger Agreement was made on the morning of the
next business day on April 4, 1996, prior to the opening of trading of the
Shares on The Nasdaq National Market and simultaneously with the announcement of
the Offer.
12. PURPOSE OF THE OFFER; SHORT FORM MERGER; PLANS FOR THE COMPANY;
DISSENTERS' RIGHTS; GOING PRIVATE TRANSACTIONS.
PURPOSE OF THE OFFER. The purpose of the Offer is for the Purchaser to
acquire control of, and an equity interest in, the Company. The purpose of the
Merger is to acquire all outstanding shares not tendered and purchased pursuant
to the Offer or the Stock Purchase Agreement. The acquisition of the entire
equity interest in the Company has been structured as a cash tender offer
followed by a cash merger in order to provide a prompt and orderly transfer of
ownership of the Company from the public stockholders to ERD and to provide
stockholders with cash for all of their Shares. The purchase of the Shares
pursuant to the Offer will increase the likelihood that the Merger will be
effected.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Board of Directors of the Company and the affirmative vote of the
majority of the holders of outstanding Shares are required to approve and adopt
the Merger Agreement and the Merger. The Board of Directors of the Company has
approved the Offer, the Merger and the Merger Agreement and the transactions
contemplated thereby, and, unless the Merger is consummated pursuant to the
short-form merger
17
<PAGE>
provisions under the DGCL described below, the only remaining required corporate
action of the Company is the approval and adoption of the Merger Agreement and
the Merger by the affirmative vote of holders of a majority of the holders of
the outstanding Shares. If the Minimum Condition is satisfied, the Purchaser
will have sufficient voting power to cause the approval and adoption of the
Merger Agreement and the Merger without the affirmative vote of any other
stockholder.
The Merger Agreement provides that, if approval or action in respect of the
Merger by the stockholders of the Company is required by applicable law, the
Company will, (i) if appropriate, call a meeting of its stockholders (the
"Stockholder Meeting") for the purpose of voting upon the Merger and will use
its reasonable best efforts to obtain stockholder approval of the Merger, (ii)
hold the Stockholder Meeting as soon as practicable following the purchase of
Shares pursuant to the Offer, (iii) recommend to its stockholders the approval
of the Merger through its Board of Directors, and (iv) use its reasonable best
efforts to obtain the necessary approvals by its stockholders of the Merger, but
subject in each case to the fiduciary duties of its Board of Directors under
applicable law as determined by the Board of Directors in good faith after
consultation with its counsel. The record date for the Stockholder Meeting will
be a date subsequent to the date ERD or the Purchaser becomes a record holder of
Shares purchased pursuant to the Offer.
SHORT FORM MERGER. Under the DGCL, if the Purchaser acquires at least 90%
of the outstanding Shares, the Purchaser will be able to approve the Merger
without a vote of the Company's other stockholders. The Merger Agreement
provides that if the Purchaser, or any other direct or indirect subsidiary of
ERD, acquires at least 90% of the outstanding Shares, ERD, the Purchaser and the
Company will take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after the expiration of the Offer
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL. In the event that all of the conditions to the Purchaser's
obligation to purchase Shares in the Offer are satisfied or waived and the
number of Shares tendered is less than 90% of the outstanding Shares, the
Purchaser may, subject to the limitations set forth in the Merger Agreement,
extend the Offer for a period not more than 10 business days without the consent
of the Company. See Section 1. If the Purchaser does not acquire at least 90% of
the outstanding Shares, a significantly longer period of time may be required to
effect the Merger, because a vote of the Company's stockholders would be
required under the DGCL.
PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business and
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. Three directors designated
by the Purchaser and two continuing directors of the Company will be the initial
directors of the Surviving Corporation and the then officers of the Company and
such other persons as are designated by ERD will be the initial officers of the
Surviving Corporation. Upon completion of the Offer, ERD intends to conduct a
detailed review of the Company and its assets, corporate structure,
capitalization, operations, policies, management and personnel. After such
review, ERD will determine what actions or changes, if any, would be desirable
in light of the circumstances which then exist, and reserves the right to effect
such actions or changes.
Except as described in this Offer to Purchase, neither ERD nor the Purchaser
has any present plans or proposals that would relate to or result in (i) any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, (ii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries, (iii) any change in the Company's Board of Directors or
management, (iv) any material change in the Company's capitalization or dividend
policy, (v) any other material change in the Company's corporate structure or
business, (vi) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
or (vii) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g) of the Exchange Act.
18
<PAGE>
DISSENTERS' RIGHTS. No dissenters' rights are available in connection with
the Offer. However, if the Merger is consummated, stockholders of the Company
may have certain rights under the DGCL to dissent, and demand appraisal of, and
to obtain payment for the fair value of their Shares. Such rights, if the
statutory procedures were complied with, could lead to a judicial determination
of the fair value of the Shares (excluding any element of value arising from the
accomplishment or expectation of the Merger) to be required to be paid in cash
to such dissenting holders for their Shares. In addition, such dissenting
stockholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, a
Delaware court would be required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity. In WEINBERGER V. UOP, INC., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Therefore, the value so determined in any appraisal
proceeding could be different from the price being paid in the Offer.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable Federal law operative at the time. The Commission has adopted Rule
13e-3 under the Exchange Act which is applicable to certain "going private"
transactions and which may under certain circumstances be applicable to the
Merger or another business combination following the purchase of Shares pursuant
to the Offer in which the Purchaser or ERD seeks to acquire the remaining shares
not held by it. The Purchaser believes, however, that Rule 13e-3 will not be
applicable to the Merger. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of such transaction and the consideration
offered to minority stockholders in such transaction be filed with the
Commission and disclosed to stockholders prior to the consummation of such
transaction.
13. CERTAIN AGREEMENTS.
The following summary of certain provisions of agreements that are described
below, copies of which are filed as exhibits to the Schedule 14D-1, is qualified
in its entirety by reference to the text of such agreements. Capitalized terms
used and not otherwise defined herein shall have the meanings given to them in
the respective agreements which they describe.
THE MERGER AGREEMENT
THE OFFER. The Purchaser commenced the Offer in accordance with the terms
of the Merger Agreement.
THE MERGER. The Merger Agreement provides that, subject to the terms and
conditions of the Merger Agreement, including the fulfillment (or waiver) of all
conditions to the obligations of the parties contained in the Merger Agreement,
at the Effective Time of the Merger and pursuant to the DGCL, the Purchaser
shall be merged with and into the Company, which shall be the Surviving
Corporation. The separate corporate existence of the Purchaser will cease and
the Company and the Purchaser will be a single corporation and the title to all
property owned by the Company and the Purchaser, both real and personal, will be
vested in the Company as the Surviving Corporation without reversion or
impairment, and the Surviving Corporation will have all liabilities of the
Company and the Purchaser. The Certificate of Incorporation of the Company will
be the Certificate of Incorporation of the Surviving Corporation until amended
as permitted by law. The Bylaws of the Company will be the Bylaws of the
Surviving Corporation until amended as permitted by law.
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CAPITAL STOCK OF THE PURCHASER. The Merger Agreement provides that, at the
Effective Time of the Merger, each share of common stock, par value $.001 per
share, of the Purchaser issued and outstanding immediately prior to the
Effective Time of the Merger will be converted into and exchanged for one
validly issued, fully paid and non-assessable share of common stock, par value
$.01 per share, of the Surviving Corporation.
CAPITAL STOCK OF THE COMPANY. The Merger Agreement provides that, at the
Effective Time of the Merger, each Share outstanding immediately prior to the
Effective Time of the Merger, other than Dissenting Shares, such Shares, if any,
as are held by ERD immediately prior to the Effective Time of the Merger and
Shares held by ERD or by the Company as treasury stock, shall be converted into
the right to receive the Common Stock Conversion Amount, and each share of
Series B Preferred Stock and Series C Preferred Stock outstanding immediately
prior to the Effective of the Merger, other than Dissenting Shares, such shares
of Series B Preferred Stock and Series C Preferred Stock, if any, as are held by
ERD immediately prior to the Effective Time of the Merger and shares of Series B
Preferred Stock and Series C Preferred Stock held by ERD or by the Company as
treasury stock, shall be converted into the right to receive the Preferred Stock
Conversion Amount. Until surrender of a certificate representing the Shares,
Series B Preferred Stock or Series C Preferred Stock, after the Effective Time
of the Merger, such certificate will be deemed to represent only the right to
receive the Common Stock Conversion Amount or the Preferred Stock Conversion
Amount, as the case may be.
DISSENTING SHARES. The Merger Agreement provides that, if required by the
DGCL, Dissenting Shares will not be exchangeable for the right to receive the
Common Stock Conversion Amount or the Preferred Stock Conversion Amount, as the
case may be, and holders of such Dissenting Shares will be entitled to receive
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or lose their rights to appraisal and payment
under the DGCL. If, after the Effective Time of the Merger, any such holder
fails to perfect or effectively withdraws or loses such right, such Dissenting
Shares will thereupon be treated as if they had been converted into and have
become exchangeable for, at the Effective Time of the Merger, the right to
receive the Common Stock Conversion Amount or the Preferred Stock Conversion
Amount, as the case may be, without any interest thereon. See Section 12 "--
Dissenters' Rights."
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to ERD and the
Purchaser relating to the Company and its subsidiaries, including, among other
things, corporate organization, authority, subsidiaries and equity investments,
capitalization, absence of violations, consents and approvals, reports with the
Commission, financial statements, absence of undisclosed liabilities, accounts
receivable, title to property, intellectual property, tax matters, employee
matters, absence of material change, absence of change or event, litigation,
compliance with law and other instruments, insurance, affiliate interests,
customers and suppliers, absence of questionable payments, inapplicability of
Section 203 of the DGCL and disclosure.
ERD and the Purchaser have also made customary representations and
warranties to the Company relating to ERD and the Purchaser, including, without
limitation, organization, corporate authority, absence of violations, consents
and approvals, litigation, financing and disclosure.
REGULAR COURSE OF BUSINESS. Pursuant to the Merger Agreement, the Company
has agreed that, except as otherwise consented to in writing by ERD, prior to
the Effective Time of the Merger, the Company will carry on its business
diligently and in the ordinary course only and, without limiting the generality
of the foregoing, the Company will use its best efforts to (i) preserve its
present business organization intact; (ii) keep available the services of its
executive officers and any management or sales personnel and preserve its
present relationships with distributors, customers, suppliers and other persons
having business dealings with it; (iii) maintain its properties and assets
(other than those disposed of in the ordinary course of business consistent with
prior practice) in good repair and
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condition, except for ordinary wear and tear; and (iv) maintain its books of
account and records in accordance with GAAP and in the usual, regular and
ordinary manner and consistent with prior practice.
The Company has agreed that, pursuant to the Merger Agreement and except as
specifically consented to in writing by ERD, prior to the Effective Time of the
Merger, the Company will not: (a) amend its certificate of incorporation or
by-laws; (b) except pursuant to conversion rights or options in existence on the
effective date of the Merger Agreement, (none of which conversion rights or
options were issued or created since the end of the Company's last fiscal year)
issue, sell or deliver, or agree to issue, sell or deliver, any shares of any
class of capital stock of the Company, any securities convertible into any such
shares or convertible into securities in turn so convertible or any options,
warrants or other rights calling for the issuance, sale or delivery of any such
shares or convertible securities; (c) encumber any of its properties or assets,
except for Permitted Encumbrances; (d) except in the ordinary course of business
(and consistent with prior practice), (i) borrow, or agree to borrow, any funds
or voluntarily incur, assume or become subject to, whether directly or by way of
guaranty or otherwise, any obligation or liability (absolute or contingent),
(ii) cancel or agree to cancel any debts or claims, (iii) lease, sublease, sell
or otherwise transfer, agree to lease, sublease, sell or otherwise transfer, or
grant or agree to grant any preferential rights to lease or otherwise acquire,
any of its properties or assets, (iv) make or agree to make any capital
expenditure in excess of $25,000 in any individual case or $100,000 in the
aggregate, (v) make or permit any amendment or termination of any Contract or
(iv) terminate service to any customer; (e) grant any increase in compensation
to any employee (except in the ordinary course of business and consistent with
prior practice), officer or director of the Company or any sales agent,
terminate any employment agreement or sales agency agreement with any sales
agent or enter into any agreement to make any special bonus payment to or
severance arrangement with any employee (except in the ordinary course of
business and consistent with prior practice), officer, director or agent of the
Company; (f) enter into or make any change in any employee benefit program,
except as required by law; (g) acquire control or ownership of any Person, or
acquire control or ownership of the customer list or any other substantial
portion of the assets of any Person, or merge, consolidate or otherwise combine
with any other Person, or enter into any agreement providing for any of the
foregoing; (h) except in the ordinary course of business, change in any material
respect any arrangement with any agent, distributor or material customer or
supplier or change the accounting practices and principles utilized in the
preparation of the Financial Statements or the method of recognition of revenue;
(i) except in the ordinary course of business, enter into or agree to enter into
any transaction except for the settlement of the Company's litigation with ENSR,
Inc. as described in Section 3.14 of the ENSA Disclosure Letter; (j) except as
required for the holders of Series B Preferred Stock or Series C Preferred
Stock, declare or pay any dividend or make any distribution on its capital stock
in cash, stock or property, redeem, repurchase or otherwise acquire any shares
of Preferred Stock; (k) fail duly and timely (by the due date or any duly
granted extension thereof) to file any Tax Reports or Tax Returns required to be
filed with federal, state, local, foreign and other authorities; or (l) unless
it is contesting the same in good faith and, if appropriate, has established
reasonable reserves therefor, fail either (i) promptly to pay any Taxes that are
shown on such returns or otherwise lawfully levied or assessed upon or payable
by it or on or with respect to any of its properties or assets, or (ii) to
withhold, collect and pay to the proper governmental authorities, or hold in
separate bank accounts for such payment, any Taxes and other assessments that
are required by law to be so withheld, collected and paid or so held.
ADDITIONAL AGREEMENTS; BEST EFFORTS. Upon the terms and subject to the
conditions set forth in the Merger Agreement, the Company agrees to use its best
efforts to take, or cause to be taken, all action and, to do or cause to be done
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by the Merger
Agreement, subject to the appropriate votes of the stockholders of the Company,
including cooperation fully with ERD and the Purchaser, including by provision
of information and making all necessary filings in connection with, among other
things, any approvals required from Governmental Entities.
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In case at any time after the Effective Time of the Merger any further action is
necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of the Company shall take all such necessary
action.
NO SOLICITATION. The Company has agreed in the Merger Agreement that it
will not, prior to May 17, 1996, authorize or permit any of its officers,
directors or employees or any investment banker, financial adviser, attorney,
accountant or other representative retained by it to, (a) solicit, initiate or
encourage (including by way of furnishing information), or take any other action
to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal, or (b) agree to or
endorse any Takeover Proposal. Notwithstanding the immediately preceding
sentence, if the Company shall not have breached the covenant provided by clause
(a) of the immediately preceding sentence and a Takeover Proposal, or a written
expression of interest that can reasonably be expected to lead to a Takeover
Proposal, shall occur, then, to the extent necessary in the written opinion of
legal counsel to the Company or its Board of Directors consistent with the
fiduciary obligations of the Company's Board of Directors, the Company and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish in
connection therewith information and take such other actions as are consistent
with the fiduciary obligations of the Company's Board of Directors, and such
actions shall not be considered a breach of this the foregoing provisions or any
other provision of the Merger Agreement. The Company shall promptly advise ERD
orally and in writing of any inquiries or Takeover Proposals. In the event (i)
the stock or assets of the Company are sold to a third party making a Takeover
Proposal, for consideration greater than the consideration to be paid by ERD
pursuant to the Merger Agreement, or (ii) the Board of Directors of ENSA shall
have failed to recommend or shall have withdrawn, modified or amended in any
material respect its approval or recommendations of the Offer or the Merger or
shall have resolved to do any of the foregoing, the Company shall pay to ERD the
sum of $100,000 as liquidated damages. As used in the Merger Agreement,
"Takeover Proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company and
made by a Person other than ERD or any proposal or offer to acquire in any
manner a substantial equity interest in, or a substantial portion of the assets
of, the Company other than the transactions contemplated by the Merger
Agreement, which is received by the Company prior to the termination of the
Merger Agreement.
AMENDMENT OF ERD STOCK OPTION PLAN. ERD has agreed pursuant to the Merger
Agreement that, the Board of Directors of ERD will authorize an amendment to its
Employee Stock Option Plan to (i) increase the number of authorized options
thereunder to a number which will be sufficient for the grant of all options
required to be granted pursuant to the Merger Agreement and (ii) permit the
grant of options to consultants, and will recommend ratification of such
amendment by ERD's stockholders at the next meeting of its stockholders.
REGISTRATION OF EMPLOYEE STOCK OPTIONS ON FORM S-8. ERD has agreed pursuant
to the Merger Agreement that, prior to the Closing Date, ERD shall file with the
Commission a Form S-8 registration statement with respect to its employee stock
option plan, and the shares and options covered thereby.
VOTE IN FAVOR OF MERGER. Pursuant to the Merger Agreement, ERD agrees to
cause all Shares purchased pursuant to the Offer, all shares of Preferred Stock
purchased pursuant to the Preferred Stock Purchase Agreement and all other
Shares and Preferred Stock owned by the Purchaser or any other subsidiary or
affiliate of ERD to be voted in favor of the approval of the Merger.
EXPENSES. The Merger Agreement provides that each party will pay all costs
and expenses incurred by such party in connection with the transactions
contemplated by the Merger Agreement, whether or not the transactions
contemplated thereby are consummated; provided, however, the Company will not
pay fees of its counsel in excess of $100,000 for services relating to the
Merger without the written consent of ERD.
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PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that none of the
parties to the Merger Agreement shall make any disclosure to the public
concerning the Merger Agreement or the transactions contemplated thereby other
than with the express written consent of the other parties thereto, except as
may be required by law, or by rule, regulation or announcement of a governmental
or quasi-governmental agency. To the extent reasonably practicable, any press
release proposed to be issued by any party to the Merger Agreement shall be
submitted to the other parties thereto for approval, which approval shall not be
unreasonably withheld or delayed.
BOARD REPRESENTATION. The Merger Agreement provides that, within five
business days after the consummation of the Offer, ERD shall designate no less
than three designees to be appointed to the Board of Directors of the Company
and the Company will take such steps as will be necessary to cause designees of
ERD to be appointed to constitute a majority of the Board of Directors of the
Company. The Merger Agreement expressly contemplates that the number of
directors will be set at five, and that Joseph T. Jacobsen and Jon Colin will
continue to serve as directors but that all other members of the Company's Board
of Directors will resign from the Board. The Merger Agreement provides further
that the Company shall, upon the request of ERD, promptly increase the size of
its Board and/or exercise its reasonable efforts to secure the resignations of
such number of directors as is necessary to enable ERD's designees to be elected
to the Board of Directors and shall cause ERD's designees to be so elected. The
Company has agreed to take, at its expense, all actions required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder to effect any
such election, including the mailing to its stockholders of the information
required to be disclosed pursuant thereto. ERD will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
Pursuant to the Merger Agreement, following the election of designees of the
Purchaser, prior to the Effective Time of the Merger, any amendment of the
Merger Agreement or the Certificate of Incorporation or Bylaws of the Company,
any termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of ERD or the Purchaser or waiver of any of the Company's rights under the
Merger Agreement will require the concurrence of a majority of the directors of
the Company then in office who are directors as of the date of the Merger
Agreement or persons designated by such directors and neither were designated by
the Purchaser nor are employees of the Company ("Continuing Directors"). In
addition, prior to the Effective Time of the Merger, the Company and the
Purchaser will use all reasonable efforts to ensure that the Company's Board of
Directors at all times includes at least two Continuing Directors.
REPRESENTATIONS TO REMAIN ACCURATE. None of the parties to the Merger
Agreement will take, agree to take, or knowingly permit to be taken any action
or do or knowingly permit to be done anything in the conduct of their respective
businesses, or otherwise, which would cause any of the respective
representations of the parties contained in the Merger Agreement to be or become
untrue in any material respect on or before Closing.
CONDITIONS PRECEDENT TO MERGER. The respective obligations of ERD, the
Purchaser and the Company to effect the Merger are subject to the fulfillment at
or prior to the Effective Time of the Merger of the following conditions: (a) if
required by applicable law, the Merger Agreement shall have been approved by the
requisite vote of the stockholders of the Company; and (b) no Governmental
Entity shall have enacted, issued, promulgated, enforced or entered any law,
rule, regulation, executive order, decree or injunction which prohibits or has
the effect of prohibiting the consummation of the Merger; provided, however, the
Company, ERD and the Purchaser have agreed that, prior to invoking this
provision, they shall use their reasonable best efforts (subject to the other
terms and conditions of the Merger Agreement) to have any such order, decree or
injunction vacated.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether prior to or after approval by the stockholders of
the Company:
(a) by mutual written consent of ERD and the Company;
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(b) by ERD or by the Company, (i) if either (x) as the result of the
failure of the Minimum Condition or any of the other conditions
described in Section 15, the Offer shall have terminated or expired in
accordance with its terms without the Purchaser having purchased any Shares
pursuant to the Offer, or (y) the Offer shall not have been consummated on
or before May 17, 1996; (ii) upon a vote at a duly held meeting or upon any
adjournment thereof, the stockholders of the Company shall have failed to
give any approval required by applicable law; or (iii) at any time after
September, 30, 1996, (or such later date as shall have been agreed to in
writing by ERD and the Company), provided, however, that the right to
terminate the Merger Agreement shall not be available (x) to ERD, if the
Purchaser or any affiliate of the Purchaser acquires the Shares pursuant to
the Offer, or (y) to any party whose failure to fulfill any obligation of
the Merger Agreement has been the cause of, or resulted in, the failure of
the Merger to have occurred on or prior to the aforesaid date.
(c) by ERD, if there has been a material misrepresentation by the
Company, or a material breach on the part of the Company of any of
their warranties or covenants set forth in the Merger Agreement, or a
material failure on the part of the Company to comply with any of their
other obligations under the Merger Agreement; or by the Company if there has
been a material misrepresentation by ERD, or a material breach on the part
of ERD of any of its warranties or covenants set forth in the Merger
Agreement, or a material failure on the part of ERD to comply with any of
its other obligations under the Merger Agreement; provided, however, that
the right to terminate the Merger Agreement pursuant to this clause shall
not be available to ERD if the Purchaser or any affiliate of the Purchaser
shall acquire Shares pursuant to the Offer;
(d) by ERD if the Board of Directors of the Company shall have failed to
recommend or shall have withdrawn, modified or amended in any
material respect its approval or recommendations of the Offer or the Merger
or shall have resolved to do any of the foregoing; or
(e) by the Company if: (i) the Offer has not been timely commenced
(except as a result of actions or omissions by the Company); or (ii)
there is a Takeover Proposal which the Board of Directors of the Company in
good faith determines represents a financially superior transaction for the
stockholders of the Company as compared to the Offer and the Merger, and the
Board of Directors of the Company determines, after consultation with its
counsel, that failure to terminate the Merger Agreement would be
inconsistent with the compliance by the Board of Directors with its
fiduciary duties to stockholders imposed by law; provided, however, that the
right to terminate the Merger Agreement shall not be available if the
Company has breached in any material respect its obligations concerning
Takeover Proposals.
ERD BRIDGE LOAN
Concurrently with the execution of the Original Merger Agreement on January
25, 1996, ERD and the Company executed the Securities Purchase Agreement
providing for the loan by ERD to the Company (the "Bridge Loan") of $500,000,
and the issuance to ERD of 500,000 Shares (the "Escrow Shares") subject to the
escrow arrangements described below. The Bridge Loan generally is subordinated
in right of payment to the Company's indebtedness to its principal bank lender.
Repayment of the Bridge Loan is due on December 31, 1996, together with interest
at the prime rate, unless (a) the Company terminates the Merger Agreement for
any reason other than a breach of the Merger Agreement by ERD, (b) there is a
Change of Control Event, (as defined) or (c) the Company commits an event of
default under the Securities Purchase Agreement, in any of which cases the
Bridge Loan and interest thereon will become immediately due and payable.
Pursuant to the Securities Purchase Agreement, the Escrow Shares have been
placed in escrow. One half of such Shares will be released to ERD on December
31, 1996 if the Bridge Loan is not repaid on or before such date, and one half
of such Shares will be released to ERD on June 30, 1997 if the Bridge Loan is
not repaid on or before such date. Escrow Shares will also be delivered to ERD
if the Bridge Loan, or any portion thereof, remains unpaid and there occurs a
Change of Control Event (as defined), the Company determines not to consummate
the Merger, or an Event of Default (as defined)
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occurs under the Bridge Loan and ERD declares the Bridge Loan immediately due
and payable. Otherwise, the Escrow Shares will be delivered to the Company upon
the repayment in full of the Bridge Loan. ERD has delivered to a person
designated by the Company as proxy to vote all Escrow Shares for as long as they
are held in escrow but such proxy will be terminated upon the consummation of
the Offer.
STOCK PURCHASE AGREEMENT
The Stock Purchase Agreement provides for a purchase price for shares of
Series B and Series C Preferred Stock of $98.22 per share. The aggregate number
of shares of Series B and Series C Preferred Stock to be purchased under the
Stock Purchase Agreement is 12,763.33 for an aggregate purchase price of
$1,253,614.27. The closing of the Stock Purchase Agreement will occur
simultaneously with the closing of the purchase of Shares pursuant to the Offer
and is conditioned upon the completion of the purchase of all or part of the
Shares tendered to Purchaser pursuant to the Offer. The Stock Purchase Agreement
also provides that as promptly as practicable after the Closing of the Stock
Purchase Agreement, Walter Barandiaran and Schneur Genack will resign from the
Board of Directors of the Company.
COLIN EMPLOYMENT AGREEMENT
Simultaneously with the closing of the Merger Agreement, Purchaser will
enter into an employment agreement with Jon Colin (the "Colin Employment
Agreement"). The Colin Employment Agreement will provide that Mr. Colin will be
employed as an executive vice president for a three year term at a base salary
at the rate of $225,000 per year. In addition to his base salary, Mr. Colin will
be awarded options to acquire 300,000 shares of common stock of ERD under ERD's
1994 Stock Option Plan pursuant to a stock option agreement to be entered into
simultaneously with Mr. Colin's employment agreement. Mr. Colin will be entitled
to an automobile on substantially the same basis as is currently provided to him
by the Company, and he will be able to participate in any medical, health,
disability and accident or other hospitalization or insurance plan established
by Purchaser.
JACOBSEN EMPLOYMENT AGREEMENT
Simultaneously with the closing of the Merger Agreement, Purchaser will
enter into an employment agreement with Joseph Jacobsen (the "Jacobsen
Employment Agreement"). The Jacobsen Employment Agreement will provide that Mr.
Jacobsen will be employed as President of Purchaser's air and consulting group
for a three year term at a base salary at the rate of $125,000 per year. In
addition to his base salary, Mr. Jacobsen will be awarded options to acquire
50,000 shares of common stock of ERD under ERD's 1994 Stock Option Plan pursuant
to a stock option agreement to be entered into simultaneously with Mr.
Jacobsen's employment agreement. Mr. Jacobsen will be entitled to an automobile
on substantially the same basis as is currently provided to him by the Company,
and he will be able to participate in any medical, health, disability and
accident or other hospitalization or insurance plan established by Purchaser.
14. DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, among other things,
prior to the Effective Time of the Merger, except pursuant to conversion rights
or options in existence on the date of the Merger Agreement, (none of which
conversion rights or options were issued or created since the end of the
Company's last fiscal year) issue, sell or deliver, or agree to issue, sell or
deliver, any shares of any class of capital stock of the Company, any securities
convertible into any such shares or convertible into securities in turn so
convertible or any options, warrants or other rights calling for the issuance,
sale or delivery of any such shares or convertible securities.
If on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should (i) split, combine or otherwise change
the Shares or its capitalization, (ii) acquire presently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares, or (iii) issue
or sell any shares of any class or any securities convertible into any such
shares, or any rights or options to acquire any such shares or convertible
securities (other than Shares issued pursuant to,
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and in accordance with the terms in effect on the date of the Merger Agreement
of, stock options issued prior to such date) then, without prejudice to the
Purchaser's rights under the Merger Agreement, the Purchaser (subject to the
Merger Agreement), in its sole discretion, may make such adjustments in the
purchase price and other terms of the Offer as it deems appropriate to reflect
such action.
If, on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should declare or pay any cash, non-cash or
stock dividend or other distribution on, or issue any rights with respect to,
the Shares, payable or distributable to stockholders of record on a date prior
to the transfer to the name of the Purchaser or its nominees or transferees on
the Company's stock transfer records of the Shares purchased pursuant to the
Offer, then, without prejudice to the Purchaser's rights under the Merger
Agreement, (i) the purchase price per Share payable by the Purchaser pursuant to
the Offer may (subject to the Merger Agreement), in the sole discretion of the
Purchaser, be reduced by the amount of any such cash dividend or distribution,
and (ii) any non-cash dividend, distribution or right to be received by the
tendering stockholders will (a) be received and held by the tendering
stockholders for the account of the Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (b) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance,
the Purchaser will be, subject to applicable law, entitled to all rights and
privileges as owner of any such non-cash dividend, distribution or right or such
proceeds and may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Purchaser in its sole
discretion. See Section 6.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other term of the
Offer or the Merger Agreement, the Purchaser shall not be required to accept for
payment or pay for, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) of the Exchange Act, any Shares not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such Shares, unless there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer that number of Shares which would
represent at least a majority of the outstanding Shares exclusive of the 500,000
Shares held in escrow pursuant to the terms of the Securities Purchase
Agreement, on a fully diluted basis (the "Minimum Condition"). Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject as aforesaid,
to pay for any Shares not theretofore accepted for payment or paid for, and may
terminate or amend the Offer if at any time on or after the date of the Merger
Agreement and before the acceptance of such Shares for payment or the payment
therefor, any of the following conditions exist or shall occur and remain in
effect:
(a) there shall have been instituted, pending or threatened any action or
proceeding by any court or other Governmental Entity (as defined
herein), which (i) seeks to challenge the acquisition by ERD or the
Purchaser (or any of its affiliates) of Shares pursuant to the Offer,
restrain, prohibit or delay the making or consummation of the Offer or the
Merger, or obtain damages in connection therewith in an amount which would
reasonably be expected to have a Material Adverse Effect (as defined in the
Merger Agreement) on the Company, (ii) seeks to make the purchase of or
payment for some or all of the Shares pursuant to the Offer or the Merger
illegal, (iii) seeks to impose limitations on the ability of ERD (or any of
its affiliates) effectively to acquire or hold, or to require ERD or the
Company or any of their respective affiliates or subsidiaries to dispose of
or hold separate, any portion of the assets or the business of ERD and its
affiliates or any material portion of the assets or the business of the
Company and its subsidiaries taken as a whole, (iv) seeks to impose material
limitations on the ability of ERD (or its affiliates) to exercise full
rights of ownership of the Shares purchased by it, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the stockholders of the Company, or (v) seeks to
restrict any future business activity by ERD (or any of its affiliates),
including, without limitation, requiring the prior consent of any person or
entity (including any Governmental Entity) to future transactions by ERD (or
any of its affiliates); or
26
<PAGE>
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any statute, rule,
regulation, judgment, decree, order or injunction, that is reasonably likely
to directly or indirectly result in any of the consequences referred to in
clauses (i) through (v) of subsection (a) above; or
(c) the Merger Agreement shall have been terminated in accordance with
its terms; or
(d) any of the representations and warranties made by the Company in the
Merger Agreement shall not have been true and correct in all material
respects when made, or shall thereafter have ceased to be true and correct
in all material respects as if made as of such later date (other than
representations and warranties made as of a specified date), or the Company
shall not in all material respects have performed each obligation and
agreement and complied in a timely manner with each covenant to be performed
and complied with by it under the Merger Agreement; or
(e) the Company's Board of Directors shall have modified or amended its
recommendation of the Offer in any manner adverse to ERD or shall
have withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Takeover Proposal or shall have resolved to do any of the
foregoing; or
(f) (i) any corporation, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) ("person"), other than ERD and the
Purchaser, shall have acquired beneficial ownership of more than 20% of the
outstanding Shares, or shall have been granted any options or rights,
conditional or otherwise, to acquire a total of more than 20% of the
outstanding Shares; (ii) any new group shall have been formed which
beneficially owns more than 20% of the outstanding Shares; or (iii) any
person (other than ERD or one or more of its affiliates) shall have entered
into an agreement in principle or definitive agreement with the Company with
respect to a tender or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the Company;
or
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, the American Stock Exchange or The Nasdaq Stock Market, (ii) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States (whether or not mandatory), (iii) a
commencement or escalation of a war, armed hostility or other international
or national calamity directly involving the United States, (iv) any material
limitation (whether or not mandatory) by any governmental or regulatory
authority, agency, commission or other entity, domestic or foreign
("Governmental Entity") on, or any other event that is reasonably likely
materially and adversely to affect the extension of credit by banks or other
lending institutions in the United States, (v) any decline in either the Dow
Jones Industrial Average or the Standard and Poor's 500 Index by an amount
in excess of 15% measured from the close of business on the date of the
Merger Agreement, or (vi) in the case of any of the foregoing existing at
the time of the commencement of the Offer, a material acceleration or
worsening thereof; or
(h) any change, development, effect or circumstance shall have occurred
or be threatened that would reasonably be expected to have a Material
Adverse Effect; or
(i) the Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any
similar law or regulation is filed against the Company which is not
dismissed within 2 business days.
The foregoing conditions, with the exception of the condition set forth in
paragraph (c), are for the sole benefit of ERD and the Purchaser and may be
asserted by ERD or the Purchaser regardless of the circumstances giving rise to
any such condition and may be waived by ERD or the Purchaser, in whole or in
part, at any time and from time to time, in the sole discretion of ERD. The
failure by ERD or the Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any right,
27
<PAGE>
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a waiver with respect to any other facts or circumstances,
and each right shall be deemed an ongoing right which may be asserted at any
time and from time to time. The condition set forth in paragraph (c) is for the
mutual benefit of ENSA, ERD and the Purchaser and cannot be waived by the
Purchaser or ERD without the written consent of ENSA, except that in the event
that ENSA terminates the Merger Agreement pursuant to Section 9.1(e)(ii)
thereto, then the consent of ENSA will not be required.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Exchange Agent to the tendering stockholders.
16. CERTAIN LEGAL MATTERS.
GENERAL. Except as described in this Section 16, based on a review of
publicly available filings by the Company with the Commission and other publicly
available information concerning the Company, neither ERD nor the Purchaser is
aware of any license or regulatory permit that appears to be material to the
business of the Company and that might be adversely affected by the Purchaser's
acquisition of Shares pursuant to the Offer, or of any approval or other action
by any governmental, administrative or regulatory agency or authority, domestic
or foreign, that would be required for the acquisition or ownership of Shares by
the Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought, except as described below under "State Takeover Statutes." While the
Purchaser does not currently intend to delay acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter, there can
be no assurance that any such approval or other action, if required, would be
obtained without substantial conditions or that adverse consequences would not
result to the Company's business or that certain parts of the Company's business
would not have to be disposed of in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser may decline to accept for
payment or pay for any Shares tendered. See Section 15.
STATE TAKEOVER LAWS. The Company and certain of its subsidiaries conduct
business in a number of states throughout the United States, some of which have
adopted laws and regulations applicable to offers to acquire shares of
corporations that are incorporated or have substantial assets, stockholders
and/or a principal place of business in such states. In EDGAR V. MITE CORP., the
Supreme Court of the United States held that the Illinois Business Takeover
Statute, which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and was therefore unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions, in particular, that the corporation has a substantial number of
stockholders in and is incorporated under the laws of such state.
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL ("Section 203") prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other actions) with a
Delaware corporation for a period of three years following the date such person
became an interested stockholder. The Board of Directors of the Company has
taken all appropriate action so that neither ERD nor the Purchaser is an
"interested stockholder" pursuant to Section 203.
The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither
28
<PAGE>
ERD nor the Purchaser knows whether any of or all of these takeover laws and
regulations will by their terms apply to the Offer, and, except as set forth
above, neither ERD nor the Purchaser has presently sought to comply with any
state takeover statute or regulation. ERD and the Purchaser reserve the right to
challenge the applicability or validity of any state law or regulation
purporting to apply to the Offer or the Merger and neither anything in this
Offer nor any action taken in connection herewith is intended as a waiver of
such right. In the event it is asserted that one or more state takeover statutes
is applicable to the Offer or the Merger and an appropriate court does not
determine that such statute is inapplicable or invalid as applied to the Offer
or the Merger, ERD or the Purchaser might be required to file certain
information with, or to receive approval from, the relevant state authorities,
and the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in consummating the Offer.
17. FEES AND EXPENSES. The Purchaser has retained MacKenzie Partners, Inc.
to act as the Information Agent and Chemical Mellon Shareholder Services,
L.L.C., to act as the Depositary in connection with the Offer. The Information
Agent may contact holders of Shares by mail, telephone, telex, telegraph and
personal interview and may request brokers, dealers and other nominee
stockholders to forward the Offer materials to beneficial owners. The
Information Agent and the Depositary will receive reasonable and customary
compensation for services relating to the Offer and will be reimbursed for
certain out-of-pocket expenses. The Purchaser and ERD have also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws.
Neither ERD nor the Purchaser will pay any fees or commissions to any broker
or dealer or any other person (other than to the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial
banks and trust companies will, upon request, be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding offering
materials to their customers.
18. MISCELLANEOUS. The Offer is being made to all holders of Shares. The
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute or
seek to have such statute declared inapplicable to the Offer. If, after such
good faith effort, the Purchaser cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of the Purchaser by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF ERD, THE PURCHASER OR THE COMPANY NOT CONTAINED IN
THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
ERD and the Purchaser have filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with all exhibits thereto, pursuant to
Rule 14d-3 of the General Rules and Regulations under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such Tender
Offer Statement and any amendments thereto, including exhibits, may be inspected
and copies may be obtained from the offices of the Commission in the manner set
forth in Section 8 (except that they will not be available at the regional
offices of the Commission).
ENSA ACQUISITION CORP.
April 4, 1996
29
<PAGE>
ANNEX I
INFORMATION RELATING TO DIRECTORS
AND EXECUTIVE OFFICERS OF ERD WASTE CORP.
AND THE PURCHASER
I. DIRECTORS AND EXECUTIVE OFFICERS OF ERD. The following table sets forth
the name, current business address and present principal occupation or
employment, and material occupations, positions, office or employments and
business addresses thereof for the past five years of each director and
executive officer of ERD. Unless otherwise indicated, each such person is a
citizen of the United States of America, and no person during the past 5 years
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, prohibiting activities subject to federal or state securities
laws or finding any violation of such laws.
<TABLE>
<CAPTION>
NAME AND POSITION HELD ADDRESS
- --------------------------------------------- --------------------------------------
<S> <C>
Joseph J. Wisneski, Director, President, and ERD Waste Corp.
Chief Operating Officer 356 Veterans Memorial Highway
Commack, New York 11725
Robert M. Rubin, Chairman of the Board and c/o Stanhope Capital
Chief Executive Officer 605 Third Avenue -- 15th Floor
New York, New York 10158
Marc P. McMenamin, Chief Operations Manager 500 North Broadway, Suite 133
of the Company The Jericho Atrium
Jericho, New York, 11753
D. David Cohen, Director 500 North Broadway, Suite 133
The Jericho Atrium
Jericho, New York 11753
Peter Reuter, Director One Pool Drive
P.O. Box 57
Roslyn, New York 11576
Carl Frischling, Director 919 Third Avenue
New York, New York 10022
</TABLE>
JOSEPH J. WISNESKI has been President, Chief Operating Officer, and a
Director of ERD since February 1983, was Vice President of ERD from November
1992 through January 1993, and was one of ERD's founding stockholders. Mr.
Wisneski has been serving as President, Treasurer and sole director of the
Purchaser since January 1996. From April 1990 to November 1992, Mr. Wisneski
served as a senior manager for Superior Contractors Network, Inc. ("Superior"),
a private service broker in the general construction field. Mr. Wisneski holds a
B.B.A. degree from Pace University and an M.B.A. degree from Fordham University.
ROBERT M. RUBIN has served as the Chairman of the Board and Chief Executive
Officer of ERD since February 1993 and as Chairman of the Purchaser since March,
1996. Mr. Rubin has served since May 1991 as the Chairman of the Board and a
director of Universal Self Care, Inc., a public company engaged in the
distribution of diabetic health products. Since October 1990, he has served as
the Chairman of the Board and Chief Executive Officer of American United Global,
Inc., a public company engaged in the manufacture and distribution of sealing
devices for automotive, aerospace, and general industrial applications and a
distributor of Case construction equipment.
D. DAVID COHEN has served as a director of ERD since January 1994. Mr. Cohen
is engaged in the private practice of law in New York. Mr. Cohen is also a
director of Data Switch Corporation and of
30
<PAGE>
Elephant & Castle Group Inc. From December 1988 to December 1990, Mr. Cohen
served as Vice President and General Counsel of Data Switch Corporation, a
publicly owned company in the electronics industry, while a partner of the New
York law firm of Parker Duryee Rosoff & Haft, to which he remains "Of Counsel".
MARC P. MCMENAMIN has served as Chief Operations Manager of ERD since June
1992 and Chief Operations Manager of Long Beach Recycling and Recovery Corp.
since June 1994. From February 1991 until June 1992, Mr. McMenamin served as
construction manager of, and was a partner in, Superior. From March 1987 until
February 1991, Mr. McMenamin served as general manager of Romark Environmental
Services, a private asbestos abatement company. Mr. McMenamin holds a B.B.A.
degree from Hofstra University.
PETER REUTER has been a director of ERD since October 1995. Mr. Reuter is
also a director of Lamp Technology, Inc., an importer and distributor of
specialty light bulbs located in Bohemia, New York. Since 1979, Mr. Reuter has
been the President of Peter J. Reuter Incorporated, a marketing consultant
company. Mr. Reuter holds a Bachelor of Electronic Engineering degree from
Polytechnic Institute of Brooklyn and an M.B.A. from New York University.
CARL FRISCHLING has served as a director of ERD since September 1995. Mr.
Frischling is a partner at the New York law firm of Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel, which he joined in September 1994. From September 1992
to August 1994, he was a partner at the law firm of Reid & Priest. Prior to
that, Mr. Frischling had been a partner at the law firm of Spengler Carlson
Gubar Brodsky & Frischling from November 1979.
II. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table
sets forth the name, current business address and present principal occupation
or employment, and material occupations, positions, office or employments and
business addresses thereof for the past five years of each director and
executive officer of the Purchaser. Unless otherwise indicated, each such person
is a citizen of the United States of America. No person during the last 5 years
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, prohibiting activities subject to federal or state securities
laws or finding any violation of such laws.
<TABLE>
<CAPTION>
NAME AND POSITION HELD ADDRESS
- ------------------------------------------ --------------------------------------
<S> <C>
Joseph Wisneski, President, Director ERD Waste Corp.
