SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Environmental Services of America, Inc..
(Name of Issuer)
Common Stock, $.02 par value
(Title of Class of Securities)
294080 40 3
(CUSIP Number)
Richard Marlin, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, New York 10022
(212) 715-9100
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
January 25, 1996
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: |_|
Check the following box if a fee is being paid with this statement: |X|
Page 1
Exhibit Index appears on page 7
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SCHEDULE 13D
CUSIP No. 8494163 Page 2
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ERD WASTE CORP.
I.R.S. IDENTIFICATION NO. 11-3121813
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
3) SEC USE ONLY
4) SOURCE OF FUNDS
WC (See Item 3)
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) |_|
6) CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
7) SOLE VOTING POWER
500,000 (See Item 5)
NUMBER
OF 8) SHARED VOTING POWER
SHARES Not Applicable
BENEFICIALLY
OWNED BY 9) SOLE DISPOSITIVE POWER
EACH 500,000 (See Item 5)
REPORTING
PERSON 10) SHARED DISPOSITIVE POWER
WITH Not Applicable
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
500,000 (See Item 5)
12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES |_|
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13.2%
14) TYPE OF REPORTING PERSON
CO
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D (the "Statement") relates to
the Common Stock, $.02 par value (the "Common Stock"), of Environmental Services
of America, Inc., a Delaware corporation (the "Company"). The principal
executive offices of the Company are located at 937 East Hazelwood Avenue,
Rahway, NJ
07065.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by ERD Waste Corp.
("ERD").
ERD is a corporation organized under the laws of the state of
Delaware and is principally engaged in the business of waste management and
disposal. The address of its principal business and principal office is 356
Veterans Memorial Highway, Commack, NY 11725.
(d) During the last five years, ERD has not been convicted in
a criminal proceeding (excluding traffic violations and similar misdemeanors).
(e) During the last five years, ERD has not been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
that resulted in ERD being subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, Federal or State securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The shares of the Company's Common Stock were acquired as
consideration for ERD's making a $500,000 loan to the Company (the "Loan"). The
source of the funds for the Loan was the working capital of ERD.
ITEM 4. PURPOSE OF TRANSACTION.
ERD and the Company entered into a definitive Agreement and
Plan of Merger dated January 25, 1996 (the "Merger Agreement"), in which the
Company will merge with ENSA Acquisition Corp ("EAC"), a wholly-owned subsidiary
of ERD. As consideration for the Company's entering into the Merger Agreement,
ERD entered into a separate Securities Purchase Agreement with the Company dated
January 25, 1996 (the "Securities Purchase Agreement"). Under the terms of the
Securities Purchase Agreement, ERD acquired beneficial ownership of the shares
of Common Stock to which this Statement relates in consideration for ERD's Loan
to the Company. Upon the Company's
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fulfillment of its obligations under the Securities Purchase Agreement,
including timely repayment of the Loan, ERD will return beneficial ownership of
the shares of Common Stock to the Company. The effectiveness of the planned
merger between EAC and the Company (the "Merger") is conditioned on the approval
of the Company's shareholders and other conditions.
(a) ERD plans that pursuant to the terms of the Merger
Agreement, all shares of all classes of capital stock of the Company will be
converted into the right to receive a payment based on the number of shares held
and cancelled upon the effectiveness of the Merger. The payment per share for
each class of stock is as follows:
Common Stock $1.69
Series B Preferred Stock $100.00
Series C Preferred Stock $100.00
(b) ERD intends that EAC and the Company shall merge under the
terms of the Merger Agreement.
(c) Not applicable.
(d) ERD contemplates changes in the present board of directors
or management of the Company or both, changes in the number or terms of
directors of the Company, and filling any existing vacancies on the board of the
Company in order to assume control of the Company if the Merger is effective.
(e) ERD does not contemplate any material change in the
present capitalization or dividend policy of the Company.
(f) ERD does not contemplate any material changes in the
business or corporate structure of the Company at the time of filing of this
Statement.