356 Veterans Memorial Highway
Commack, New York 11725
Robert Rubin, Chairman c/o Stanhope Capital
605 Third Avenue
New York, New York 10158
Aaron Karp, Secretary Karp & Sommers
950 Third Avenue
New York, New York 10022
</TABLE>
JOSEPH WISNESKI. Please see Directors and Executive Officers of ERD.
AARON KARP has served as Secretary of the Purchaser since March, 1996. Mr.
Karp is engaged in the private practice of law in New York. Since 1983, Mr. Karp
has been a partner at the law firm of Karp and Sommers. Mr. Karp received his
L.L.B. degree from Harvard University.
31
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
P.O. Box 817 120 Broadway -- 13th Floor 120 Broadway -- 13th Floor
Midtown Station New York, NY 10271 New York, NY 10271
New York, NY 10018 Attention: Reorganization Attention: Reorganization
Attention: Reorganization Department Department
Department
FACSIMILE TRANSMISSION:
(201) 329-8936
(For Eligible Institutions
Only)
CONFIRMATION OF FAX:
(201) 296-4100
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or the Depositary. Stockholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
abcdef
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
32
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED APRIL 4, 1996
OF
ENSA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
P.O. Box 817 120 Broadway -- 13th Floor 120 Broadway -- 13th Floor
Midtown Station New York, NY 10271 New York, NY 10271
New York, NY 10018 Attention: Reorganization Department Attention: Reorganization Department
Attention: Reorganization Department
FACSIMILE TRANSMISSION:
(201) 329-8936
(For Eligible Institutions Only)
CONFIRMATION OF FAX:
(201) 296-4100
</TABLE>
-----------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE
APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates representing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in Instruction 2) is utilized, if
delivery is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company or the Philadelphia Depository Trust
Company (individually, a "Book-Entry Transfer Facility" and, collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 2 of the Offer to Purchase. Stockholders whose certificates are not
immediately available, or who cannot deliver their certificates or confirmation
of the book-entry transfer of their Shares into the Depositary's account at a
Book-Entry Transfer Facility ("Book-Entry Confirmation") and all other documents
required hereby to the Depositary on or prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase), must tender their Shares according to
the guaranteed delivery procedures set forth in Section 2 of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Check Box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ____________________________________________________________
Transaction Code Number ____________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): __________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If Delivered by Book-Entry Transfer, Check Box of Book-Entry Transfer
Facility:
Name of Tendering Institution: ____________________________________________
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number ____________________________________________________________
Transaction Code Number ____________________________________________________
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Name(s) and Address(es) of Registered Holder(s) Certificate(s) Tendered
(Please fill in, if blank) (Attach additional lists if necessary)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Total Number of Number of
Certificates Shares Represented Shares
Number(s)* by Certificate(s) Tendered**
<S> <C> <C> <C>
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
Total Shares
- ----------------------------------------------------------------------------------------------------------------------------
*Need not be completed by stockholders tendering by book-entry transfer.
**Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the
Depositary are being tendered hereby. See Instruction 4.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to ENSA Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of ERD Waste Corp.,
a Delaware corporation ("ERD"), the above-described shares of common stock, par
value $.02 per share (the "Shares"), of Environmental Services of America, Inc.,
a Delaware corporation (the "Company"),
2
<PAGE>
pursuant to the Purchaser's offer to purchase all of the outstanding Shares at a
price of $1.66 per Share, net to the tendering stockholder in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
April 4, 1996 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer"). The Purchaser reserves the right to transfer or assign, in whole or
from time to time in part, to ERD or to one or more affiliates of ERD, the right
to purchase Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchaser all right, title and interest in and to
all of the Shares that are being tendered hereby (and any and all other Shares
or other securities or rights issued or issuable in respect thereof on or after
March 29, 1996) and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
any such other Shares or securities or rights), with full power of substitution
(such power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates representing such Shares (and any such
other Shares or securities or rights), or transfer ownership of such Shares (and
any such other Shares or securities or rights) on the account books maintained
by a Book-Entry Transfer Facility, together in either such case with all
accompanying evidences of transfer and authenticity, to or upon the order of the
Purchaser upon receipt by the Depositary, as the undersigned's agent, of the
purchase price (adjusted, if appropriate, as provided in the Offer to Purchase),
(b) present such Shares (and any such other Shares or securities or rights) for
registration and transfer on the books of the Company, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby irrevocably appoints Joseph Wisneski, and he or any
other designee of the Purchaser, the attorneys and proxies of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or his substitute shall, in his sole discretion, deem proper,
and otherwise act (including pursuant to written consent) with respect to all
the Shares tendered hereby which have been accepted for payment by the Purchaser
prior to the time of such vote or action (and any and all other Shares or
securities or rights issued or issuable in respect thereof on or after March 29,
1996), which the undersigned is entitled to vote at any meeting of stockholders
(whether annual or special and whether or not an adjourned meeting) of the
Company, or consent in lieu of any such meeting, or otherwise. This proxy and
power of attorney is coupled with an interest in the Shares tendered hereby and
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares (and any such other Shares or securities
or rights) by the Purchaser in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior proxies granted by the undersigned
at any time with respect to such Shares (and any such other Shares or securities
or rights) and no subsequent proxies will be given (and if given will be deemed
not to be effective) with respect thereto by the undersigned. The undersigned
acknowledges that in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, the Purchaser or the Purchaser's
designee must be able to exercise full voting and other rights of a record and
beneficial holder with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or securities or rights issued or issuable
in respect thereof on or after March 29, 1996) and that, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchaser to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any such other Shares or securities or rights).
No authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated in
the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment (and accompanying
documents, as appropriate) to the registered holder(s) appearing under
"Description of Shares Tendered" at the address shown below such registered
holder(s) name(s). In the event that either or both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates representing
Shares not tendered or accepted for payment in the name(s) of, and deliver such
check and/or return such certificates to, the person or persons so indicated.
Stockholders tendering Shares by book entry transfer may request that any Shares
not accepted for payment be returned by crediting such account maintained at a
Book-Entry Transfer Facility as such stockholder may designate by making an
appropriate entry under "Special Payment Instructions." The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name of the registered holder(s)
thereof if the Purchaser does not accept for payment any of the Shares so
tendered hereby.
3
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares To be completed ONLY if certificates representing
not tendered or not purchased and/or the check for Shares not tendered or not purchased and/or the
the purchase price of Shares purchased are to be check for the purchase price of Shares purchased are
issued in the name of someone other than the to be sent to someone other than the undersigned, or
undersigned, or if Shares tendered by book-entry to the undersigned at an address other than that
transfer which are not purchased are to be returned shown under "Description of Shares Tendered."
by credit to an account maintained at a Book-Entry
Transfer Facility other than that account designated
above.
Issue check and/or certificate(s) to: Issue check and/or certificate(s) to:
Name: Name:
(Please Print) (Please Print)
Address: Address:
(Include Zip (Include Zip Code)
Code)
(Tax Identification or Social Security
Number)
/ / Credit unpurchased Shares delivered by
book-entry transfer to the Book-Entry Transfer
Facility account set forth below.
Check appropriate box:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
(Account Number)
</TABLE>
4
<PAGE>
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Signature(s) of Holder(s) of Shares
Dated: , 199
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, agents, officers or corporations or others acting
in a fiduciary or representative capacity, please set forth the full title and
see Instruction 5.)
Name(s)
(Please Print)
Capacity (full title)
Address
(Include Zip Code)
Area Code and Telephone Number
Taxpayer Identification or
Social Security No.
(Complete Substitute Form W-9 on Reverse Side)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
PLACE MEDALLION GUARANTEE IN SPACE BELOW.
Authorized Signature(s)
Name
(Please Print)
Title
Name of Firm
Address
(Include Zip Code)
Area Code and Telephone Number
Dated: , 199
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in a Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of Shares) tendered
herewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
this Letter of Transmittal, or (ii) if such Shares are tendered for the account
of a firm that is a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (each being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates
representing Shares are to be forwarded herewith to the Depositary or, unless an
Agent's Message (as defined below) is utilized, if tenders of Shares are to be
made pursuant to the procedures for delivery by book-entry transfer set forth in
Section 2 of the Offer to Purchase. Certificates representing all physically
tendered Shares, or any book-entry confirmation of Shares, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in connection
with a book-entry transfer, an Agent's Message, and any other documents required
by this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). If a stockholder's certificate(s)
representing Shares are not immediately available (or the procedure for the
book-entry transfer cannot be completed on a timely basis) or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date, such stockholder's Shares may nevertheless be tendered if the
procedures for guaranteed delivery set forth in Section 2 of the Offer to
Purchase are followed. Pursuant to such procedure, (i) such tender must be made
by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchaser, must be received by the Depositary on or prior to the Expiration
Date, and (iii) the certificates representing all tendered Shares, in proper
form for transfer, or Book-Entry Confirmation of Shares, as the case may be, in
each case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq Stock Market Inc.'s National Market trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 2 of the Offer to Purchase. The term "Agent's Message" means
a message transmitted through electronic means by a Book-Entry Transfer Facility
to, and received by, the Depositary and forming a party of a book-entry
confirmation, which states that such Book-Entry Transfer Facility has received
an express acknowledgment from the participant in such Book-Entry Transfer
Facility tendering the Shares that such participant has received, and agrees to
be bound by, this Letter of Transmittal.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATE(S)
REPRESENTING SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH
A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER. THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF SUCH DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER SHARES BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any
certificate submitted are to be tendered, fill in the number of Shares that are
to be tendered in the box entitled "Number of Shares Tendered." In such case,
new certificate(s) representing the remainder of the Shares that were
represented by the old certificate(s) will be sent to the registered holder(s),
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face(s) of the certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and tendered hereby, no endorsements of certificates or separate
stock powers are required, unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6
<PAGE>
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority so to act must be submitted.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution, unless the signature is that of an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates representing Shares not tendered or accepted for payment are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such other person) payable on
account of the transfer to such person will be deducted from the purchase price,
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
certificates representing Shares not tendered or accepted for payment are to be
issued in the name of a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Stockholders tendering Shares by book-entry
transfer may request that Shares not accepted for payment be credited to such
account maintained at a Book-Entry Transfer Facility as such stockholder may
designate hereon. If no such instructions are given, such Shares not accepted
for payment will be returned by crediting the account at the Book-Entry Transfer
Facility designated above.
8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time and from time to time in the
Purchaser's sole discretion, in the case of any Shares tendered hereby.
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
Substitute Form W-9, which is provided below, and to certify whether the
stockholder is subject to backup withholding of Federal income tax. If a
tendering stockholder is subject to backup withholding, the stockholder must
cross out item (2) of the Certification box of the Substitute Form W-9. Failure
to provide the information on the Substitute Form W-9 may subject the tendering
stockholder to 31% Federal income tax withholding on the payment of the purchase
price. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he or she
should write "Applied For" in the space provided for the TIN in Part 1, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part 1 and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
11. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8
to avoid backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at the address set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent at the address set forth below or from your broker, dealer,
commercial bank or trust company.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payer) with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his social security number. If a tendering stockholder
is subject to backup withholding, he must cross out item (2) of the
Certification box on the Substitute Form W-9. If the Depositary is not provided
with the correct TIN, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit to the Depositary a properly completed
Internal Revenue Service Form W-8, signed under penalties
7
<PAGE>
of perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service (the
"IRS").
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to stockholder with
respect to Shares purchased pursuant to the Offer, the stockholder is required
to notify the Depositary of his correct TIN by completing the Substitute Form
W-9 below certifying that the TIN provided on such form is correct (or that such
stockholder is awaiting a TIN) and that (i) such holder is exempt from backup
withholding, (ii) such holder has not been notified by the IRS that he is
subject to backup withholding as a result of a failure to report all interest or
dividends, or (iii) the IRS has notified such holder that he is no longer
subject to backup withholding (see Part 2 of Substitute Form W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, he should
write "Applied For" in the space provided for in the TIN in Part 1, and sign and
date the Substitute Form W-9. If "Applied For" is written in Part 1 and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price until a TIN is provided to
the Depositary.
<TABLE>
<S> <C> <C>
PAYER'S NAME: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER EMPLOYER IDENTIFICATION NUMBER
IDENTIFICATION NUMBER (TIN) (IF AWAITING TIN WRITE "APPLIED
FOR")
PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING, SEE THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 AND COMPLETE AS
INSTRUCTED THEREIN.
CERTIFICATIONS -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer Identification Number
has not been issued to me) and either (a) I have mailed or delivered an application to receive a Taxpayer
Identification Number to the appropriate Internal Revenue Service ("IRS") or Social Security Administration office
or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a
Taxpayer Identification Number within sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number; and
(2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been
notified by the IRS that I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are
subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS
that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines).
SIGNATURE DATE , 199
</TABLE>
8
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
THE INFORMATION AGENT FOR THE OFFER IS:
abcdef
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll-Free (800) 322-2885
9
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
AT
$1.66 NET PER SHARE
BY
ENSA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS THE OFFER IS EXTENDED.
April 4, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by ENSA Acquisition Corp., a Delaware corporation
(the "Purchaser"), and a wholly owned subsidiary of ERD Waste Corp., a Delaware
corporation ("ERD"), to act as Information Agent in connection with Purchaser's
offer to purchase all of the outstanding shares of common stock, par value $.02
per share (the "Shares"), of Environmental Services of America, Inc., a Delaware
corporation (the "Company"), at a price of $1.66 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated April 4, 1996 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer"), copies of which are
enclosed herewith. This Offer is being made in connection with the Amended and
Restated Agreement and Plan of Merger, dated as of April 3, 1996, among ERD, the
Purchaser and the Company (the "Merger Agreement").
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES REPRESENTING AT LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING
SHARES OF THE COMPANY, OTHER THAN THOSE SHARES HELD BY ERD, ON A FULLY DILUTED
BASIS AS OF THE DATE THE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE OFFER.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal to be used by stockholders of the Company
in accepting the Offer. Facsimile copies of the Letter of Transmittal (with
manual signatures) may be used to tender Shares.
3. A printed form of letter which may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee with
space provided for obtaining such clients' instructions with regard to the
Offer.
<PAGE>
4. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates representing Shares are not immediately available or if time
will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the
procedures for book-entry transfer cannot be completed on a timely basis.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to Chemical Mellon Shareholder Services,
L.L.C., as Depositary.
Your attention is directed to the following:
1. The tender price is $1.66 per Share, net to the seller in cash.
2. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER
AND THE MERGER (AS DEFINED IN THE OFFER TO PURCHASE) ARE FAIR TO, AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, May 1, 1996, unless the Offer is extended.
4. The Offer is being made for all of the outstanding Shares. The Offer
is conditioned upon, among other things, there being validly tendered and
not withdrawn prior to the expiration of the Offer a number of shares
representing at least a majority of the total number of outstanding shares
of the Company, other than those Shares held by ERD, on a fully diluted
basis as of the date the Shares are accepted for payment pursuant to the
Offer.
5. Stockholders who tender Shares will not be obligated to pay
brokerage fees, commissions or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all Shares which
are validly tendered on or prior to the Expiration Date and not theretofore
withdrawn pursuant to the Offer to Purchase. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates representing such Shares (or a
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company, pursuant to the procedures described in Section 2 of
the Offer to Purchase), (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, (or,
in connection with a book-entry transfer, an Agent's Message (as defined in
Section 2 of the Offer to Purchase)), and (iii) all other documents required by
the Letter of Transmittal.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2, "Procedure for Tendering Shares," in the
Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker or dealer or to
any other person (other than the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Purchaser will,
however, upon request, reimburse you for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients. Purchaser
will pay or cause to be paid any transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the enclosed
Letter of Transmittal.
2
<PAGE>
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS
THE OFFER IS EXTENDED.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained by contacting,
the Information Agent at its address and telephone numbers set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
MACKENZIE PARTNERS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF PURCHASER, ERD, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS
ENCLOSED AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
AT
$1.66 NET PER SHARE
BY
ENSA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated April 4, 1996
(the "Offer to Purchase") and the related Letter of Transmittal (which together
constitute the "Offer") relating to the offer by ENSA Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of ERD
Waste Corp., a Delaware corporation ("ERD"), to purchase all of the outstanding
shares of common stock, par value $.02 per share (the "Shares"), of
Environmental Services of America, Inc., a Delaware corporation (the "Company"),
at a price of $1.66 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer. The Offer is being made in
connection with the Amended and Restated Agreement and Plan of Merger, dated as
of April 3, 1996, among ERD, the Purchaser and the Company (the "Merger
Agreement").
WE ARE THE HOLDER OF RECORD OF SHARES FOR YOUR ACCOUNT. A TENDER FOR SUCH
SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION
ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, pursuant to the
terms and conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $1.66 per Share, net to you in cash.
2. THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER
AND THE MERGER (AS DEFINED IN THE OFFER TO PURCHASE) ARE FAIR TO, AND IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, May 1, 1996, unless the Offer is extended.
4. The Offer is being made for all of the outstanding Shares. The Offer
is conditioned upon, among other things, there being validly tendered and
not withdrawn prior to the expiration of the Offer a number of Shares
representing at least a majority of the total number of outstanding Shares
of the Company, other than those Shares held by ERD, on a fully diluted
basis as of the date the Shares are accepted for payment pursuant to the
Offer.
5. Stockholders who tender Shares will not be obligated to pay
brokerage fees, commissions or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer.
<PAGE>
If you wish to have us tender any or all of your Shares, please complete,
sign and return the instruction form set forth below. An envelope to return your
instructions to us is enclosed. If you authorize the tender of your Shares, all
such Shares will be tendered unless otherwise specified on the instruction form
set forth below. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO
ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION
OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements and amendments thereto. The Purchaser is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to any valid state statute. If the Purchaser becomes
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, the Purchaser will make a good faith
effort to comply with any such state statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, the
Purchaser cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchaser by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
------------------------
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF ENVIRONMENTAL SERVICES OF AMERICA, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated April 4, 1996 and the related Letter of Transmittal (which
together constitute the "Offer") relating to the Offer by ENSA Acquisition Corp.
(the "Purchaser"), a Delaware corporation and a wholly-owned subsidiary of ERD
Waste Corp., a Delaware corporation, to purchase all of the outstanding shares
of common stock, par value $.02 per share (the "Shares"), of Environmental
Services of America, Inc., a Delaware corporation, at a price of $1.66 per
Share, net to the seller in cash.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered:* SIGN HERE
Shares
Account Number:
Dated: , 199 Signature(s)
*Unless otherwise indicated, it will be
assumed that all Shares held by us for
your account are to be tendered. Please print name(s) and address(es) here
Area Code and Telephone Number(s)
Tax Identification or
Social Security Number
</TABLE>
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
TO
ENSA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates representing shares of common
stock, par value $.02 per share (the "Shares"), of Environmental Services of
America, Inc., a Delaware corporation, are not immediately available (or if the
procedure for book-entry transfer cannot be completed on a timely basis), or if
time will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase). Such form
may be delivered by hand or transmitted by facsimile transmission or mail to the
Depositary. See Section 2 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT DELIVERY: BY HAND:
P.O. Box 817 120 Broadway -- 13th Floor 120 Broadway -- 13th Floor
Midtown Station New York, NY 10271 New York, NY 10271
New York, NY 10018 Attention: Reorganization Attention: Reorganization
Attention: Reorganization Department Department
Department
FACSIMILE TRANSMISSION:
(201) 329-8936
(For Eligible Institutions
Only)
CONFIRMATION OF FAX:
(201) 296-4100
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in Section 2 of the Offer to Purchase) and
certificates representing the Shares to the Depositary within the time period
specified herein. Failure to do so could result in a financial loss to the
Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to ENSA Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of ERD Waste Corp., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated April 4, 1996 (the "Offer to Purchase") and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares Name(s) of Record Holder(s)
Certificate No(s). (if available)
Check ONE box if Shares will be tendered by (Please Type or Print)
book-entry transfer: Address(es)
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Name of Tendering Institution: (Zip Code)
Area Code and Tel. No.(s):
Account Number
Dated , 1996 Signature(s)
</TABLE>
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program, (each, an "Eligible Institution"), (a)
represents that the above named person(s) own(s) the Shares tendered hereby
within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (b) represents that such tender of
Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees
delivery to the Depositary, at one of its addresses set forth above, of
certificates representing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees, or an Agent's Message in the case of a book-entry
transfer, and any other required documents, within three Nasdaq Stock Market
Inc.'s National Market trading days after the date hereof.
<TABLE>
<S> <C>
(Name of Firm) (Authorized Signature)
(Address) (Title)
Name
(Zip Code) (Please Type or Print)
Date , 1996
Area Code and Tel. No.
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES REPRESENTING SHARES SHOULD BE SENT WITH YOUR LETTER
OF TRANSMITTAL.
3
<PAGE>
CONTACTS:
JOSEPH WISNESKI, PRESIDENT
ERD WASTE CORP.
(516) 543-0606
JON COLIN, PRESIDENT
ENVIRONMENTAL SERVICES OF AMERICA, INC.
(908) 381-9229
JEANNE CARR
MACKENZIE PARTNERS, INC.
(212) 929-5500
FOR IMMEDIATE RELEASE:
ERD WASTE CORP. TO ACQUIRE
ENVIRONMENTAL SERVICES OF AMERICA, INC.
Commack, New York and Rahway, New Jersey, April 4, 1996 -- ERD Waste Corp.
(NASDAQ:ERDI) ("ERD") and Environmental Services of America, Inc. (NASDAQ:ENSA)
("ENSA") jointly announced today that they have entered into an Amended Merger
Agreement, slightly modifying their previously announced agreement. Under the
Amended Agreement, ERD would acquire, for cash, all of the outstanding common
stock of ENSA at a price of $1.66 per share.
Also pursuant to the Amended Agreement, a subsidiary of ERD will shortly
commence a tender offer to purchase all of ENSA's 4,330,553 shares of common
stock (excluding 500,000 shares that ERD already owns which are being held in
escrow) for $1.66 per share in cash, for a total of approximately $6.36 million.
The tender offer will be followed by a merger in which each of the remaining
shares of ENSA will be exchanged for $1.66 in cash.
The offer will be made pursuant to definitive offering documents to be
filed with the Securities and Exchange Commission. The offer is conditioned on
the tender of a majority of the outstanding shares of common stock not owned by
ERD, as well as certain other conditions.
"ENSA provides ERD with exciting opportunities to grow both in sales and
profits from synergies resulting from a combination of the two companies." said
Joseph Wisneski, ERD's President and Chief Operating Officer.
Jon Colin, President of ENSA stated, "We believe that the Amended Agreement
and ERD's tender offer afford a fair value to our stockholders at this time."
<PAGE>
ENSA, headquartered in Rahway, New Jersey, is a diversified environmental
services company specializing in the identification, management, treatment,
transportation and disposal of hazardous and non-hazardous wastes; remediation
of hazardous waste sites; air quality testing and monitoring services and
equipment; and consulting and technical support services related to all of the
foregoing. ENSA reported sales of $32.8 million for the fiscal year ended
December 31, 1994.
ERD is a diversified waste management company specializing in the
management and disposal of municipal solid waste, industrial and commercial non-
hazardous solid waste, and hazardous waste. ERD incinerates municipal solid
waste and industrial and commercial non-hazardous solid waste, utilizes the
steam produced thereby to cogenerate electricity, and provides brokerage,
advisory, consulting, and technical services to generators of waste. ERD
reported revenues in excess of $6.7 million for the fiscal year ended
January 31, 1995.
<PAGE>
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS MADE SOLELY BY THE OFFER TO PURCHASE DATED APRIL 4,
1996, AND THE RELATED LETTER OF TRANSMITTAL AND IS NOT BEING MADE TO (NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF SHARES IN ANY JURISDICTION
IN WHICH THE MAKING OF THE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. IN ANY JURISDICTION THE
SECURITIES LAWS OF WHICH REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR
DEALER, THE OFFER SHALL BE DEEMED MADE ON BEHALF OF THE PURCHASER BY ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ENVIRONMENTAL SERVICES OF AMERICA, INC.
AT
$1.66 NET PER SHARE
BY
ENSA ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ERD WASTE CORP.
ENSA Acquisition Corp., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of ERD Waste Corp., a Delaware corporation ("ERD"), is
offering to purchase all outstanding shares of common stock, par value $.02 per
share (the "Shares"), of Environmental Services of America, Inc., a Delaware
corporation (the "Company"), at $1.66 per Share, net to the seller in cash (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated April 4, 1996 and in the related Letter of Transmittal
(which together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MAY 1, 1996, UNLESS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT
NUMBER OF SHARES WHICH WOULD CONSTITUTE A MAJORITY OF THE OUTSTANDING SHARES,
OTHER THAN THOSE SHARES HELD BY ERD, ON A FULLY DILUTED BASIS (THE "MINIMUM
CONDITION").
<PAGE>
The Offer is being made pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of April 4, 1996 (the "Merger Agreement"), among ERD,
the Purchaser and the Company pursuant to which, following the consummation of
the Offer and the satisfaction or waiver of certain conditions, the Purchaser
will be merged with and into the Company (the "Merger"). At the effective time
of the Merger, each outstanding Share (other than Shares held in the Company's
treasury or by any wholly owned subsidiary of the Company, or owned by ERD, the
Purchaser or any other wholly owned subsidiary of ERD or held by stockholders,
if any, who are entitled to and who properly exercise dissenters' rights under
Delaware law) will be converted into the right to receive the Offer Price,
without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice
Chemical Mellon Shareholder Services, L.L.C. (the "Depositary") of the
Purchaser's acceptance for payment of such Shares. Upon the terms and subject
to the conditions of the Offer, payment for Shares purchased pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from the Purchaser and transmitting payment to tendering
stockholders. In all cases, payment for Shares purchased pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) certificates for
such Shares or timely confirmation of book-entry transfer of such Shares into
the Depositary's account at a Book-Entry Transfer Facility (as defined in the
Offer to Purchase) pursuant to the procedures set forth in Section 2 of the
Offer to Purchase, (b) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees and
(c) any other documents required by the Letter of Transmittal. Under no
circumstances will interest be paid by the Purchaser on the purchase price of
the Shares, regardless of any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Wednesday, May 1, 1996, unless and until the Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire. The Purchaser expressly reserves the
right, in its sole discretion (but subject to the terms of the Merger
Agreement), at any time or from time to time, and regardless of whether or not
any of the events set forth in Section 15 of the Offer to Purchase shall have
occurred or shall have been determined by the Purchaser to have occurred, to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary. The
- 2 -
<PAGE>
Purchaser shall not have any obligation to pay interest on the purchase price
for tendered Shares in the event the Purchaser exercises its right to extend the
period of time during which the Offer is open. There can be no assurance that
the Purchaser will exercise its right to extend the Offer. Any such extension
will be followed by a public announcement thereof no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date. During any such extension, all Shares previously tendered and
not withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 Midnight, New York City time, on Wednesday, May, 1996 (or, if the
Purchaser shall have extended the period of time during which the Offer is open,
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire) and, unless theretofore accepted for payment and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time on or after
June 3, 1996. For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If certificates for Shares have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in Section 2 of the Offer to Purchase), the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for book-
entry transfer as set forth in Section 2 of the Offer to Purchase, any notice of
withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of
the procedures described in Section 2 of the Offer to Purchase at any time prior
to the Expiration Date.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
- 3 -
<PAGE>
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase and the Letter of Transmittal
may be directed to the Information Agent as set forth below, and copies will be
furnished promptly at the Purchaser's expense.
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
April 4, 1996
- 4 -
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
- -- Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- -------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
NUMBER OF --
FOR THIS TYPE OF ACCOUNT:
- -------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined funds,
any one of the individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the minor is
account) the only contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State law
8. Sole proprietorship account The owner(4)
- -------------------------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF --
FOR THIS TYPE OF ACCOUNT:
- -------------------------------------------------------------------------
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not
designated in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, from your local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on payments of interest,
dividends and with respect to broker transactions include the following:
- -A corporation.
- -A financial institution.
- -An organization exempt from tax under section 501(a), or an
individual retirement plan.
- -The United States or any agency or instrumentality thereof.
- -A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
- -A foreign government, a political subdivision of a foreign
government, or any agency or instrumentality thereof.
- -An international organization or any agency or
instrumentality thereof.
- -A registered dealer in securities or commodities registered in
the U.S. or a possession of the U.S.
- -A real estate investment trust.
- -A common trust fund operated by a bank under
section 584(a).
- -An exempt charitable remainder trust, or a non-exempt trust
described in section 4947(a)(1).
- -An entity registered at all times under the Investment
Company Act of 1940.
- -A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- -Payments to nonresident aliens subject to withholding under
section 1441.
- -Payments to partnerships not engaged in a trade or business
in the U.S. and which have at least one nonresident partner.
- -Payments of patronage dividends where the amount received
is not paid in money.
- -Payments made by certain foreign organizations.
- -Payments made to a middleman known in the investment
community as a nominee as listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List.
Payments of interest not generally subject to backup withholding include the
following:
- -Payments of interest on obligations issued by individuals. Note:
You may be subject to backup withholding if this interest is $600 or more and
is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- -Payments of tax-exempt interest (including exempt-interest
dividends under section 852).
- -Payments described in section 6049(b)(5) to nonresident
aliens.
- -Payments on tax-free covenant bonds under section 1451.
- -Payments made by certain foreign organizations.
- -Payments made to a middleman known in the investment
community as a nominee as listed in the most recent publication of the American
Society of Corporate Secretaries, Inc., Nominee List.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER,
WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE
PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE
FORM.
Certain payments, other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
LOAN AGREEMENT
Dated as of March 29, 1996
ERD WASTE CORP., a Delaware corporation, having its principal place of
business at 356 Veterans Memorial Highway, Commack, New York 11725 (the
"Borrower"), ERD WASTE CORP. (INDIANA), an Indiana corporation, having its
principal place of business at 102 W. Columbus Drive, East Chicago, Indiana
46312, ABSORBENT MANUFACTURING & TECHNOLOGY, INC., an Illinois corporation,
having its principal place of business at 6840 West 66th Place, Bedford Park,
Illinois 60638, ENSA ACQUISITION CORP., a Delaware corporation, having its
principal place of business at 937 East Hazelwood Avenue, Rahway, New Jersey
07065, ENVIRONMENTAL WASTE INCINERATION, INC., a Delaware corporation, having
its principal place of business at 70 Water Street, Long Beach, New York 11561,
ERD WASTE CORP. OF ILLINOIS, an Illinois corporation, having its principal place
of business at 465 East 170th Street, South Holland, Illinois 60473, ERD
MANAGEMENT CORP., a New York corporation, having its principal place of business
at 356 Veterans Memorial Highway, Commack, New York 11725, C&J ENTERPRISES,
INC., a Delaware corporation, having its principal place of business at 356
Veterans Memorial Highway, Commack, New York 11725 and LONG BEACH RECYCLING AND
RECOVERY CORP., a New York corporation having its principal place of business at
70 Water Street, Long Beach, York 11561 (individually, a "Guarantor" and
collectively, the "Guarantors") and CHEMICAL BANK, a New York banking
corporation, having an office at 395 North Service Road, Suite 302, Melville,
New York 11747 (the "Bank") hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ADJUSTED LIBOR RATE" means, with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum (rounded, if not already a whole
multiple of 1/100th of one (.01%) percent to the nearest 1/l00th of one (.01%)
percent) equal to the product of (a) the LIBOR Rate and (b) Statutory Reserves.
"AFFILIATE" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with,
such Person; (ii) a Person which directly or indirectly beneficially owns or
holds five (5%) percent or more of any class of voting stock of, or five (5%)
percent or more of the equity interest in, such Person; or (iii) a Person
five (5%) percent or more of the voting stock of which, or five (5%) or more
<PAGE>
of the equity interest of which, is directly or indirectly beneficially owned
or held by such Person. The term control means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract, or otherwise.
"AGREEMENT" means this Loan Agreement, as amended, supplemented or modified
from time to time.
"ALTERNATE BASE RATE" means, for any day, the higher of (a) the Prime Rate
(computed on the basis of the actual number of days elapsed over a year of 360
days) in effect on such day, (b) the Base CD Rate in effect on such day plus one
(1%) percent (computed on the basis of the actual number of days elapsed over a
year of 360 days), or (c) the Federal Funds Effective Rate in effect on such day
plus one-half of one (1/2%) percent (computed on the basis of the actual number
of days elapsed over a year of 360 days). For purposes of this Agreement any
change in the Alternate Base Rate due to a change in the Prime Rate, the Month
Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Three Month Secondary CD
Rate or the Federal Funds Effective Rate, respectively. If for any reason the
Bank shall have determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Base CD Rate or the Federal
Funds Effective Rate, or both, for any reason, including, without limitation,
the inability or failure of the Bank to obtain sufficient bids or publications
in accordance with the terms thereof, the Alternate Base Rate shall be
determined without regard to clause (b) or (c), or both, of the first sentence
of this definition, as appropriate, until the circumstances giving rise such
inability no longer exist.
"ALTERNATE BASE RATE LOAN" means a Loan bearing interest at the Alternate
Base Rate in accordance with the provisions of Article II hereof.
"ASSESSMENT RATE" means the annual assessment rate (net of refunds and
rounded upwards, if necessary, to the next one sixteenth (1/16) of one (1%)
percent) estimated by the Bank (in good faith, but in no event in excess of
statutory or regulatory maximums) to be payable by the Bank to the Federal
Deposit Insurance Corporation (or any successor) for insurance by such
corporation (or such successor) of time deposits made in Dollars at the Bank's
domestic offices during the current calendar year.
"BASE CD RATE" means the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"BOARD OF GOVERNORS" means the Board of Governors of the Federal Reserve
System of the United States of America.
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"BUSINESS DAY" means a day of the year on which banks are not required or
authorized to close in New York City, provided that, if the relevant day relates
to a Eurodollar Loan, a Eurodollar Interest Period, or notice with respect to a
Eurodollar Loan, the term "Business Day" shall mean a day on which dealings in
dollar deposits are also carried on in the London Interbank Market and banks are
open for business in London.
"CAPITAL LEASE" means a lease which has been or should be, in accordance
with GAAP, capitalized on the books of the lessee.
"CHANGE OF CONTROL" means, with respect to any Person, any event or
occurrence, the result of which is (i) 20% or more of the voting securities of
such Person are transferred in a single transaction or a series of related
transactions or (ii) 20% or more of such Person's board of directors or similar
governing body is changed in a single transaction or series of related
transactions.
"COLLATERAL" means all property which is subject or is to be subject to the
Lien granted by the Security Agreements.
"COMMITMENT" means the Bank's obligation to make Revolving Credit Loans to
the Borrower pursuant to the terms and conditions of this Agreement and to
convert the outstanding balance of such Revolving Credit Loans to the Converted
Term Loan on the Conversion Date.
"CONSOLIDATED CAPITAL EXPENDITURES" means, as to any Person, the aggregate
amount of any expenditures (including purchase money Liens) by such Person and
its Consolidated Subsidiaries for assets (including fixed assets acquired under
Capital Leases) which it is contemplated will be used or usable in fiscal years
subsequent to the year of acquisition.
"CONSOLIDATED CURRENT ASSETS" means, as to any Person, at any date, the
aggregate amount of all assets of such Person and its Consolidated Subsidiaries
which would be properly classified as current assets at such date, but excluding
deferred assets, all computed and consolidated in accordance with GAAP.
"CONSOLIDATED CURRENT LIABILITIES" means, as to any Person, the aggregate
amount of all liabilities of such Person and its Consolidated Subsidiaries
(including tax and other proper accruals) which would be properly classified as
current liabilities, including the outstanding principal amount of the Revolving
Credit Note, all computed and consolidated in accordance with GAAP.
"CONSOLIDATED DEBT SERVICE RATIO" means, as to any Person, for any rolling
four quarter period, the ratio of (i) Consolidated EBITDA less Consolidated
Capital Expenditures of such Person for such period to (ii) the sum of such
Person's (1) interest expense (calculated on a consolidated basis), (2) current
portion of long term debt, and (3) with respect to the Borrower, 20% of the
total outstanding Revolving Credit Loans as of the end of the fiscal
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quarter for which the Consolidated Debt Service Ratio is being measured.
"CONSOLIDATED EBITDA" means, with respect to any Person, the sum of such
Person's (calculated on a consolidated basis): (i) net income, (ii) interest
expense, (iii) taxes paid, (iv) depreciation expense and (v) amortization.
"CONSOLIDATED SUBORDINATED DEBT" means, as to any Person, all of the
Subordinated Debt of such Person and its Consolidated Subsidiaries, computed and
consolidated in accordance with GAAP.
"CONSOLIDATED SUBSIDIARIES" means, as to any Person, those Subsidiaries of
such Person which are consolidated with such Person in the financial statements
delivered pursuant to Section 5.01(b).
"CONSOLIDATED TANGIBLE NET WORTH" means, as to any Person, the excess of
(i) such Person's Consolidated Total Assets, less all intangible assets properly
classified as such in accordance with GAAP, including, but without limitation,
patents, patent rights, trademarks, trade names, franchises, copyrights,
licenses, permits and goodwill over (ii) such Person's Consolidated Total
Liabilities.
"CONSOLIDATED TOTAL ASSETS" means, as to any Person, the aggregate net book
value of the assets of such Person and its Consolidated Subsidiaries after all
appropriate adjustments in accordance with GAAP (including without limitation,
reserves for doubtful receivables, obsolescence, depreciation and amortization
and excluding the amount of any write-up or revaluation of any asset), computed
and consolidated in accordance with GAAP.
"CONSOLIDATED TOTAL LIABILITIES" means, as to any Person, all of the
liabilities of such Person and its Consolidated Subsidiaries, including all
items which, in accordance with GAAP would be included on the liability side of
the balance sheet (other than capital stock, treasury stock, capital surplus and
retained earnings) computed and consolidated in accordance with GAAP.
"CONSOLIDATED TOTAL UNSUBORDINATED LIABILITIES" means, as to any Person,
the excess of (i) such Person's Consolidated Total Liabilities over (ii) such
Person's Consolidated Subordinated Debt.
"CONVERSION DATE" means the earlier of (i) April 1, 1998, or (ii) the
Optional Conversion Date.
"CONVERTED TERM LOAN" shall have the meaning assigned in Section 2.04
hereof.
"CONVERTED TERM LOAN MATURITY DATE" means the third (3rd) anniversary of
the Conversion Date.
"CONVERTED TERM LOAN NOTE" means a promissory note of the Borrower payable
to the order of the Bank, in substantially the
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<PAGE>
form of Exhibit B annexed hereto, evidencing the indebtedness of the
Borrower to the Bank resulting from the Converted Term Loan made by the Bank to
the Borrower pursuant to this Agreement.
"DEBT" means, as to any Person, (i) all indebtedness or liability of such
Person for borrowed money; (ii) indebtedness of such Person for the deferred
purchase price of property or services (including trade obligations); (iii)
obligations of such Person as a lessee under Capital Leases; (iv) current
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (v) obligations of such Person under letters of credit issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; and (ix) all other liabilities recorded as such,
or which should be recorded as such, on such Person's financial statements in
accordance with GAAP.
"DEFAULT" means any of the events specified in Section 6.01 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"DOLLARS" AND THE SIGN "$" mean lawful money of the United States of
America.
"ENSA" means Environmental Services of America, Inc.
"ENSA ACQUISITION" means the acquisition of ENSA by the
Borrower through a tender offer for the common and preferred stock of ENSA
and/or a merger of ENSA Acquisition Corp. ("EAC") into ENSA, pursuant to the
draft Agreement and Plan of Merger among the Borrower, EAC and ENSA dated March,
1996.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
which together with any other Person would be treated, with such Person, as a
single employer under Section 4001 of ERISA.
"EURODOLLAR LOAN" means a Loan bearing interest at a rate based on the
Adjusted LIBOR Rate in accordance with the provisions of Article II hereof.
"EVENT OF DEFAULT" means any of the events specified in Section 6.01 of
this Agreement, provided that any requirement for notice or lapse of time or any
other condition has been satisfied.
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<PAGE>
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Bank from three (3) federal funds brokers
of recognized standing selected by it.
"GAAP" means Generally Accepted Accounting Principles.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means those generally accepted
accounting principles and practices which are recognized as such by the American
Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Borrower and the Bank relating to the
determination of Generally Accepted Accounting Principles shall, in the absence
of manifest error, be conclusively resolved for all purposes hereof by the
written opinion with respect thereto, delivered to the Bank, of the independent
accountants selected by the Borrower and approved by the Bank for the purpose of
auditing the periodic financial statements of the Borrower.
"GUARANTOR" OR "GUARANTORS" means one or more of the Guarantors named as
such in the preamble to this Agreement, and any other Person required to
guarantee the obligations of the Borrower in accordance with Section 5.01(l) of
this Agreement.
"GUARANTY" OR "GUARANTIES" means the guaranty or guaranties executed and
delivered by the Guarantors pursuant to Section 3.01(h) or Section 5.01(l) of
this Agreement.
"HAZARDOUS MATERIALS" includes, without limit, any flammable explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related materials defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 9601 et seq.), and in the regulations adopted and
publications promulgated pursuant thereto, or any other federal, state or local
environmental law, ordinance, rule or regulation.
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<PAGE>
"INTEREST DETERMINATION DATE" means the date on which an Alternate Base
Rate Loan is converted to a Eurodollar Loan and, in the case of a Eurodollar
Loan, the last day of the applicable Interest Period.
"INTEREST PAYMENT DATE" means (i) as to each Eurodollar Loan, the last
Business Day of each month during the applicable Interest Period and the last
day of each Interest Period and (ii) as to each Alternate Base Rate Loan, the
last Business Day of each month.
"INTEREST PERIOD" means as to any Eurodollar Loan, the period commencing on
the date of such Eurodollar Loan and ending on the numerically corresponding day
in the calendar month that is one, three, six, nine or twelve months thereafter,
as the Borrower may elect (or, if there is no numerically corresponding day, on
the last Business Day of such month); provided, however, (i) with respect to a
Revolving Credit Loan, no Interest Period shall end later than the Conversion
Date, (ii) with respect to the Converted Term Loan, no Interest Period shall end
later than the Converted Term Loan Maturity Date, (iii) if any Interest Period
would end on a day which shall not be a Business Day, such Interest Period shall
be, in the case of Eurodollar Loans, extended to the next succeeding Business
Day unless such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next preceding
Business Day, (iv) no Interest Period in respect of a Eurodollar Loan
representing a portion of the principal required to be paid in accordance with
Section 2.07 may be selected unless the outstanding Alternate Base Rate Loans
and Eurodollar Loans for which the relevant Interest Periods end on or prior to
the date of such payment are in an aggregate amount which will be sufficient to
make such payment, (v) interest shall accrue from and including the first day of
such Interest Period to but excluding the date of payment of such interest
pursuant to Section 2.08, and (vi) no Interest Period of particular duration
with respect to a Eurodollar Loan may be selected by the Borrower if the Bank
determines, in its sole discretion, that Eurodollar Loans with such maturities
are not generally available.
"INVESTMENT" means any stock, evidence of Debt or other security of any
Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms in the ordinary course of business) and any purchase of
(i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment or option to make any such purchase, or any other
investment.
"LIBOR RATE" means the rate (rounded upwards, if not already a whole
multiple of 1/16th of one (1%) percent, to the next higher of 1/16th of one (1%)
percent) at which dollar deposits approximately equal in principal amount to the
requested Eurodollar
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<PAGE>
Loan and for a maturity equal to the requested Interest Period are offered in
immediately available funds to the London office of the Bank by leading banks in
the London Interbank Market for Eurodollars at approximately 11:00 a.m., London
time, two (2) Business Days prior to the commencement of such Interest Period.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"LOAN" OR "LOANS" means the Revolving Credit Loans or the Converted Term
Loan or any or all of the same as the context may require and includes Alternate
Base Rate Loans and Eurodollar Loans, as the context may require.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the
Security Agreements and any other document executed or delivered pursuant to
this Agreement.
"LONG BEACH PROPERTY" means the waste treatment plant and the land on which
it is situated in Long Beach, New York.
"MATERIAL ADVERSE CHANGE" means, as to any Person, (i) a material adverse
change in the financial condition, business, operations, properties or results
of operations of such Person or (ii) any event or occurrence which could have a
material adverse effect on the ability of such Person to perform its obligations
under the Loan Documents.
"MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of ERISA
which covers employees of the Borrower or any ERISA Affiliate.
"NOTE" OR "NOTES" means the Revolving Credit Note or the Converted Term
Loan Note or either or both of the same as the context may require.
"OPTIONAL CONVERSION DATE" shall have the meaning assigned in Section 2.04
hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENTS" means, (i) direct obligations of the United States
of America or any governmental agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature within one year
from the date of
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<PAGE>
acquisition thereof; (ii) time certificates of deposit having a maturity of one
year or less issued by any commercial bank organized and existing under the laws
of the United States or any state thereof and having aggregate capital and
surplus in excess of $1,000,000,000.00; (iii) money market mutual funds having
assets in excess of $2,500,000,000; (iv) commercial paper rated not less than
P-1 or A-1 or their equivalent by Moody's Investor Services, Inc. or Standard &
Poor's Corporation, respectively; (v) tax exempt securities rated Prime 2 or
better by Moody's Investor Services, Inc. or A-1 or-better by Standard & Poor's
Corporation or (vi) loans, advances or investments between the Borrower and one
or more Guarantors, or a Guarantor and the Borrower or one or more Guarantors.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust,
unincorporated association, joint venture or other entity or a
federal, state or local government, or a political subdivision thereof or any
agency of such government or subdivision.
"PLAN" means any employee benefit plan established, maintained, or to which
contributions have been made by the Borrower or any ERISA Affiliate.
"PRIME RATE" means the rate per annum announced by the Bank from time to
time as its prime rate in effect at its principal office on a 360-day basis;
each change in the Prime Rate shall be effective on the date such change is
announced to become effective.
"PROHIBITED TRANSACTION" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended from time
to time.
"REGULATION D" means Regulation D of the Board of Governors, as the same
may be amended and in effect from time to time.
"REGULATION G" means Regulation G of the Board of Governors, as the same
may be amended and in effect from time to time.
"REGULATION T" means Regulation T of the Board of Governors, as the same
may be amended and in effect from time to time.
"REGULATION U" means Regulation U of the Board of Governors, as the same
may be amended and in effect from time to time.
"REGULATION X" means Regulation X of the Board of Governors, as the same
may be amended and in effect from time to time.
"REPORTABLE EVENT" means any of the events set forth in Section 4043 of
ERISA.
"REVOLVING CREDIT LOANS" shall have the meaning assigned to such term in
Section 2.01 of this Agreement.
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"REVOLVING CREDIT NOTE" means a promissory note of the Borrower payable to
the order of the Bank, in substantially the form of Exhibit A annexed hereto,
evidencing the aggregate indebtedness of the Borrower to the Bank resulting from
Revolving Credit Loans made by the Bank to the Borrower pursuant to this
Agreement.
"SECURITY AGREEMENT" or "SECURITY AGREEMENTS" means the security agreement
or security agreements to be executed and delivered pursuant to Section 3.01(i)
of this Agreement.
"STATUTORY RESERVES" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency, or supplemental reserves)
expressed as a decimal established by the Board of Governors or any other
banking authority to which the Bank is subject (i) with respect to the Adjusted
LIBOR Rate for Eurocurrency Liabilities (as defined in Regulation D) or (ii)
with respect to the Base CD Rate, for new negotiable non-personal time deposits
in Dollars of over $l00,000.00 with maturities approximating equal to three (3)
months. Such reserve percentages shall include, without limitation, those
imposed under such Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exceptions or
offsets which may be available from time to time to the Bank under such
Regulation D. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"SUBORDINATED DEBT" means Debt of any Person, the repayment of which the
obligee and obligor have agreed in writing, on terms which have been approved by
the Bank in advance in writing, shall be subordinate and junior to the rights of
the Bank with respect to Debt owing from such Person to the Bank.
"SUBSIDIARY" means, as to any Person, any corporation, partnership or joint
venture whether now existing or hereafter organized or acquired (i) in the case
of a corporation, of which a majority of the securities having ordinary voting
power for the election of directors (other than securities having such.power
only by reason of the happening of a contingency) are at the time owned by such
Person and/or one or more Subsidiaries of such Person or (ii) in the case of a
partnership or joint venture, of which a majority of the partnership or other
ownership interests are at the time owned by such Person and/or one or more
Subsidiaries of such Person.
"THREE-MONTH SECONDARY CD RATE" means, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) through the
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public information telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of the Board of Governors, be published
in Federal Reserve Statistical Release #15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Bank from three (3) New York City negotiable certificate of deposit dealers of
recognized standing selected by it.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to and including".
SECTION 1.03. ACCOUNTING TERMS. Except as otherwise herein specifically
provided, each accounting term used herein shall have the meaning given to it
under GAAP.
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ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. THE REVOLVING CREDIT LOANS. The Bank agrees, on the date of
this Agreement, on the terms and conditions of this Agreement and in reliance
upon the representations and warranties set forth in this Agreement, to lend to
the Borrower prior to the Conversion Date such amounts as the Borrower may
request from time to time (individually, a "Revolving Credit Loan" or
collectively, the "Revolving Credit Loans"), which amounts may be borrowed,
repaid and reborrowed, provided, however, that the aggregate amount of such
Revolving Credit Loans outstanding at any one time shall not exceed Seven
Million Five Hundred Thousand ($7,500,000.00) Dollars (the "Commitment"), or
such lesser amount of the Commitment as may be reduced pursuant to Section 2.12
hereof.
Each Revolving Credit Loan shall be an Alternate Base Rate Loan or a
Eurodollar Loan (or a combination thereof) as the Borrower may request subject
to and in accordance with Section 2.02. The Bank may at its option make any
Eurodollar Loan by causing a foreign branch or affiliate to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of the Revolving Credit
Note. Subject to the other provisions of this Agreement, Revolving Credit Loans
of more than one type may be outstanding at the same time, provided that not
more than six (6) Eurodollar Loans may be outstanding at one time.
SECTION 2.02. NOTICE OF REVOLVING CREDIT LOANS.
(a) The Borrower shall give the Bank irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) at least
three (3) Business Days prior to each Revolving Credit Loan comprised in whole
or in part of one or more Eurodollar Loans (subject to Availability) and (ii)
prior to 11:00 a.m. on the day of each Revolving Credit Loan consisting solely
of an Alternate Base Rate Loan. Such notice shall specify the date of such
borrowing, the amount thereof and whether such Loan is to be (or what portion or
portions thereof are to be) an Alternate Base Rate Loan or a Eurodollar Loan
and, if such Loan or any portion thereof is to consist of one or more Eurodollar
Loans, the principal amounts thereof and Interest Period or Interest Periods
with respect thereto. If no election as to a type of Loan is specified in such
notice, such Loan (or portion thereof as to which no election is specified)
shall be an Alternate Base Rate Loan. If no election as to the Interest Period
is specified in such notice with respect to any Eurodollar Loan, the Borrower
shall be deemed to have selected an Interest Period of one month's duration and
if a Eurodollar Loan is requested when such Loans are not available, the
Borrower shall be deemed to have requested an Alternate Base Rate Loan.
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(b) The Borrower shall have the right, on such notice to the Bank as is
required pursuant to (a) above, (i) to continue any Eurodollar Loan or a portion
thereof into a subsequent Interest Period (subject to availability) or (ii) to
convert an Alternate Base Rate Loan into a Eurodollar Loan (subject to
availability) subject to the following:
(a) if an Event of Default shall have occurred and be continuing at
the time of any proposed conversion or continuation only Alternate Base Rate
Loans shall be available;
(b) in the case of a continuation or conversion of fewer that all
Loans, the aggregate principal amount of each Eurodollar Loan continued or into
which a Loan is converted shall be in the minimum principal amount of
$500,000.00 and in minimum increased multiples of $100,000.00;
(c) each continuation or conversion shall be effected by the Bank
applying the proceeds of the new Loan to the Loan (or portion thereof) being
continued or converted;
(d) if the new Loan made as a result of a continuation or conversion
shall be a Eurodollar Loan, the first Interest Period with respect thereto shall
commence on the date of continuation or conversion;
(e) each request for a Eurodollar Loan which shall fail to state an
applicable Interest Period shall be deemed to be a request for an Interest
Period of one month and each request for a Eurodollar Loan made when such Loans
are not available shall be deemed to be a request for an Alternate Base Rate
Loan;
(f) no Interest Period in respect of a Eurodollar Loan representing a
portion of the principal required to be paid in accordance with Section 2.07 may
be selected unless the outstanding Alternate Base Rate Loans and Eurodollar
Loans for which the relevant Interest Periods end on or prior to the date of
such payment are in an aggregate amount which will be sufficient to make such
payment; and
(g) in the event that the Borrower shall not give notice to continue
a Eurodollar Loan as provided above, such Loan shall automatically be converted
into an Alternate Base Rate Loan at the expiration of the then current Interest
Period.
SECTION 2.03. REVOLVING CREDIT NOTE. Each Revolving Credit Loan shall be
(i) in the case of each Alternate Base Rate Loan in the minimum principal amount
of $250,000.00 and (ii) in the case of each Eurodollar Loan in the minimum
principal amount of $500,000.00 and in minimum increased multiples of
$100,000.00 (except that, if any such Alternate Base Rate Loan so requested
shall exhaust the remaining available Commitment, such Alternate Base Rate Loan
may be in an amount equal to the amount of the remaining available Commitment).
Each Revolving Credit Loan shall be evidenced by the
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Revolving Credit Note of the Borrower. The Revolving Credit Note shall be dated
the date hereof and be in the principal amount of Seven Million Five Hundred
Thousand ($7,500,000.00) Dollars, and shall mature on the Conversion Date, at
which time the entire outstanding principal balance and all interest thereon
shall be due and payable. The Revolving Credit Note shall be entitled to the
benefits and subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the time of
each payment of principal thereon, the holder of the Revolving Credit Note is
hereby authorized by the Borrower to make a notation on the schedule annexed to
the Revolving Credit Note of the date and amount, and the type and Interest
Period of the Revolving Credit Loan or payment, as the case may be. Failure to
make a notation with respect to any Revolving Credit Loan shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Revolving
Credit Note with respect to such Revolving Credit Loan, and any payment of
principal on the Revolving Credit Note by the Borrower shall not be affected by
the failure to make a notation thereof on said schedule.
SECTION 2.04. CONVERSION DATE; MAKING OF CONVERTED TERM LOAN.
(a) The Borrower shall be obligated to pay to the Bank on the Conversion
Date the then outstanding principal amount of the Revolving Credit Loans and all
accrued but unpaid interest thereon. The Bank agrees, upon the terms and
subject to the conditions hereof, including, but without limitation, the
conditions of Section 3.03 hereof, and provided that no Default or Event of
Default shall have occurred and be continuing, to make a converted term loan
(the "Converted Term Loan") to the Borrower, on the Conversion Date in an amount
equal to the lesser of the Commitment or the aggregate principal amount of
Revolving Credit Loans then outstanding under the Revolving Credit Note.
(b) Upon three (3) Business Days' prior written notice to the Bank, the
Borrower may request the Bank to make the Converted Term Loan prior to the
Conversion Date and the Bank agrees, upon the terms and subject to the
conditions hereof, including, but without limitation, the conditions of Section
3.03 hereof, and provided that no Default or Event of Default shall have
occurred and be continuing, to make the Converted Term Loan on the date so
requested (the "Optional Conversion Date").
(c) The Bank shall make the Converted Term Loan by crediting the amount
thereof towards the repayment of the principal amount of Revolving Credit Loans
outstanding under the Revolving Credit Note.
(d) The Converted Term Loan, or portions thereof, shall be an Alternate
Base Rate Loan or a Eurodollar Loan (or a combination thereof) as the Borrower
may request subject to and in accordance with Section 2.05 hereof. The Bank may
at its option make any Eurodollar Loan by causing a foreign branch or affiliate
to make such Loan provided that any exercise of such option shall not
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affect the obligations of the Borrower to repay such Loan in accordance with the
terms of the Converted Term Loan Note.
SECTION 2.05. NOTICE OF CONVERTED TERM LOAN DESIGNATIONS.
(a) The Borrower may elect to designate the Converted Term Loan (or a
portion thereof) as an Alternate Base Rate Loan or a Eurodollar Loan by so
specifying in the irrevocable notice given pursuant to this Section 2.05;
provided, however, that each Eurodollar Loan for any specific Interest Period
shall be in the minimum principal amount of $500,000.00 and in minimum multiples
of $100,000.00.
(b) The Borrower shall give the Bank irrevocable written, telex,
telephonic (immediately confirmed in writing) or facsimile notice (i) at least
three (3) Business Days prior to each election to designate the Converted Term
Loan (or a portion thereof) as a Eurodollar Loan (subject to availability) and
(ii) prior to 11:00 a.m. on the day of such Loan of each election to designate
the Converted Term Loan (or a portion thereof) as an Alternate Base Rate Loan,
in each case specifying the date (which shall be a Business Day) and the
aggregate principal amount of such Loan and, if any portion thereof is to
consist of one or more Eurodollar Loans, the respective principal amounts and
Interest Periods for each such Eurodollar Loan; provided that:
(i) if the Borrower shall fail to specify the duration of an Interest
Period with regard to any Eurodollar Loan in its notice, the Interest Period
shall be for a period of one month; and
(ii) if the Borrower shall request a Eurodollar Loan when such Loans
are not available, the request shall be deemed to be a request for an Alternate
Base Rate Loan.
SECTION 2.06. CONVERTED TERM LOAN NOTE. The Converted Term Loan shall be
evidenced by the Converted Term Loan Note of the Borrower. The Converted Term
Loan Note shall be dated the Conversion Date and shall mature on the Converted
Term Loan Maturity Date at which time the entire outstanding principal balance
and all interest thereon shall be due and payable. The Converted Term Loan Note
shall be entitled to the benefits and subject to the provisions of this
Agreement.
SECTION 2.07. REPAYMENT OF CONVERTED TERM LOAN NOTE. The principal
balance of the Converted Term Loan Note shall be payable in thirty six (36)
monthly installments, due on the last Business Day of each month beginning on
the first such day after the Conversion Date, and continuing on the last
Business Day of each calendar month thereafter. Each of the first thirty five
(35) such monthly installments shall be in an amount equal to 1/36th of the
principal amount of the Converted Term Loan and the thirty sixth (36th) such
monthly principal installment shall be in an amount equal to the then
outstanding principal balance of the Converted Term Loan Note.
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SECTION 2.08. PAYMENT OF INTEREST ON THE REVOLVING CREDIT NOTE AND THE
CONVERTED TERM LOAN NOTE.
(a) In the case of an Alternate Base Rate Loan, interest shall be payable
at a rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) equal at all times to (i) in the case of Revolving
Credit Loans, the Alternate Base Rate plus one-half of one (1/2%) percent and
(ii) in the case of the Converted Term Loan, the Alternate Base Rate plus one
(1%) percent. Such interest shall be payable on each Interest Payment Date,
commencing with the first Interest Payment Date after the date of such Alternate
Base Rate Loan, on each Interest Determination Date, on the Conversion Date and
on the Converted Term Loan Maturity Date. Any change in the rate of interest on
the Revolving Credit Note or the Converted Term Loan Note due to a change in the
Alternate Base Rate shall take effect as of the date of such change in the
Alternate Base Rate.
(b) In the case of a Eurodollar Loan, interest shall be payable at a rate
per annum (computed on the basis of the actual number of days elapsed over a
year of 360 days) equal to the Adjusted LIBOR Rate plus three and one half
(3 1/2) percent. Such interest shall be payable on each Interest Payment Date,
commencing with the first Interest Payment Date after the date of such
Eurodollar Loan, on each Interest Determination Date, on the Conversion Date and
on the Converted Term Loan Maturity Date. In the event Eurodollar Loans are
available, the Bank shall determine the rate of interest applicable to each
requested Eurodollar Loan for each Interest Period at 11:00 a.m., New York City
time, or as soon as practicable thereafter, two (2) Business Days prior to the
commencement of such Interest Period and shall notify the Borrower of the rate
of interest so determined. Such determination shall be conclusive absent
manifest error.
SECTION 2.09. CONVERSION AND CONTINUATION OF LOANS. On or after the
Conversion Date, the Borrower shall have the right, at any time, on such notice
to the Bank as is required pursuant to Section 2.05, (i) to continue any
Eurodollar Loan or portion thereof into a subsequent Interest Period (subject to
availability) or (ii) to convert an Alternate Base Rate Loan into a Eurodollar
Loan (subject to availability), subject to the following:
(a) if an Event of Default shall have occurred and be continuing at the
time of any proposed conversion or continuation only Alternate Base Rate Loans
shall be available;
(b) in the case of a continuation or conversion of fewer than all Loans,
the aggregate principal amount of each Eurodollar Loan continued or into which a
Loan is converted shall be in the minimum principal amount of $500,000.00 and in
minimum increased multiples of $100,000.00;
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(c) each continuation or conversion shall be effected by the Bank applying
the proceeds of the new Loan to the Loan (or portion thereof) being continued or
converted;
(d) if the new Loan made as a result of a continuation or conversion shall
be a Eurodollar Loan, the first Interest Period with respect thereto shall
commence on the date of continuation or conversion;
(e) each request for a Eurodollar Loan which shall fail to state an
applicable Interest Period shall be deemed to be a request for an Interest
Period of one month and each request for a Eurodollar Loan made when such Loans
are not available shall be deemed to be a request for an Alternate Base Rate
Loan;
(f) unless sufficient Alternate Base Rate Loans are outstanding or other
Eurodollar Loans are outstanding with Interest Periods expiring prior to the
next scheduled installment payment of the Converted Term Loan Note, and are
sufficient to enable the Borrower to make such installment payment, any
Eurodollar Loan a portion of which is required to be repaid on any such
installment payment date shall be automatically converted at the end of such
Interest Period into an Alternate Base Rate Loan; and
(g) in the event that the Borrower shall not give notice to continue a
Eurodollar Loan as provided above, such Loan shall automatically be converted
into an Alternate Base Rate Loan at the expiration of the then current Interest
Period.
SECTION 2.10. USE OF PROCEEDS. The proceeds of the Revolving Credit Loans
shall be used by the Borrower for general corporate purposes, including (i)
working capital, (ii) for advances to the Guarantors and (iii) to partially
finance the ENSA Acquisition but no other acquisition, and the proceeds of the
Converted Term Loan shall be used by the Borrower exclusively to satisfy
existing obligations to the Bank under the Revolving Credit Note. No part of
the proceeds of any Loan may be used (i) in order to pay dividends or repurchase
any of the Borrower's capital stock or (ii) for any purpose that directly or
indirectly violates or is inconsistent with, the provisions of Regulations G, T,
U or X.
SECTION 2.11. COMMITMENT FEE. The Borrower agrees to pay to the Bank from
the date of this Agreement and for so long as the Commitment remains
outstanding, on the last Business Day of each calendar quarter, a commitment fee
computed at the rate of one quarter of one (1/4%) percent per annum (computed
on the basis of the actual number of days elapsed over 360 days) on the average
daily unused amount of the Commitment, such commitment fee being payable for the
calendar quarter, or part thereof, preceding the payment date.
SECTION 2.12. REDUCTION OF COMMITMENT. Upon at least three (3) Business
Days' written notice, the Borrower may irrevocably elect to have the unused
Commitment terminated in whole or reduced
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in part provided, however, that any such partial reduction shall be in a minimum
amount of Two Hundred Fifty Thousand ($250,000.00) Dollars, or whole multiples
thereof. The Commitment, once terminated or reduced, shall not be reinstated
without the express written approval of the Bank.
SECTION 2.13. PREPAYMENT. (a) The Borrower shall have the right at any
time and from time to time to prepay any Alternate Base Rate Loan, in whole or
in part, without premium or penalty on the same day on which telephonic notice
is given to the Bank (immediately confirmed in writing) of such prepayment
provided, however, that each such prepayment shall be on a Business Day and
shall be in an aggregate principal amount which is an integral multiple of
$250,000.00.
(b) The Borrower shall have the right at any time and from time to time,
subject to the provisions of this Agreement, to prepay any Eurodollar Loan, in
whole or in part, on three (3) Business Days' prior irrevocable written notice
to the Bank, provided, however, that such prepayment may only be made on an
Interest Determination Date.
(c) The notice of prepayment under this Section 2.13 shall set forth the
prepayment date and the principal amount of the Loan being prepaid and shall be
irrevocable and shall commit the Borrower to prepay such Loan by the amount and
on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment. Each
prepayment under this Section 2.13 shall be applied first towards unpaid
interest on the amount being prepaid and then towards the principal in whole or
partial prepayment of Loans by the Borrower. In the absence of such
specification, amounts being prepaid shall be applied first to any Alternate
Base Rate Loan then outstanding and then to Eurodollar Loans in the order of the
expiration of their respective Interest Periods. In the case of the Converted
Term Loan, all partial prepayments of Loans shall be applied to installments of
principal of the Converted Term Loan, as the case may be, in the inverse order
of maturity.
SECTION 2.14. REIMBURSEMENT BY BORROWER. The Borrower shall reimburse the
Bank upon the Bank's demand for any loss, cost or expense incurred or to be
incurred by it (in the Bank's sole determination) as a result of any prepayment
or conversion (whether voluntarily or by acceleration) of any Eurodollar Loan
other than on the last day of the Interest Period for such Loan, or if the
Borrower fails to borrow the Eurodollar Loan (or is not able to borrow because
of an Event of Default or for any other reason hereunder) after having given the
irrevocable notice of borrowing required by this Agreement. Such reimbursement
shall include, but not be limited to, any loss, cost or expense incurred by the
Bank in obtaining, liquidating or redeploying any funds used or to be used in
making or maintaining the Eurodollar Loan.
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SECTION 2.15. STATUTORY RESERVES. It is understood that the cost to the
Bank of making or maintaining Eurodollar Loans may fluctuate as a result of the
applicability of, or change in, Statutory Reserves. The Borrower agrees to pay
to the Bank from time to time, as provided in Section 2.16 below, such amounts
as shall be necessary to compensate the Bank for the portion of the cost of
making or maintaining any Eurodollar Loans made by it resulting from any such
Statutory Reserves, or change therein, it being understood that the rates of
interest applicable to Eurodollar Loans hereunder have been determined on the
basis of Statutory Reserves in effect at the time of determination of the
Adjusted LIBOR Rate and that such rates do not reflect costs imposed on the Bank
in connection with any change to such Statutory Reserves. It is agreed that for
purposes of this paragraph the Eurodollar Loans made hereunder shall be deemed
to constitute Eurocurrency Liabilities as defined in Regulation D and to be
subject to the reserve requirements of Regulation D without benefit or credit of
proration, exemptions or offsets which might otherwise be available to the Bank
from time to time under Regulation D.
SECTION 2.16. INCREASED COSTS. If, after the date of this Agreement, the
adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
(i) subjects the Bank to any tax with respect to its Commitment, the
Loans, the Notes or on any amount paid or to be paid under or pursuant to this
Agreement, the Loans or the Notes (other than any tax measured by or based upon
the overall net income of the Bank);
(ii) changes the basis of taxation of payments to the Bank of any
amounts payable hereunder (other than any tax measured by or based upon the
overall net income of the Bank);
(iii) imposes, modifies or deems applicable any reserve, capital
adequacy or deposit requirements against any assets held by, deposits with or
for the account of, or loans made by, the Bank; or
(iv) imposes on the Bank any other condition affecting its Commitment,
the Loans, the Notes or this Agreement; and the result of any of the foregoing
is to increase the cost to the Bank of maintaining this Agreement or the
Commitment or making the Loans, or to reduce the amount of any payment (whether
of principal, interest or otherwise) receivable by the Bank or to require the
Bank to make any payment on or calculated by reference to the gross amount of
any sum received by it, in each case by an amount which the Bank in its sole
judgment deems material, then and in any such case:
(a) the Bank shall promptly advise the Borrower of such event,
together with the date thereof, the amount of
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such increased cost or reduction or payment and the way in which such
amount has been calculated; and
(b) the Borrower shall pay to the Bank, within ten (10) days
after the advice referred to in subsection (a) hereinabove, such an
amount or amounts as will compensate the Bank for such additional
cost, reduction or payment for so long as the same shall remain in
effect.
The determination of the Bank as to additional amounts payable pursuant to
this Section 2.16 shall be conclusive evidence of such amounts absent manifest
error.
SECTION 2.17. CAPITAL ADEQUACY. If the Bank shall have determined that
the applicability of any law, rule, regulation or guideline, or the adoption
after the date hereof of any other law, rule, regulation or guideline regarding
capital adequacy, or any change in any of the foregoing or in the interpretation
or administration of any of the foregoing by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank (or any lending office of the Bank) or the
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Bank's capital or on the capital of the Bank's holding company, if any,
as a consequence of its obligations hereunder to a level below that which the
Bank or the Bank's holding company could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies and the
policies of the Bank's holding company with respect to capital adequacy) by an
amount deemed by the Bank to be material, then from time to time the Borrower
shall pay to the Bank such additional amount or amounts as will compensate the
Bank or the Bank's holding company for any such reduction suffered.
SECTION 2.18. CHANGE IN LEGALITY. (a) Notwithstanding anything to the
contrary contained elsewhere in this Agreement, if any change after the date
hereof in law, rule, regulation, guideline or order, or in the interpretation
thereof by any governmental authority charged with the administration thereof,
shall make it unlawful for the Bank to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby with respect to a
Eurodollar Loan, then, by written notice to the Borrower, the Bank may:
(i) declare that Eurodollar Loans will not thereafter be made
hereunder, whereupon the Borrower shall be prohibited from requesting such
Eurodollar Loans hereunder unless such declaration is subsequently
withdrawn; and
(ii) require that, subject to the provisions of Section 2.14, all
outstanding Eurodollar Loans made by it be converted to an Alternate Base
Rate Loan, whereupon all of such
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Eurodollar Loans shall be automatically converted to an Alternate Base Rate
Loan as of the effective date of such notice as provided in paragraph (b)
below.
(b) For purposes of this Section 2.18, a notice to the Borrower by the
Bank pursuant to paragraph (a) above shall be effective, for the purposes of
paragraph (a) above, if lawful, and if any Eurodollar Loans shall then be
outstanding, on the last day of the then current Interest Period; otherwise,
such notice shall be effective on the date of receipt by the Borrower.
SECTION 2.19. INDEMNITY. The Borrower will indemnify the Bank against any
loss or expense which the Bank may sustain or incur as a consequence of any
default in payment or prepayment of the principal amount of any Loan or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, by notice of prepayment or otherwise), or the occurrence of any
Event of Default, including but not limited to any loss or expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
affect or maintain such Loan or any part thereof. When claiming under this
Section 2.19, the Bank shall provide to the Borrower a statement signed by an
officer of the Bank, explaining the amount of any such loss or expense
(including the calculation of such amount), which statement shall, in the
absence of manifest error, be conclusive with respect to the parties hereto.
SECTION 2.20 CHANGE IN LIBOR; AVAILABILITY OF RATES. In the event, and on
each occasion, that, on the day the interest rate for any Eurodollar loan is to
be determined, the Bank shall have determined (which determination, absent
manifest error, shall be conclusive and binding upon the Borrower) that dollar
deposits in the amount of the principal amount of the requested Eurodollar Loan
are not generally available in the London Interbank Market, or that the rate at
which such dollar deposits are being offered will not adequately and fairly
reflect the cost to the Bank of making or maintaining the principal amount of
such Eurodollar Loan during such Interest Period, such Eurodollar Loan shall be
unavailable. The Bank shall, as soon as practicable thereafter, give written,
telex or telephonic notice of such determination of unavailability to the
Borrower. Any request by the Borrower for an unavailable Eurodollar Loan shall
be deemed to have been a request for an Alternate Base Rate Loan. After such
notice shall have been given and until the Bank shall have notified the Borrower
that the circumstances giving rise to such notice no longer exist, each
subsequent request for an unavailable Eurodollar Loan shall be deemed to be a
request for an Alternate Base Rate Loan.
SECTION 2.21. AUTHORIZATION TO DEBIT BORROWER'S ACCOUNT. The Bank is
hereby authorized to debit the Borrower's account maintained with the Bank for
(i) all scheduled payments of principal and/or interest under the Notes, and
(ii) the commitment fee and all other amounts due hereunder; all such debits to
be made on the days such payments are due in accordance with the terms hereof.
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SECTION 2.22. LATE CHARGES, DEFAULT INTEREST. (a) If the Borrower shall
default in the payment of any principal installment of or interest on any Loan
or any other amount becoming due hereunder, the Borrower shall pay interest, to
the extent permitted by law, on such defaulted amount up to the date of actual
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to two
(2%) percent in excess of the interest rate otherwise in effect with respect to
the type of Loan in connection with which the required payments have not been
made.
(b) Upon the occurrence and during the continuation of an Event of
Default, the Borrower shall pay interest on all amounts owing under the Notes
and this Agreement (after as well as before judgment) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to two (2%) percent in excess of the interest rate otherwise in
effect hereunder.
SECTION 2.23. PAYMENT. All payments by the Borrower hereunder or under
the Notes shall be made in Dollars in immediately available funds at the office
of the Bank by 12:00 noon, New York City time on the date on which such payment
shall be due. Interest on the Notes shall accrue from and including the date of
each Loan to but excluding the date on which such Loan is paid in full or
refinanced with a Loan of a different type.
SECTION 2.24. INTEREST ADJUSTMENTS. (a) If the provisions of this
Agreement or the Notes would at any time otherwise require payment by the
Borrower to the Bank of any amount of interest in excess of the maximum amount
then permitted by applicable law the interest payments shall be reduced to the
extent necessary so that the Bank shall not receive interest in excess of such
maximum amount. To the extent that, pursuant to the foregoing sentence, the
Bank shall receive interest payments hereunder or under the Notes in an amount
less than the amount otherwise provided, such deficit (hereinafter called the
"Interest Deficit") will cumulate and will be carried forward (without interest)
until the termination of this Agreement. Interest otherwise payable to the Bank
hereunder and under the Notes for any subsequent period shall be increased by
such maximum amount of the Interest Deficit that may be so added without causing
the Bank to receive interest in excess of the maximum amount then permitted by
applicable law.
(b) The amount of the Interest Deficit shall be treated as a prepayment
penalty and paid in full at the time of any optional prepayment by the Borrower
to the Bank of all or any part of the Converted Term Loan. The amount of the
Interest Deficit relating to the Notes at the time of any complete payment of
the Notes at that time outstanding (other than an optional prepayment thereof)
shall be cancelled and not paid.
SECTION 2.25. PARTICIPATIONS, ETC. The Bank shall have the right at any
time, with or without notice to the Borrower, to sell,
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assign, transfer or negotiate all or any part of the Revolving Credit Note or
the Converted Term Loan Note or the Commitment or grant participations therein
to one or more banks (foreign or domestic, including an affiliate of the Bank),
insurance companies or other financial institutions, pension funds or mutual
funds. The Borrower and the Guarantors agree and consent to the Bank providing
financial and other information regarding their business and operations to
prospective purchasers or participants and further agree that to the extent that
the Bank should sell, assign, transfer or negotiate all or any part of the Notes
or the Commitment, the Bank shall be forever released and discharged from its
obligations under the Notes, the Commitment and this Agreement to the extent
same is sold, assigned, transferred or negotiated. Nothing herein shall be read
or construed as prohibiting or otherwise limiting the ability or right of the
Bank to pledge any Note to a Federal Reserve Bank.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. CONDITIONS PRECEDENT TO THE MAKING OF THE INITIAL REVOLVING
CREDIT LOAN. The obligation of the Bank to make the initial Revolving Credit
Loan contemplated by this Agreement is subject to the condition precedent that
the Bank shall have received from the Borrower and the Guarantors the following,
in form and substance satisfactory to the Bank and its counsel:
(a) The Revolving Credit Note duly executed and payable to the order of
the Bank.
(b) Certified (as of the date of this Agreement) copies of the resolutions
of the Board of Directors of the Borrower authorizing the Loans and authorizing
and approving this Agreement and the other Loan Documents and the execution,
delivery and performance thereof and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement and the other Loan Documents.
(c) Certified (as of the date of this Agreement) copies of the resolutions
of the Boards of Directors and the shareholders of each of the Guarantors,
authorizing and approving this Agreement, their Guaranties and any other Loan
Document applicable to the Guarantors, and the execution, delivery and
performance thereof and certified copies of all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Agreement, their Guaranties and the other Loan Documents.
(d) A certificate of the Secretary or an Assistant Secretary (attested to
by another officer) of the Borrower certifying: (i) the names and true
signatures of the officer or officers of the Borrower authorized to sign this
Agreement, the Revolving Credit Note, the Converted Term Loan Note and the other
Loan Documents to be delivered hereunder on behalf of the Borrower; and (ii) a
copy of the Borrower's by-laws as complete and correct on the date of this
Agreement.
(e) A Certificate of the Secretary or an Assistant Secretary (attested to
by another officer) of each of the Guarantors certifying (i) the names and true
signatures of the officer or officers of the Guarantors authorized to sign this
Agreement, their Guaranties and any other Loan Documents to be delivered
hereunder on behalf of the Guarantors; (ii) a copy of each of the Guarantors'
by-laws as complete and correct on the date of this Agreement; and (iii) the
stock ownership of each Guarantor.
(f) Copies of the certificate of incorporation and all amendments thereto
of each of the Borrower and the Guarantors certified in each case by the
Secretary of State (or equivalent
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officer) of the state of incorporation of each of the Borrower and the
Guarantors and a certificate of existence and good standing with respect to each
of the Borrower and the Guarantors from the Secretary of State (or equivalent
officer) of the state of incorporation of each of the Borrower and the
Guarantors and from the Secretary of State (or equivalent officer) of any state
in which the Borrower or the Guarantors are authorized to do business.
(g) An opinion of Karp and Sommers, counsel for the Borrower and the
Guarantors as to certain matters referred to in Article IV hereof and as to such
other matters as the Bank or its counsel may reasonably request.
(h) From each of the Guarantors, an executed Guaranty.
(i) From the Borrower and each of the Guarantors, an executed Security
Agreement giving to the Bank a first priority security interest in all present
and future accounts, contract rights, chattel paper, general intangibles,
instruments and documents of the Borrower and the Guarantors, all whether now
owned or hereafter acquired, and in all machinery and equipment acquired by the
Borrower and the Guarantors after the date of this Agreement (collectively the
"Collateral").
(j) From the Borrower and each of the Guarantors, UCC-1 filings perfecting
the Bank's security interests in the Collateral.
(k) A property damage insurance policy for the Collateral in the amount of
the greater of (1) the replacement value of the Collateral or (2) the principal
amount outstanding under the Loans, naming the Bank as loss payee with an
insurance company acceptable to the Bank. The policy shall provide for thirty
(30) days notice to the Bank of cancellation or change.
(l) The last audit performed on the Borrower and/or the Guarantors by the
New York State Department of Environmental Conservation or any and all other
federal, state or local regulatory authorities, the review of which shall be
satisfactory to the Bank and its counsel in all respects, with such additional
accreditation and regulatory documents as may be required by the Bank.
(m) An accounts receivable aging schedule (by account) of the Borrower and
the Guarantors, dated not more than thirty (30) days prior to the date of this
Agreement, such schedule to be satisfactory to the Bank in all respects.
(n) Copies of all shareholder agreements, management contracts, employment
agreements and similar agreements between or among the Borrower, any of the
Guarantors and Robert Rubin and/or Joseph Wisneski the review of which shall be
satisfactory to the Bank in all respects.
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(o) The management prepared consolidated and consolidating financial
statements of the Borrower and the Guarantors for the nine (9) month period
ended October 31, 1995, prepared in accordance with GAAP, the review of which
shall be satisfactory to the Bank in all respects.
(p) All material loan or credit agreements to which the Borrower or any
Guarantor is a party, the review of which shall be satisfactory to the Bank in
all respects.
(q) Insurance policies or binders related thereto for the Borrower and
Guarantors evidencing professional liability, general liability and umbrella
liability coverage, such policies and coverages to be satisfactory to the Bank
in all respects.
(r) All employee benefit plans of the Borrower and the Guarantors, the
review of which shall be satisfactory to the Bank in all respects.
(s) A schedule of all lease agreements in which the Borrower or any of the
Guarantors are the lessees, which schedule shall include the name of the lessor,
the name of the lessee, the term of the lease, the annual lease expenditure, the
expiration of the lease and whether such lease is an operating or capital lease,
the review of such schedule to be satisfactory to the Bank in all respects.
(t) A schedule of all contracts entered into by the Borrower or any of the
Guarantors with the City of Long Beach, New York, the review of which shall be
satisfactory to the Bank in all respects.
(u) A copy of the Agreement and Plan of Merger among the Borrower, ENSA
Acquisition Corp. and Environmental Services of America, Inc., and all other
documents and agreements relating to the ENSA Acquisition, the review of which
shall be satisfactory to the Bank in all respects.
(v) Evidence of full repayment and cancellation of any other credit
facilities and/or indebtedness to other lenders and evidence of receipt of UCC-3
financing statements to terminate any such lender's security interest in the
assets of the Borrower or the Guarantors, or an assignment of such security
interests to the Bank, as the Bank may request in its sole and absolute
discretion.
(w) From the Borrower, copies of the Phase I and Phase II Environmental
Audits on the Long Beach Property.
(x) The Bank and its counsel shall have completed its diligence on certain
litigation involving principals of the Borrower, which shall be satisfactory to
the Bank in all respects.
(y) The following statements shall be true and the Bank shall have
received a certificate signed by the President or Chief
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Financial Officer of the Borrower and each Guarantor dated the date hereof,
stating:
(i) That the representations and warranties contained in Article IV
of this Agreement and in the Loan Documents are true and correct on and as of
such date;
(ii) That no Default, Event of Default or Material Adverse Change in
the Borrower or any Guarantor has occurred and is continuing, or would result
from the making of the initial Revolving Credit Loan; and
(iii) The purpose for which the proceeds of the requested Loan
will be made, with supporting documentation satisfactory to the Bank in all
respects.
(z) All schedules, documents, certificates and other information provided
to the Bank pursuant to or in connection with this Agreement shall be
satisfactory to the Bank and its counsel in all respects.
(aa) All legal matters incident to this Agreement and the Loan
transactions contemplated hereby shall be satisfactory to Cullen and Dykman,
counsel to the Bank.
(bb) Such other approvals, opinions, documents or due diligence checkings
as the Bank or its counsel may reasonably request, the review of which shall be
satisfactory to the Bank in all respects.
(cc) All fees, expenses and other costs required to be paid by the
Borrower in connection with this Agreement shall have been paid.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOANS. The
obligations of the Bank to make each Revolving Credit Loan (including the
initial Revolving Credit Loan) shall be subject to the further condition
precedent that on the date of such Revolving Credit Loan:
(a) The following statements shall be true and the Bank shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower and each Corporate Guarantor dated the date of such Revolving
Credit Loan, stating:
(i) That the representations and warranties contained in Article IV
of this Agreement and in the Loan Documents are true and correct on and as of
such date as though made on and as of such date; and
(ii) That no Default, Event of Default or Material Adverse Change in
the Borrower or any Guarantor has occurred and is continuing, or would result
from such Revolving Credit Loan; and
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(iii) The purpose for which the proceeds of the requested Loan
will be made, with supporting documentation satisfactory to the Bank in all
respects.
(b) The Bank shall have received such other approvals, opinions or
documents as the Bank may reasonably request.
SECTION 3.03. CONDITIONS PRECEDENT TO THE CONVERTED TERM LOAN. The
obligation of the Bank to make the Converted Term Loan shall be subject to the
condition precedent that the Bank shall have received on or before the
Conversion Date all of the documents by Sections 3.01 and 3.02 and each of the
following, in form and substance satisfactory to the Bank and its counsel:
(a) The Converted Term Loan Note duly executed by the Borrower.
(b) The following statements shall be true and the Bank shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower and each Guarantor dated the Conversion Date stating that:
(i) The representations and warranties contained in Article IV of
this Agreement and in the Loan Documents are true and correct on and as of the
Conversion Date as though made on and as of such date; and
(ii) No Default, Event of Default or Material Adverse Change in the
Borrower or any Guarantor has occurred and is continuing, or would result from
the making of the Converted Term Loan.
(c) ADDITIONAL DOCUMENTATION. The Bank shall have received such other
approvals, opinions, or documents as the Bank or its counsel may reasonably
request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES. On the date hereof, on each
date that the Borrower requests a Revolving Credit Loan and on the Conversion
Date, the Borrower and each of the Guarantors represent and warrant as follows:
(a) On the date hereof, the only Subsidiaries of the Borrower or a
Guarantor are those set forth on Schedule 4.01(4) annexed hereto, which Schedule
accurately sets forth with respect to each such Subsidiary, its name and
address, any other addresses at which it conducts business, its state of
incorporation and each other jurisdiction in which it is qualified to do
business and the identity and share holdings of its stockholders. Except as set
forth on Schedule 4.01(a), all of the issued and outstanding shares of each
Subsidiary which are owned by the Borrower or a Guarantor are owned by the
Borrower or such Guarantor free and clear of any mortgage, pledge, lien or
encumbrance. Except as set forth on Schedule 4.01(a), there are not outstanding
any warrants, options, contracts or commitments of any kind entitling any Person
to purchase or otherwise acquire any shares of common or capital stock or other
equity interest of the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor, nor are there outstanding any securities which are convertible
into or exchangeable for any shares of the common or capital stock of the
Borrower, any Guarantor or any Subsidiary of the Borrower or a Guarantor.
(b) The Borrower and each Guarantor are each a corporation duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and each has the corporate power to
own its assets and to transact the business in which it is presently engaged and
is duly qualified and is in good standing in all other jurisdictions where the
character or nature of its business requires such qualification.
(c) The execution, delivery and performance by the Borrower and each
Guarantor of the Loan Documents to which they are a party are within the
Borrower's and the Guarantors' corporate power and have been duly authorized by
all necessary corporate action and do not and will not (i) require any consent
or approval of the stockholders of the Borrower or Guarantors; (ii) do not
contravene the Borrower's or any of the Guarantors' certificates of
incorporation, charters or by-laws; (iii) violate any provision of or any law,
rule, regulation, contractual restriction, order, writ, judgment, injunction, or
decree, determination or award binding on or affecting the Borrower or any
Guarantor; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement, or any other agreement, lease or
instrument to which the Borrower or any Guarantor is a party or by which it or
its properties may be bound or affected; and (v) result in, or require the
creation or imposition of any Lien (other than the Lien of the
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Loan Documents) upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower or any Guarantor.
(d) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Borrower or any Guarantor of any
Loan Document to which it is a party, except authorizations, approvals, actions,
notices or filings which have been obtained, taken or made, as the case may be.
(e) The Loan Documents when delivered hereunder will have been duly
executed and delivered on behalf of the Borrower and each Guarantor, as the case
nay be, and will be legal, valid and binding obligations of the Borrower and
each Guarantor, as the case may be, enforceable against the Borrower or such
Guarantor in accordance with their respective terms.
(f) The consolidated financial statements of the Borrower and its
Consolidated Subsidiaries for the fiscal year ended January 31, 1995, and for
the three (3) quarters ended October 31, 1995, copies of which have been
furnished to the Bank, fairly present the financial condition of the Borrower
(including, without limitation, all contingent liabilities) and its Consolidated
Subsidiaries as at such dates and the results of operations of the Borrower and
its Consolidated Subsidiaries for the periods ended on such dates, all in
accordance with GAAP, and since January 31, 1995 there has been (i) no material
increase in the liabilities (including contingent liabilities) of the Borrower
and its Consolidated Subsidiaries and (ii) no Material Adverse Change in the
Borrower and its Consolidated Subsidiaries. The Borrower and its Consolidated
Affiliates did not incur Consolidated Capital Expenditures in excess of
$1,606,000.00 during the fiscal year ended January 31, 1996.
(g) Except as disclosed in Schedule 4.01(g), there is no pending or
threatened action; proceeding or investigation affecting the Borrower, any
Guarantor or any Subsidiary of the Borrower or a Guarantor, before any court,
governmental agency or arbitrator, which may either in one case or in the
aggregate, result in a Material Adverse Change in the Borrower, any Guarantor or
any such Subsidiary.
(h) The Borrower, each Guarantor and each Subsidiary of the Borrower or a
Guarantor have filed all federal, state and local tax returns required to be
filed and have paid all taxes, assessments and governmental charges and levies
thereon to be due, including interest and penalties.
(i) The Borrower, each Guarantor and each Subsidiary of the Borrower or
any Guarantor possess all licenses, permits, franchises, patents, copyrights,
trademarks and trade names, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
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conducted, and neither the Borrower, any Guarantor nor any such Subsidiary are
in violation of any similar rights of others.
(j) Neither the Borrower nor any Guarantor is a party to any indenture,
loan or credit agreement or any other agreement, lease or instrument or subject
to any charter or corporate restriction which could result in a Material Adverse
Change in the Borrower or any Guarantor.
(k) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation G, T, U or X), and no proceeds of any Loan will be used to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or in any other way which will cause the
Borrower to violate the provisions of Regulations G, T, U or X.
(l) No proceeds of any Loan will be used to acquire any security in any
transaction which is subject to Sections 13 or 14 of the Securities Exchange Act
of 1934.
(m) The Borrower, each Guarantor and each Subsidiary of the Borrower or a
Guarantor are in all material respects in compliance with all federal and state
laws and regulations in all jurisdictions where the failure to comply with such
laws or regulations could result in a Material Adverse Change in the Borrower,
any of the Guarantors or any such Subsidiary.
(n) The Borrower, each Guarantor, each Subsidiary of the Borrower or a
Guarantor and each ERISA Affiliate are in compliance in all material respects
with all Applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed nor has any Plan been
terminated no circumstances exist which constitute grounds under Section 4042 of
ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower, any Guarantor, any Subsidiary of the Borrower
or a Guarantor, nor any ERISA Affiliate has completely or partially withdrawn
under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the Borrower,
each Guarantor, each Subsidiary of the Borrower or a Guarantor and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans and the present fair market value of all Plan assets
exceeds the present value of all vested benefits under each Plan, as determined
on the most recent valuation date of the Plan in accordance with the provisions
of ERISA for calculating the potential liability of the Borrower, any Guarantor,
any such Subsidiary or any ERISA Affiliate to PBGC or the Plan under Title IV of
ERISA; and neither the Borrower, any Guarantor, any such Subsidiary nor any
ERISA Affiliate has incurred any liability to the PBGC under ERISA.
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(o) The Borrower, each Guarantor and each Subsidiary of the Borrower or a
Guarantor are in compliance with all federal, state or local laws, ordinances,
rules, regulations or policies governing Hazardous Materials and neither the
Borrower, any Guarantor nor any such Subsidiary has used Hazardous Materials on,
from, or affecting any property now owned or occupied or hereafter owned or
occupied by the Borrower, any Guarantor or any such Subsidiary in any manner
which violates federal, state or local laws, ordinances, rules, regulations or
policies governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials, and that to
the best of the Borrower's, Guarantors' and such Subsidiaries' knowledge, no
prior owner of any such property or any tenant, subtenant, prior tenant or prior
subtenant have used Hazardous Materials on, from or affecting such property in
any manner which violates federal, state or local laws, ordinances, rules,
regulations, or policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials.
(p) The proceeds of the Revolving Credit Loans and the Converted Term
Loan shall be used exclusively for the purposes set forth in Section 2.10
hereof.
(q) The properties and assets of the Borrower and the Guarantors are not
subject to any Lien other than those described in Section 5.02(a) hereof.
(r) Neither the business nor the properties of the Borrower, any Guarantor
or any Subsidiary of the Borrower or a Guarantor are affected by any fire,
explosion, accident, strike, hail, earthquake, embargo, act of God or of the
public enemy, or other casualty (whether or not covered by insurance), which
could result in a Material Adverse Change in the Borrower, any Guarantor or any
such Subsidiary.
(s) Except for Liens described in Section 5. 02(a)(ix), the Lien on the
Collateral created by the Security Agreements constitute valid first priority
perfected security interests in favor of the Bank.
(t) The liability of the Guarantors (other than C&J Enterprises, Inc. and
Long Beach Recycling and Recovery Corp.) as a result of the execution of their
respective Guaranties and the execution of this Agreement shall not cause the
liabilities (including contingent liabilities) of each of the Guarantors (other
than C&J Enterprises, Inc. and Long Beach Recycling and Recovery Corp.) to
exceed the fair saleable value of their respective assets.
(u) The Guarantors acknowledge they have derived or expect to derive a
financial or other advantage from the Loans obtained by the Borrower from the
Bank.
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(v) Schedule 4.01(v) is a complete and correct list of all credit
agreements, indentures, purchase agreements, guaranties, Capital Leases, and
other investments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements for
the issuance of letters of credit or for acceptance financing) in respect of
which the Borrower or any Guarantor are in any manner directly or contingently
obligated, and the maximum principal or face amounts of the credit in question,
outstanding or to be outstanding, are correctly stated, and all Liens of any
nature given or agreed to be given as security therefor are correctly described
or indicated in such Schedule.
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ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any amount shall remain
outstanding under the Revolving Credit Note or the Converted Term Loan Note, or
so long as the Commitment shall remain in effect, the Borrower and the
Guarantors will, unless the Bank shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Subsidiary of the
Borrower or a Guarantor to comply, in all material respects with all applicable
laws, rules, regulations and orders, where the failure to so comply could result
in a Material Adverse Change in the Borrower, a Guarantor or any such
Subsidiary.
(b) REPORTING REQUIREMENTS. Furnish to the Bank: (i) ANNUAL FINANCIAL
STATEMENTS. (1) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the audited
consolidated and consolidating financial statements of the Borrower and its
Consolidated Subsidiaries for such year including balance sheets with related
statements of income and retained earnings and statements of cash flows, all in
reasonable detail and setting forth in comparative form the figures for, the
previous fiscal year, together with an unqualified opinion, prepared by
independent certified public accountants selected by the Borrower and
satisfactory to the Bank, all such financial statements to be prepared in
accordance with GAAP, and (2) As soon as available and in any event within
ninety (90) days after the end of each fiscal year of each Guarantor, a copy of
the financial statements of each Guarantor for such year, including balance
sheets with related statements of income and retained earnings and statements of
cash flows, all in reasonable detail and setting forth in comparative form the
figures for the previous fiscal year, prepared on a review basis by independent
certified public accountants selected by the Guarantors and satisfactory to the
Bank, all such financial statements to be prepared in accordance with GAAP.
(ii) QUARTERLY FINANCIAL STATEMENTS. (1) As soon as available and in any
event within forty five (45) days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, a copy of the consolidated
and consolidating financial statements of the Borrower and its Consolidated
Subsidiaries for such quarter, including a balance sheet with related statements
of income and retained earnings and a statement of cash flows, all in reasonable
detail and setting forth in comparative form the figures for the comparable
quarter for the previous fiscal year, prepared by the management of the
Borrower, and certified by its Chief Financial Officer, all such financial
statements to be prepared in accordance with GAAP; and (2) As soon as available
and in any event within forty-five (45) days after the end of each of the first
three fiscal quarters of each fiscal year of each Guarantor, a copy
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of the financial statements of each Guarantor for such quarter, including a
balance sheet with related statements of income and retained earnings and a
statement of cash flows, all in reasonable detail and setting forth in
comparative form the figures for the comparable quarter for the previous fiscal
year, prepared by management of the Borrower, and certified by its Chief
Financial Officer, all such financial statements to be prepared in accordance
with GAAP.
(iii) MANAGEMENT LETTERS. Promptly upon receipt thereof, copies of any
reports submitted to the Borrower or any Guarantor by independent certified
public accountants in connection with the examination of the financial
statements of the Borrower and each Guarantor made by such accountants;
(iv) CERTIFICATE OF NO DEFAULT. Simultaneously with the delivery of the
financial statements referred to in Section 5.01(b)(i) and (ii), a certificate
of the President or the Chief Financial Officer of the Borrower or Guarantor, as
the case may be, (1) certifying that no Default or Event of Default has occurred
and is continuing, or if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which is
proposed to be taken with respect thereto; and (2) with computations
demonstrating compliance with the covenants contained in Section 5.03.
(v) ACCOUNTANTS' REPORT. Simultaneously with the delivery of the annual
financial statements referred to in Section 5.01 (b)(i), a certificate of the
independent certified public accountants who audited such statements to the
effect that, in making the examination necessary for the audit or review of such
statements, they have obtained no knowledge of any condition or event which
constitutes a Default or Event of Default, or if such accountants shall have
obtained knowledge of any such condition or event, specify in such certificate
each such condition or event of which they have knowledge and the nature and
status thereof.
(vi) ACCOUNTS RECEIVABLE AGING SCHEDULE. As soon as available and in any
event within fifteen (15) days after the end of each month, an accounts
receivable aging schedule.
(vii) NOTICE OF LITIGATION. Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency, or instrumentality, domestic or
foreign, affecting the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor.
(viii) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as possible and in
any event within five (5) days after the occurrence of each Default or Event of
Default, a written notice setting forth the details of such Default or Event
of Default and the action which is proposed to be taken by the Borrower with
respect thereto.
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(ix) ERISA REPORTS. Promptly after the filing or receiving thereof, copies
of all reports, including annual reports, and notices which the Borrower, any
Guarantor or any Subsidiary of the Borrower or a Guarantor, files with or
receives from the PBGC, the Internal Revenue Service or the U.S. Department of
Labor under ERISA; and as soon as possible after the Borrower, any Guarantor or
any such Subsidiary knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that the PBGC or
the Borrower, any Guarantor or any such Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower or such Guarantor will deliver to the Bank a certificate of the
President or the Chief Financial Officer of the Borrower or such Guarantor
setting forth details as to such Reportable Event or Prohibited Transaction or
Plan termination and the action the Borrower or such Guarantor proposes to take
with respect thereto;
(x) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof,
copies of any statement or report furnished to any other party pursuant to the
terms of any indenture, loan, or credit or similar agreement and not otherwise
required to be furnished to the Bank pursuant to any other clause of this
Section 5.01(b).
(xi) PROXY STATEMENTS, ETC. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements and reports which the
Borrower or any Guarantor sends to its stockholders, and copies of all regular,
periodic, and special reports, and all registration statements which the
Borrower or any Guarantor files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national securities exchange.
(xii) NOTICE OF AFFILIATES. Promptly after any Person becomes an Affiliate
of the Borrower or a Guarantor, notice to the Bank of such Affiliate.
(xiii) GENERAL INFORMATION. Such other information respecting the condition
or operations, financial or otherwise, of the Borrower, any Guarantor or any
Subsidiary of the Borrower or a Guarantor as the Bank may from time to time
reasonably request.
(c) TAXES. Pay and discharge, and cause its Subsidiaries to pay and
discharge, all taxes, assessments and governmental charges upon it or them, its
or their income and its or their properties prior to the dates on which
penalties are attached thereto, unless and only to the extent that (i) such
taxes shall be contested in good faith and by appropriate proceedings by the
Borrower, any Guarantor or any such Subsidiary, as the case may be; (ii) there
be adequate reserves therefor in accordance with GAAP entered on the books of
the Borrower, any Guarantor or any such Subsidiary; and (iii) no enforcement
proceedings against the Borrower, any Guarantor or any such Subsidiary have been
commenced.
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(d) CORPORATE EXISTENCE. Preserve and maintain, and cause its
Subsidiaries to preserve and maintain, their corporate existence and good
standing in the jurisdiction of their incorporation and the rights, privileges
and franchises of the Borrower, each Guarantor and each such Subsidiary in each
case where failure to so preserve or maintain could result in a Material Adverse
Change in the Borrower, such Guarantor or such Subsidiary.
(e) MAINTENANCE OF PROPERTIES AND INSURANCE. (i) Keep, and cause any
Subsidiaries to keep, the respective properties and assets (tangible or
intangible) that are useful and necessary in its business, in good working order
and condition, reasonable wear and tear excepted; (ii) maintain, and cause any
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
properties doing business in the same general areas in which the Borrower, any
Guarantors and any such Subsidiaries operate; and (iii) cause the Bank to be
named as loss payee on any such insurance policies.
(f) BOOKS OF RECORD AND ACCOUNT. Keep, and cause any Subsidiaries to
keep, adequate records and proper books of record and account in which complete
entries will be made in a manner to enable the preparation of financial
statements in accordance with GAAP, reflecting all financial transactions of the
Borrower, the Guarantors, and any such Subsidiaries.
(g) VISITATION. At any reasonable time, and from time to time, permit the
Bank or any agents or representatives thereof, to examine and make copies of and
abstracts from the books and records of, and visit the properties of, the
Borrower or any Guarantor and to discuss the affairs, finances and accounts of
the Borrower or any Guarantor with any of the respective officers or directors
of the Borrower or such Guarantor or the Borrower's or such Guarantor's
independent accountants.
(h) PERFORMANCE AND COMPLIANCE WITH OTHER AGREEMENTS. Perform and comply,
and cause any Subsidiaries to perform and comply, with each of the provisions of
each and every agreement the failure to perform or comply with which could
result in a Material Adverse Change in the Borrower, any Guarantor or any
Subsidiary.
(i) CONTINUED PERFECTION OF LIENS AND SECURITY INTEREST. Record or file
or rerecord or refile the Loan Documents or a financing statement or any other
filing or recording or refiling or rerecording in each and every office where
and when necessary to preserve and perfect the security interests of the Loan
Documents.
(j) PENSION FUNDING. Comply with the following and cause each ERISA
Affiliate of the Borrower, any Guarantor or any Subsidiary of the Borrower or a
Guarantor to comply with the following:
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(i) engage solely in transactions which would not subject any of such
entities to either a civil penalty assessed pursuant to Section 502 (i) of
ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in
either case in an amount in excess of $25,000.00;
(ii) make full payment when due of all amounts which, under the
provisions of any Plan or ERISA, the Borrower, any Guarantor, any such
Subsidiary or any ERISA Affiliate of any of same is required to pay as
contributions thereto;
(iii) all applicable provisions of the Internal Revenue Code and the
regulations promulgated thereunder, including but not limited to Section
412 thereof, and all applicable rules, regulations and interpretations of
the Accounting Principles Board and the Financial Accounting Standards
Board;
(iv) not fail to make any payments in an aggregate amount greater than
$25,000.00 to any Multiemployer Plan that the Borrower, any Guarantor, any
such Subsidiary or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining
thereto; or
(v) not take any action regarding any Plan which could result in the
occurrence of a Prohibited Transaction.
(k) LICENSES. Maintain at all times, and cause each Subsidiary to
maintain at all times, all licenses or permits necessary to the conduct of its
business or as may be required by any governmental agency or instrumentality
thereof.
(l) NEW AFFILIATES. Cause any Affiliate of the Borrower or a Guarantor
formed after the date of this Agreement to become a Guarantor of all obligations
of the Borrower to the Bank, whether incurred under this Agreement or otherwise
and to secure its obligations as a Guarantor by granting to the Bank a first
priority security interest in all personal property of such Affiliate.
(m) CITY OF LONG BEACH CONSENTS. Promptly, but in no event later than six
(6) months from the date of this Agreement, deliver to the Bank copies of the
executed consent(s) of the City of Long Beach (the "City") to the assignment by
Long Beach Recycling and Recovery Corp. ("LBRR") to Environmental Waste
Incineration, Inc. of (i) the Lease Agreement dated as of November 16, 1984
between the City and LBRR, (ii) the Lease Agreement dated as of May 13, 1992
between the City and LBRR, and (iii) the Solid Waste Disposal Agreement between
the City and LBRR.
SECTION 5.02. NEGATIVE COVENANTS. So long as any amount shall remain
outstanding under the Revolving Credit Note or the Converted Term Loan Note, or
so long as the Commitment shall remain in effect, neither the Borrower nor the
Guarantors will, without the written consent of the Bank:
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(a) LIENS, ETC. Create, incur, assume or suffer to exist, any Lien, upon
or with respect to any of its properties, now owned or hereafter acquired,
except:
(i) Liens in favor of the Bank;
(ii) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(iii) Liens imposed by law, such as mechanics', materialmens',
landlords, warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established;
(iv) Liens under workers', compensation, unemployment insurance,
Social Security, or similar legislation;
(v) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(vi) Liens described in Schedule 5.02(a), provided that no such Liens
shall be renewed, extended or refinanced;
(vii) Judgment and other similar Liens arising in connection with
court proceedings (other than those described in Section 6.01(f)), provided
that, except for C&J Enterprises, Inc. and Long Beach Recycling and Recovery
Corp., the execution or other enforcement of such Liens is effectively stayed
and the claims secured thereby are being actively contested in good faith and by
appropriate proceedings;
(viii) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
Borrower's or a Guarantor's occupation, use and enjoyment of the property or
assets encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(ix) Purchase money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease, provided that:
(1) Any property subject to any of the foregoing is acquired by
the Borrower or any Guarantor in the ordinary course of
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its respective business and the Lien on any such property is created
contemporaneously with such acquisition;
(2) The obligation secured by any Lien so created, assumed, or
existing shall not exceed seventy-five (75%) percent of lesser of cost or fair
market value of the property acquired aa of the time of the Borrower or any
Guarantor acquiring the same;
(3) Each such Lien shall attach only to the property so acquired
and fixed improvements thereon;
(4) The Debt secured by all such Liens shall not exceed
$1,000,000.00 at any time outstanding in the aggregate; and
(5) The obligation secured by such Lien is permitted by the
provisions of Section 5.02(b) and the related expenditure is permitted by the
provisions of Section 5.03(c).
(b) DEBT. Create, incur, assume, or suffer to exist, any Debt, except:
(i) Debt of the Borrower under this Agreement or the Notes or any
other Debt of the Borrower or the Guarantors owing to the Bank;
(ii) Debt described in Schedule 5.02(b), provided that no such Debt
shall be renewed, extended or refinanced;
(iii) Subordinated Debt;
(iv) Accounts payable to trade creditors for goods or services which
are not aged more than sixty (60) days from billing date and current operating
liabilities (other than for borrowed money) which are not more than thirty (30)
days past due, in each case incurred in the ordinary course of business and paid
within the specified time, unless contested in good faith and by appropriate
Proceedings; and
(v) Debt of the Borrower or any Guarantor secured by purchase money
Liens permitted by Section 5.02(a)(ix).
(c) LEASE OBLIGATIONS. Create, incur, assume, or suffer to exist any
obligation as lessee for the rental or hire of any real or personal property,
except (i) Capital Leases permitted by Section 5.02(a), or (ii) leases existing
on the date of this Agreement and any extensions or renewals thereof and other
leases entered into after the date of this Agreement (other than Capital Leases)
which do not in the aggregate require the Borrower or any Guarantor to make
payments (including taxes, insurance, maintenance, and similar expenses which
the Borrower or any Guarantor is required to pay under the terms of any lease)
in any fiscal year of the Borrower or any Guarantor in excess of $300,000.00.
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(d) MERGER. Merge into, or consolidate with or into, or have merged into
it, any Person, except for the ENSA Acquisition; and, for the purpose of this
subsection (d), the acquisition or sale by the Borrower or any Guarantor by
lease, purchase or otherwise, of all, or substantially all, of the common stock
or the assets of any Person or of it shall be deemed a merger of such Person
with the Borrower or any Guarantor.
(e) SALE OF ASSETS, ETC. Sell, assign, transfer, lease or. otherwise
dispose of any of its assets, (including a sale lease back transaction) with or
without recourse, except for (i) inventory disposed of in the ordinary course of
business; and (ii) the sale or other disposition of assets no longer used or
useful in the conduct of its business.
(f) INVESTMENTS, ETC. Make any Investment other than Permitted
Investments.
(g) TRANSACTIONS WITH AFFILIATES. Except in the ordinary course of
business and pursuant to the reasonable requirements of the Borrower's, a
Guarantor's or a Subsidiary's business and upon fair and reasonable terms no
less affordable to the Borrower, or the Guarantor or the Subsidiary than would
be obtained in a comparable arm's length transaction with a Person not an
Affiliate, enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate.
(h) PREPAYMENT OF OUTSTANDING DEBT. Pay, in whole or in part, any
outstanding Debt (other than Debt owing to the Bank) of the Borrower or any
Guarantor, which by its terms is not then due and payable.
(i) GUARANTEES. Guaranty, or in any other way become directly or
contingently obligated for any Debt of any other Person (including any
agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; (ii) guarantees existing on the
date hereof and set forth in Schedule 5.02(i) annexed hereto; or (iii)
guaranties by the Borrower or the Guarantors of Debt of the Borrower or the
Guarantors if such Debt is permitted by the provisions of Section 5.02(b) of
this Agreement.
(j) CHANGE OF BUSINESS. Materially alter the nature of its business.
(k) FISCAL YEAR. Change the ending date of its fiscal year from January
31.
(l) LOSSES. Incur a net loss for any fiscal quarter.
(m) ACCOUNTING POLICIES. Change any accounting policies, except as
permitted by GAAP.
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(n) CHANCRE OF TAX STATUS. Change its tax reporting status as a sub-
chapter C corporation.
(o) DIVIDENDS, ETC. Declare or pay any dividends, purchase, redeem,
retire or otherwise acquire for value any of its capital stock now or hereafter
outstanding, or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of the Borrower or any Guarantor; or
allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock; or make any other distribution by reduction of capital or
otherwise in respect of any share of its capital stock.
(p) CHANGE OF CONTROL. Allow, or have occur, a Change of Control.
(q) MANAGEMENT. Fail to retain Joseph Wisneski in a reasonably active
full time capacity in the management of the Borrower.
(r) HAZARDOUS MATERIAL. The Borrower, each Guarantor and each Subsidiary
of the Borrower or a Guarantor shall not cause or permit any property owned or
occupied by the Borrower any Guarantor or any such Subsidiary to be used to
generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce or process Hazardous Materials, except in compliance with all
applicable federal, state and local laws or regulations nor shall the Borrower,
any Guarantor or any such Subsidiary cause or permit, as a result of any
intentional or unintentional act or omission on the part of the Borrower, any
Guarantor or any such Subsidiary or any tenant or subtenant, a release of
Hazardous Materials onto any property owned or occupied by the Borrower, any
Guarantor or any such Subsidiary or onto any other property. The Borrower, each
Guarantor and each such Subsidiary shall not fail to comply with all applicable
federal, state and local laws, ordinances, rules and regulations, whenever and
by whomever triggered, and shall not fail to obtain and comply with, any and all
approvals, registrations or permits required thereunder. The Borrower and the
Guarantors shall execute any documentation required by the Bank in connection
with the representations, warranties and covenants contained in this paragraph
and Section 4.01 of this Agreement.
SECTION 5.03. FINANCIAL REQUIREMENTS. So long as any amount shall remain
outstanding under the Revolving Credit Note or the Converted Term Loan Note or
so long as the Commitment shall remain in effect:
(a) MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower will
maintain at all times a Consolidated Tangible Net Worth of not less than
$12,500,000.00 from the date of this Agreement until January 30, 1997, and on
January 31, 1997 until January 30, 1998, and on each succeeding January 31 until
the next succeeding January 30, not less than $1,500,000.00 in excess of
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the Borrower's Consolidated Tangible Net Worth as of the preceding January 31.
(b) CONSOLIDATED CAPITAL EXPENDITURES. The Borrower will not make
Consolidated Capital Expenditures (i) in excess of $1,500,000.00 in the
aggregate during the fiscal year ending January 31, 1997 and (ii) in excess of
$500,000.00 in the aggregate during any fiscal year thereafter.
(c) CURRENT RATIO. The Borrower will maintain at all times a ratio
of Consolidated Current Assets to Consolidated Current Liabilities of not less
than 2.50 to 1.00.
(d) LEVERAGE RATIO. The Borrower will maintain at all times a ratio
of Consolidated Total Liabilities to Consolidated Tangible Net Worth of not
greater than 1.25 to 1.00.
(e) CONSOLIDATED DEBT SERVICE RATIO. The Borrower will maintain a
Consolidated Debt Service Ratio of (i) not less than 1.50 to 1.00 from the date
of this Agreement until January 30, 1997; (ii) not less than 1.75 to 1.00 from
January 31, 1997 until January 30, 1998; and (iii) not less than 2.00 to 1.00
from January 31, 1998 and thereafter.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of principal of,
or interest on, the Revolving Credit Note or the Converted Term Loan Note when
due or any fees or other amounts owed in connection with this Agreement; or
(b) Any representation or warranty made by the Borrower or any
Guarantor herein or in the Loan Documents or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower or any Guarantor shall fail to perform or observe
any term, covenant, or agreement contained in this Agreement in any other Loan
Document (other than the Notes) on its part to be performed or observed; or
(d) The Borrower, any Guarantor, or any Subsidiary of the Borrower or
a Guarantor shall fail to pay any Debt (excluding Debt evidenced by the
Revolving Credit Note and the Converted Term Loan Note) of the Borrower, any
Guarantor or any such Subsidiary (as the case may be), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(e) The Borrower, any Guarantor or any Subsidiary of the Borrower or
a Guarantor shall generally not pay its Debts as such Debts become due, or shall
admit in writing its inability to pay its Debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower, any Guarantor or any such Subsidiary
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment protection relief, or
composition of it or its Debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any
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substantial part of its property and if instituted against the Borrower, any
Guarantor or any such Subsidiary shall remain undismissed for a period of 30
days; or the Borrower, any Guarantor or any such Subsidiary shall take any
action to authorize any of the actions set forth above in this subsection (e);
or
(f) Any judgment or order or combination of judgments or orders for
the payment of money, in excess of $50,000.00 in the aggregate, which sum shall
not be subject to full, complete and effective insurance coverage, shall be
rendered against the Borrower, any Guarantor or any Subsidiary of the Borrower
or a Guarantor and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any period of
30 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or
(g) Any Guarantor shall fail to perform or observe any term or
provision of its Guaranty or any representation or warranty made by any
Guarantor (or any of its officers or partners) in connection with such
Guarantor's Guaranty shall prove to have been incorrect in any material respect
when made; or
(h) Any of the following events occur or exist with respect to the
Borrower any Guarantor, any Subsidiary of the Borrower or a Guarantor, or any
ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any
Reportable Event with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution of the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization insolvency, or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Bank subject the Borrower, any
Guarantor, any such Subsidiary or any ERISA Affiliate to any tax, penalty, or
other liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
combination thereof) which in the aggregate exceeds or may exceed $50,000.00; or
(i) This Agreement or any other Loan Document, at any time after its
execution and delivery and for any reason, ceases to be in full force and effect
or shall be declared to be null and void, or the validity or enforceability of
any document or instrument delivered pursuant to this Agreement shall be
contested by the Borrower, any Guarantor or any party to such document or
instrument or the Borrower, any Guarantor or any party to such document or
instrument shall deny that it has any or further liability or obligation under
any such document or instrument; or
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(j) An event of default specified in any Loan Document other than
this Agreement shall have occurred and be continuing.
SECTION 6.02. REMEDIES ON DEFAULT. Upon the occurrence and
continuance of an Event of Default the Bank may by notice to the Borrower, (i)
terminate the Commitment, (ii) declare the Revolving Credit Note, the Converted
Term Loan Note, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Commitment shall be
terminated, the Revolving Credit Note, the Converted Term Loan Note, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest. or further notice of any kind, all of
which are hereby expressly waived by the Borrower and (ii) proceed to enforce
its rights whether by suit in equity or by action at law, whether for specific
performance of any covenant or agreement contained in this Agreement or any Loan
Document, or in aid of the exercise of any power granted in either this
Agreement or any Loan Document or proceed to obtain judgment or any other relief
whatsoever appropriate to the enforcement of its rights, or proceed to enforce
any other legal or equitable right which the Bank may have by reason of the
occurrence of any Event of Default hereunder or under any Loan Document,
provided, however, upon the occurrence of an Event of Default referred to in
Section 6.01 (e), the Commitment shall be immediately terminated, the Revolving
Credit Note and the Converted Term Loan Note, all interest thereon and all other
amounts payable under this Agreement shall be immediately due and payable
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Borrower. Any amounts collected
pursuant to action taken under this Section 6.02 shall be applied to the payment
of, first, any costs incurred by the Bank in taking such action, including but
without limitation attorneys fees and expenses, second, to payment of the
accrued interest on the Revolving Credit Note and the Converted Term Loan Note,
and third, to payment of the unpaid principal of the Revolving Credit Note and
the Converted Term Loan Note.
SECTION 6.03. REMEDIES CUMULATIVE. No remedy conferred upon or
reserved to the Bank hereunder or in any Loan Document is intended to be
exclusive of any other available remedy, but each and every such remedy shall be
cumulative and in addition to every other remedy given under this Agreement or
any Loan Document or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power accruing upon any Event of Default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Bank to exercise any remedy
reserved to it in this Article VI, it shall not be necessary to give any notice,
other than such notice as may be herein expressly required in this Agreement or
in any Loan Document.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document to which the
Borrower or any Guarantor is a party, nor consent to any departure by the
Borrower or any Guarantor from any provision of any Loan Document to which it is
a party, shall in any event be effective unless the same shall be in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed, telegraphed, sent by facsimile or delivered, if to the Borrower or
any Guarantor, at the address of the Borrower or Guarantor, as the case may be,
set forth at the beginning of this Agreement and if to the Bank, at the address
of the Bank set forth at the beginning of this Agreement to the attention of ERD
Waste Corp. Account Officer, or, as to each party, at such other address as
shall be designated by such party in a written notice complying as to delivery
with the terms of this Section 7.02 to the other parties. All such notices and
communications shall be effective when mailed, telegraphed or delivered, except
that notices to the Bank shall not be effective until received by the Bank.
SECTION 7.03. NO WAIVER, REMEDIES. No failure on the part of the
Bank to exercise, and no delay in exercising, any right, power or remedy under
any Loan Document, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 7.04. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay
on demand all costs and expenses of the Bank in connection with the preparation,
execution, delivery and administration of this Agreement, the Revolving Credit
Note, the Converted Term Loan Note and any other Loan Documents, including,
without limitation, the fees and expenses of counsel for the Bank with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities under this Agreement, and all costs and expenses, if any
(including counsel fees and expenses), in connection with the enforcement of
this Agreement, the Revolving Credit Note, the Converted Term Loan Note and any
other Loan Documents. The Borrower shall at all times protect, indemnify,
defend and save harmless the Bank from and against any and all claims, actions,
suits and other legal proceedings, and liabilities, obligations, losses,
damages, penalties, judgments,
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costs, expenses or disbursements which the Bank may, at any time, sustain or
incur by reason of or in consequence of or arising out of the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. The Borrower acknowledges that it is the intention of the parties
hereto that this Agreement shall be construed and applied to protect and
indemnify the Bank against any and all risks involved in the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, all of which risks are hereby assumed by the Borrower, including,
without limitation, any and all risks of the acts or omissions, whether rightful
or wrongful, of any present or future DE JURE or DE FACTO government or
governmental authority, provided that the Borrower shall not be liable for any
portion of such liabilities obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Bank's
gross negligence or willful misconduct. The provisions of this Section 7.04
shall survive the payment of the Notes and the termination of this Agreement.
SECTION 7.05. RIGHTS OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank,
Chemical Securities, Inc. or any other affiliate of the Bank to or for the
credit or the account of the Borrower or any Guarantor against any and all of
the obligations of the Borrower or any Guarantor now or hereafter existing under
this Agreement, the Revolving Credit Note and the Converted Term Loan Note,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or the Revolving Credit Note or the Converted Term Loan Note and
although such obligations may be unmatured. The rights of the Bank under this
Section are in addition to all other rights and remedies (including, without
limitation, other rights of set-off) which the Bank may have.
SECTION 7.06. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrower, the Guarantors and the Bank
and thereafter it shall be binding upon and inure to the benefit of the
Borrower, the Guarantors and the Bank and their respective successors and
assigns, except that neither the Borrower nor any Guarantor shall have any right
to assign its rights hereunder or any interest herein without the prior written
consent of the Bank.
SECTION 7.07. FURTHER ASSURANCES. The Borrower and each Guarantor
agree at any time and from time to time at its expense, upon request of the Bank
or its counsel, to promptly execute, deliver, or obtain or cause to be executed,
delivered or obtained any and all further instruments and documents and to take
or cause to be taken all such other action the Bank may deem desirable in
obtaining the full benefits of, this Agreement or any other Loan Document.
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SECTION 7.08. SECTION HEADINGS, SEVERABILITY, ENTIRE AGREEMENT.
Section and subsection headings have been inserted herein for convenience only
and shall not be construed as part of this Agreement. Every provision of this
Agreement and each Loan Document is intended to be severable; if any term or
provision of this Agreement, any Loan Document, or any other document delivered
in connection herewith shall be invalid, illegal or unenforceable for any reason
whatsoever, the validity, legality and enforceability of the remaining
provisions hereof or thereof shall not in any way be affected or impaired
thereby. All exhibits and schedules to this Agreement shall be annexed hereto
and shall be deemed to be part of this Agreement. This Agreement and the
exhibits and schedules attached hereto embody the entire Agreement and
understanding between the Borrower, the Guarantors and the Bank and supersede
all prior agreements and understandings relating to the subject matter hereof.
SECTION 7.09. GOVERNING LAW. This Agreement, the Revolving Credit
Note and the Converted Term Loan Note and all other Loan Documents shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 7.10. WAIVER OF JURY TRIAL. The Borrower, each Guarantor and
the Bank waive all rights to trial by jury on any cause of action directly or
indirectly involving the terms, covenants or conditions of this Agreement or any
Loan Document.
SECTION 7.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
ERD WASTE CORP. C&J ENTERPRISES, INC.
By /s/ Joseph Wisneski By /s/ Joseph Wisneski
---------------------------- ----------------------------
Name: Joseph Wisneski Name: Joseph Wisneski
Title: President Title: President
ERD WASTE CORP. (INDIANA) LONG BEACH RECYCLING &
RECOVERY CORP.
By /s/ Robert M. Rubin By /s/ Joseph Wisneski
---------------------------- ----------------------------
Name: Robert M. Rubin Name: Joseph Wisneski
Title: Chairman of the Board Title: President
ABSORBENT MANUFACTURING & CHEMICAL BANK
TECHNOLOGY, INC.
By /s/ Robert M. Rubin By /s/ Robert F. Eisen, Jr.
---------------------------- ----------------------------
Name: Robert M. Rubin Name: Robert F. Eisen, Jr.
Title: Chairman of the Board Title: Vice President
ENSA ACQUISITION CORP.
By /s/ Joseph Wisneski
----------------------------
Name: Joseph Wisneski
Title: President
ENVIRONMENTAL WASTE INCINERATION,
INC.
By /s/ Robert M. Rubin
----------------------------
Name: Robert M. Rubin
Title: Chairman of the Board
ERD WASTE CORP. OF ILLINOIS
By /s/ Robert M. Rubin
----------------------------
Name: Robert M. Rubin
Title: Chairman of the Board
ERD MANAGEMENT CORP.
By /s/ Robert M. Rubin
----------------------------
Name: Robert M. Rubin
Title: Chairman of the Board
-50-
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
ERD WASTE CORP.
ENSA ACQUISITION CORP.
AND
ENVIRONMENTAL SERVICES OF AMERICA, INC.
DATED APRIL 3, 1996
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I THE OFFER
SECTION 1.1 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.2 Company Actions. . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IA THE MERGER . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1A.1 The Merger.. . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1A.2 Capital Stock of EAC.. . . . . . . . . . . . . . . . . . 9
SECTION 1A.3 Capital Stock of ENSA. . . . . . . . . . . . . . . . . . 9
SECTION 1A.4 Stock Transfer Books.. . . . . . . . . . . . . . . . . . 9
ARTICLE II COMMON STOCK CONVERSION AMOUNT;
PREFERRED STOCK CONVERSION AMOUNT;
DISSENTING SHARES; CLOSING . . . . . . . . . . . . . . . . . 10
SECTION 2.1 Common Stock Conversion Amount.. . . . . . . . . . . . . 10
SECTION 2.2 Preferred Stock Conversion Amount. . . . . . . . . . . . .10
SECTION 2.3 No Further Ownership Rights in ENSA Capital Stock. . . . 10
SECTION 2.4 Dissenting Shares. . . . . . . . . . . . . . . . . . . . .10
SECTION 2.5 Closing. . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 2.6 Actions to be Taken. . . . . . . . . . . . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ENSA. . . . . . . . . 12
SECTION 3.1 Corporate Organization . . . . . . . . . . . . . . . . . 12
SECTION 3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.3 Subsidiaries and Equity Investments. . . . . . . . . . . 13
SECTION 3.4 Capitalization . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3.5 No Violation; Consents and Approvals . . . . . . . . . . 14
SECTION 3.6 SEC Reports and Financial Statements of ENSA . . . . . . 15
SECTION 3.7 Absence of Undisclosed Liabilities . . . . . . . . . . . 15
SECTION 3.8 Accounts Receivable. . . . . . . . . . . . . . . . . . . 15
SECTION 3.9 Title to Property. . . . . . . . . . . . . . . . . . . . 16
SECTION 3.10 Intellectual Property. . . . . . . . . . . . . . . . . . 17
SECTION 3.11 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.12 Employee Matters . . . . . . . . . . . . . . . . . . . . 19
SECTION 3.13 No Material Change . . . . . . . . . . . . . . . . . . . 20
SECTION 3.14 Absence of Change or Event . . . . . . . . . . . . . . . 20
SECTION 3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . 21
--i--
<PAGE>
SECTION 3.16 Compliance With Law and Other Instruments. . . . . . . . 22
SECTION 3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3.18 Affiliate Interests. . . . . . . . . . . . . . . . . . . 26
SECTION 3.19 Customers and Suppliers. . . . . . . . . . . . . . . . . 26
SECTION 3.20 Absence of Questionable Payments . . . . . . . . . . . . 27
SECTION 3.21 Section 203 of the DGCL Not Applicable . . . . . . . . . 27
SECTION 3.22 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ERD AND EAC . . . . . . . . 27
SECTION 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.2 Corporate Authority. . . . . . . . . . . . . . . . . . . 27
SECTION 4.3 No Violation; Consents and Approvals . . . . . . . . . . 28
SECTION 4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4.5 Financing. . . . . . . . . . . . . . . . . . . . . . . . .28
SECTION 4.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V COVENANTS OF ENSA . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.1 Regular Course of Business . . . . . . . . . . . . . . . 29
SECTION 5.2 Restricted Activities and Transactions.. . . . . . . . . 29
SECTION 5.3 Stockholders' Meeting. . . . . . . . . . . . . . . . . . 31
SECTION 5.4 Proxy Statement. . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.5 Merger Without Meeting of Stockholders . . . . . . . . . .32
SECTION 5.6 Access to Information. . . . . . . . . . . . . . . . . . 32
SECTION 5.7 Additional Agreements; Best Efforts. . . . . . . . . . . 32
SECTION 5.8 No Solicitation. . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.9 Advice of Changes; SEC Filings . . . . . . . . . . . . . 33
SECTION 5.10 Actions at Request of ERD. . . . . . . . . . . . . . . . 33
SECTION 5.11 Actions at Closing.. . . . . . . . . . . . . . . . . . . 33
ARTICLE VI COVENANTS OF EAC AND ERD. . . . . . . . . . . . . . . . . . . 34
SECTION 6.1 Amendment of ERD Stock Option Plan . . . . . . . . . . . 34
SECTION 6.2 Registration of Employee Stock Options on Form S-8 . . . 34
SECTION 6.3 Employment Agreements. . . . . . . . . . . . . . . . . . 34
SECTION 6.4 Option Agreements. . . . . . . . . . . . . . . . . . . . 34
SECTION 6.5 Vote in Favor of Merger. . . . . . . . . . . . . . . . . 34
SECTION 6.6 Information in Proxy Statement.. . . . . . . . . . . . . 34
SECTION 6.7 Confidential Information . . . . . . . . . . . . . . . . 34
SECTION 6.8 Actions at Closing . . . . . . . . . . . . . . . . . . . .35
ARTICLE VII MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.1 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.2 Public Announcements.. . . . . . . . . . . . . . . . . . 35
--ii--
<PAGE>
SECTION 7.3 Board Representation . . . . . . . . . . . . . . . . . . .35
SECTION 7.4 Further Assurances.. . . . . . . . . . . . . . . . . . . 36
SECTION 7.5 Preparation of Required Filings. . . . . . . . . . . . . 36
SECTION 7.6 Representations to Remain Accurate.. . . . . . . . . . . 36
ARTICLE VIII CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.2 Certain Liabilities. . . . . . . . . . . . . . . . . . . 38
ARTICLE X POST CLOSING COVENANTS. . . . . . . . . . . . . . . . . . . . 39
Section 10.1 Deposit of Funds with Exchange Agent. . . . . . . . . . . 39
Section 10.2 Mailing of Conversion Payments. . . . . . . . . . . . . . 39
ARTICLE XI SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 39
SECTION 11.1 Survival of Representations and Warranties . . . . . . . 39
ARTICLE XII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 39
SECTION 12.1 Entire Agreement.. . . . . . . . . . . . . . . . . . . . 40
SECTION 12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 12.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 12.4 Nonwaiver. . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 12.5 Counterparts.. . . . . . . . . . . . . . . . . . . . . . 40
SECTION 12.6 Assignment; Binding Nature; No Beneficiaries.. . . . . . 41
SECTION 12.7 Headings.. . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 12.8 Governing Law; Consent to Jurisdiction . . . . . . . . . 41
SECTION 12.9 Specific Performance . . . . . . . . . . . . . . . . . . 41
SECTION 12.10 Severability . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 12.11 Construction . . . . . . . . . . . . . . . . . . . . . . 42
--iii--
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER ("Agreement")
is entered into on April 3, 1996, by and among ERD WASTE CORP., a Delaware
corporation with offices at 356 Veterans Memorial Highway, Commack, New York
11725 ("ERD"), ENSA ACQUISITION CORP., a Delaware corporation and a direct
wholly owned subsidiary of ERD with offices at 356 Veterans Highway, Commack,
New York 11725 ("EAC"), and ENVIRONMENTAL SERVICES OF AMERICA, INC., a Delaware
corporation with offices at 937 East Hazelwood Avenue, Rahway, New Jersey 07065
(together with its subsidiaries, "ENSA").
W I T N E S S E T H :
WHEREAS, ENSA is engaged in the business of identifying, managing,
treating, transporting, and disposing of, hazardous and non-hazardous wastes;
remediation of hazardous waste sites; air quality testing and monitoring
services; and providing consulting and technical support services related to the
foregoing (the "Business");
WHEREAS, the respective Boards of Directors of ENSA, ERD and EAC each
have approved the acquisition of ENSA by ERD pursuant to a tender offer (the
"Offer") by EAC for all of the outstanding shares of common stock, par value
$.02 per share, of ENSA (the "ENSA Common Stock") at a price of $1.66 per share,
net to the seller in cash, without interest, other than ENSA Common Stock owned
by ERD, followed by a merger (the "Merger") of EAC with and into ENSA, all upon
the terms and subject to the conditions set forth herein;
WHEREAS, simultaneously with this Agreement, ERD and EAC will be
entering into an agreement with the holders of at least 90% of the outstanding
shares of ENSA's Series B Preferred Stock, par value $.01 per share (the "Series
B Preferred Stock"), and of Series C Preferred Stock, par value $.01 per share
(the "Series C Preferred Stock"), to purchase such shares at a price of $98.22
per share (the "Preferred Stock Purchase Agreement"); and
WHEREAS, pursuant to the Merger, each issued and outstanding share of
ENSA Common Stock, Series B Preferred Stock and Series C Preferred Stock not
owned directly or indirectly by ERD or ENSA, except shares of ENSA Common Stock,
Series B Preferred Stock and Series C Preferred Stock held by holders who comply
with the provisions of Delaware law regarding the right of stockholders to
dissent from the Merger and require appraisal of their shares of ENSA Common
Stock, Series B Preferred Stock or
<PAGE>
Series C Preferred Stock, will be converted into the right to receive the per
share consideration paid pursuant to the Offer.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the parties hereto hereby agree as follows:
DEFINITIONS
"Affiliate" shall have the meaning ascribed thereto in Rule 405 of the
Securities Act.
"Affiliate Agreements" has the meaning set forth in Section 3.18(b).
"Benefit Plans" has the meaning set forth in Section 3.12.
"Certificate of Merger" means the certificate of merger substantially
in the form attached hereto as Exhibit B and properly executed in accordance
with the DGCL.
"Closing" has the meaning set forth in Section 2.5.
"Colin" means Jon Colin.
"Colin Employment Agreement" has the meaning set forth in Section
2.6(ii).
"Colin Option Agreement" has the meaning set forth in Section 2.6(iv).
"Common Stock Conversion Amount" has the meaning set forth in Section
2.1.
"DGCL" means the General Corporation Law of the State of Delaware.
"Disinterested Stockholders of ENSA" means those stockholders of ENSA
other than Colin, Jacobsen, Walter Barandiaran, Argentum Capital Partners, L.P.,
Environmental Venture Fund, L.P., ERD or Affiliates of any of them.
"Dissenting Shares" means shares of ENSA Common Stock as to which the
holder has perfected his demand for dissenter's rights in accordance with
Section 262 of the DGCL and has not effectively withdrawn or lost such holder's
rights to an appraisal of such holder's shares thereunder.
"Effective Time of the Merger" has the meaning set forth in Section
1A.1(d).
- 2 -
<PAGE>
"Encumbrances" means pledges, liens, charges, encumbrances, easements,
defects, security interests, claims, options and restrictions of every kind.
"ENSA" means Environmental Services of America, Inc., including all of
its subsidiaries, unless any such subsidiary is specifically mentioned or
excluded in a provision of this Agreement.
"ENSA Common Stock" has the meaning set forth in the recitals of this
Agreement.
"ENSA Disclosure Letter" means the letter so captioned, dated as of
January 25, 1996, addressed to ERD, and delivered by ENSA to ERD and EAC at or
prior to the signing of this Agreement.
"ERD" has the meaning set forth in the first paragraph of this
Agreement.
"ERISA" has the meaning set forth in Section 3.12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
"Exchange Agent" has the meaning set forth in Section 2.1.
"GAAP" means generally accepted accounting principles.
"Investment Banking Agreement" has the meaning set forth in Section
2.6(viii).
"Jacobsen" means Joseph T. Jacobsen.
"Jacobsen Employment Agreement" has the meaning set forth in Section
2.6(iii).
"Jacobsen Option Agreement" has the meaning set forth in Section
2.6(v).
"Letter of Transmittal" has the meaning set forth in Section
2.1.
"Local Law" has the meaning set forth in Section 3.5.
"Material Adverse Effect" means a material adverse effect on the
financial condition, assets, liabilities (contingent or otherwise), results of
operations, business or business prospects of ENSA.
"Merger" has the meaning set forth in the recitals of this Agreement.
- 3 -
<PAGE>
"Offer" has the meaning set forth in the recitals of this Agreement.
"Permit" has the meaning set forth in Section 3.5.
"Permitted Encumbrances" means the encumbrances listed and briefly
described in Section 3.9(a) of the ENSA Disclosure Letter.
"Person" means an individual, partnership, venture, unincorporated
association, organization, syndicate, corporation, trust and trustee, executor,
administrator or other legal or personal representative or any government or
agency or political subdivision thereof.
"Preferred Stock" means, collectively, the shares of Series A, Series
B and Series C Preferred Stock of ENSA.
"Preferred Stock Conversion Amount" has the meaning set forth in
Section 2.2.
"Preferred Stock Purchase Agreement" has the meaning set forth in the
recitals of this Agreement.
"Proceedings" has the meaning set forth in Section 3.15.
"Property" has the meaning set forth in Section 3.16(b).
"Proxy Statement" has the meaning set forth in Section 5.4.
"Real Property" has the meaning set forth in Section 3.9.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning set forth in Section 3.6.
"Securities Act" means the Securities Act of 1933, as amended.
"Series B Preferred Stock" has the meaning set forth in the recitals
of this Agreement.
"Series C Preferred Stock" has the meaning set forth in the recitals
of this Agreement.
- 4 -
<PAGE>
"Subsidiaries" means, collectively, ENSI, Inc., TRI-S, Incorporated,
Northeast Environmental Services, Inc., Environmental Services of America-IN,
Inc., Environmental Services of America-MO, Inc. and ENSA Environmental, Inc.
"Surrendering Stockholder" has the meaning set forth in Section 2.1.
"Surviving Corporation" has the meaning set forth in Section 1A.1(a).
"Takeover Proposal" has the meaning set forth in Section 5.8.
"Taxes" has the meaning set forth in Section 3.11.
"Tax Returns" has the meaning set forth in Section 3.11.
"Voting Debt" has the meaning set forth in Section 3.4.
ARTICLE I
THE OFFER
SECTION 1.1 THE OFFER. (a) Subject to the terms and conditions of
this Agreement, within five business days after the signing of this Agreement,
EAC shall, and ERD shall cause EAC to, commence, within the meaning of Rule 14d-
2 under the Securities Exchange Act of 1934, as amended (including the rules and
regulations promulgated thereunder, the "Exchange Act"), the Offer. The
obligation of EAC to, and of ERD to cause EAC to, commence the Offer and accept
for payment, and pay for, any shares of ENSA Common Stock tendered pursuant to
the Offer shall be subject to the conditions set forth in Exhibit A (the "Offer
Conditions"). The Offer shall initially expire twenty (20) business days after
the date of its commencement, unless this Agreement is terminated in accordance
with Article IX, in which case the Offer (whether or not previously extended in
accordance with the terms hereof) shall expire on such date of termination.
Without the prior written consent of ENSA, EAC shall not (i) impose conditions
to the Offer in addition to the Offer Conditions, (ii) modify or amend the Offer
Conditions or any other term of the Offer in a manner adverse to the holders of
shares of ENSA Common Stock, (iii) waive or amend the Minimum Condition (as
defined in Exhibit A), (iv) reduce the number of shares of ENSA Common Stock
subject to the Offer, (v) reduce the price per share of ENSA Common Stock to be
paid pursuant to the Offer, (vi) except as provided in the following sentence,
extend the Offer, if all of the Offer Conditions are satisfied or waived, or
(vii) change the form of consideration payable in the Offer. Notwithstanding
the foregoing and subject to the provisions of Section 9.1, EAC may, without the
consent of ENSA, extend the Offer at any time, and from time to time, (i) if at
the then scheduled expiration date of the Offer any of the conditions to EAC's
obligation to accept for payment and pay for shares of ENSA
- 5 -
<PAGE>
Common Stock shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived; (ii) for any period required by any rule,
regulation, interpretation or position of the SEC or its staff applicable to the
Offer; or (iii) if all Offer Conditions are satisfied or waived but the number
of shares of ENSA Common Stock tendered is less than 90% of the then outstanding
number of shares of ENSA Common Stock respectively, for an aggregate period of
not more than 10 business days (for all such extensions) beyond the latest
expiration date that would be permitted under clause (i) or (ii) of this
sentence. So long as this Agreement is in effect and the Offer Conditions have
not been satisfied or waived, EAC shall, and ERD shall cause EAC to, cause the
Offer not to expire. Subject to the terms and conditions of the Offer (but
subject to the right of termination in accordance with Article IX), EAC shall,
and ERD shall cause EAC to, pay for all shares of ENSA Common Stock validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) On the date of commencement of the Offer, ERD and EAC shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal (such Schedule 14D-1 and the documents therein pursuant to which the
Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). ENSA and its counsel shall be given an opportunity to
review and comment upon the Offer Documents prior to the filing thereof with the
SEC. The Offer Documents shall comply as to form in all material respects with
the requirements of the Exchange Act, and, on the date filed with the SEC and on
the date first published, sent or given to ENSA's stockholders, the Offer
Documents shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except that no representation is made by ERD or EAC with
respect to information supplied by ENSA in writing for inclusion in the Offer
Documents. Each of ERD, EAC and ENSA agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
each of ERD and EAC further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of shares of ENSA Common Stock, in each case as and to the extent
required by applicable federal securities laws. ERD and EAC agree to provide
ENSA and its counsel in writing with any comments ERD, EAC or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
upon receipt of such comments.
SECTION 1.2 COMPANY ACTIONS. (a) ENSA hereby approves of and
consents to the Offer and represents that the Board of Directors of ENSA at a
meeting duly called and held has duly adopted resolutions (i) approving this
Agreement, the Offer and the Merger, (ii) determining that the terms of the
Offer and Merger are fair to, and in the best interests of, ENSA and its
stockholders, and (iii) recommending that ENSA's stockholders accept the Offer
and tender their shares of ENSA Common Stock and approve the Merger
- 6 -
<PAGE>
and this Agreement. ENSA hereby consents to the inclusion in the Offer Documents
of such recommendation of the Board of Directors of ENSA.
(b) On the date the Offer Documents are filed with the SEC, ENSA
shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-
9 with respect to the Offer (such Schedule 14D-9, as amended from time to time,
including the exhibits thereto, the "Schedule 14D-9") containing the
recommendations described in paragraph (a) of Section 1.2 above and shall mail
the Schedule 14D-9 to the stockholders of ENSA as required by Rule 14D-9
promulgated under the Exchange Act. ERD and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 prior to the filing
thereof with the SEC. The Schedule 14D-9 shall comply as to form in all material
respects with the requirements of the Exchange Act and, on the date filed with
the SEC and on the date first published, sent or given to ENSA's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by ENSA with respect to
information supplied by ERD or EAC in writing for inclusion in the Schedule 14D-
9. Each of ENSA, ERD and EAC agrees promptly to correct any information provided
by it for use in the Schedule 14D-9 if and to the extent that such information
shall have become false or misleading in any material respect, and ENSA further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and disseminated to the holders of shares of ENSA
Common Stock, in each case as and to the extent required by applicable federal
securities laws. ENSA agrees to provide ERD and EAC and their counsel in writing
with any comments ENSA or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer, ENSA shall cause its transfer agent
to promptly furnish EAC with a list, as of a recent date, of the holders of ENSA
Common Stock and mailing labels containing the names and addresses of the record
holders of ENSA Common Stock and of those persons becoming record holders
subsequent to such date, together with copies of all lists of stockholders,
security position listings (including shares of ENSA Common Stock held by
depositories) and computer files and all other information in ENSA's possession
or control regarding the beneficial owners of ENSA Common Stock, and shall
furnish to EAC such information and assistance (including updated lists of
stockholders, security position listings and computer files) as EAC may
reasonably request in communicating the Offer to ENSA's stockholders.
- 7 -
<PAGE>
ARTICLE IA
THE MERGER
SECTION 1A.1 THE MERGER. Subject to the terms and conditions of
this Agreement, including the fulfillment (or waiver) of all conditions to the
obligations of the parties contained herein, at the Effective Time of the Merger
and pursuant to the General Corporation Law of the State of Delaware (the
"DGCL"), the following shall occur:
(a) EAC shall be merged with and into ENSA, which shall be the
surviving corporation (the "Surviving Corporation"). The separate
existence of EAC shall cease at the Effective Time of the Merger, and
thereupon ENSA and EAC shall be a single corporation and the title to all
property owned by ENSA and EAC, both real and personal, shall be vested in
ENSA as the Surviving Corporation without reversion or impairment, and the
Surviving Corporation shall have all liabilities of EAC and ENSA. Without
limiting the generality of the foregoing, upon the Effective Time of Merger
the Surviving Corporation shall possess all the rights, privileges, powers
and franchises of a public as well as of a private nature, subject to all
the restrictions, liabilities and duties of ENSA and EAC; and all the
rights, privileges, powers and franchises of ENSA and EAC, and all
property, real, personal and mixed, and all debts due to ENSA or EAC on
whatever account, as well for stock subscriptions as all other things in
action or belonging to each of ENSA and EAC shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as
effectually the property of the Surviving Corporation as they were of ENSA
and EAC, and the title to any real estate vested by deed or otherwise in
ENSA or EAC shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of ENSA or EAC shall be preserved
unimpaired, and all debts, liabilities and duties of ENSA and EAC shall
thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if said debts, liabilities and duties had
been incurred or contracted by it.
(b) The certificate of incorporation of ENSA, in the form
attached as Exhibit A to the ENSA Disclosure Letter, shall be the
certificate of incorporation of the Surviving Corporation until amended as
permitted by law.
(c) The By-Laws of ENSA, in the form attached as Exhibit B to
the ENSA Disclosure Letter, shall be the by-laws of the Surviving
Corporation until amended as permitted by law.
(d) As soon as practicable after the terms and conditions of
this Agreement have been satisfied, on the Closing Date, the Certificate of
Merger or, if applicable, the Certificate of Ownership and Merger (each,
the "Certificateof of
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Merger"), executed in accordance with the relevant provisions of the
DGCL, shall be filed with the office of the Secretary of State of the State
of Delaware. The Merger shall become effective when the Certificate of
Merger is so filed. The date and time when the Merger is effective is
referred to in this Agreement as the "Effective Time of the Merger."
SECTION 1A.2 CAPITAL STOCK OF EAC. At the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of any holder
thereof, each share of common stock, par value $.001 per share, of EAC issued
and outstanding immediately prior to the Effective Time of the Merger shall be
converted into and exchanged for one validly issued, fully paid and non-
assessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
SECTION 1A.3 CAPITAL STOCK OF ENSA. At the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of ERD, EAC,
ENSA or any holder thereof:
(a) Each share of ENSA Common Stock outstanding immediately
prior to the Effective Time of the Merger, other than Dissenting Shares and
such shares, if any, as are held by ERD immediately prior to the Effective
Time of the Merger, shall be converted into the right to receive the
payments set forth in Section 2.1. Until surrender of a certificate
representing ENSA Common Stock as contemplated by Section 2.1, after the
Effective Time of the Merger, such certificate shall be deemed to represent
only the right to receive the Common Stock Conversion Amount set forth in
Section 2.1.
(b) All shares of ENSA Series B Preferred Stock and Series C
Preferred Stock outstanding immediately prior to the Effective Time of the
Merger, other than Dissenting Shares and such shares, if any, as are held
by ERD immediately prior to the Effective Time of the Merger, shall be
converted into the right to receive the payments set forth in Section 2.2.
Until surrender of a certificate representing Series B Preferred Stock or
Series C Preferred Stock as contemplated by Section 2.2, after the
Effective Time of the Merger, such certificate shall be deemed to represent
only the right to receive the Preferred Stock Conversion Amount set forth
in Section 2.2.
(c) All shares of ENSA Common Stock, Series B Preferred Stock
and Series C Preferred Stock held by ERD or by ENSA as treasury stock shall
be cancelled.
(d) Each authorized but unissued share of ENSA Common Stock
shall cease to exist.
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SECTION 1A.4 STOCK TRANSFER BOOKS. At the close of business on the
day prior to the Effective Time of the Merger, the stock transfer books of ENSA
shall be closed and no transfer of ENSA Common Stock shall thereafter be made on
such stock transfer books.
ARTICLE II
COMMON STOCK CONVERSION AMOUNT;PREFERRED STOCK CONVERSION AMOUNT;
DISSENTING SHARES; CLOSING
Section 2.1 COMMON STOCK CONVERSION AMOUNT. As soon as practicable
after the Effective Date of the Merger, each holder (other than ERD) of a
certificate (or certificates), which immediately prior to the Effective Date
of the Merger represented outstanding shares of ENSA Common Stock
(a "Surrendering Stockholder") shall be entitled to receive, upon surrender of
such certificate (or certificates) to an exchange agent to be appointed by EAC
(the "Exchange Agent") in accordance with instructions set forth in a letter of
transmittal addressed to the Exchange Agent (the "Letter of Transmittal"), cash
in the amount of $1.66 per share of ENSA Common Stock (the "Common Stock
Conversion Amount"). The Common Stock Conversion Amount shall be paid by check
and shall be mailed to the address of such Surrendering Stockholder as indicated
on ENSA's stock register or to such other address as such Surrendering
Stockholder indicates in writing signed by such Surrendering Stockholder.
SECTION 2.2 PREFERRED STOCK CONVERSION AMOUNT. As soon as
practicable after the Effective Date of the Merger, each holder (other than ERD)
of a certificate (or certificates), which immediately prior to the Effective
Date of the Merger represented outstanding shares of Series B Preferred Stock or
Series C Preferred Stock (a "Surrendering Stockholder") shall be entitled to
receive, upon surrender of such certificate (or certificates) to the Exchange
Agent in accordance with the instructions set forth in the Letter of
Transmittal, cash in the amount of $98.22 per share of Series B Preferred Stock
or Series C Preferred Stock (the "Preferred Stock Conversion Amount"). The
Preferred Stock Conversion Amount shall be paid by check and shall be mailed to
the address of such Surrendering Stockholder as indicated on ENSA's stock
register or to such other address as such Surrendering Stockholder indicates in
writing signed by such Surrendering Stockholder.
SECTION 2.3 NO FURTHER OWNERSHIP RIGHTS IN ENSA CAPITAL STOCK. The
Common Stock Conversion Amount and the Preferred Stock Conversion Amount to be
paid in accordance with the terms hereof shall be deemed to be paid in full
satisfaction of all rights pertaining to the shares of ENSA Common Stock or ENSA
Series B Preferred Stock or Series C Preferred Stock, as the case may be.
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SECTION 2.4 DISSENTING SHARES. Notwithstanding any provision of
this Agreement to the contrary, if required by the DGCL (but only to the extent
required thereby), shares of ENSA Common Stock and Preferred Stock which are
issued and outstanding immediately prior to the Effective Time of the Merger and
which are held by holders of such shares of ENSA Common Stock or Preferred Stock
who have properly exercised appraisal rights with respect thereto in accordance
with Section 262 of the DGCL (the "Dissenting Shares") will not be exchangeable
for the right to receive the Common Stock Conversion Amount or the Preferred
Stock Conversion Amount, as the case may be, and holders of such shares of ENSA
Common Stock or Preferred Stock will be entitled to receive payment of the
appraised value of such shares of ENSA Common Stock or Preferred Stock in
accordance with the provisions of such Section 262 unless and until such holders
fail to perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time of the Merger, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of ENSA Common Stock or Preferred Stock will thereupon be treated as if
they had been converted into and have become exchangeable for, at the Effective
Time of the Merger, the right to receive the Common Stock Conversion Amount or
the Preferred Stock Conversion Amount, as the case may be, without any interest
thereon. ENSA will give ERD prompt notice of any demands received by ENSA for
appraisals of shares of ENSA Common Stock or Preferred Stock, and ERD shall have
the right to participate in all negotiations and proceedings with respect to any
such demands. Neither ENSA nor the Surviving Corporation shall, except with the
prior written consent of ERD, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
SECTION 2.5 CLOSING. Subject to the last sentence of this Section
2.5 and Article IX hereof, the consummation of the transactions contemplated
hereby (the "Closing") shall take place at 10:00 A.M., local time, on the fifth
business day after the condition to the Closing set forth in Section 8.1(a)
hereof has been met at the offices of Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New York, New York 10022, or such other time and
place as the parties may mutually agree. The day on which the Closing actually
takes place is herein sometimes referred to as the Closing Date. In the event a
party hereto is entitled not to close on the scheduled date because a condition
to the Closing set forth in Article VIII hereof has not been met (or waived by
the party entitled to waive it), such party may postpone the Closing from time
to time, by giving at least five days prior notice to the other party, until the
condition has been met (which all parties will use their best efforts to cause
to happen), subject to Article IX.
SECTION 2.6 ACTIONS TO BE TAKEN. In addition to the satisfaction
of the conditions and the actions to be taken at the Closing as set forth in
Article VIII hereof, the following actions shall be taken five business days
after the latest to occur of (a) the first purchase of ENSA Common Stock by the
Purchaser pursuant to the Offer, (b) the purchase of the Preferred Stock
pursuant to the Preferred Stock Purchase Agreement, and (c) designees of ERD are
appointed to constitute a majority of the Board of Directors of ENSA pursuant to
Section 7.3:
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(i) ENSA shall pay the sum of $400,000 to Colin as consideration for
the termination of his existing employment agreement with ENSA;
(ii) EAC and Colin shall enter into an employment agreement in the
form attached hereto as Exhibit 2.6(ii) (the "Colin Employment
Agreement");
(iii) EAC and Jacobsen shall enter into an employment agreement in the
form attached hereto as Exhibit 2.6(iii) (the "Jacobsen
Employment Agreement);
(iv) ERD and Colin shall enter into a stock option agreement in the
form attached hereto as Exhibit 2.6(iv) (the "Colin Option
Agreement");
(v) ERD and Jacobsen shall enter into a stock option agreement in the
form attached hereto as Exhibit 2.6(v) (the "Jacobsen Option
Agreement");
(vi) ENSA shall pay the Argentum Group $100,000 pursuant to the terms
of an investment banking fee agreement (the "Investment Banking
Agreement") entered into between the Argentum Group and ENSA.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ENSA
ENSA hereby represents and warrants to each of EAC and ERD as follows:
SECTION 3.1 CORPORATE ORGANIZATION. ENSA and each of its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its organization and has full corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and, is duly licensed or qualified and in good
standing as a foreign corporation in each jurisdiction in which the nature of
the activities conducted by it or the character of the properties owned, leased
or operated by it requires it to be so licensed or so qualified, except where
the failure to be so licensed or so qualified would not have a Material Adverse
Effect on ENSA, or such Subsidiary. ENSA has heretofore delivered to ERD and
EAC complete and correct copies of its and its Subsidiaries' Certificate of
Incorporation and Bylaws, as currently in effect.
SECTION 3.2 AUTHORITY. ENSA has full corporate power and authority
to enter into this Agreement and, subject to approval of this Agreement by the
stockholders of ENSA in accordance with the applicable provisions of the DGCL
and in accordance with the provisions of Section 8.1(a) of this Agreement, to
consummate the transactions contemplated hereby. The execution, delivery and
performance by ENSA of this Agreement have been duly authorized by all requisite
corporate action on the part of ENSA, subject to such approval of this Agreement
by the stockholders of ENSA in accordance with the
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applicable provisions of the DGCL and in accordance with the provisions of
Section 8.1(a) of this Agreement. This Agreement has been duly executed and
delivered by ENSA, and (assuming due execution and delivery by ERD and EAC) this
Agreement constitutes a valid and binding obligation of ENSA, enforceable in
accordance with its terms.
SECTION 3.3 SUBSIDIARIES AND EQUITY INVESTMENTS. Section 3.3 of
the ENSA Disclosure Letter contains a list of all direct and indirect
subsidiaries of ENSA. Except as disclosed in Section 3.3, ENSA does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest,
including interests in partnerships and joint ventures.
SECTION 3.4 CAPITALIZATION. As of the date hereof, the authorized
capital stock of ENSA consists of 10,000,000 shares of ENSA Common Stock, 4,000
Shares of Series A Preferred Stock, 12,000 Shares of Series B Preferred Stock
and 20,000 shares of Series C Preferred Stock. As of the date hereof, 3,830,553
shares of ENSA Common Stock are issued and outstanding, no shares of Series A
Preferred Stock, are issued and outstanding, 10,257.78 shares of Series B
Preferred Stock are issued and outstanding and 3,200 shares of Series C
Preferred Stock and issued and outstanding. All such issued and outstanding
shares of ENSA Common Stock and Preferred Stock have been validly issued, fully
paid and nonassessable and are not subject to preemptive rights. Except as
disclosed in Section 3.4 of the ENSA Disclosure Letter, and except for the
rights created pursuant to this Agreement and the issued and outstanding shares
of ENSA Common Stock and Preferred Stock set forth herein, as of the date
hereof, there are no (i) outstanding shares of capital stock, or any notes,
bonds, debentures or other indebtedness having the right to vote (or convertible
into or exchangeable for securities having the right to vote) ("Voting Debt"),
of ENSA, (ii) outstanding options, warrants, calls, subscriptions or other
rights of any kind to acquire, or agreements or commitments in effect to which
ENSA is a party or by which it is bound obligating it to issue or sell, or cause
to be issued or sold, any additional shares of capital stock or any Voting Debt,
or granting any rights to obtain any benefit measured by the value of ENSA's
capital stock (including without limitation, stock appreciation rights granted
under any option plans) or (iii) outstanding securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares or Voting Debt. ENSA is not committed to
issue any such option, warrant, call, subscription, right or security, and after
the Effective Time of the Merger, there will be no such option, warrant, call,
subscription, right, agreement, commitment or security. There are no contracts,
commitments or agreements relating to voting, purchase or sale of ENSA's capital
stock or Voting Debt (including, without limitation, any redemption by ENSA
thereof) (i) between or among ENSA and any of its stockholders and (ii) to the
best of ENSA's knowledge, between or among any of ENSA's stockholders.
SECTION 3.5 NO VIOLATION; CONSENTS AND APPROVALS. Except as set
forth in Section 3.5 of the ENSA Disclosure Letter, neither ENSA nor any of its
properties or assets is subject to or bound by any provision of:
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(a) any law, statute, rule, regulation, ordinance or judicial or
administrative decision;
(b) any provision of its articles or certificate of incorporation,
bylaws, or similar organizational document;
(c) any (i) credit or loan agreement, mortgage, deed of trust, note,
bond, indenture, license, concession, franchise, permit, trust,
custodianship or other restriction, (ii) instrument, lease, obligation,
contract or agreement other than those contemplated by clause (i), which,
in the case of this clause (ii), individually involves the payment or
receipt by ENSA on an annual basis of more than $25,000 or (iii)
instruments, obligations, contracts or agreements, other than those
contemplated by clause (i), which, in the case of this clause (iii),
individually involve the payment or receipt by ENSA of more than $25,000 or
collectively involve the payment or receipt by ENSA of more than $100,000;
or
(d) any judgment, order, writ, injunction or decree; that would
impair, prohibit or prevent, or would be violated or breached by, or would
result in the creation of any Encumbrance as a result of, or under which
there would be a material default (with or without notice or lapse of time,
or both) or right of termination, cancellation or acceleration of any
material obligation or the loss of a material benefit as a result of, the
execution, delivery and performance by ENSA of this Agreement and the
consummation of the transactions contemplated hereby, except in the case of
any municipal, county or township law, statute, rule, regulation,
ordinance, administrative decision, license or permit ("Local Law or
Permit"), where such event or occurrence is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on ENSA.
Other than (i) the filing of the Certificate of Merger as provided in
Section 1A.1, (ii) the filing with the SEC of the Schedule 14D-9, (iii) the
filing with the SEC of the Proxy Statement, (iv) such consents, orders,
approvals, authorizations, registrations, declarations and filings as may
be required under applicable state securities laws and the securities laws
of any foreign country, and (v) such local consents, orders, approvals,
authorizations, registrations, declarations and filings which, if not
obtained or made, would not, individually or in the aggregate, reasonably
be likely to have a Material Adverse Effect on ENSA and that would not
impair, prohibit or prevent the consummation of the transactions
contemplated hereby, no consent, order, approval or authorization of, or
declaration, notice, registration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
(each a "Governmental Entity"), individual, corporation, partnership, trust
or unincorporated organization (together with Governmental Entities, each a
"Person") is required by or with respect to ENSA in connection with the
execution, delivery and performance by ENSA of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 3.6 SEC REPORTS AND FINANCIAL STATEMENTS OF ENSA. Except
as set forth in Section 3.6 of the ENSA Disclosure Letter, ENSA has timely filed
with the
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SEC, and has heretofore provided to ERD, true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
since the date ENSA became subject to the reporting requirements under Section
13 of the Exchange Act or (as such documents have been amended since the time of
their filing, collectively, the "SEC Documents"). The SEC Documents, including
without limitation any financial statements and schedules included therein, at
the time filed or, if subsequently amended, as so amended, (i) did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the applicable rules and regulations of the
SEC thereunder. The financial statements of ENSA included in SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP, applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) and fairly present (subject, in the case of the unaudited
statements, to customary year-end audit adjustments) the financial position of
ENSA as at the dates thereof and the results of its operations and cash flows.
SECTION 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to
the extent set forth in ENSA's Annual Report on Form 10-K for the year ended
December 31, 1994, or as disclosed in the Form 10-Q for the nine month period
ended September 30, 1995, or as disclosed in Section 3.7 of the ENSA Disclosure
Letter, as of September 30, 1995, ENSA had no liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that would be required
by GAAP to be reflected on the balance sheet of ENSA (including the notes
thereto) as of such date. Since September 30, 1995, ENSA has not incurred any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, not in the ordinary course of business or which would have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 3.8 ACCOUNTS RECEIVABLE. The accounts receivable disclosed
in SEC Documents as of September 30, 1995, and, with respect to accounts
receivable created since such date, disclosed in any subsequently filed SEC
Documents, or as accrued on the books of ENSA in the ordinary course of business
consistent with past practices in accordance with GAAP since the last filed SEC
Documents, represent and will represent bona fide claims against debtors for
sales and other charges, are not subject to discount except for normal cash and
immaterial discounts, and the amount carried for doubtful accounts and
allowances disclosed in each of such SEC Documents or accrued on such books is
sufficient to provide for any losses which may be sustained on realization of
the receivables.
SECTION 3.9 TITLE TO PROPERTY.
(a) Except for the Permitted Encumbrances affecting personal property
described in Section 3.9(a) of the ENSA Disclosure Letter, ENSA has good
and valid
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title to all of its properties, assets and other rights that do not
constitute real property, free and clear of all Encumbrances, except for
such Encumbrances securing indebtedness that is not, in the aggregate,
greater than $10,000. ENSA owns, has valid leasehold interests in or valid
contractual rights to use, all of the assets, tangible and intangible, used
by, or necessary for the conduct of the business of, ENSA.
(b) The machinery, tools, equipment and other tangible physical
assets of ENSA (other than items of inventory) are in good working order,
except for normal wear and tear and except for such machinery, tools,
equipment and other tangible physical assets that do not, in the aggregate,
have a book value greater than $25,000, in the aggregate, and are in an
operating condition sufficient to conduct the business of ENSA as now being
conducted.
(c) Section 3.9(c) of the ENSA Disclosure Letter sets forth with
specific reference to this Section each and every parcel of real property
or interest in real estate owned, held under a lease or used by, or
necessary for the conduct of the business of, ENSA (the "Real Property").
(d) ENSA:
(i) owns and has good and marketable title in fee simple to the
Real Property designated as "owned property" in Section 3.9(c) of the
ENSA Disclosure Letter free and clear of all Encumbrances, except
(A) minor imperfections of title, none of which, individually or in
the aggregate, materially detracts from the value of or impairs the
use of the affected property or impairs the operations of ENSA, (B)
liens for current taxes not yet due and payable and (C) Permitted
Encumbrances affecting such Real Property and reflected in Section
3.9(a) of the ENSA Disclosure Letter;
(ii) with respect to the Real Property designated as "leased
property" in Section 3.9(c) of the ENSA Disclosure Letter, and except
as set forth in such Section, is in peaceful and undisturbed
possession of the space and/or estate under each lease under which it
is a tenant, and there are no material defaults by it as tenant
thereunder; and
(iii) has good and valid rights of ingress and egress to and from
all the Real Property from and to the public street systems for all
usual street, road and utility purposes.
(e) All of the buildings, structures, improvements and fixtures used
by or useful in the business of ENSA, owned or leased by ENSA, are in a
good state of repair, maintenance and operating condition and, except as so
disclosed and, except for normal wear and tear, there are no defects with
respect thereto which would materially impair the day-to-day use of any
such buildings, structures, improvements or fixtures or which would subject
ENSA to material liability under applicable law.
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SECTION 3.10 INTELLECTUAL PROPERTY. Except as set forth on Section
3.10 of the ENSA Disclosure Letter, ENSA owns or has valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, service marks, trade secrets, applications for trademarks
and for service marks, know-how and other proprietary rights and information
used or held for use in connection with the business of ENSA as currently
conducted or as contemplated to be conducted; there is no assertion or claim
challenging the validity of any of the foregoing which, individually or in the
aggregate, could have a Material Adverse Effect on ENSA; the conduct of the
business of ENSA as currently conducted does not conflict in any way with any
patent, patent right, license, trademark, trademark right, trade name, trade
name right, service mark or copyright of any third party that, individually or
in the aggregate, could have a Material Adverse Effect on ENSA; and to the best
knowledge of ENSA, there are no infringements of any proprietary rights owned by
ENSA which, individually or in the aggregate, could have a Material Adverse
Effect on ENSA.
SECTION 3.11 TAX MATTERS. Except as set forth in Schedule 3.11 to
the ENSA Disclosure Letter:
(a) ENSA (or any predecessor) and any consolidated, combined,
unitary, affiliated or aggregate group for Tax purposes of which ENSA (or
any predecessor) is or has been a member (a "Consolidated Group") has, to
the best of ENSA's knowledge, timely filed all Tax Returns required to be
filed by it, has paid all Taxes shown on any Tax Return to be due in
connection with or respect to the periods or transactions covered by such
Tax Returns and has paid all other Taxes as are due, and has provided
adequate reserves in its financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax Returns.
(b) The reserves for Taxes (including deferred taxes) are
adequate to cover all Taxes accruable through the Closing (including Taxes
being contested) in accordance with GAAP.
(c) To ENSA's knowledge, (i) no material claim for unpaid Taxes
that are due and payable has become a lien against the property of ENSA or
is being asserted against ENSA or any member of a Consolidated Group, (ii)
no audit of any Tax Return of ENSA or any member of a Consolidated Group is
being conducted by a Tax or other governmental authority and there are no
pending or threatened audits, investigations or claims relating to any
liability in respect of Taxes, and (iii) no extension of the statute of
limitations relating to any Taxes is in effect with respect to ENSA or any
member of a Consolidated Group. Within two weeks after the execution of
this Agreement, ENSA will supplement Schedule 3.11 of the ENSA Disclosure
Letter to provide the following information with respect to ENSA as of the
most recent practicable date: (i) the tax basis of ENSA in the assets;
(ii) the amount of any net operating loss, net capital loss, unused
investment or other credits, unused foreign tax credits, or excess
charitable contributions allocable to ENSA; (iii) all material Tax
elections with respect to Taxes affecting ENSA; (iv) the amount of
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deferred gain or loss, if any, allocable to ENSA arising out of any
deferred intercompany transaction (as such term is defined in Treas. Reg.
Section l.1502-13); and (v) a list of all income Tax Returns filed on or
behalf of ENSA which indicates those tax returns that have been audited and
the outcome of such audits and a copy of all Tax Returns filed on or behalf
of ENSA for the taxable periods ending after 1991. Within two weeks after
the execution of this Agreement, ENSA will notify ERD whether the remaining
representations contained in the provisions that follow in this Section
3.11 are accurate or whether ENSA needs to supplement Section 3.11 of the
ENSA Disclosure Letter to establish an exception with respect to any of
such representations or warranties. ENSA is not a party to any agreement,
contract, arrangement or plan that would result after the Closing (taking
into account the transactions contemplated by this Agreement), separately
or in the aggregate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code. ENSA is not a party to any
tax sharing agreement or any other agreement providing for payments by ENSA
with respect to Taxes. ENSA is not obligated under any agreement with
respect to industrial development bonds or other obligations with respect
to which the excludability from gross income of the holder for federal or
state income Tax purposes could be affected by the transactions
contemplated hereunder. ENSA is not a "consenting corporation" under
section 341(f) of the Code (or any corresponding provision of state, local
or foreign law). ENSA is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code. ENSA has not entered into any sale leaseback or any leveraged lease
transaction. ENSA will not be required, as a result of a change in method
of accounting, to include any adjustment under section 481 of the Code (or
any corresponding provision of foreign law) in taxable income for any
period after the Closing. ENSA does not own any property of a character,
the indirect transfer of which, pursuant to this Agreement, would give rise
to any material documentary, stamp or other transfer Tax.
As used herein, "Tax" or "Taxes" shall mean taxes, fees, levies,
duties, tariffs, imposts, and governmental impositions or charges of any kind in
the nature of (or similar to) taxes, payable to any federal, state, local or
foreign taxing authority, including (without limitation) (i)income, franchise,
profits, gross receipts, AD VALOREM, net worth, value added, sales, use,
service, real or personal property, special assessments, capital stock, license,
payroll, withholding, employment, social security, workers' compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, and (ii)
interest, penalties, additional taxes and additions to tax imposed with respect
thereto. As used herein, "Tax Return" shall mean returns, reports, and
information statements with respect to Taxes required to be filed with the IRS
or any other taxing authority, domestic or foreign, including, without
limitation, consolidated, combined and unitary tax returns (including returns
required in connection with any employee benefit plan). As used herein, the
"Code" refers to the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
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SECTION 3.12 EMPLOYEE MATTERS. (a) With respect to each employee
benefit plan (including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, employee-related insurance or other plan, arrangement
or understanding (whether or not legally binding) (all the foregoing being
herein called the "Benefit Plans"), maintained or contributed to by ENSA, ENSA
has made available to ERD a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service, (ii) such Benefit
Plan, (iii) each trust agreement and group annuity contract, if any, relating to
such Benefit Plan and (iv) the most recent actuarial report or valuation
relating to a Benefit Plan subject to Title IV of ERISA, if any.
(b) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, and to ENSA's best knowledge, there exists no
condition or set of circumstances in connection with which ENSA could be subject
to any liability that is reasonably likely to have a Material Adverse Effect on
ENSA (except liability for benefits claims and funding obligations payable in
the ordinary course), under ERISA, the Code or any other applicable law.
(c) With respect to the Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with GAAP, on the financial statements of ENSA, which obligations
could have a Material Adverse Effect on ENSA.
(d) Except as set forth in Section 3.12(d) of the ENSA Disclosure
Letter, ENSA is not a party to any oral or written (i) consulting agreement not
terminable on 60 days or less notice or union or collective bargaining
agreement, (ii) agreement with any director, executive officer or key employee
of ENSA the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving ENSA of the
nature contemplated by this Agreement, or agreement with respect to any
executive officer of ENSA providing any term of employment or compensation
guarantee extending for a period longer than one year, or (iii) agreement or
plan, including any stock option plan, stock appreciation right plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
SECTION 3.13 NO MATERIAL CHANGE. Since September 30, 1995, there
have been no events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
ENSA.
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SECTION 3.14 ABSENCE OF CHANGE OR EVENT. Except as contemplated by
this Agreement or as disclosed in Section 3.14 of the ENSA Disclosure Letter,
since September 30, 1995, ENSA has conducted its business only in the ordinary
course and has not:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
liabilities or obligations incurred in the ordinary course of business
and consistent with prior practice;
(b) mortgaged, pledged or subjected to lien, restriction or any
other Encumbrance any of its property, businesses or assets, tangible
or intangible, of ENSA, except for liens arising in the ordinary
course of business and consistent with prior practice to secure debt
incurred for the purpose of financing all or part of the purchase
price or the cost of construction or improvement of the equipment or
other property subject to such liens, provided that (i) the principal
amount of any debt secured by such lien does not exceed 100% of such
purchase price or cost, (ii) such lien does not extend to or cover any
other property other than such item of property and any improvements
on such item and (iii) the incurrence of such debt was in the ordinary
course of business and consistent with prior practice;
(c) except in the ordinary course of business and consistent
with prior practice, sold, transferred, leased or loaned to others or
otherwise disposed of any of its assets (or committed to do any of the
foregoing), including the payment of any loans owed to any Affiliate,
except for inventory sold to customers or returned to vendors in the
ordinary course of business and consistent with prior practice, or
canceled, waived, released or otherwise compromised any debt or claim,
or any right of significant value;
(d) suffered any damage, destruction or loss (whether or not
covered by insurance) which has had or is reasonably likely to have a
Material Adverse Effect on ENSA;
(e) made or committed to make any capital expenditures or
capital additions or betterments in excess of an aggregate of $50,000;
(f) encountered any labor union organizing activity, had any
actual or threatened employee strikes, or any work stoppages, slow-
downs or lock-outs related to any labor union organizing activity or
any actual or threatened employee strikes;
(g) instituted any litigation, action or proceeding before any
court, governmental body or arbitration tribunal relating to it or its
property, except for litigation, actions or proceedings instituted in
the ordinary course of business and consistent with prior practice;
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(h) split, combined or reclassified any of its capital stock, or
declared or paid any dividend or made any other payment or
distribution in respect of its capital stock, or directly or
indirectly redeemed, purchased or otherwise acquired any of its
capital stock;
(i) acquired, or agreed to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquired, or
agreed to acquire, any assets which are material, individually or in
the aggregate, to ENSA, except for purchases of inventory in the
ordinary course of business and consistent with prior practice;
(j) increased, or agreed or promised to increase, the
compensation of any officer, employee or agent of ENSA, directly or
indirectly, including by means of any bonus, pension plan, profit
sharing, deferred compensation, savings, insurance, retirement, or any
other employee benefit plan, except in the ordinary course of business
and consistent with prior practice;
(k) except in the ordinary course of business and consistent
with prior practice, increased promotional or advertising expenditures
or otherwise changed its policies or practices with respect thereto;
(l) made or changed any election concerning Taxes or Tax
Returns, changed an annual accounting period or adopted or changed any
accounting method; or
(m) except in the ordinary course of business and consistent
with prior practice, filed any amended Tax Return or extended the
applicable statute of limitations for any taxable period, received
notification of an examination, audit or pending assessment with
respect to Taxes, entered into any closing agreement with respect to
Taxes, settled or compromised any Tax claim or assessment or
surrendered any right to claim a refund of Taxes or obtained or
entered into any Tax ruling, agreement, contract, understanding,
arrangement or plan.
SECTION 3.15 LITIGATION. Except as specifically disclosed in the
SEC Documents filed prior to the date hereof, there is no (i) outstanding
consent, order, judgment, writ, injunction, award or decree of any court or
arbitration tribunal against or involving ENSA or any of its properties or
assets, (ii) action, suit, claim, counterclaim, litigation, arbitration, dispute
or proceeding pending or, to ENSA's best knowledge, threatened against or
involving ENSA or any of its properties or assets or (iii) to ENSA's best
knowledge, investigation or audit pending or threatened against or relating to
ENSA or any of its properties or assets or any of its officers or directors (in
their capacities as such) (collectively, "Proceedings") which is, individually
or in the aggregate, reasonably likely to
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have a Material Adverse Effect on ENSA, or would impair, prohibit or prevent the
consummation of the transactions contemplated hereby. To ENSA's best knowledge,
there are no existing facts or circumstances which could form a basis for any
Proceeding which, if commenced, would be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on ENSA, or would impair,
prohibit or prevent the consummation of the transactions contemplated hereby.
SECTION 3.16 COMPLIANCE WITH LAW AND OTHER INSTRUMENTS. To ENSA's
best knowledge, except as set forth in Section 3.16 of the ENSA Disclosure
Letter:
(a) ENSA and its properties, assets, operations and activities, have
complied and are in compliance in all respects with all applicable federal,
state and local laws, rules, regulations, ordinances, orders, judgments and
decrees including, without limitation, health and safety statutes and
regulations and all Environmental Laws, including, without limitation, all
restrictions, conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except, with respect to laws, rules, regulations, ordinances, orders, judgments
and decrees other than those relating to Environmental Laws, the Foreign Corrupt
Practices Act and applicable criminal statutes, where the failure to have
complied or be in compliance is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on ENSA, or that would
impair, prohibit or prevent the consummation of the transactions contemplated
hereby. ENSA is not in violation of or in default under any terms or provisions
of (i) its articles or certificate of incorporation, bylaws or similar
organizational document, (ii) any credit or loan agreement, mortgage or security
agreement, deed of trust, note, bond or indenture, or (iii) any other
instrument, obligation, contract or agreement to which it is subject or by which
it is bound, except, in the case of clauses (ii) and (iii), for violations or
defaults which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on ENSA.
(b) To ENSA's best knowledge, (i) ENSA has obtained all Permits that
are (A) required under all federal, state and local laws, rules, regulations,
ordinances, orders, judgments and decrees, including, without limitation, the
Environmental Laws, for the ownership, use and operation of each property,
facility or location owned, operated or leased by ENSA (the "Property") or (B)
otherwise necessary in the conduct of the business of ENSA, except for failures
to obtain Permits (other than those that would result in the imposition of
criminal sanctions) which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on ENSA and (ii) all such Permits are
in effect, no appeal nor any other action is pending to revoke any such Permit,
and ENSA is in full compliance with all terms and conditions of all such
Permits, except for failures to be in compliance which are not, individually or
in the aggregate, reasonably likely to have a Material Adverse Effect on ENSA.
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(c) To ENSA's best knowledge, ENSA has heretofore delivered to ERD
true and complete copies of all environmental studies in ENSA's possession
relating to the Property or any other property or facility previously owned,
operated or leased by ENSA.
(d) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, or to ENSA's best knowledge,
investigation, proceeding, notice or demand letter pending relating to ENSA or
the Property (or any other property or facility formerly owned, operated or
leased by ENSA) or, to ENSA's best knowledge, threatened relating to ENSA or the
Property (or any other such property of facility) and relating in any way to the
Environmental Laws or any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except for such actions, suits, demands, claims, hearings, notices
of violation, proceedings, notices or demand letters which are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect on
ENSA.
(e) Neither ENSA nor, to ENSA's best knowledge, any other Person has,
Released, placed, stored, buried or dumped any Hazardous Substances, Oils,
Pollutants or Contaminants or any other wastes produced by, or resulting from,
any business, commercial, or industrial activities, operations, or processes,
on, beneath, or adjacent to the Property (or any other property or facility
formerly owned, operated or leased by ENSA) except in the ordinary course of
business of ENSA in accordance with applicable laws and regulations and in a
manner such that there has been no Release of any such substances into the
environment, except where such Releases, placement, storage, burial or dumping
of Hazardous Substances, Oils, Pollutants or Contaminants are not, individually
or in the aggregate, reasonably likely to have a Material Adverse Effect on
ENSA.
(f) To ENSA's best knowledge, no Release or Cleanup occurred at the
Property (or any other property or facility formerly owned, operated or leased
by ENSA) which could result in the assertion or creation of a lien on the
Property by any Governmental Entity with respect thereto, nor has any such
assertion of a lien been made by any Governmental Entity with respect thereto,
except for such Releases, Cleanups or assertions of liens which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on ENSA.
(g) To ENSA's best knowledge, no employee of ENSA in the course of
his or her employment with ENSA has been exposed to any Hazardous Substances,
Oils, Pollutants or Contaminants or any other substance, generated, produced or
used by ENSA which could give rise to any claim against ENSA, except for such
claims which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on ENSA.
(h) ENSA has not received any notice or order from any Governmental
Entity or private or public entity advising it that ENSA is responsible for or
potentially responsible for Cleanup or paying for the cost of Cleanup of any
Hazardous Substances, Oils, Pollutants or Contaminants or any other waste or
substance, and ENSA has not entered
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into any agreements concerning such Cleanup, nor is ENSA aware of any facts
which might reasonably give rise to such notice, order or agreement, except for
such notices, orders or agreements which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on ENSA.
(i) To ENSA's best knowledge, and except for such items which are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on ENSA, the Property does not contain any: (i) underground
storage tanks; (ii) asbestos; (iii) equipment using PCB's; (iv) underground
injection wells; or (v) septic tanks in which process wastewater or any
Hazardous Substances, Oils, Pollutants or Contaminants have been disposed.
(j) To ENSA's best knowledge, with regard to ENSA and the Property
(or any other property or facility formerly owned, operated or leased by ENSA),
and except where the following are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on ENSA, there are no past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent compliance or
continued compliance with the Environmental Laws as in effect on the date hereof
or with any regulation, code, plan, order, decree, judgment, injunction, notice
or demand letter issued, entered, promulgated or approved thereunder, or which
may give rise to any common law or legal liability under the Environmental Laws,
or otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, generation, processing, distribution, use, treatment, storage,
place of disposal, transport or handling, or the Release or threatened Release
into the indoor or outdoor environment by ENSA or a present or former facility
of ENSA, of any Hazardous Substances, Oils, Pollutants or Contaminants.
(k) Other than as a contractor in the ordinary course of business,
ENSA has not entered into any agreement that may require it to pay to,
reimburse, guaranty, pledge, defend, indemnify or hold harmless any person for
or against Environmental Liabilities and Costs. ENSA is not party to any suit
or subject to any claim by any party that it has agreed to indemnify or hold
harmless for or against Environmental Liabilities and costs.
(l) The following terms shall be defined as follows:
"CLEANUP" means all actions required to: (1) cleanup, remove, treat
or remediate Hazardous Substances, Oils, Pollutants or Contaminants in
the indoor or outdoor environment; (2) prevent the Release of
Hazardous Substances, Oils, Pollutants or Contaminants so that they do
not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (3) perform pre-remedial studies
and investigations and post-remedial monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or
potential cleanup, removal, treatment or
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remediation of Hazardous Substances, Oils, Pollutants or Contaminants
in the indoor or outdoor environment.
"ENVIRONMENTAL LAWS" means all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection
of the environment, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Substances, Oils,
Pollutants or Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous Substances, Oils,
Pollutants or Contaminants, and all laws and regulations with regard
to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or Contaminants.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
obligations, responsibilities, obligations to conduct Cleanup, losses,
damages, deficiencies, punitive damages, consequential damages, treble
damages, costs and expenses (including, without limitation, all fees,
disbursements and expenses of counsel, expert and consulting fees and
costs of investigations and feasibility studies and responding to
government requests for information or documents), fines, penalties,
restitution and monetary sanctions, interest, direct or indirect,
known or unknown, absolute or contingent, past, present or future,
resulting from any claim or demand, by any Person, whether based in
contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any
Environmental Law, or arising from environmental, health or safety
conditions, involving the Release or threatened Release of Hazardous
Substances, Oils, Pollutants or Contaminants into the environment, as
a result of past or present ownership, leasing or operation of any
properties, owned, leased or operated by ENSA or ENSA's Subsidiary,
including, without limitation, any of the foregoing incurred in
connection with the conduct of any Cleanup.
"HAZARDOUS SUBSTANCES, OILS, POLLUTANTS OR CONTAMINANTS" means all
substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"RELEASE" means, when used as a noun, any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface strata) or into or out
of any property, including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air, soil,
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surface water, groundwater or property, and when used as a verb, the
occurrence of any Release.
SECTION 3.17 INSURANCE. The insurance policies in force with
respect to the business and properties of ENSA, all of which are listed and
briefly described in Section 3.17 of the ENSA Disclosure Letter, are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
are sufficient for material compliance with all requirements of law and all
agreements to which ENSA is a party; are valid, outstanding and enforceable
policies; and, to ENSA's best knowledge and belief, provide adequate insurance
coverage for the assets and operations of ENSA.
SECTION 3.18 AFFILIATE INTERESTS. (a) Except as disclosed by the
SEC Documents, and except for services provided by ENSA's directors and
executive officers in their capacities as such and the compensation paid
therefor, Section 3.18 of the ENSA Disclosure Letter sets forth all amounts paid
(or deemed for accounting purposes to have been paid) and services provided by
ENSA to, or received by ENSA from, any Affiliate of ENSA since December 31, 1994
and all such amounts currently owed by ENSA to, or to ENSA by, any Affiliate of
ENSA.
(b) Each contract, agreement, plan or arrangement between ENSA on the
one hand and any Affiliate of ENSA on the other hand ("Affiliate Agreements") is
disclosed in Section 3.18 of the ENSA Disclosure Letter. Except as disclosed in
Section 3.18, each of the transactions described in Section 3.18(a) of the ENSA
Disclosure Letter and each of the Affiliate Agreements was entered into in the
ordinary course of business and on commercially reasonable terms and conditions.
SECTION 3.19 CUSTOMERS AND SUPPLIERS. Except as disclosed by the
SEC Documents or in Section 3.19 of the ENSA Disclosure Letter, no customer
which individually accounted for more than 5% of ENSA's gross revenues during
the 12 month period preceding the date hereof, and no supplier of ENSA, has
canceled or otherwise terminated, or made any written threat to ENSA to cancel
or otherwise terminate, its relationship with ENSA, or has at any time on or
after September 30, 1995 decreased materially its services or supplies to ENSA
in the case of any such supplier, or its usage of the services of ENSA in the
case of any such customer, and to ENSA's best knowledge, no such supplier or
customer intends to cancel or otherwise terminate its relationship with ENSA or
to decrease materially its services or supplies to ENSA or its usage of the
services of ENSA, as the case may be. From and after the date hereof, no
customer which individually accounted for more than 5% of ENSA's gross revenues
during the 12 month period preceding the Closing Date, has canceled or otherwise
terminated, or made any written threat to ENSA to cancel or otherwise terminate
prior to a scheduled termination date, for any reason, including without
limitation the consummation of the transactions contemplated hereby, its
relationship prior to a scheduled termination date with ENSA, and to ENSA's best
knowledge, no such customer intends to cancel or otherwise terminate its
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relationship with ENSA or to decrease materially its usage of the services or
products of ENSA. ENSA has not knowingly breached, so as to provide a benefit
to ENSA that was not intended by the parties, any agreement with, or engaged in
any fraudulent conduct with respect to, any customer or supplier of ENSA.
SECTION 3.20 ABSENCE OF QUESTIONABLE PAYMENTS. Neither ENSA nor
any director, officer, agent, employee or other Person acting on behalf of ENSA
has used, or authorized the use of, any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others or
established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act. Neither ENSA nor any current director,
officer, agent, employee or other Person acting on behalf of ENSA, has accepted
or received any unlawful contributions, payments, gifts, or expenditures.
SECTION 3.21 SECTION 203 OF THE DGCL NOT APPLICABLE. The provisions
of Section 203 of the DGCL will not, prior to the termination of this Agreement,
apply to this Agreement, the Merger or the other transactions contemplated
hereby.
SECTION 3.22 DISCLOSURE. No representation or warranty by ENSA in
this Agreement contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, to make the statements herein or therein
not misleading. There is no fact known to ENSA which could have a Material
Adverse Effect on ENSA, which has not been set forth in the SEC Documents or in
this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ERD AND EAC
ERD and EAC represent and warrant to ENSA as follows:
SECTION 4.1 ORGANIZATION. Each of ERD and EAC is a corporation
duly incorporated, validly existing and in good standing under the laws of its
state of organization and has full corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
SECTION 4.2 CORPORATE AUTHORITY. Each of ERD and EAC has full
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
each of ERD and EAC of this Agreement have been duly authorized by all requisite
corporate action on the part of ERD and EAC, respectively. This Agreement has
been duly executed and delivered by each of ERD and EAC, and (assuming due
execution and delivery by ENSA)
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this Agreement constitutes a valid and binding obligation of ERD and EAC,
enforceable in accordance with its terms.
SECTION 4.3 NO VIOLATION; CONSENTS AND APPROVALS. Neither ERD, EAC
nor any of their respective properties or assets, is subject to or bound by any
provision of:
(a) any law, statute, rule, regulation, ordinance or judicial or
administrative decision;
(b) any provision of its certificate of incorporation or by-laws; or
(c) any judgment, order, writ, injunction or decree,
that would impair, prohibit or prevent, or would be violated or breached by, or
under which there would be a material default (with or without notice or lapse
of time, or both) as a result of, the execution, delivery and performance by
each of ERD and EAC of this Agreement and the consummation of the transactions
contemplated hereby, except in the case of any Local Law or Permit, where such
event or occurrence is not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on ERD.
SECTION 4.4 LITIGATION. There is no (i) outstanding consent,
order, judgment, writ, injunction, award or decree of any court or arbitration
tribunal against or involving ERD, or any of its properties or assets, (ii)
action, suit, claim, counterclaim, litigation, arbitration, dispute or
proceeding pending or, to ERD's knowledge, threatened against ERD, or any of its
properties or assets or (iii) to ERD's knowledge, investigation or audit pending
or threatened against or relating to ERD, or any of its respective properties or
assets or any of its officers or directors (in their capacities as such), which,
individually or in the aggregate, is reasonably likely to impair, prohibit or
prevent the consummation of the transactions contemplated hereby.
SECTION 4.5 FINANCING. ERD and the Purchaser have sufficient funds
to enable the Purchaser to purchase all outstanding shares of ENSA Common Stock
pursuant to the Offer and the Merger and all outstanding shares of the Preferred
Stock pursuant to the Preferred Stock Purchase Agreement and the Merger and to
pay all fees and expenses related to the transactions contemplated by this
Agreement.
SECTION 4.6 DISCLOSURE. No representation or warranty by ERD or
EAC in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, to make the statements
herein or therein not misleading.
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ARTICLE V
COVENANTS OF ENSA
ENSA hereby covenants and agrees as follows:
SECTION 5.1 REGULAR COURSE OF BUSINESS. Except as otherwise
consented to in writing by ERD, prior to the Effective Time of the Merger, ENSA
shall carry on its business diligently and in the ordinary course only and,
without limiting the generality of the foregoing, ENSA shall use its best
efforts to (i) preserve its present business organization intact; (ii) keep
available the services of its executive officers and any management or sales
personnel and preserve its present relationships with distributors, customers,
suppliers and other persons having business dealings with it; (iii) maintain its
properties and assets (other than those disposed of in the ordinary course of
business consistent with prior practice) in good repair and condition, except
for ordinary wear and tear; and (iv) maintain its books of account and records
in accordance with GAAP and in the usual, regular and ordinary manner and
consistent with prior practice.
SECTION 5.2 RESTRICTED ACTIVITIES AND TRANSACTIONS. Except as
specifically consented to in writing by ERD, prior to the Effective Time of the
Merger, ENSA shall not:
(a) amend its certificate of incorporation or by-laws;
(b) except pursuant to conversion rights or options in existence on
the date hereof, (none of which conversion rights or options were issued or
created since the end of ENSA's last fiscal year) issue, sell or deliver,
or agree to issue, sell or deliver, any shares of any class of capital
stock of ENSA, any securities convertible into any such shares or
convertible into securities in turn so convertible or any options, warrants
or other rights calling for the issuance, sale or delivery of any such
shares or convertible securities;
(c) encumber any of its properties or assets, except for Permitted
Encumbrances;
(d) except in the ordinary course of business (and consistent with
prior practice), (i) borrow, or agree to borrow, any funds or voluntarily
incur, assume or become subject to, whether directly or by way of guaranty
or otherwise, any obligation or liability (absolute or contingent), (ii)
cancel or agree to cancel any debts or claims, (iii) lease, sublease, sell
or otherwise transfer, agree to lease, sublease, sell or otherwise
transfer, or grant or agree to grant any preferential rights to lease or
otherwise acquire, any of its properties or assets, (iv) make or agree to
make any capital expenditure in excess of $25,000 in any individual case
or $100,000 in the aggregate, (v) make or permit any amendment or
termination of any Contract or (iv) terminate service to any customer;
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(e) grant any increase in compensation to any employee (except in the
ordinary course of business and consistent with prior practice), officer or
director of ENSA or any sales agent, terminate any employment agreement
or sales agency agreement with any sales agent or enter into any agreement
to make any special bonus payment to or severance arrangement with any
employee (except in the ordinary course of business and consistent with
prior practice), officer, director or agent of ENSA;
(f) enter into or make any change in any employee benefit program,
except as required by law;
(g) acquire control or ownership of any Person, or acquire control or
ownership of the customer list or any other substantial portion of the
assets of any Person, or merge, consolidate or otherwise combine with any
other Person, or enter into any agreement providing for any of the
foregoing;
(h) except in the ordinary course of business, change in any material
respect any arrangement with any agent, distributor or material customer or
supplier or change the accounting practices and principles utilized in the
preparation of the Financial Statements or the method of recognition of
revenue;
(i) except in the ordinary course of business, enter into or agree to
enter into any transaction except for the settlement of ENSA's litigation
with ENSR, Inc. as described in Section 3.14 of the ENSA Disclosure Letter;
(j) except as required for the Series B or Series C Stockholders,
declare or pay any dividend or make any distribution on its capital stock
in cash, stock or property, redeem, repurchase or otherwise acquire any
shares of ENSA Common Stock or Preferred Stock;
(k) fail duly and timely (by the due date or any duly granted
extension thereof) to file any Tax Reports or Tax Returns required to be
filed with federal, state, local, foreign and other authorities; or
(l) unless it is contesting the same in good faith and, if
appropriate, has established reasonable reserves therefor, fail either (i)
promptly to pay any Taxes that are shown on such returns or otherwise
lawfully levied or assessed upon or payable by it or on or with respect to
any of its properties or assets, or (ii) to withhold, collect and pay to
the proper governmental authorities, or hold in separate bank accounts for
such payment, any Taxes and other assessments that are required by law to
be so withheld, collected and paid or so held.
For purposes of this Section 5.2, no action by ENSA involving, or for the direct
or indirect benefit of, any Affiliated Person shall be considered an action in
the ordinary course of business.
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SECTION 5.3 STOCKHOLDERS' MEETING. If approval or action in
respect of the Merger by the stockholders of ENSA is required by applicable law,
ENSA shall (i) if appropriate, call a meeting of its stockholders (the
"Stockholder Meeting") for the purpose of voting upon the Merger and shall use
its reasonable best efforts to obtain stockholder approval of the Merger, (ii)
hold the Stockholder Meeting as soon as practicable following the purchase of
shares of ENSA Common Stock pursuant to the Offer and the purchase of the
Preferred Stock pursuant to the Preferred Stock Purchase Agreement,
(iii) recommend to its stockholders the approval of the Merger through its Board
of Directors, and (iv) use its reasonable best efforts to obtain the necessary
approvals by its stockholders of the Merger, this Agreement and the transactions
contemplated hereby, but subject in each case to the fiduciary duties of its
Board of Directors under applicable law as determined by the Board of Directors
in good faith after consultation with ENSA's counsel. The record date for the
Stockholder Meeting shall be a date subsequent to the date ERD or EAC becomes a
record holder of ENSA Common Stock purchased pursuant to the Offer and of the
Preferred Stock pursuant to the Preferred Stock Purchase Agreement.
SECTION 5.4 PROXY STATEMENT. If required by applicable law, ENSA
will, as soon as practicable following the expiration of the Offer, prepare and
file a preliminary version of the proxy statement to be sent to the stockholders
of ENSA in connection with the Stockholders Meeting (the "Proxy Statement"), or,
if applicable, an information statement in lieu of a proxy statement pursuant to
Rule 14C under the Exchange Act (with all references herein to the Proxy
Statement being deemed to refer to such information statement, to the extent
applicable) with the SEC with respect to the Stockholders Meeting and will use
its reasonable best efforts to respond to any comments of the SEC or its staff
and to cause the Proxy Statement to be cleared by the SEC. ENSA will notify ERD
of the receipt of any comments from the SEC or its staff and of any request by
the SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply ERD with copies of all correspondence
between ENSA or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement or the Merger.
ENSA shall give ERD and its counsel the opportunity to review the Proxy
Statement prior to its being filed with the SEC and shall give ERD and its
counsel the opportunity to review all amendments and supplements to the Proxy
Statement and all responses to requests for additional information and replies
to comments prior to their being filed with, or sent to, the SEC. Each of ENSA
and ERD agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of and requests
by the SEC. As promptly as practicable after the Proxy Statement has been
cleared by the SEC, ENSA shall mail the Proxy Statement to the stockholders of
ENSA. If at any time prior to the approval of this Agreement by ENSA's
stockholders there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, ENSA will prepare and mail to
its stockholders such an amendment or supplement. ENSA represents and warrants
to ERD and EAC that the Proxy Statement (x) will not, on the date the Proxy
Statement (or any amendment or supplement thereto) is first mailed to
stockholders, at the time of the Stockholders Meeting, or at the Effective Time
of the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light
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of the circumstances under which they are made, not misleading; and (y) will
comply in all material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, ENSA makes no representation or warranty with
respect to any information supplied by ERD or EAC in writing for inclusion in
the Proxy Statement.
Section 5.5 MERGER WITHOUT MEETING OF STOCKHOLDERS. In the event
that EAC, or any other direct or indirect subsidiary of ERD, shall acquire at
least 90% of the outstanding shares of ENSA Common Stock and at least 90% of the
outstanding shares of each of Series B Preferred Stock and Series C Preferred
Stock, the parties shall take all necessary and appropriate action to cause the
Merger to become effective as soon as practicable after the expiration of the
Offer without a meeting of stockholders of ENSA, in accordance with Section 253
of the DGCL.
SECTION 5.6 ACCESS TO INFORMATION. ENSA agrees that ERD and EAC
may conduct such reasonable investigation with respect to the business, business
prospects, assets, liabilities (contingent or otherwise), results of operations,
employees and financial condition of ENSA as will permit ERD and ENSA to
evaluate their interest in the transactions contemplated by this Agreement.
SECTION 5.7 ADDITIONAL AGREEMENTS; BEST EFFORTS. ENSA shall use
its best efforts to take, or cause to be taken, all action and, to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate votes of the stockholders of ENSA,
including cooperation fully with ERD and EAC, including by provision of
information and making all necessary filings in connection with, among other
things, any approvals required from Governmental Entities. In case at any time
after the Effective Time of the Merger any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of ENSA shall take all such necessary action.
SECTION 5.8 NO SOLICITATION. ENSA shall not, prior to May 17,
1996, and shall not authorize or permit any of its officers, directors or
employees or any investment banker, financial adviser, attorney, accountant or
other representative retained by it to, (a) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal, or (b) agree to or
endorse any Takeover Proposal. Notwithstanding the immediately preceding
sentence, if ENSA shall not have breached the covenant provided by clause (a) of
the immediately preceding sentence and a Takeover Proposal, or a written
expression of interest that can reasonably be expected to lead to a Takeover
Proposal, shall occur, then, to the extent necessary in the written opinion of
legal counsel to ENSA or its Board of Directors consistent with the fiduciary
obligations of ENSA's Board of Directors, ENSA and its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives retained by it may furnish in connection therewith
information and take such other actions as are consistent with the fiduciary
obligations of ENSA's Board of Directors, and such actions
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shall not be considered a breach of this Section 5.8 or any other provision of
this Agreement. ENSA shall promptly advise ERD orally and in writing of any
inquiries or Takeover Proposals. In the event (i) the stock or assets of ENSA
are sold to a third party making a Takeover Proposal, for consideration greater
than the consideration to be paid by ERD pursuant to this Agreement, or (ii) the
Board of Directors of ENSA shall have failed to recommend or shall have
withdrawn, modified or amended in any material respect its approval or
recommendations of the Offer or the Merger or shall have resolved to do any of
the foregoing, ENSA shall pay to ERD the sum of $100,000 as liquidated damages.
As used in this Agreement, "Takeover Proposal" shall mean any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving ENSA and made by a Person other than ERD or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial portion
of the assets of, ENSA other than the transactions contemplated by this
Agreement, which is received by ENSA prior to the termination of this Agreement.
SECTION 5.9 ADVICE OF CHANGES; SEC FILINGS. ENSA shall confer on a
regular and frequent basis with ERD, report on operational matters and promptly
advise ERD of any change or event having, or which, insofar as can reasonably be
foreseen, could have, a Material Adverse Effect on ENSA. ENSA shall promptly
provide ERD (or its counsel) copies of all filings made by it with any state or
federal governmental entity in connection with this Agreement and the
transactions contemplated hereby.
SECTION 5.10 ACTIONS AT REQUEST OF ERD. Between the date hereof and
the Closing, the President of ERD shall be permitted to recommend to Colin that
certain actions be taken by ENSA or that certain activities cease. In the event
that Colin does not agree with such recommendation, the matter shall be resolved
by a majority vote of a quorum of the board of directors of ENSA.
SECTION 5.11 ACTIONS AT CLOSING. ENSA shall take all actions
required to be taken at Closing by the terms of this Agreement.
ARTICLE VI
COVENANTS OF EAC AND ERD
EAC and ERD hereby covenant and agree as follows:
SECTION 6.1 AMENDMENT OF ERD STOCK OPTION PLAN. The board of
directors of ERD shall authorize an amendment to its Employee Stock Option Plan
to (i) increase the number of authorized options thereunder to a number which
will be sufficient for the grant of all options required to be granted pursuant
to this Agreement and (ii) permit the grant of options to consultants, and shall
recommend ratification of such amendments by ERD's stockholders at the next
meeting of its stockholders.
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SECTION 6.2 REGISTRATION OF EMPLOYEE STOCK OPTIONS ON FORM S-8.
Prior to the Closing Date, ERD shall file with the SEC a Form S-8 registration
statement with respect to its employee stock option plan, and the shares and
options covered thereby.
SECTION 6.3 EMPLOYMENT AGREEMENTS. At or prior to the Closing, EAC
shall execute and deliver the Colin Employment Agreement and the Jacobsen
Employment Agreement.
SECTION 6.4 OPTION AGREEMENTS. At or prior to the Closing, EAC
shall execute and deliver the Colin Option Agreement and the Jacobsen Option
Agreement.
SECTION 6.5 VOTE IN FAVOR OF MERGER. ERD agrees to cause all
shares of ENSA Common Stock purchased pursuant to the Offer, all shares of
Preferred Stock purchased pursuant to the Preferred Stock Purchase Agreement and
all other shares of ENSA Common Stock and Preferred Stock owned by EAC or any
other subsidiary or affiliate of ERD to be voted in favor of the approval of the
Merger.
SECTION 6.6 INFORMATION IN PROXY STATEMENT. ERD and EAC represent
and warrant to ENSA that the information supplied by ERD or EAC in writing for
inclusion in the Proxy Statement (or any amendment or supplement thereto) will
not, on the date the Proxy Statement is first mailed to stockholders, at the
time of the Stockholders Meeting or at the Effective Time of the Merger contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 6.7 CONFIDENTIAL INFORMATION. Each of ERD and EAC will
hold and will cause their respective representatives to hold in strict
confidence, unless compelled to disclose by judicial or administrative process,
or, in the opinion of its counsel, by other requirements of law, all documents
and information concerning ENSA furnished to ERD and EAC in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (a) previously known by ERD or EAC prior
to its disclosure to ERD or EAC by ENSA, (b) in the public domain through no
fault of ERD or EAC or (c) later lawfully acquired by the ERD or EAC from other
sources that are not under an obligation of confidentiality) and will not
release or disclose such information to any other Person, except in connection
with this Agreement to its lenders, auditors, attorneys, financial advisors and
other consultants and advisors.
SECTION 6.8 ACTIONS AT CLOSING. Each of ERD and EAC shall take all
actions required to be taken at Closing pursuant to the terms of this Agreement.
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ARTICLE VII
MUTUAL COVENANTS
Each of the parties to this Agreement hereby covenants and agrees, as
to itself, as follows:
SECTION 7.1 EXPENSES. Each party shall pay all costs and expenses
incurred by such party in connection with the transactions contemplated by this
Agreement, whether or not the transactions contemplated hereby are consummated;
PROVIDED, HOWEVER, ENSA shall not pay fees of its counsel in excess of $100,000
for services relating to the Merger without the written consent of ERD.
SECTION 7.2 PUBLIC ANNOUNCEMENTS. None of the parties hereto shall
make any disclosure to the public concerning this Agreement or the transactions
contemplated hereby other than with the express written consent of the other
parties hereto, except as may be required by law, or by rule, regulation or
announcement of a governmental or quasi-governmental agency. To the extent
reasonably practicable, any press release proposed to be issued by any party
hereto shall be submitted to the other parties hereto for approval, which
approval shall not be unreasonably withheld or delayed.
SECTION 7.3 BOARD REPRESENTATION. (a) Within five business days
after the consummation of the Offer, ERD shall designate no less than three
designees to be appointed to the Board of Directors of ENSA and ENSA will take
such steps as will be necessary to cause designees of ERD to be appointed to
constitute a majority of the Board of Directors of ENSA. It is contemplated
that the number of directors will be set at five, and that Joseph T. Jacobsen
and Jon Colin will continue to serve as directors on ENSA's Board of Directors
but that all other members of ENSA's Board of Directors will resign from the
Board. ENSA shall, upon request by ERD, promptly increase the size of the Board
of Directors and/or exercise its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable ERD's
designees to be elected to the Board of Directors and shall cause ERD's
designees to be so elected. ENSA shall take, at its expense, all action required
pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 7.3 and shall include in the Schedule 14D-9 or otherwise
timely mail to its stockholders such information with respect to ENSA and its
officers and directors as is required by Section 14(f) and Rule 14f-1 in order
to fulfill its obligations under this Section 7.3. ERD will supply to ENSA in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1.
(b) Following the election of designees of ERD pursuant to this
Section 7.3, prior to the Effective Time of the Merger, any amendment of this
Agreement or the Certificate of Incorporation or Bylaws of ENSA, any termination
of this Agreement by ENSA, any extension by ENSA of the time for the performance
of any of the obligations or other acts of ERD or EAC or waiver of any of ENSA's
rights or obligations hereunder shall
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require the concurrence of a majority of the directors of ENSA then in office
who are directors as of the date hereof or persons designated by such directors
and neither were designated by ERD nor are employees of ENSA ("Continuing
Directors"). Prior to the Effective Time of the Merger, ENSA and ERD shall use
all reasonable efforts to ensure that ENSA's Board of Directors at all times
includes at least two Continuing Directors.
SECTION 7.4 FURTHER ASSURANCES. Each party hereto agrees to
execute and deliver such instruments and take such other actions as any other
such party may reasonably request in order to carry out the intent of this
Agreement.
SECTION 7.5 PREPARATION OF REQUIRED FILINGS. ERD and EAC, on the
one hand, and ENSA on the other hand, shall (a) cooperate with one another in
determining whether any filings are required to be made or consents or approvals
are required to be obtained in any jurisdiction in connection with the
consummation of the transactions contemplated hereby and in making any such
filings promptly and in seeking to obtain timely any such consents or approvals,
and (b) use their best efforts to cause the satisfaction of the conditions
within their control to the others' obligation at the Closing. The respective
parties shall each furnish to one another and to one another's counsel all such
information as may be required in order to fulfill the foregoing obligations.
SECTION 7.6 REPRESENTATIONS TO REMAIN ACCURATE. None of the
parties hereto will take, agree to take, or knowingly permit to be taken any
action or do or knowingly permit to be done anything in the conduct of their
respective businesses, or otherwise, which would cause any of the respective
representations of the parties contained herein to be or become untrue in any
material respect on or before Closing.
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the Merger of the
following conditions:
(a) STOCKHOLDER APPROVAL. If approval of the Merger by the holders
of the ENSA Common Stock and/or the holders of the Preferred Stock is
required by applicable law, the Merger shall have been approved by the
requisite vote of such holders.
(b) NO ORDER. No court or other Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree or injunction which prohibits or has
the effect of prohibiting the consummation of the Merger; PROVIDED,
HOWEVER, that, prior to invoking this provision, ENSA, ERD
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and EAC shall use their reasonable best efforts (subject to the other terms
and conditions of this Agreement) to have any such order, decree or
injunction vacated.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION.
This Agreement may be terminated:
(a) by the mutual consent in writing of ERD and ENSA;
(b) by ERD or by ENSA,
(i) if either (x) as the result of the failure of the
Minimum Condition or the occurrence of any of the other
conditions set forth in Exhibit A hereto, the Offer shall have
terminated or expired in accordance with its terms without EAC
having purchased any shares of ENSA Common Stock pursuant to the
Offer, or (y) the Offer shall not have been consummated on or
before May 17, 1996;
(ii) upon a vote at a duly held meeting or upon any
adjournment thereof, the stockholders of ENSA shall have failed
to give any approval required by applicable law; or
(iii) at any time after September 30, 1996, (or such
later date as shall have been agreed to in writing by ERD and
ENSA), PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this clause shall not be available (x) if
EAC or any affiliate of EAC acquires ENSA Common Stock pursuant
to the Offer, or (y) to any party whose failure to fulfill any
obligation of this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or prior to the
aforesaid date.
(c) by ERD, if there has been a material misrepresentation by ENSA,
or a material breach on the part of ENSA of any of their warranties or
covenants set forth herein, or a material failure on the part of ENSA to
comply with any of their other obligations hereunder; or by ENSA if there
has been a material misrepresentation by ERD, or a material breach on the
part of ERD of any of its warranties or covenants set forth herein, or a
material failure on the part of ERD to comply with any of its other
obligations hereunder; PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this clause shall not be available to ERD if EAC or
any affiliate of EAC shall acquire shares of ENSA Common Stock pursuant to
the Offer;
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(d) by ERD if the Board of Directors of ENSA shall have failed to
recommend or shall have withdrawn, modified or amended in any material
respect its approval or recommendations of the Offer or the Merger or shall
have resolved to do any of the foregoing; or
(e) by ENSA if:
(i) the Offer has not been timely commenced (except as a result
of actions or omissions by ENSA) in accordance with Section 1.1(a); or
(ii) there is a Takeover Proposal which the Board of Directors of
ENSA in good faith determines represents a financially superior
transaction for the stockholders of ENSA as compared to the Offer and
the Merger, and the Board of Directors of ENSA determines, after
consultation with its counsel, that failure to terminate this
Agreement would be inconsistent with the compliance by the Board of
Directors with its fiduciary duties to stockholders imposed by law;
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant
to this clause shall not be available if ENSA has breached in any
material respect its obligations under Section 5.8.
The exercise of the power of termination provided in this Section 9.1 shall be
effective only after written notice thereof, signed on behalf of the party
exercising such power by its duly authorized officer, shall have been given to
the other parties. If this Agreement is terminated in accordance with this
Article IX, the Merger shall be abandoned without further action by ENSA or ERD.
SECTION 9.2 CERTAIN LIABILITIES. In the event of a termination
pursuant to Section 9.1(a) or 9.1(b) hereof, the transactions contemplated
herein shall be abandoned without any liability or further obligation of any
party to any other party to this Agreement but, in the case of a termination
pursuant to any other subsection of Section 9.1 hereof, such termination shall
be without prejudice to a party's remedies in respect of a breach, default or
nonfulfillment of any representation, warranty, covenant or obligation hereunder
by any other party to this Agreement occurring prior to the date of termination.
In the event that any breach, default or nonfulfillment of any representation,
warranty, covenant or obligation hereunder on the part of a party hereto shall
have occurred, in addition to any other remedy, the non-defaulting party shall
be entitled to seek and obtain an order of specific performance thereof against
the defaulting party from a court of competent jurisdiction.
ARTICLE X
POST CLOSING COVENANTS
Section 10.1 DEPOSIT OF FUNDS WITH EXCHANGE AGENT. Within five (5)
business days following the Closing, EAC and ERD shall deposit with the Exchange
Agent
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sufficient funds to pay to ENSA stockholders the amounts to which they are
entitled to receive upon surrender of the certificates representing the ENSA
Common Stock ("Conversion Payments"), and shall cause the Letter of Transmittal
to be mailed to each holder of record of ENSA Common Stock, other than ERD and
holders of Dissenting Shares.
SECTION 10.2 MAILING OF CONVERSION PAYMENTS. ERD and EAC, jointly
and severally, shall take all appropriate actions to cause Conversion Payments
to be mailed to each ENSA stockholder within three (3) business days following
receipt by the Exchange Agent of certificates representing shares converted into
the right to receive the Conversion Payments and a duly executed Letter of
Transmittal from such stockholder.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND COVENANTS; INDEMNITY
SECTION 11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations and warranties and covenants of ENSA, ERD and EAC
contained in this Agreement or in any Exhibit or any certificate or other
document delivered pursuant hereto shall survive until the Effective Time of the
Merger and the consummation of the transactions contemplated by this Agreement.
The representations and warranties contained in this Agreement or any document
delivered pursuant hereto shall not be affected or deemed waived by reason of
the fact that any other party to this Agreement and/or its representatives knew
or should have known that any such representation or warranty is or might be
inaccurate in any respect.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1 ENTIRE AGREEMENT. This Agreement (including all
Schedules and Exhibits hereto), together with the other documents and
certificates delivered hereunder, state the entire agreement of the parties,
merge all prior negotiations, agreements and understandings, if any, and state
in full all representations, warranties and agreements which have induced this
Agreement, except that any confidentiality agreements heretofore executed and
delivered by the parties hereto shall not be so merged and shall continue in
full force and effect. Each party agrees that in dealing with third parties no
contrary representations will be made.
SECTION 12.2 NOTICES. All notices and demands of any kind which any
party hereto may be required or desire to serve upon another party under the
terms of this Agreement shall be in writing and shall be served upon such other
party: (a) by personal service upon such other party at such other party's
address set forth on the signature pages of
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this Agreement; or (b) by mailing a copy thereof by certified or registered
mail, postage prepaid, with return receipt requested, addressed to such other
party at the address of such other party set forth on the signature pages of
this Agreement; or (c) by sending a copy thereof by Federal Express or
equivalent courier service, addressed to such other party at the address of such
other party set forth on the signature pages of this Agreement; or (d) by
sending a copy thereof by facsimile to such other party at the facsimile number,
if any, of such other party set forth on the signature pages of this Agreement.
In case of service by Federal Express or equivalent courier service or
by facsimile or by personal service, such service shall be deemed complete upon
receipt. In the case of service by mail, such service shall be deemed complete
upon reasonable proof of receipt. The addresses and facsimile numbers to which,
and persons to whose attention, notices and demands shall be delivered or sent
may be changed from time to time by notice served, as hereinabove provided, by
any party upon the other parties.
SECTION 12.3 AMENDMENT. This Agreement may be modified or amended
only by an instrument in writing, duly executed by all of the parties hereto.
SECTION 12.4 NONWAIVER. No waiver by any party of any term,
provision, covenant, representation or warranty contained in this Agreement (or
any breach thereof) shall be effective unless it is in writing executed by the
party against which such waiver is to be enforced; no waiver shall be deemed or
construed as a further or continuing waiver of any such term, provision,
covenant, representation or warranty (or breach) on any other occasion or as a
waiver of any other term, provision, covenant, representation or warranty (or
of the breach of any other term, provision covenant, representation or
warranty) contained in this Agreement on the same or any other occasion.
SECTION 12.5 COUNTERPARTS. For the convenience of the parties, any
number of counterparts hereof may be executed, each such executed counterpart
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
SECTION 12.6 ASSIGNMENT; BINDING NATURE; NO BENEFICIARIES. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that
this Agreement may not be transferred, assigned, pledged or hypothecated by any
party hereto, other than by operation of law. This Agreement shall not confer
any rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns, except that Colin and Jacobsen are
intended beneficiaries of Sections 2.6(i) through 2.6(v) hereof, and shall hhav
ethe right to enforce such sections to the same extent as any party hereto..
SECTION 12.7 HEADINGS. The headings in this Agreement are inserted
for convenience only and shall not constitute a part hereof.
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SECTION 12.8 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware applicable to contracts made and to be entirely performed
therein. In the event of any controversy or claim arising out of or relating to
this Agreement or any agreement entered into in connection herewith or the
breach or alleged breach hereof or thereof. Each of the parties hereto agrees
that service of process or of any other papers upon such party by registered
mail at the address to which notices are required to be sent to such party under
Section 12.2 shall be deemed good, proper and effective service upon such party.
SECTION 12.9 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the covenants contained in this Agreement and the agreements
entered into in connection herewith are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the covenants contained in this Agreement and
the agreements entered into in connection herewith and to enforce specifically
this Agreement and the agreements entered into in connection herewith in
addition to any other remedy to which such other parties may be entitled at law
or in equity, without proving damages or that monetary damages would not be an
adequate remedy for such breach. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or available hereunder shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
available hereunder.
SECTION 12.10 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. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
SECTION 12.11 CONSTRUCTION. In this Agreement (i) words denoting the
singular include the plural and vice versa, (ii) "it" or "its" or words denoting
any gender include all genders, (iii) the word "including" shall mean "including
without limitation", whether or not expressed, (iv) any reference to a statute
shall mean the statute and any regulations thereunder in force as of the date of
this Agreement or the Closing Date, as applicable, unless otherwise expressly
provided, (v) any reference herein to a Section, Article, Schedule or Exhibit
refers to a Section or Article of or a Schedule or Exhibit to this Agreement,
unless otherwise stated, (vi) "business day" means any day other than a day on
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<PAGE>
which commercial banks in New York, New York are authorized or required by law
to be closed for business, (vii) any reference to a party's "best efforts" or
"reasonable efforts" shall not include any obligation of such party to pay, or
guaranty the payment of, money or other consideration to any third party or to
the imposition on such party or its Affiliates of any conditions reasonably
considered by such party to be materially burdensome to such party or its
Affiliates, and (viii) except as otherwise expressly provided herein, all dollar
amounts are expressed in United States funds.
[SIGNATURE PAGES TO FOLLOW]
- 42 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date and year first written above.
ENVIRONMENTAL SERVICES OF AMERICA,
INC.
By: /s/ Jon Colin
-----------------
Name: Jon Colin
Title: President
Attn: Jon Colin
Address:
Environmental Services of America, Inc.
937 East Hazelwood Avenue
Rahway, NJ 07065
Facsimile No.: (908) 381-7887
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<PAGE>
ERD WASTE CORP.
By: /s/ Joseph Wisneski
----------------------
Name: Joseph Wisneski
Title: President
Attn: Joseph Wisneski
Address:
ERD Waste Corp.
356 Veterans Memorial Highway
Commack, NY 11725
Facsimile No.: (516) 543-0678
ENSA ACQUISITION CORP.
By: /s/ Joseph Wisneski
-------------------
Name: Joseph Wisneski
Title: President
Attn: Joseph Wisneski
Address:
ENSA Acquisition Corp.
c/o ERD Waste Corp.
356 Veterans Memorial Highway
Commack, NY 11725
Facsimile No.: (516) 543-0678
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<PAGE>
LIST OF EXHIBITS
Exhibit A - Conditions of the Offer
Exhibit B - Certificate of Merger
- 45 -
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or this Agreement, EAC shall
not be required to accept for payment or pay for, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) of the Exchange Act,
any shares of ENSA Common Stock not theretofore accepted for payment or paid for
and may terminate or amend the Offer as to such shares of ENSA Common Stock,
unless there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of shares of ENSA Common Stock which would
represent at least a majority of the outstanding shares of ENSA Common Stock
exclusive of the 500,000 shares of ENSA Common Stock held in escrow pursuant
to the terms of the Securities Purchase Agreement, dated January 25, 1995,
between ERD and ENSA, on a fully diluted basis (the "Minimum Condition").
Furthermore, notwithstanding any other term of the Offer or this Agreement, EAC
shall not be required to accept for payment or, subject as aforesaid, to pay for
any shares of ENSA Common Stock not theretofore accepted for payment or paid
for, and may terminate or amend the Offer if at any time on or after the date of
this Agreement and before the acceptance of such shares of ENSA Common Stock for
payment or the payment therefor, any of the following conditions exist or shall
occur and remain in effect:
(a) there shall have been instituted, pending or threatened any
action or proceeding by any court or other Governmental Entity, which (i)
seeks to challenge the acquisition by ERD or EAC (or any of its affiliates)
of shares of ENSA Common Stock pursuant to the Offer, restrain, prohibit or
delay the making or consummation of the Offer or the Merger, or obtain
damages in connection therewith in an amount which would reasonably be
expected to have a Material Adverse Effect, (ii) seeks to make the purchase
of or payment for some or all of the shares of ENSA Common Stock pursuant
to the Offer or the Merger illegal, (iii) seeks to impose limitations on
the ability of ERD (or any of its affiliates) effectively to acquire or
hold, or to require ERD or ENSA or any of their respective affiliates or
subsidiaries to dispose of or hold separate, any portion of the assets or
the business of ERD and its affiliates or any material portion of the
assets or the business of ENSA and its subsidiaries taken as a whole, (iv)
seeks to impose material limitations on the ability of ERD (or its
affiliates) to exercise full rights of ownership of the shares of ENSA
Common Stock purchased by it, including, without limitation, the right to
vote the shares purchased by it on all matters properly presented to the
stockholders of ENSA, or (v) seeks to restrict any future business activity
by ERD (or any of its affiliates), including, without limitation, requiring
the prior consent of any person or entity (including any Governmental
Entity) to future transactions by ERD (or any of its affiliates); or
(b) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any statute, rule,
regulation, judgment, decree, order or injunction, that is reasonably
likely to directly or indirectly result in any of the consequences referred
to in clauses (i) through (v) of subsection (a) above; or
(c) the Agreement shall have been terminated in accordance with its
terms; or
(d) any of the representations and warranties made by ENSA in the
Agreement shall not have been true and correct in all material respects
when made, or shall thereafter have
A-1
<PAGE>
ceased to be true and correct in all material respects as if made as of
such later date (other than representations and warranties made as of a
specified date), or ENSA shall not in all material respects have performed
in a timely manner each obligation and agreement and complied in a timely
manner with each covenant to be performed and complied with by it under the
Agreement; or
(e) ENSA's Board of Directors shall have modified or amended its
recommendation of the Offer in any manner adverse to ERD or shall have
withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Takeover Proposal or shall have resolved to do any of the
foregoing; or
(f) NYC any corporation, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) ("person"), other than ERD and EAC, shall
have acquired beneficial ownership of more than 20% of the outstanding
shares of ENSA Common Stock, or shall have been granted any options or
rights, conditional or otherwise, to acquire a total of more than 20% of
the outstanding shares of ENSA Common Stock; (ii) any new group shall have
been formed which beneficially owns more than 20% of the outstanding shares
of ENSA Common Stock; or (iii) any person (other than ERD or one or more of
its affiliates) shall have entered into an agreement in principle or
definitive agreement with ENSA with respect to a tender or exchange offer
for any shares of ENSA Common Stock or a merger, consolidation or other
business combination with or involving ENSA; or
(g) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the New York Stock
Exchange, the American Stock Exchange or The Nasdaq Stock Market, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement or escalation of a war, armed hostilities or other
international or national calamity directly involving the United States,
(iv) any material limitation (whether or not mandatory) by any Governmental
Entity on, or any other event that is reasonably likely materially and
adversely to affect the extension of credit by banks or other lending
institutions in the United States, (v) any decline in either the Dow Jones
Industrial Average or the Standard and Poor's 500 Index by an amount in
excess of 15% measured from the close of business on the date of this
Agreement, or (vi) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or worsening
thereof; or
(h) any change, development, effect or circumstance shall have
occurred or be threatened that would reasonably be expected to have a
Material Adverse Effect; or
(i) ENSA shall commence a case under any chapter of Title XI of the
United States Code or any similar law or regulation; or a petition under
any chapter of Title XI of the United States Code or any similar law or
regulation is filed against ENSA which is not dismissed within 2 business
days.
The foregoing conditions, with the exception of the condition set forth in
paragraph (c), are for the sole benefit of ERD and EAC and may be asserted by
ERD or EAC regardless of the circumstances giving rise to any such condition and
may be waived by ERD or EAC, in whole or in
A-2
<PAGE>
part, at any time and from time to time, in the sole discretion of ERD. The
failure by ERD or EAC at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any right, the waiver of such right with respect to
any particular facts or circumstances shall not be deemed a waiver with respect
to any other facts or circumstances, and each right shall be deemed an ongoing
right which may be asserted at any time and from time to time. The condition
set forth in paragraph (c) is for the mutual benefit of ENSA, ERD and EAC and
cannot be waived by EAC or ERD without the written consent of ENSA, provided,
however, that in the event ENSA terminates the Merger Agreement pursuant to
Section 9.1(e)(ii), the consent of ENSA will not be required.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of ENSA Common Stock not theretofore accepted for payment shall
forthwith be returned by the Exchange Agent to the tendering stockholders.
A-3
<PAGE>
EXHIBIT B
CERTIFICATE OF MERGER
OF
ENSA ACQUISITION CORP.
AND
ENVIRONMENTAL SERVICES OF AMERICA, INC.
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(i) ENSA ACQUISITION CORP., which is incorporated under the laws of the
State of Delaware; and
(ii) ENVIRONMENTAL SERVICES OF AMERICA, INC., which is incorporated
under the laws of the State of Delaware.
2. An Amended and Restated Agreement of Merger has been approved, adopted,
certified, executed, and acknowledged by each of the aforesaid constituent
corporations in accordance with the provisions of subsection (c) of Section 251
of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation in the merger herein certified is
Environmental Services of America, Inc., which will continue its existence as
said surviving corporation under its present name upon the effective date of
said merger pursuant to the provisions of the General Corporation Law of the
State of Delaware.
4. The Certificate of Incorporation of Environmental Services of America,
Inc., as now in force and effect, shall continue to be the Certificate of
Incorporation of said surviving corporation until amended and changed pursuant
to the provisions of the General Corporation Law of the State of Delaware.
B-1
<PAGE>
5. The executed Amended and Restated Agreement of Merger between the
aforesaid constituent corporations is on file at the principal place of
business of the aforesaid surviving corporation, the address of which is as
follows: Environmental Services of America, Inc., 937 East Hazelwood Avenue,
Rahway, New Jersey 07065.
6. A copy of the aforesaid Amended and Restated Agreement of Merger will
be furnished by the aforesaid surviving corporation, on request, and without
cost, to any stockholder of each of the aforesaid constituent corporations.
B-2
<PAGE>
Dated:_____________, 1996
ENSA ACQUISITION CORP.
By:______________________
Its President
Dated:_____________, 1996
ENVIRONMENTAL SERVICES
OF AMERICA, INC.
By:______________________
Its President
B-3
<PAGE>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of January 25, 1996, by and between ENVIRONMENTAL SERVICES OF AMERICA,
INC., a Delaware corporation (the "Company"), and ERD WASTE CORP., a Delaware
corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, in connection with the proposed merger (the "Merger") of ENSA
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of
Purchaser ("EAC"), with and into the Company, the Company, Purchaser and EAC
have, simultaneously with the execution of this Agreement, entered into an
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement");
and
WHEREAS, subject to the terms and conditions set forth herein, Purchaser
desires to purchase from the Company, and the Company desires to issue, sell and
deliver to Purchaser (i) a promissory note having principal amount of $500,000
(the "Note") in substantially the form attached hereto as Exhibit A, and (ii)
five hundred thousand (500,000) shares (the "Shares", and together with the
Note, the "Securities") of the Company's Common Stock, par value $.02 per share
(the "Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings
ascribed to them in this Section 1.
"BUSINESS DAY" means any day that is not a Saturday or Sunday or a legal
holiday on which banks are authorized or required to be closed in New York, New
York.
"CERTIFICATES" shall have the meaning set forth in Section 2.1 hereto.
"CHANGE OF CONTROL EVENT" means any (i) merger, consolidation or other
business combination involving the Company or any of its Subsidiaries, (ii) any
acquisition in any manner of a substantial equity interest in, or a substantial
portion of the assets of, the Company or any Subsidiary, PROVIDED, HOWEVER that
no event described in either clause (i) or
<PAGE>
clause (ii) above shall constitute a Change of Control Event if (x) Purchaser
shall have consented in writing to such event, or (y) the proceeds of such event
are used to repay amounts owing under (1) the UJB Loan Agreement, (2) any other
indebtedness that is secured by assets of the Company or any Subsidiary, or (3)
the Note.
"CLOSING" has the meaning set forth in Article III.
"COMMON STOCK" has the meaning set forth in the second Whereas clause of
this Agreement.
"COMPANY" has the meaning set forth in the preamble to this Agreement.
"COMPANY WITHDRAWAL DECISION" means any decision by the Company not to
consummate the merger, PROVIDED, HOWEVER that no such decision shall constitute
a Company Withdrawal Decision if (x) Purchaser shall have consented in writing
to such decision, or (y) such decision is based on Purchaser's having made a
material misrepresentation, material breach of its warranties or covenants, or
material failure to comply with its other obligations under the Merger Agreement
or (z) the stockholders or Disinterested Stockholders of the Company shall have
failed to vote to approve the Merger. The Company's termination of the Merger
Agreement after April 10, 1996, pursuant to Section 10.1(b) thereof, or after
any later date that Purchaser and the Company shall agree upon in writing
pursuant to such Section 10.1(b) (April 10, 1996 or any such agreed upon later
date, as the case may be, being hereinafter referred to as the "Termination
Date") shall not constitute a Company Withdrawal Decision, unless (i) in the
event Purchaser shall have been ready and willing to consummate the Merger on
the Termination Date, the Company's failure to consummate the Merger on such
Termination Date was not due to a Purchaser's having made a material
misrepresentation, material breach of its warranties or covenants, or material
failure to comply with its other obligations under the Merger Agreement, or (ii)
in the event the Company shall have been ready and willing to consummate the
Merger on the Termination Date, Purchaser's failure to consummate the Merger on
such Termination Date was due to the Company's having made an intentional
material misrepresentation, intentional material breach of its warranties or
covenants, or intentional material failure to comply with its other obligations
under the Merger Agreement.
"ENCUMBRANCES" means pledges, liens, charges, encumbrances, easements,
defects, security interests, claims, options and restrictions of every kind.
"ESCROW AGENT" means, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
"ESCROW AGREEMENT" means the escrow agreement, in substantially the form
attached hereto as Exhibit B, to be entered into at the Closing by and among the
Company, Purchaser and the Escrow Agent.
"EVENT OF DEFAULT" has the meaning set forth in Article IX of this
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
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<PAGE>
"FINAL PAYMENT" shall have the meaning set forth in Section 5.1 of this
Agreement.
"INVESTMENT" in any Person means any loan or advance to such Person, any
purchase or other acquisition of any capital stock or other ownership or profit
interest, warrants, rights, options obligations or other securities of such
Person, any capital contribution to such Person or any other investment in such
Person.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the financial
condition, assets, liabilities (contingent or otherwise), results of operations,
business or business prospects of the Company and the Subsidiaries taken as a
whole.
"MATURITY DATE" has the meaning set forth in Section 4.2 of this Agreement.
"MERGER" has the meaning set forth in the first Whereas clause of this
Agreement.
"MERGER AGREEMENT" has the meaning set forth in the first Whereas clause of
this Agreement.
"NOTE" has the meaning set forth in the second Whereas clause of this
Agreement.
"PERSON" means an individual, partnership, venture, unincorporated
association, organization, syndicate, corporation, limited liability company,
trust and trustee, executor, administrator or other legal or personal
representative or any government or agency or political subdivision thereof.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.1 hereto.
"PURCHASER" has the meaning set forth in the preamble to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"SHARES" has the meaning set forth in the second Whereas clause of this
Agreement.
"SUBSIDIARIES" has the meaning set forth in Section 6.4 of this Agreement.
"SUBSIDIARY GUARANTY" means the Subsidiary Guaranty, in substantially the
form attached hereto as Exhibit C, to be executed and delivered by each
Subsidiary at the Closing.
"TAXES" means, all taxes of any kind, including, without limitation, those
on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment,
exercise, severance, stamp, occupation, premium, value added, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign.
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<PAGE>
"UJB LOAN AGREEMENT" means that certain Loan Agreement, by and among the
Company, its Subsidiaries and United Jersey Bank, a New Jersey banking
corporation ("UJB"), dated June 23, 1994, or any extension or renewal thereof.
"UJB OBLIGATIONS" has the meaning set forth in Section 4.5 hereof.
Capitalized terms used but not otherwise defined in this Agreement shall
have the meanings ascribed to them in the Merger Agreement.
ARTICLE II
PURCHASE AND SALE
Section 2.1 PURCHASE AND SALE. Subject to and upon the terms and
conditions hereinafter set forth, at the Closing the Company shall, in reliance
upon the representations and warranties of Purchaser contained herein or made
pursuant hereto, issue, sell and deliver to Purchaser, free of all Encumbrances
(but subject to the terms and conditions set forth herein and in the Escrow
Agreement), and Purchaser shall, in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, purchase
from the Company, the Note and the Shares, for an aggregate purchase price (the
"Purchase Price") of Five Hundred Thousand Dollars ($500,000). At the Closing
the Company shall deliver to Purchaser (i) the Note, and (ii) two certificates
(the "Certificates"), each of which shall represent two hundred fifty thousand
(250,000) of the Shares and shall be duly registered in Purchaser's name,
against payment in full by Purchaser of the Purchase Price by delivery to the
Company of a check payable to the order of the Company. The Company shall be
liable for and shall pay all transfer taxes attributable to the issuance and
sale of the Shares.
Section 2.2 ALLOCATION. The Company and Purchaser agree that the
Purchase Price shall be allocated $490,000 to the Note and $10,000 to the
Shares. The Company and Purchaser agree that interest on the Note is only the
stated interest thereon plus any Original Issue Discount that may result from
this allocation.
ARTICLE III
THE CLOSING
Subject to the fulfillment or waiver of the conditions precedent set forth
in Articles X and XI, the closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel, 919 Third Avenue, New York, New York 10022 on January 25, 1996
at 10:00 a.m., prevailing local time, or at such other place or on such other
date as Purchaser and the Company may agree upon in writing. The date on which
the Closing occurs is herein referred to as the "Closing Date."
ARTICLE IV
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<PAGE>
TERMS OF THE NOTE
Section 4.1 INCORPORATION BY REFERENCE. The terms and provisions of the
Note are hereby incorporated into this Agreement by reference.
Section 4.2 MATURITY. Principal of, and any accrued and unpaid interest
on, the Note shall be due and payable in full on the Maturity Date. The
"Maturity Date" shall be the date which is the earliest of (i) the date of any
Change of Control Event , (ii) the date that is ten (10) days after any Company
Withdrawal Decision that does not occur between April 1, 1996 and April 10,
1996, (iii) April 10, 1996, where a Company Withdrawal Decision does occur
between April 1, 1996 and April 10, 1996 and (iv) December 31, 1996.
Notwithstanding anything else in this Agreement or the Note to the contrary,
Purchaser may postpone the Maturity Date of the Note in Purchaser's sole
discretion, by giving notice of such postponement (a "Postponement Notice") to
the Company at least five (5) days prior to the Maturity Date as in effect prior
to such postponement.
Section 4.3 INTEREST. The Company shall pay to Purchaser interest from
the date hereof accrued on the unpaid principal amount of the Note from time to
time outstanding at a rate of 8.5 % per annum, which rate represents the prime
rate as set forth in THE WALL STREET JOURNAL on the Closing Date (the "Prime
Rate"). Interest shall be payable in arrears on the Maturity Date.
Section 4.4 DEFAULT INTEREST. Upon the occurrence and during the
continuance of any Event of Default, the Company shall pay interest at the Prime
Rate plus 4% per annum on (i) the unpaid principal amount of the Note from time
to time outstanding, payable on the maturity date and on demand, and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full, and on demand.
Section 4.5 OPTIONAL PREPAYMENT. The Company shall have the right to
prepay the principal amount of the Note at any time in whole or from time to
time in part, with accrued interest on the amount prepaid to the date of
prepayment without premium or penalty therefor.
Section 4.5 SUBORDINATION. The indebtedness of the Company to Purchaser
under the Note will be subordinated pursuant to a Subordination Agreement,
among the Company, Purchaser and UJB (the "Subordination Agreement") in
substantially the form of Exhibit D hereto.
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<PAGE>
ARTICLE V
ESCROW OF SHARES; GRANT OF PROXY; REGISTRATION RIGHTS
Section 5.1 ESCROW OF SHARES. (a) Purchaser agrees that, at the
Closing, it shall deliver to the Escrow Agent, pursuant to the terms of the
Escrow Agreement, the Certificates representing the Shares, together with an
undated stock power for each such Certificate, duly executed in blank.
(b) The parties agree that under the circumstances described herein, and
subject to the terms of the Escrow Agreement, the Shares shall be released from
escrow and either delivered to Purchaser or returned to the Company as follows:
(i) upon the occurrence of a Change of Control Event or on the
Maturity Date following a Company Withdrawal Decision, if the Company shall
not have paid in full all of its obligations under the Note (the "Final
Payment") on or before such date all the Shares still in escrow shall be
released from escrow and delivered to Purchaser;
(ii) if no Change of Control Event or Company Withdrawal Decision
shall have occurred, and the Company shall not have made the Final Payment
on or before December 31, 1996, 250,000 of the Shares shall be released
from escrow and delivered to Purchaser;
(iii) if no Change of Control Event or Company Withdrawal Decision
shall have occurred, and the Company shall not have made the Final Payment
on or before June 30, 1997, the remaining 250,000 Shares shall be released
from escrow and delivered to Purchaser;
(iv) if an Event of Default shall have occurred, other than an Event
of Default based solely on the Company's failure to pay when due any
principal or interest on the Note, and if Purchaser exercises its option to
declare the Note immediately due and payable, all of the Shares still in
escrow shall be released from escrow and delivered to Purchaser;
(v) whenever the Final Payment is made, all of the Shares still in
escrow shall be released from escrow and returned to the Company; PROVIDED,
HOWEVER, that if an event entitling Purchaser to the delivery of some or
all of the Shares (the "Deliverable Shares") as set forth in any of clauses
(i), (ii), (iii) or (iv) of this subsection 5.1(b) has occurred prior to
the making of the Final Payment, but the Escrow Agent is, pursuant to the
terms of the Escrow Agreement, still holding such Deliverable Shares, such
Deliverable Shares shall not be delivered to the Company pursuant to this
clause 5.1(b)(v), but shall instead be disposed of pursuant to the terms of
Section 2(a) of the Escrow Agreement; and PROVIDED, FURTHER that in no
event shall any of the Shares be released from escrow and returned to the
Company until Purchaser has received reasonably satisfactory assurances
from UJB that at the time the Final Payment was made an event of default
with respect to the UJB Loan, as defined therein, (x) had not
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<PAGE>
occurred and was not continuing, and (y) would not result from the making
of such Final Payment.
(c) Any and all dividends, cash, instruments, securities and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any of the Shares while such Shares are still in
escrow, shall be delivered to the Escrow Agent and held in escrow with such
Shares, and either delivered to Purchaser or returned to the Company, as the
case may be, together with such Shares, when such Shares are so delivered or
returned.
Section 5.2 GRANT OF PROXY; IRREVOCABILITY. Purchaser hereby agrees
that in the event that a vote of the stockholders of the Company shall be taken,
or the written consent of the stockholders shall be requested, for any purpose
other than the approval of a Change of Control Event or a Company Withdrawal
Decision, Purchaser shall appoint such Person or Persons as the Company shall
designate, proxy to vote all of the Shares that are still held in escrow and are
not Deliverable Shares as defined in Section 5.1(b)(v) above, in connection with
such vote or action by written consent.
Section 5.3 REGISTRATION RIGHTS.
(a) If, at any time following the date of this Agreement, the Company
shall file a registration statement (other than any registration statement on
Form S-4, Form S-8, or any successor form) with the SEC while any Registrable
Shares (as hereinafter defined) are outstanding, the Company shall give all the
then holders of any Registrable Shares (the "Eligible Holders") at least 30
days' prior written notice of the filing of such registration statement. If
requested by any Eligible Holder in writing within 20 days after receipt of any
such notice, the Company shall, at the Company's sole expense (other than the
fees and disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Shares sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Shares of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent necessary to permit the public offering and sale of the
Registrable Shares through the facilities of all securities exchanges and the
over-the-counter markets on which the Company's securities are traded, and will
use its best efforts through its officers, directors, auditors, and counsel to
cause such registration statement to become effective as promptly as
practicable. Notwithstanding the foregoing, if the managing underwriter of any
such offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Registrable Shares requested to be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company for its own account, then any Eligible Holder who
shall have requested registration of his or its Registrable Shares shall not be
entitled to have such Eligible Holder's Registrable Shares (or the portions
thereof so designated by the managing underwriter) included in such registration
statement, provided that no such exclusion or reduction shall be made as to any
Registrable Shares if any securities of the Company are included in such
registration statement for the account of any person other than the Company and
any Eligible Holder unless the securities included in such
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registration statement for such other person shall have been reduced pro rata to
the reduction of the Registrable Shares which were requested to be included in
such registration. As used herein, "Registrable Shares" shall mean the Shares
and any other securities issued in exchange for, upon conversion of, as a
dividend on or otherwise in respect of such Shares which have not been
previously sold pursuant to a registration statement or Rule 144 promulgated
under the Act.
(b) If, at any time after the Maturity Date, the Company shall receive a
written request from Eligible Holders who in the aggregate own a majority of the
total number of Registrable Shares (the "Majority Holders"), to register the
sale of all or part of such Registrable Shares, the Company shall, as promptly
as practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Registrable Shares
through the facilities of all securities exchanges and the over-the-counter
markets on which the Company's securities are traded, and will use its best
efforts through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable; provided,
however, that the Company shall only be obligated to file one such registration
statement. All expenses incurred in connection with such registration (other
than the fees and disbursements of counsel for the Eligible Holders and
underwriting discounts, if any, payable in respect of the Registrable Shares
sold by the Eligible Holders) shall be borne by the Company. The Company shall
not be obligated to effect any registration of its securities pursuant to this
Section 5.3(b) within six months after the effective date of a previous
registration statement prepared and filed in accordance with Section 5.3(a) (in
which Registrable Shares could have been included). Within ten business days
after receiving any request contemplated by this Section 5.3(b), the Company
shall send written notice to all the other Eligible Holders advising each of
them that the Company is proceeding with such registration and offering to
include therein all or any portion of any such other Eligible Holder's
Registrable Shares, provided that the Company receives a written request to do
so from such Eligible Holder within 20 days after receipt by him or it of the
Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall use its best efforts to cause the Registrable
Shares so registered to be registered or qualified for sale under the securities
or blue sky laws of such jurisdictions as the Eligible Holder may reasonably
request; provided, however, that the Company shall not by reason of this Section
5.3(c) be required to qualify to do business in any state in which it is not
otherwise required to qualify to do business or to file a general consent to
service of process.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 5.3 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Shares covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of six months from the date on which the Eligible Holders are first
free to sell such Registrable Shares; provided, however, that, if the Company is
required to keep any such
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registration or qualification in effect with respect to securities other than
the Registrable Shares beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Registrable Shares
for so long as such registration or qualification remains or is required to
remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall furnish to each Eligible Holder such reasonable
number of copies of the registration statement and of each amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Registrable Shares
included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall furnish each Eligible Holder of any Registrable
Shares so registered with an opinion of its counsel (reasonably acceptable to
the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to the best knowledge of such counsel
has the SEC or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, and (ii) the registration statement and the prospectus included therein
and any supplements or amendments thereto (except for financial statements and
related schedules and documents incorporated thereto by reference, as to which
such counsel need express no opinion) comply as to form in all material respects
with the Act and the rules and regulations of the SEC thereunder.
(g) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company and each Eligible Holder shall enter into a cross-
indemnity agreement and a contribution agreement, each in customary form, with
each underwriter, if any, and, if requested, enter into an underwriting
agreement containing conventional representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Shares.
(h) The Company agrees that until all the Registrable Shares have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Shares to sell such securities under Rule 144.
(i) The Company will not grant to any persons the right to request the
Company to register any securities of the Company without the written consent of
the Majority Holders, provided that the Company may grant such registration
rights to other persons so long as such rights are PARI PASSU or subordinate to
the rights of the holders of the Registrable Shares.
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Section 5.4 INDEMNIFICATION
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, from and against any and all loss, liability, charge, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 5.4, without limitation, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with any untrue statement or
alleged untrue statement of a material fact contained (A) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Registrable Shares, or (B) in any application or other
document or communication (in this Section 5.4 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Registrable Shares under the
securities or blue sky laws thereof, or filed with the SEC or any securities
exchange; or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to such Eligible
Holder by or on behalf of such person expressly for inclusion in any
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under the Note.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability under this Section 5.4(a) unless the Company shall
have been materially prejudiced by such failure or relieve the Company from any
liability other than pursuant to this Section 5.4(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
employed counsel reasonably satisfactory to such indemnified party or parties to
have charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different from
or additional to those available to the Company, in any of which
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events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 5.4 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any
Registrable Shares or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating to
any sale of any Registrable Shares.
(b) Purchaser agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Shares held by the Purchaser, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Eligible Holders in Section 5.4(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Purchaser by or on behalf of the Purchaser expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Purchaser pursuant
to this Section 5.4(b), the Purchaser shall have the rights and duties given to
the Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
5.4(a).
(c) To provide for just and equitable contribution, if (i) an indemnified
party makes a claim for indemnification pursuant to Section 5.4(a) or 5.4(b)
(subject to the limitations thereof) but it is found in a final judicial
determination, not subject to further appeal, that such indemnification may not
be enforced in such case, even though this Agreement expressly provides for
indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Registrable
Shares included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement, alleged untrue statement,
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omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company or by such Eligible Holders, and the
parties' relative intent, knowledge, access to information, and opportunity to
correct or prevent such statement, alleged statement, omission or alleged
omission. The Company and the Purchaser agree that it would be unjust and
inequitable if the respective obligations of the Company and the Eligible
Holders for contribution were determined by pro rata or per capita allocation of
the aggregate losses, liabilities, claims, damages, and expenses (even if the
Eligible Holders and the other indemnified parties were treated as one entity
for such purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 5.4(c). In no case shall
any Eligible Holder be responsible for a portion of the contribution obligation
imposed on all Eligible Holders in excess of its pro rata share based on the
number of shares of Common Stock owned by it and included in such registration
compared to the number of shares of Common Stock owned by all Eligible Holders
and included in such registration. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 5.4(c), each person, if any,
who controls any Eligible Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, and each officer, director, partner,
employee, agent, and counsel of each such Eligible Holder or control person
shall have the same rights to contribution as such Eligible Holder or control
person and each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed any such registration statement, each director of
the Company, and its or their respective counsel shall have the same rights to
contribution as the Company, subject in each case to the provisions of this
Section 5.4(c). Anything in this Section 5.4(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 5.4(c) is intended to supersede any right to contribution under the Act,
the Exchange Act or otherwise.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser that, except as is set
forth on the Company Disclosure Schedule, each of the statements contained in
this Article VI is true, correct and complete.
Section 6.1 ORGANIZATION AND GOOD STANDING. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization and has full corporate
power and authority to enter into and carry out its obligations under this
Agreement, the Escrow Agreement and the Note.
Section 6.2 AUTHORIZATION. The execution and delivery of this Agreement
and the Escrow Agreement by the Company, and the issuance of the Note and the
Shares by the Company, have been duly authorized by all necessary corporate
action required on the part
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of the Company. All of the Shares, when issued, will be duly authorized,
validly issued, fully paid and non-assessable. This Agreement, the Escrow
Agreement and the Note have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or other laws affecting
the rights of creditors generally and by general principles of equity.
Section 6.3 NO CONFLICT. Neither the execution and delivery of this
Agreement or the Escrow Agreement by the Company nor the issuance of the Note or
the Shares by the Company, nor the consummation of the transactions contemplated
hereby or thereby, will (i) conflict with, violate, result in the breach of any
term of, constitute a default under, require the consent of or any notice to or
filing with any third party or government authority under, or create an
Encumbrance on any of the Shares or the assets of the Company or any of its
Subsidiaries under, any note, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which they are bound, or any law, order, rule, regulation, decree, writ or
injunction of any governmental body having jurisdiction over the Company, its
Subsidiaries, or their respective properties; or (ii) conflict with or violate
the certificate of incorporation or by-laws, or equivalent organizational
documents, of the Company or any of its Subsidiaries.
Section 6.4 SUBSIDIARIES. The Company has no direct or indirect
subsidiaries other than the Persons set forth on Schedule 6.4 hereto (the
"Subsidiaries"). The Company does not own, directly or indirectly, any capital
stock or other equity securities of, or have any direct or indirect equity or
ownership interest in, any Person other than the Subsidiaries.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company that each of the
statements contained in this Article VII is true, correct and complete.
Section 7.1 ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to enter into and
carry out its obligations under this Agreement.
Section 7.2 AUTHORIZATION. The execution and delivery of this Agreement
and the Escrow Agreement by Purchaser have been duly authorized by all necessary
corporate action required on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and constitutes a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the rights of creditors generally
and by general principles of equity.
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Section 7.3 SECURITIES LAWS. (a) Purchaser is purchasing the
Securities for its own account, for investment, and is not purchasing the
Securities (i) in connection with the offer or sale of the Securities to others,
(ii) with a view to the distribution of the Securities within the meaning of the
Act, (iii) with a view to underwriting any such distribution, or (iv) with a
view to engaging in conduct which may violate the registration requirements of
the Act or any state securities laws.
(b) Purchaser understands that the Securities will not be registered under
the Act and may not be sold or otherwise disposed of unless they are registered
or are sold or otherwise disposed of in a transaction that is exempt from such
registration. Purchaser understands that the Note and the certificates
representing the Shares will bear a restrictive legend similar or identical to
the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT (OR IN COMPLIANCE WITH AN EXEMPTION
FROM SUCH REGISTRATION) UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS."
ARTICLE VIII
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
Section 8.1 REGULAR COURSE OF BUSINESS. Except as otherwise consented
to in writing by Purchaser, prior to the Maturity Date, the Company shall carry
on its business diligently and in the ordinary course only and, without limiting
the generality of the foregoing, the Company shall use its reasonable best
efforts to (i) preserve its present business organization intact; (ii) keep
available the services of its executive officers and any management or sales
personnel and preserve its present relationships with distributors, customers,
suppliers and other persons having business dealings with it; (iii) maintain its
properties and assets (other than those disposed of in the ordinary course of
business consistent with prior practice) in good repair and condition, except
for ordinary wear and tear; and (iv) maintain its books of account and records
in accordance with GAAP and in the usual, regular and ordinary manner and
consistent with prior practice. Nothing in this Section 8.1 shall prevent the
Company from selling any assets or entering into any transaction that would
otherwise be prohibited by clauses (i) or (iii) of the preceding sentence if the
proceeds of such transaction are used to repay amounts owing under (1) the UJB
Loan Agreement, (2) any other indebtedness that is secured by assets of the
Company or any Subsidiary, or (3) the Note.
Section 8.2 NEW SUBSIDIARIES. The Company shall cause any Person that
becomes a direct or indirect subsidiary of the Company to execute the Subsidiary
Guaranty.
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Section 8.3 ADVICE OF CHANGES; SEC FILINGS. The Company shall confer on
a regular and frequent basis with Purchaser, report on operational matters and
promptly advise Purchaser of any change or event having, or which, insofar as
can be reasonably foreseen, could have, a Material Adverse Effect on the
Company. The Company shall promptly provide Purchaser (or its counsel) with
copies of all filings made by it with the SEC.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.1 EVENTS OF DEFAULT. Any of the following shall constitute an
Event of Default hereunder:
(a) (i) the Company shall fail to pay when due any principal or interest
on the Note, or (ii) the Company shall fail to pay when due any other amount
payable hereunder, and such failure shall remain uncured for a period of five
(5) days;
(b) any representation, warranty or certification of the Company made or
deemed to be made under this Agreement or any other writing or certificate
required to be furnished by the Company to the Purchaser pursuant to this
Agreement is or shall be incorrect when made or deemed to be made in any
material respect;
(c) the Company or any of the Subsidiaries shall fail to observe or
perform any covenant or agreement contained in this Agreement other than a
failure to pay described in Section 9.1(a)(i) or (ii), and such failure to
observe or perform shall remain uncured ten (10) days after Purchaser shall have
given notice of such failure to the Company;
(d) the Company or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall take any corporate action to authorize any of the
foregoing; or
(e) an involuntary case or other proceeding shall be commenced against the
Company or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 30 days; or an order for
relief shall be entered against the Company or any of its Subsidiaries under any
bankruptcy, insolvency or other similar law now or hereafter in effect.
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Section 9.2 ACCELERATION. Upon the occurrence of any Event of Default
the Purchaser may, by notice to the Company, declare the Note (together with
accrued interest thereon) to be, and the Note shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company; PROVIDED, HOWEVER
that if any Event of Default specified in paragraph (d) or (e) above occurs with
respect to the Company, without any notice to the Company or any other act by
the Purchaser, the Note (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company. Notwithstanding the
foregoing, Purchaser shall have available to it all other remedies at law or
equity. The failure of the Purchaser to exercise the option described in the
preceding sentence at any time shall not constitute a waiver of the Purchaser's
right to exercise such option at any other time.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Article II of this Agreement shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by Purchaser:
Section 10.1 REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty of the Company contained in this Agreement, any
Schedule attached hereto or any certificate delivered pursuant hereto shall be
true and accurate as of the date when made, shall be deemed repeated at the time
of the Closing and shall then be true and accurate in all material respects.
Section 10.2 COMPLIANCE WITH COVENANTS. The Company shall have performed
and observed in all material respects all covenants and agreements to be
performed or observed by the Company under this Agreement at or before the
Closing.
Section 10.3 CONSENTS OF THIRD PARTIES. All consents of third parties to
any contracts, and all material approvals and consents of regulatory authorities
that are required to carry out the transactions contemplated in this Agreement
shall have been received.
Section 10.4 EXECUTION OF OTHER DOCUMENTS. The Escrow Agreement, the
Subsidiary Guaranty and the Merger Agreement shall have been entered into by all
parties thereto.
Section 10.5 SECRETARY'S CERTIFICATES. Purchaser shall have received from
the Company and each Subsidiary a certificate of its Secretary or an Assistant
Secretary, in form and substance satisfactory to Purchaser, dated the Closing
Date, as to the following:
(i) resolutions of the Company's or such Subsidiaries' Board of
Directors then in full force and effect authorizing (x) in the case of the
Company, the execution, delivery and performance of this Agreement and the
Escrow Agreement,
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and the issuance and sale of the Note and the Shares, and (y) in the case
of the Subsidiaries, the execution, delivery and performance of the
Subsidiary Guaranty; and
(ii) the incumbency and signatures of those of its officers authorized
to act with respect to (x) in the case of the Company, this Agreement, the
Escrow Agreement, the Note, and the Merger Agreement, and (y) in the case
of each Subsidiary, the Subsidiary Guaranty.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company under Article II of this Agreement shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by the Company:
Section 11.1 REPRESENTATIONS AND WARRANTIES. Each and every
representation and warranty of Purchaser contained in this Agreement, any
Schedule attached hereto or any certificate delivered pursuant hereto shall be
true and accurate as of the date when made, shall be deemed repeated at the time
of the Closing and shall then be true and accurate in all material respects.
Section 11.2 COMPLIANCE WITH COVENANTS. Purchaser shall have performed
and observed in all material respects all covenants and agreements to be
performed or observed by Purchaser under this Agreement at or before the
Closing.
Section 11.3 CONSENTS OF THIRD PARTIES. All consents of third parties to
any contracts, and all material approvals and consents of regulatory authorities
that are required to carry out the transactions contemplated in this Agreement
shall have been received.
Section 11.4 EXECUTION OF OTHER DOCUMENTS. The Escrow Agreement, the
Subsidiary Guaranty and the Merger Agreement shall have been entered into by all
parties thereto.
Section 11.5 SECRETARY'S CERTIFICATE. The Company shall have received
from Purchaser a certificate of its Secretary or an Assistant Secretary, in form
and substance satisfactory to the Company, dated the Closing Date, as to the
following:
(i) resolutions of Purchaser's Board of Directors then in full force
and effect authorizing the execution, delivery and performance of this
Agreement, the Escrow Agreement and the Merger Agreement; and
(ii) the incumbency and signatures of those of its officers authorized
to act with respect to this Agreement, the Escrow Agreement, the Note, and
the Subsidiary Guaranty.
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<PAGE>
ARTICLE XII
MISCELLANEOUS
Section 12.1 ENTIRE AGREEMENT. This Agreement, the Note and the Escrow
Agreement, together with the other documents and certificates delivered
hereunder or thereunder, states the entire agreement of the parties, and merges
all prior negotiations, agreements and understandings.
Section 12.2 NOTICES. All notices and demands of any kind which any party
hereto may be required or desire to serve upon another party under the terms of
this Agreement or the Note shall be in writing and shall be delivered to such
other party: (a) by hand delivery to such other party at such other party's
address set forth on the signature pages of this Agreement; or (b) by mailing a
copy thereof by certified or registered mail, postage prepaid, with return
receipt requested, addressed to such other party at the address of such other
party set forth on the signature pages of this Agreement; or (c) by sending a
copy thereof by Federal Express or equivalent courier service, addressed to such
other party at the address of such other party set forth on the signature pages
of this Agreement; or (d) by sending a copy thereof by facsimile to such other
party at the facsimile number, if any, of such other party set forth on the
signature pages of this Agreement.
In case of delivery by Federal Express or equivalent courier service or by
facsimile or by personal delivery, such delivery shall be deemed complete upon
receipt. In the case of delivery by mail, such delivery shall be deemed
complete upon reasonable proof of receipt. The addresses and facsimile numbers
to which, and persons to whose attention, notices and demands shall be delivered
or sent may be changed from time to time by notice delivered, as hereinabove
provided, by any party upon the other parties.
Section 12.3 AMENDMENT. This Agreement may be modified or amended only by
an instrument in writing, duly executed by all of the parties hereto.
Section 12.4 NONWAIVER. No waiver by any party of any term, provision,
covenant, representation or warranty contained in this Agreement (or any breach
thereof) shall be effective unless it is in writing executed by the party
against which such waiver is to be enforced; no waiver shall be deemed or
construed as a further or continuing waiver of any such term, provision,
covenant, representation or warranty (or breach) on any other occasion or as a
waiver of any other term, provision, covenant, representation or warranty (or
of the breach of any other term, provision covenant, representation or
warranty) contained in this Agreement on the same or any other occasion.
Section 12.5 COUNTERPARTS. For the convenience of the parties, any number
of counterparts hereof may be executed, each such executed counterpart shall be
deemed an original and all such counterparts together shall constitute one and
the same instrument.
Section 12.6 ASSIGNMENT; BINDING NATURE; NO BENEFICIARIES. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective
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<PAGE>
successors and assigns; provided, however, that this Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto, other than
by operation of law. This Agreement shall not confer any rights or remedies
upon any Person other than the parties hereto and their respective successors
and permitted assigns.
Section 12.7 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
Section 12.8 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of New York applicable to contracts made and to be entirely performed
therein. In the event of any controversy or claim arising out of or relating to
this Agreement or any agreement entered into in connection herewith or the
breach or alleged breach hereof or thereof, each of the parties hereto agrees
that service of process or of any other papers upon such party by registered
mail at the address to which notices are required to be sent to such party under
Section 12.2 shall be deemed good, proper and effective service upon such
party.
Section 12.9 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the covenants contained in this Agreement and the agreements
entered into in connection herewith are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the covenants contained in this Agreement and
the agreements entered into in connection herewith and to enforce specifically
this Agreement and the agreements entered into in connection herewith in
addition to any other remedy to which such other parties may be entitled at law
or in equity, without proving damages or that monetary damages would not be an
adequate remedy for such breach. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or available hereunder shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
available hereunder.
Section 12.10 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. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid and unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
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<PAGE>
Section 12.11 EXPENSES. Whether or not the transactions contemplated
hereby are consummated each party hereto shall pay all costs and expenses
incurred by such party in respect of the transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Securities Purchase Agreement as of the day and year first above set forth.
ENVIRONMENTAL SERVICES OF AMERICA, INC.
By: /s/ Jon Colin
------------------------
Name: Jon Colin
Title: President
Address: Environmental Services of America, Inc.
Corporate Offices, Building #2
Rahway, NJ 07605
Phone: 908 381-9229
Fax: 908 381-7887
ERD WASTE CORP.
By: /s/ Joseph Wisneski
------------------------
Name: Joseph Wisneski
Title: President
Address: ERD Waste Corp.
356 Veterans Memorial Highway
Commack, New York 11725
Phone: 516 543-0606
Fax: 516 543-0678
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<PAGE>
Schedule 6.4
ENVIRONMENTAL SERVICES OF AMERICA, INC.
SUBSIDIARIES - EACH 100% OWNED BY ENSA
ENSA ENVIRONMENTAL, INC.
ENSI, INC.
NORTHEAST ENVIRONMENTAL SERVICES, INC.
TRI-S, INCORPORATED
ENSA/GOVERNMENT SERVICES, INC.
ENVIRONMENTAL SERVICES OF AMERICA - IN, INC.
ENVIRONMENTAL SERVICES OF AMERICA - MO, INC.
ENSI OF PENNSYLVANIA, INC.
ENSI/SOUTH JERSEY, INC.
<PAGE>
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
among
ERD WASTE CORP.
("Buyer")
and
ARGENTUM CAPITAL PARTNERS, L.P.
("Seller")
and
Environmental Venture Fund, L.P.
("Seller")
and
those Additional Sellers Listed on Schedule 1
------------------------
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<PAGE>
TABLE OF CONTENTS
ARTICLE I Certain Definitions . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Purchase and Sale of Shares. . . . . . . . . . . . . . . . . . . . 3
2.2 Payment of Purchase Price. . . . . . . . . . . . . . . . . . . . . 3
2.3 Delivery of Portion of Purchase Price to Sellers' Counsel. . . . . 3
2.4 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV Representations and Warranties of Sellers . . . . . . . . . . 4
4.1 Ownership of Shares. . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 No Conflict; Transactions with Certain Persons . . . . . . . . . . 4
4.4 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 No Broker or Finder. . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V Representations and Warranties of Buyer . . . . . . . . . . . 5
5.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . 5
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.3 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Securities Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.5 No Broker or Finder. . . . . . . . . . . . . . . . . . . . . . . . 6
5.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI Covenants of EVF, Argentum and Sellers. . . . . . . . . . . . 7
6.1 Best Efforts to Satisfy Conditions.. . . . . . . . . . . . . . . . 7
6.2 Resignation of Sellers' Designees. . . . . . . . . . . . . . . . . 7
6.3 Cooperation in Purchase of Additional Series B Preferred Stock. . 7
6.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VII Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . 7
7.1 Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII Conditions to Closing . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IX Termination of Agreement. . . . . . . . . . . . . . . . . . . 8
9.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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<PAGE>
ARTICLE X Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 8
10.1 Survival of Representations and Warranties . . . . . . . . . . . 8
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 8
10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
10.5 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.6 Nonwaiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 9
10.8 Assignment; Binding Nature, No Beneficiaries.. . . . . . . . . . 9
10.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.10 Governing Law; Consent to Jurisdiction.. . . . . . . . . . . . . 10
10.11 Specific Performance.. . . . . . . . . . . . . . . . . . . . . . 10
10.12 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.13 Public Announcements . . . . . . . . . . . . . . . . . . . . . . 11
10.14 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 11
ii
<PAGE>
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (this "Agreement") dated as of the ___ day of
March, 1996, by and between ERD Waste Corp. ("Buyer"), Argentum Capital
Partners, L.P., ("Argentum"), Environmental Venture Fund, L.P. ("EVF") and those
persons listed on Schedule 1 who have executed such Schedule in the space
provided opposite such persons' name, (each a "Seller" and, collectively with
Argentum and EVF, "Sellers").
RECITALS
WHEREAS, subject to the terms and conditions of this Agreement, Buyer
desires to purchase from EVF, and EVF desires to sell to Buyer 5,222.22 shares
of Series B Preferred Stock and 1,000 shares of Series C Preferred Stock of
Environmental Services of America, Inc. (the "Company"); and
WHEREAS, subject to the terms and conditions of this Agreement, Buyer
desires to purchase from Argentum, and Argentum desires to sell to Buyer, 2,700
Shares of Series B Preferred Stock and 2,200 Shares of Series C Preferred Stock
of the Company; and
WHEREAS, subject to the terms and conditions of this Agreement, Buyer
desires to purchase from each Seller listed on Schedule 1 who has executed
Schedule 1 in the space provided opposite such Seller's name (each an
"Additional Seller" and, collectively, "Additional Sellers"), and each
Additional Seller desires to sell to Buyer, the number of shares of Series B
Preferred Stock set forth opposite such Additional Seller's name;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto intending to be legally
bound, hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Act" means the Securities Act of 1933, as amended.
"Additional Seller" has the meaning set forth in the recitals of the
Agreement.
"Agreement" has the meaning set forth in the preamble of this Agreement.
"Argentum" has the meaning set forth in the first paragraph of this
Agreement.
<PAGE>
"Business Day" means any day that is not a Saturday or Sunday or a legal
holiday on which banks are authorized or required to be closed in New York, New
York.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Closing" has the meaning set forth in Article III.
"Closing Date" has the meaning set forth in
Article III.
"Company" has the meaning set forth in the first WHEREAS clause of this
Agreement.
"Encumbrance" means any lien, pledge, mortgage, security interest, charge
restriction, adverse claim or other encumbrance of any kind or nature
whatsoever.
"EVF" has the meaning set forth in the first paragraph of this Agreement.
"Merger" means the proposed merger of the Company with and into a
subsidiary of Buyer.
"Person" means an individual, partnership, venture, unincorporated
association, organization, syndicate, corporation, limited liability company,
trust and trustee, executor, administrator or other legal or personal
representative or any government or any agency or political subdivision thereof.
"Purchase Price" means the aggregate purchase price to be paid for the
Shares tendered by a Seller identified in Schedule 1 hereto.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Series B Preferred Stock" means the Company's Series B Preferred Stock,
par value $0.01 per share.
"Series C Preferred Stock" means the Company's Series C Preferred Stock,
par value $0.01 per share.
"Shares" means the shares of Series B Preferred Stock and Series C
Preferred Stock to be purchased hereunder.
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<PAGE>
"Tender Offer" has the meaning set forth in Article VIII.
ARTICLE II
Purchase and Sale
2.1 PURCHASE AND SALE OF SHARES. Subject to, and upon, the terms and
conditions hereinafter set forth, at the Closing, each Seller shall sell,
convey, assign, transfer and deliver to Buyer free of all Encumbrances, and
Buyer shall purchase from such Seller, the number of shares of Series B
Preferred Stock and, in the case of Argentum and EVF, Series C Preferred Stock,
set forth opposite such Seller's name on Schedule 1 for an aggregate purchase
price in an amount as set forth opposite such Seller's name on Schedule 1 and
payable in the manner set forth in Sections 2.2 and 2.3.
2.2 PAYMENT OF PURCHASE PRICE.
The Net Purchase Price allocable to each Seller shall be paid by Buyer
to such Seller at the Closing of the Purchase and sale of such Seller's Shares
by certified check.
2.3 DELIVERY OF PORTION OF PURCHASE PRICE TO SELLERS' COUNSEL. At the
Closing of the purchase of the Shares to be sold by Sellers hereunder, Buyer
shall deliver to Argentum, on behalf of Sellers, certified checks in amounts
equal to the Purchase Price allocable to each Seller.
2.4 PURCHASE PRICE. The purchase price for each Share shall be $98.22.
ARTICLE III
CLOSING
3.1 CLOSING. Subject to the fulfillment or waiver of the conditions
precedent set forth in Articles VIII and IX, the closing of the transactions
contemplated hereby shall be held on the date of the first closing of any
purchase of shares pursuant to the Tender Offer, or at such other time as the
Buyer, EVF and Argentum shall agree. Such Closing referenced in this Section
3.1 is referred to as the Closing, the date on which the Closing occurs is
herein referred to as a "Closing Date."
3.2 DELIVERIES AT CLOSING. At the Closing, against delivery by Buyer of
the Net Purchase Price by wire transfer or certified check, each Seller shall
deliver to Buyer certificates representing all of its Shares, with duly executed
stock powers endorsed in blank. Each Seller shall be liable for and shall pay
all Taxes, direct or indirect, if any, attributable to the transfer of such
Seller's Shares.
- 3 -
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller severally and not jointly represents and warrants to the Buyer
that, as to itself (but not as to any other Seller) as follows:
4.1 OWNERSHIP OF SHARES. Seller owns beneficially and of record, and has
good and valid title to and the right to transfer to Buyer, the Shares to be
transferred by such Seller hereunder, free and clear of all Encumbrances. Upon
delivery of Seller's shares to Buyer at the applicable Closing, Seller will
transfer to Buyer good and valid title to all of the Shares to be transferred by
Seller hereunder, free and clear of all Encumbrances.
4.2 AUTHORIZATION. This Agreement has been duly authorized by Seller, and
Seller has full legal authority to enter into and carry out its obligations
under this Agreement. This Agreement has been duly executed and delivered by
Seller and constitutes its valid and binding obligation, enforceable against it
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other laws affecting the rights
of creditors generally and by general principles of equity.
4.3 NO CONFLICT; TRANSACTIONS WITH CERTAIN PERSONS. Neither the execution
and delivery of this Agreement by Seller, nor the consummation of the
transactions contemplated hereby, will (i) conflict with, violate, result in the
breach of any term of, constitute a default under, require the consent of or any
notice to or filing with any third party or government authority under, or
create an Encumbrance on any of the Shares or the assets of Seller under, any
note, mortgage, deed of trust or other agreement or instrument to which Seller
is a party or by which it is bound, or any law, order, rule, regulation, decree,
writ or injunction of any governmental body having jurisdiction over Seller or
its properties; or (ii) if Seller is a limited partnership, trust or
corporation, conflict with or violate the limited partnership agreement, trust
agreement, certificate of incorporation or by-laws, of Seller.
4.4 LITIGATION. No lawsuit, governmental investigation or legal,
administrative or arbitration action or proceeding is pending or, to the best of
Seller's knowledge, threatened against Seller, (or, if applicable, any director,
officer or employee of Seller in his or her capacity as such,) which questions
the validity of this Agreement or seeks to prohibit, enjoin or otherwise
challenge the consummation of the transactions contemplated hereby. Seller is
not specifically identified as a party or subject to any restrictions or
limitations under any judgment, order or decree of any court, administrative
agency or
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<PAGE>
other governmental authority which would enjoin the consummation of the
transactions contemplated hereby.
4.5 NO BROKER OR FINDER. Seller has not dealt with any broker or finder
in connection with the transactions contemplated by this Agreement, and no
commission, finder's fees or other similar compensation or remuneration is or
will be payable to any Person by Buyer as a result of Seller's actions in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby other than fees to be paid to the
Argentum Group pursuant to a consulting agreement dated the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has full corporate power and authority to enter into and carry out
its obligations under this Agreement.
5.2 AUTHORIZATION. The execution and delivery of this Agreement, and all
agreements and instruments to be delivered hereunder, by Buyer have been duly
authorized by all necessary corporate action required on the part of Buyer.
This Agreement has been duly executed and delivered by Buyer and constitutes a
valid and binding obligation of Buyer, enforceable of Buyer in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium or other laws affecting the rights of
creditors generally and by general principles of equity.
5.3 NO CONFLICT. Neither the execution and delivery of this Agreement by
Seller, nor the consummation of the transactions contemplated hereby, will (i)
conflict with, violate, result in the breach of any term of, constitute a
default under, or create an Encumbrance on any of the assets of Buyer under any
note, mortgage, deed of trust or other agreement or instrument to which Buyer is
a party or by which it is bound, on any law, under, rule, regulation, decree,
writ or injunction of any governmental body having jurisdiction over Buyer or
its properties; or (ii) conflict with or violate the certificate of
incorporation or by-laws of Buyer.
5.4 SECURITIES LAWS. (a) Buyer is purchasing the Shares for its own
account, for investment, and is not purchasing the Shares (i) in connection with
the offer or sale of the Shares to others, (ii) with a view to the distribution
of the Shares within the meaning of he Act, (iii) with a view to underwriting
any such
- 5 -
<PAGE>
distribution, or (iv) with a view to engaging in conduct which may violate the
registration requirements of the Act or any state securities laws.
(b) Buyer understands that (i) any Series B or Series C Preferred
Stock it may acquire pursuant to this Agreement will not be registered under the
Act and may not be sold or otherwise disposed of unless they are registered or
are sold or otherwise disposed of in a transaction that is exempt from such
registration, (ii) such Series B and Series C Preferred Stock may have to be
held for at least two years before they may be sold without significant
restrictions, and Buyer is financially able to bear the risk of holding such
shares for an extended period of time, and (iii) certificates representing such
shares will bear a restrictive legend similar or identical to the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT (OR IN COMPLIANCE WITH AN EXEMPTION
FROM SUCH REGISTRATION) UNDER THE SECURITIES ACT OF 1933 AND
APPLICABLE STATE SECURITIES LAWS."
(c) Buyer has received and read carefully the Company's most report
on Form 10K and subsequent 10Q's.
(d) Buyer has evaluated the merits and risks of an investment in the
Series B and Series C Preferred Stock, and can make such investment based solely
on such evaluation, the representations, warranties and covenants of Sellers
contained herein (or on any schedule, certificate or other document delivered by
Sellers pursuant hereto).
5.5 NO BROKER OR FINDER. Buyer has not dealt with any broker or finder in
connection with the transactions contemplated by this Agreement, and no
commission, finder's fees or other similar compensation or remuneration is or
will be payable to any Person by Sellers as a result of Buyer's actions in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
5.6 LITIGATION. No lawsuit, governmental investigation or legal,
administrative or arbitration action or proceeding is pending or, to the best of
Buyer's knowledge, threatened against Buyer, (or, if applicable, any officer,
director or employee of Buyer in his or her capacity as such) which questions
the validity of this Agreement or seeks to prohibit, enforce or otherwise
challenge the consummation of the transactions contemplated hereby. Buyer is
not specifically identified as a party or subject to any restrictions or
limitations under any judgment, order or decree of any court, administrative
agency or
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<PAGE>
other governmental authority which would enjoin the consummation of the
transactions contemplated hereby.
ARTICLE VI
COVENANTS OF EVF, ARGENTUM AND SELLERS
6.1 BEST EFFORTS TO SATISFY CONDITIONS. EVF and Argentum shall use their
best efforts to satisfy the conditions set forth in Articles VIII and IX that
are within their control.
6.2 RESIGNATION OF SELLERS' DESIGNEES. In consideration of the payment of
the Purchase Price and the issuance of the Warrants to EVF and Argentum and
other mutual promises contained herein, as promptly as practicable after
Closing, Argentum and EVF shall cause Messrs. Barandiaran and Genack to resign
from their position as directors of the Company, at the time of Closing.
6.3 COOPERATION IN PURCHASE OF ADDITIONAL SERIES B PREFERRED STOCK. EVF
and Argentum shall cooperate with Buyer in contacting the other holders of
Series B Preferred Stock so that Buyer and such holders will have an opportunity
to enter into this Agreement.
6.4 FURTHER ASSURANCES. Each Seller agrees to execute and deliver, and to
use its best efforts to cause the Company to execute and deliver such additional
documents and instruments, and to perform such additional acts, as Buyer may
reasonably request to effectuate or carry out and perform all the terms,
provisions and conditions of this Agreement and the transactions contemplated
hereby and to effectuate the intent and purposes hereof.
ARTICLE VII
COVENANTS OF BUYER
7.1 FURTHER ASSURANCES. Buyer agrees to execute and deliver such
additional documents and instruments, and to perform such additional acts, as
Seller may reasonably request to effectuate or carry out and person all the
terms, provisions and conditions of this Agreement and the transactions
contemplated hereby, and to effectuate the intent and purposes hereof.
ARTICLE VIII
CONDITIONS TO CLOSING
The respective obligations of each party to consummate the transactions
contemplated under this Agreement shall be subject to the fulfillment prior to
the Closing Date of the condition that ENSA Acquisition Corp. ("EAC") shall have
completed the
- 7 -
<PAGE>
purchase of all or part of the shares of common stock of the Company tendered to
EAC pursuant to the tender offer as contemplated by the Amended and Restated
Agreement and Plan of Merger to which the Company, Buyer and EAC are parties
(the "Tender Offer").
ARTICLE IX
TERMINATION OF AGREEMENT
9.1 This Agreement may be terminated at any time prior to the Closing of
the Sale of the Shares of any Seller, but only with respect to such Seller, by
mutual consent of Buyer and such Seller.
ARTICLE X
MISCELLANEOUS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties hereto set forth in this Agreement shall not survive
the Closing, except for the representations and warranties of Sellers set forth
in Section 4.1 of this Agreement, which shall survive the Closing Date. Each
party hereto shall be entitled to rely on such representations or warranties
regardless of any inquiry or investigation made by or on behalf of such party.
10.2 EXPENSES. Whether or not the transactions contemplated hereby are
consummated, each party hereto shall pay all costs and expenses incurred by such
party in respect of the transactions contemplated hereby.
10.3 ENTIRE AGREEMENT. This Agreement states the entire agreement of the
parties, merges all prior negotiations, agreements and understandings, if any,
and states in full all representations, warranties and agreements which have
induced this Agreement. Each party agrees that in dealing with third parties no
contrary representations will be made.
10.4 NOTICES.
(a) All notices and demands of any kind which any party hereto may be
required or desire to serve upon another party under the terms of this Agreement
shall be in writing and shall be served upon such other party; (i) by personal
service upon such other party at such other party's address set forth on the
signature pages of this Agreement in the case of Argentum and EVF, and on
Schedule 1 in the case of the Additional Sellers; or (ii) by mailing a copy
thereof by certified mail, postage prepaid, with return receipt requested,
addressed to such other party at the address of such other party set forth on
the signature pages of this Agreement; or (iii) by sending a copy thereof by
Federal Express or equivalent courier service,
- 8 -
<PAGE>
addressed to such other part at the address of such other party set forth on the
signature pages of this Agreement; or (iv) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth on the signature pages of this Agreement.
(b) In case of service by Federal Express or equivalent courier
service or by facsimile or by personal service, such service shall be deemed
complete upon receipt. In the case of service by mail, such service shall be
deemed complete on the third Business Day after mailing. The addresses and
facsimile numbers to which, and persons to show attention, notices and demands
shall be delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other party.
10.5 AMENDMENT. This Agreement may be modified or amended only by an
instrument in writing, duly executed by all of the parties hereto.
10.6 NONWAIVER. No waiver by any party of any term, provision, covenant,
representation or warranty contained in this Agreement (or any breach thereof)
shall be effective unless it is in writing executed by the party against which
such waiver is to be enforced; no waiver shall be deemed or construed as a
further or continuing waiver of any such term, provision, covenant,
representation or warranty (or breach) on any other occasion
or as a waiver of any other term, provision, covenant, representation or
warranty (or of the breach of any other term, provision, covenant,
representation or warranty) contained in this Agreement on the same or any other
occasion.
10.7 COUNTERPARTS. Any number of counterparts hereof may be executed,
each such executed counterpart shall be deemed an original and all such
counterparts together shall constitute one and the same instrument.
10.8 ASSIGNMENT; BINDING NATURE, NO BENEFICIARIES. This Agreement may not
be assigned by any party hereto without the written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective successors and permitted assigns. Except as otherwise
expressly provided in this Article XI, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns.
10.9 HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
10.10 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York applicable to
- 9 -
<PAGE>
contracts made and to be entirely performed therein. In the event of any
controversy or claim arising out of or relating to this Agreement or the breach
or alleged breach hereof, each of the parties hereto irrevocably (i) submits to
the non-exclusive jurisdiction of the U.S. District Court for the Southern
District of New York (or, if such court does not have jurisdiction, the courts
of the State of New York located in New York County),
(ii) waives any objection which it may have at any time to the laying of venue
of any action or proceeding brought in any such court, (iii) waives any claim
that such action or proceeding has been brought in an inconvenient forum, and
(iv) agrees that service of process or of any other papers upon such party by
registered mail at the address to which notices are required to be sent to such
party under Section 11.4 shall be deemed good, proper and effective service upon
such party.
10.11 SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges and
agrees that the other party would be damaged irreparably in the event any of the
covenants contained in this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other party shall be entitled to an injunction or
injunctions to prevent breaches of the covenants contained in this Agreement and
to enforce specifically this Agreement and the covenants contained herein, in
addition to any other remedy to which such other parties may be entitled at law
or in equity.
10.12 CONSTRUCTION. In this Agreement (i) words denoting the singular
include the plural and vice versa, (ii) "it" or "its" or words denoting any
gender include all genders, (iii) the word "including" shall mean "including
without limitation", whether or not expressed, (iv) any references herein to a
Section, Article, Schedule or Exhibit refers to a Section or Article of or a
Schedule or Exhibit to this Agreement, unless otherwise stated, and (v) any
reference to a party's "best efforts" or "reasonable efforts" shall not include
any obligation of such party to pay, or guarantee the payment of, money or other
consideration to any third party or to the imposition on such party or its
affiliates of any conditions reasonably considered by such party to be
materially burdensome to such party or its affiliates.
10.13 PUBLIC ANNOUNCEMENTS. Each of the parties agrees that after the
signing of this Agreement such party shall not make any press release or public
announcement concerning this Agreement or the transactions contemplated hereby
without the prior written approval of the other party; provided, however, that
Buyer may describe this Agreement and the transactions contemplated in
connection with obtaining financing in order to satisfy Buyer's payment
obligations hereunder or as otherwise required by law.
- 10 -
<PAGE>
10.14 REMEDIES CUMULATIVE. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein shall not preclude the assertion of exercise by such party
of any other right or remedy provided for herein.
- 11 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto (including those parties who have
executed schedule 1) have duly executed and delivered this Agreement as of the
day and year first above written.
ERD WASTE CORP.
By: /s/ Joe Wisneski
-----------------------------------
Joe Wisneski
President
Address: 356 Veteran's Memorial Highway
Commack, New York 11725
Facsimile No: (516) 543-0678
with a copy to:
Richard Marlin, Esq.
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
Facsimile No: (212) 715-8000
ARGENTUM CAPITAL PARTNERS, L.P.
By: /s/ Walter Barandiaran
-----------------------------------
Walter Barandiaran
President, BR Associates, Inc.,
General Partner
Address: 405 Lexington Avenue
New York, New York 10174
Facsimile No: (212) 949-8294
ENVIRONMENTAL VENTURE FUND, L.P.
By: Bret Maxwell
-----------------------------------
General Partner
Address: c/o First Analysis Corporation
230 S. Wacker Drive
Chicago, Illinois 60606
Facsimile No: (212) 752-2914
- 12 -
<PAGE>
SCHEDULE 1
Aggregate
Purchase Price
Number of for Series B
Shares of Preferred
Preferred Stock
Stockholder Stock Tendered(1) Tendered(2) Signature
- ----------- -------------- -------- ---------
Stuart Graff
7115 Ayrshire 104.44 $10,528.10 /s/ Stuart Graff
Boca Raton, FL 33496 --------------------
James Padget
Trust 104.44 $10,528.10 /s/ James Padget
4925 North Mesa Drive --------------------
Castle Rock, CO 80104
Duncan Miller
524 East 72nd Street 138.89 $13,641.78
Apt. 37C --------------------
New York, NY 10021
Stanley Chase
116 Centre Island Road 138.89 $13,641.78 /s/ Stanley Chase
Oyster Bay, NY 11771 --------------------
Gershon A. Stern
2179 East Landis Avenue 288.89 $28,374.78
Vineland, NJ 08360 --------------------
Miles Lerman
1189 Riviera Blvd. 288.89 $28,374.78 /s/ Miles Lerman
Vineland, NJ 08360 --------------------
(1) Unless otherwise indicated, reference to Preferred Stock in this Schedule
means Series B Preferred Stock.
(2) The purchase price to be paid to each Seller for each share of Series B
Preferred Stock and, in the case of Argentum Capital Partners, L.P. and
Environmental Venture Fund, L.P., Series C Preferred Stock, is $98.22 per
share.
1-i
<PAGE>
Aggregate
Purchase Price
Number of for Series B
Shares of Preferred
Preferred Stock
Stockholder Stock Tendered Tendered Signature
- ----------- -------------- -------- ---------
Ronald Nash - IRA
c/o NAI Associates, Inc. 138.89 $13,641.78 /s/ Ronald Nash
134 Essex Drive --------------------
Tenafly, NJ 07670
Ronald Weiss
950 Park Avenue 138.89 $13,641.78 /s/ Ronald Weiss
New York, NY 10028 -------------------
Arnold & Sandra Raynor /s/ Arnold Raynor
26 83 Hemlock Farms 138.89 $13,641.78 /s/ Sandra Raynor
Hawley, PA 18428 -------------------
Harvey G. Felson
540 Longacre Avenue 190.00 $18,661.80 /s/ Harvey G. Felson
Woodmere, NY 11598 --------------------
Paul B. Goodrich
8057 W. Mercer Way 60.00 $ 5,893.20 /s/ Paul B. Goodrich
Mercer Island, WA --------------------
Steven F. Bouck
5320 North Wayne 60.00 $ 5,893.20 /s/ Steven F. Bouck
Chicago, IL 60606 -------------------
The Equity Group
c/o Robert Goldstein 138.89 $13,641.78
919 Third Avenue --------------------
18th Floor
New York, NY 10022
1-ii
<PAGE>
Aggregate
Purchase Price
Number of for Series B
Shares of Preferred
Preferred Stock
Stockholder Stock Tendered Tendered Signature
- ----------- -------------- -------- ---------
Walter H. Barandiaran
245 East 93rd Street 277.78 $ 27,283.55 /s/ Walter H. Barandiaran
Apt. 26D -------------------------
New York, NY 10128
Ronald Heller
7 Ethan Allen Court 127.78 $ 12,550.55
Orangeburg, NY 10962 ------------------------
Environmental Venture
Fund, L.P. 6,222.22(3) $611,146.45 See Stock Purchase
233 South Wacker Drive Agreement.
Suite 9500
Chicago, IL 60606
Argentum Capital
Partners, L.P. 4,900.00(4) $481,278.00 See Stock Purchase
The Chrysler Building Agreement.
405 Lexington Avenue
54th Floor
New York, NY 10174
(3) Consists of 5,222.22 shares of Series B Preferred Stock and 1,000 shares of
Series C Preferred Stock.
(4) Consists of 2,700 shares of Series B Preferred Stock and 2,200 shares of
Series C Preferred Stock.
1-iii
<PAGE>
FORM OF COLIN EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of _______________,
1996, by and between ENSA ACQUISITION CORP. (hereinafter the "Company"), a
Delaware corporation, and Jon Colin (hereinafter "Employee").
WHEREAS, the Company is a party to an agreement and plan of merger
among the Company, ERD Waste Corp. ("ERD") and "ENSA" Acquisition Corp. ("EAC")
(the "Merger Agreement") pursuant to which EAC shall be merged with and into the
Company (the "Merger");
WHEREAS, the Merger Agreement contemplates that the Company will enter
into an employment agreement with Employee;
WHEREAS, the Company desires to employ the Employee on the terms and
conditions provided in this Agreement;
WHEREAS, the Employee desires to accept such employment and to render
services to the Company on the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. EMPLOYMENT: The Company shall employ Employee and Employee
shall accept such employment and shall render services under the conditions and
terms set forth herein. During the period of his employment, Employee shall
devote his full time, attention, energy, knowledge and skill to the business and
interests of the Company, from offices of the Company to be maintained in the
Central New Jersey area, and the Company shall be entitled to the profits and
other benefits arising from or incident to the work, services and advice of
Employee. Employee shall render services to the Company as an Executive Vice
President with the primary responsibility of seeking out and consulting on
potential mergers and acquisitions to be undertaken by the Company, and shall
perform such other duties and responsibilities as may be assigned to the
Employee from time to time by the board of directors (the "Directors"), Chief
Executive Officer or President of the Company. Employee shall abide by the
practices and policies of the Company governing the conduct of employees.
2. TERM: The term of Employee's employment under this
Agreement shall commence on the date hereof (the "Effective Date") and shall end
on the third year anniversary date of the Effective Date, unless sooner
terminated as provided in this Agreement.
3. COMPENSATION:
a. During the term of his employment hereunder, the
Company shall pay Employee a base salary at the rate of Two Hundred Twenty Five
Thousand ($225,000) Dollars per year.
<PAGE>
Employee's base salary shall be paid in equal, bi-weekly installments commencing
with the first pay period immediately following the Effective Date.
b. In addition to his base salary, Employee shall be
awarded options to acquire 300,000 shares of Common Stock of ERD under ERD's
1994 Stock Option Plan pursuant to a stock option agreement (the "Stock Option
Agreement") effective on the date hereof.
4. OTHER BENEFITS:
a. The Company shall pay Employee for ordinary and
reasonable business expenses incurred by him in the performance of services
pursuant to this Agreement, upon submission of receipts or other evidence of
such expenditures that is satisfactory to the Company. In addition, during the
term of Employee's employment hereunder, the Company shall provide Employee with
a Company-owned or leased automobile for his use or reimburse Employee for his
costs in leasing such automobile, generally on the same basis as the Company has
heretofore provided an automobile or reimbursement to Employee. Employee shall
keep such records and shall deliver to the Company such documentation covering
such expenses as the Company shall require.
b. During the term of his employment, Employee shall be
entitled to participate in any medical, health, disability and accident or other
hospitalization or insurance plan established by the Company for its employees
generally and the employee benefits provided to Employee by the Company shall be
no less than his present benefits at the Company.
c. During each full year of the term of Employee's
employment hereunder (such year being determined by reference to the first day
of the calendar month following the Effective Date, and ending twelve months
thereafter) Employee shall be entitled to five (5) weeks paid vacation which
shall not be cumulative from year to year.
5. TERMINATION:
a. Subject to the terms and conditions set forth in this
Agreement, the Company may, at any time, with or without cause, terminate
Employee's employment hereunder, upon delivery of written notice of termination
to Employee.
b. If Employee's employment is terminated for cause, (i)
Employee shall be entitled to receive his base salary through the date of
termination in full satisfaction of all obligations of the Company to Employee,
(ii) all of Employee's unexercised options granted pursuant to the Stock Option
Agreement, whether vested or unvested, shall be cancelled and (iii) Employee
shall no longer be entitled to the benefits provided in Section 4, above. For
purposes of this Agreement, "for Cause" shall mean and be limited to
embezzlement of Company funds, theft of Company property or any comparable act
of dishonesty or fraud in connection
2
<PAGE>
with Employee's employment by the Company or other comparable action materially
harmful to the Company.
c. If Employee's employment is terminated without cause
(i) the Company shall be obligated to pay Employee's base salary when payment of
Employee's base salary would otherwise be due and without interruption, as
provided in Section 3(a) for the entire term of this Agreement such payment
shall be in full satisfaction of all of the obligations of the Company to
Employee under Sections 3(a) and 4(a), (b) and (c) other than previously
unreimbursed expenses to which Employee is entitled under Section 4(a); and (ii)
all of Employee's unvested options granted pursuant to the Stock Option
Agreement shall immediately vest and shall be exercisable as provided in the
Stock Option Agreement.
6. NON-SOLICITATION: If Employee's employment is terminated at
any time during the term hereof for any reason other than Employee's death, the
Company, at its election, by notice to Employee given not later than ten (10)
days after such termination and referring specifically to this subparagraph,
shall have the right to require for one (1) year from the date of termination
(the "restricted period") that Employee not directly or indirectly solicit the
business of any customer of the Company or the employment of any employee of the
Company, and, if the Company so elects, Employee agrees not to solicit such
business or employment, provided that in the case of termination of Employee by
the Company that is not for cause, (i) the Company continues to pay to Employee
during the restricted period, when payment of Employee's base salary would
otherwise be due and without interruption, an amount equal to one hundred (100%)
percent of Employee's base salary in effect immediately prior to termination.
Any failure by the Company to make the payments required hereunder as and when
due, shall constitute a full and irrevocable waiver of the Company's rights
under this paragraph 6.
7. ASSIGNMENT: This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except that the
Company may assign or transfer this Agreement to a successor organization in the
event of merger, consolidation, or transfer of sale of all or substantially all
of the assets of the Company, in which case the term Company shall mean such
successor, provided that in the case of any such assignment or transfer, the
obligations of this Agreement are assumed by such successor or are binding upon
and inure to the benefit of such successor as a matter of law.
8. NOTICES: All notices hereunder shall be in writing and
shall be deemed to have been given at the time when mailed in any general or
branch United States Post Office enclosed in a certified post-paid envelope,
addressed to the respective parties stated below, or to such changed address as
such party may fix by notice as aforesaid:
3
<PAGE>
To the Company: ENSA ACQUISITION CORP.
c/o ERD WASTE CORP.
Attn: Board of Directors
356 Veterans Memorial Highway
Commack, New York 11725
Attn: Joseph Wisneski,
President; and
To Employee: Jon Colin
13 Meadow Lane
Old Bridge, NJ 08853
9. GOVERNING LAW: This Agreement and all performance under
this Agreement shall be governed by the laws of the State of New York.
10. WAIVER, MODIFICATION: No waiver or modification of this
Agreement or of any covenant, condition or limitation contained herein shall be
valid or effective unless it is in writing and duly executed by Employee and the
Company.
11. RESOLUTION OF DISPUTES: Any controversy or claim arising
out of or relating to this Agreement or the breach thereof, including without
limitation a claim for declaratory relief or relief which is equitable in
nature, shall be settled by arbitration in the City of New York, New York, by an
arbitrator selected by Employee and the Company. The arbitrator shall have the
power to award injunctive as well as other relief to carry out the terms of this
Agreement. If the Company and Employee cannot agree an the appointment of an
arbitrator within ten (10) days after a request for arbitration made by either
party, then such arbitrator shall be an attorney-at-law with no prior
professional association with any of the parties or their affiliates who is
selected in accordance with procedures established and implemented by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except as may
be otherwise provided in this paragraph 10. All costs of the arbitration,
including reasonable attorney's fees, shall be borne as the Arbitrator shall
direct. Judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction over the parties. Any award of the arbitrator may
include interest at a rate or rates considered just under the circumstances by
the arbitrator.
4
<PAGE>
IN WITNESS WHEREOF, Employee has signed his name and the Company, by
the signatures of its duly authorized officers, has executed this Agreement, as
of the date and year mentioned at the top of page one.
ENSA ACQUISITION CORP.
(CORPORATE SEAL)
By:
---------------------------
Attest:
-----------------------
Secretary
WITNESS:
- ---------------------------------- ------------------------------
Jon Colin
5
<PAGE>
FORM OF JACOBSEN EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), dated as of _______________,
1996, by and between ENSA ACQUISITION CORP. (hereinafter the "Company"), a
Delaware corporation, and Joseph T. Jacobsen (hereinafter "Employee").
WHEREAS, the Company is a party to an amended and restated agreement
and plan of merger among the Company, ERD Waste Corp. ("ERD") and ENSA
Acquisition Corp. ("EAC") (the "Merger Agreement") pursuant to which EAC shall
be merged with and into the Company (the "Merger");
WHEREAS, the Merger Agreement contemplates that the Company will enter
into an employment agreement with Employee;
WHEREAS, the Company desires to employ the Employee on the terms and
conditions provided in this Agreement;
WHEREAS, the Employee desires to accept such employment and to render
services to the Company on the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. EMPLOYMENT: The Company shall employ Employee and Employee
shall accept such employment and shall render services under the conditions and
terms set forth herein. During the period of his employment, Employee shall
devote his full time, attention, energy, knowledge and skill to the business and
interests of the Company, from offices of the Company to be maintained in the
Central Bucks County, Pennsylvania area, and the Company shall be entitled to
the profits and other benefits arising from or incident to the work, services
and advice of Employee. Employee shall render services to the Company as the
President of the Company's air and consulting group with the primary
responsibility of running the air and consulting group of the Company, and shall
perform such other duties and responsibilities as may be assigned to the
Employee from time to time by the board of directors (the "Directors"), Chief
Executive Officer or President of the Company. Employee shall abide by the
practices and policies of the Company governing the conduct of employees.
2. TERM: The term of Employee's employment under this
Agreement shall commence on the date hereof (the "Effective Date"), and shall
end on the third year anniversary date of the Effective Date, unless sooner
terminated as provided in this Agreement.
3. COMPENSATION:
a. During the term of his employment hereunder, the
Company shall pay Employee a base salary at the rate
<PAGE>
of One Hundred Twenty Five Thousand ($125,000) Dollars per year. Employee's
base salary shall be paid in equal, bi-weekly installments commencing with the
first pay period immediately following the Effective Date.
b. In addition to his base salary, Employee shall be
awarded options to acquire 50,000 shares of Common Stock of ERD under ERD's 1994
Stock Option Plan, as amended, pursuant to a stock option agreement (the "Stock
Option Agreement") effective on the date hereof.
4. OTHER BENEFITS:
a. The Company shall pay Employee for ordinary and
reasonable business expenses incurred by him in the performance of services
pursuant to this Agreement, upon submission of receipts or other evidence of
such expenditures that is satisfactory to the Company. In addition, during the
term of Employee's employment hereunder, the Company shall provide Employee with
a Company-owned or leased automobile for his use or reimburse Employee for his
costs in leasing such automobile, generally on the same basis as the Company has
heretofore provided an automobile or reimbursement to Employee. Employee shall
keep such records and shall deliver to the Company such documentation covering
such expenses as the Company shall require.
b. During the term of his employment, Employee shall be
entitled to participate in any medical, health, disability and accident or other
hospitalization or insurance plan established by the Company for its employees
generally and the employee benefits provided to Employee by the Company shall be
no less than his present benefits at the Company.
c. During each full year of the term of Employee's
employment hereunder (such year being determined by reference to the first day
of the calendar month following the Effective Date, and ending twelve months
thereafter) Employee shall be entitled to five (5) weeks paid vacation which
shall not be cumulative from year to year.
5. TERMINATION:
a. Subject to the terms and conditions set forth in this
Agreement, the Company may at any time, with or without cause, terminate
Employee's employment hereunder upon delivery of written notice of termination
to Employee.
b. If Employee's employment is terminated for cause, (i)
Employee shall be entitled to receive his base salary through the date of
termination in full satisfaction of all obligations of the Company to Employee,
(ii) all of Employee's unexercised options granted pursuant to the Stock Option
Agreement, whether vested or unvested, shall be cancelled and (iii) Employee
shall no longer be entitled to the benefits provided in Section 4, above. For
purposes of this Agreement, "for Cause" shall mean and
2
<PAGE>
be limited to embezzlement of Company funds, theft of Company property or any
comparable act of dishonesty or fraud in connection with Employee's employment
by the Company or other comparable action materially harmful to the Company.
c. If Employee's employment is terminated without cause
(i) the Company shall be obligated to pay Employee's base salary when payment of
Employee's base salary would otherwise be due and without interruption, as
provided in Section 3(a) for the entire term of this Agreement such payment
shall be in full satisfaction of all of the obligations of the Company to
Employee under Sections 3(a) and 4(a), (b) and (c) other than previously
unreimbursed business expenses to which Employee is entitled under Section 4(a);
and (ii) all of Employee's unvested options granted pursuant to the Stock Option
Agreement shall immediately vest and shall be exercisable as provided in the
Stock Option Agreement.
6. NON-SOLICITATION: If Employee's employment is terminated at
any time during the term hereof for any reason other than Employee's death, the
Company, at its election, by notice to Employee given not later than ten (10)
days after such termination and referring specifically to this subparagraph,
shall have the right to require for one (1) year from the date of termination
(the "restricted period") that Employee not directly or indirectly solicit the
business of any customer of the Company or the employment of any employee of the
Company, and, if the Company so elects, Employee agrees not to solicit such
business or employment, provided that in the case of termination of Employee by
the Company that is not for cause, (i) the Company continues to pay to Employee
during the restricted period, when payment of Employee's base salary would
otherwise be due and without interruption, an amount equal to one hundred (100%)
percent of Employee's base salary in effect immediately prior to termination.
Any failure by the Company to make the payments required hereunder as and when
due, shall constitute a full and irrevocable waiver of the Company's rights
under this paragraph 6.
7. ASSIGNMENT: This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except that the
Company may assign or transfer this Agreement to a successor organization in the
event of merger, consolidation, or transfer of sale of all or substantially all
of the assets of the Company, in which case the term Company shall mean such
successor, provided that in the case of any such assignment or transfer, the
obligations of this Agreement are assumed by such successor or are binding upon
and inure to the benefit of such successor as a matter of law.
8. NOTICES: All notices hereunder shall be in writing and
shall be deemed to have been given at the time when mailed in any general or
branch United States Post Office enclosed in a certified post-paid envelope,
addressed to the respective
3
<PAGE>
parties stated below, or to such changed address as such party may fix by notice
as aforesaid:
To the Company: ENSA ACQUISITION CORP.
c/o ERD WASTE CORP.
Attn: Board of Directors
356 Veterans Memorial Highway
Commack, New York 11725
Attn: Joseph Wisneski,
President; and
To Employee: Joseph T. Jacobsen
1521 Brook Lane
Jamison, PA 18929
9. GOVERNING LAW: This Agreement and all performance under
this Agreement shall be governed by the laws of the State of New York.
10. WAIVER, MODIFICATION: No waiver or modification of this
Agreement or of any covenant, condition or limitation contained herein shall be
valid or effective unless it is in writing and duly executed by Employee and the
Company.
11. RESOLUTION OF DISPUTES: Any controversy or claim arising
out of or relating to this Agreement or the breach thereof, including without
limitation a claim for declaratory relief or relief which is equitable in
nature, shall be settled by arbitration in the City of New York, New York, by an
arbitrator selected by Employee and the Company. The arbitrator shall have the
power to award injunctive as well as other relief to carry out the terms of this
Agreement. If the Company and Employee cannot agree an the appointment of an
arbitrator within ten (10) days after a request for arbitration made by either
party, then such arbitrator shall be an attorney-at-law with no prior
professional association with any of the parties or their affiliates who is
selected in accordance with procedures established and implemented by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except as may
be otherwise provided in this paragraph 10. All costs of the arbitration,
including reasonable attorney's fees, shall be borne as the Arbitrator shall
direct. Judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction over the parties. Any award of the arbitrator may
include interest at a rate or rates considered just under the circumstances by
the arbitrator.
4
<PAGE>
IN WITNESS WHEREOF, Employee has signed his name and the Company, by
the signatures of its duly authorized officers, has executed this Agreement, as
of the date and year mentioned at the top of page one.
ENSA ACQUISITION CORP.
(CORPORATE SEAL)
By:
---------------------------
Attest:
-----------------------
Secretary
WITNESS:
- ------------------------------- ------------------------------
Joseph T. Jacobsen
5