(g) ERD does not contemplate any changes in the Company's
charter, bylaws, or instruments corresponding thereto or other actions which may
impede the acquisition of control of the Company by any person.
(h) ERD plans to cause all shares of all classes of the
Company's stock to cease to be quoted on NASDAQ upon the effectiveness of the
Merger.
(i) ERD plans to cause all classes of all equity securities of
the Company to become eligible for termination of registration pusuant to
Section 12(g)(4) of the Securities Exchange Act of 1934 upon the effectiveness
of the Merger.
(j) Not applicable.
Except as disclosed in this Item 4, ERD has no other current
plans or proposals which relate to or would result in any
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of the events described in Items (a) through (j) of the instructions to Item 4
of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) ERD beneficially owns an aggregate of 500,000
shares of Common Stock, representing approximately 13.2% of the
shares of Common Stock of the Company.1
(b) ERD has sole power to vote and dispose of
Common Stock beneficially owned by it.
(c) Except as detailed in Item 4, ERD has not effected any
transactions in the Common Stock during the past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
See Item 4 above.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are attached to this Statement:
Exhibit A Agreement and Plan of Merger
Exhibit B Securities Purchase Agreement
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1 Based upon 3,801,722 shares of Common Stock reported by the Company to
be outstanding as of September 30, 1995 in its Quarterly Report on Form
10-Q for the quarter ended September 30, 1995.
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SIGNATURE
---------
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set forth in
this Statement is true, complete and correct.
Dated: February 2, 1996
ERD WASTE CORP.
By: Joseph Wisneski, as President of
ERD Waste Corp.
/s/ Joseph Wisneski
-------------------------
Name: Joseph Wisneski
6
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
A Agreement and Plan of
Merger 8
B Securities Purchase
Agreement
7
AGREEMENT AND PLAN OF MERGER
AMONG
ERD WASTE CORP.
ENSA ACQUISITION CORP.
AND
ENVIRONMENTAL SERVICES OF AMERICA, INC.
DATED JANUARY __, 1996
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS.......................................................... 1
ARTICLE I THE MERGER.......................................... 5
SECTION 1.1 The Merger................................... 5
SECTION 1.2 Capital Stock of EAC......................... 6
SECTION 1.3 Capital Stock of ENSA........................ 6
SECTION 1.4 Stock Transfer Books......................... 7
ARTICLE II COMMON STOCK CONVERSION AMOUNT; SERIES B
CONVERSION AMOUNT; CLOSING.......................... 7
SECTION 2.1 Payment of Common Stock Conversion Amount..... 7
SECTION 2.2 Preferred Stock Conversion Amount............. 7
SECTION 2.3 No Further Ownership Rights in ENSA Capital
Stock......................................... 8
SECTION 2.4 Closing....................................... 8
SECTION 2.5 Actions to be Taken at the Closing............ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ENSA............... 9
SECTION 3.1 Corporate Organization........................ 9
SECTION 3.2 Authority..................................... 9
SECTION 3.3 Subsidiaries and Equity Investments........... 10
SECTION 3.4 Capitalization................................ 10
SECTION 3.5 No Violation; Consents and Approvals.......... 11
SECTION 3.6 SEC Reports and Financial Statements of ENSA.. 12
SECTION 3.7 Absence of Undisclosed Liabilities............ 12
SECTION 3.8 Accounts Receivable........................... 13
SECTION 3.9 Title to Property............................. 13
SECTION 3.10 Intellectual Property......................... 14
SECTION 3.11 Tax Matters................................... 15
SECTION 3.12 Employee Matters.............................. 16
SECTION 3.13 No Material Change............................ 17
SECTION 3.14 Absence of Change or Event.................... 17
SECTION 3.15 Litigation.................................... 19
SECTION 3.16 Compliance With Law and Other Instruments..... 20
SECTION 3.17 Insurance..................................... 24
SECTION 3.18 Affiliate Interests........................... 24
SECTION 3.19 Customers and Suppliers....................... 25
SECTION 3.20 Absence of Questionable Payments.............. 25
SECTION 3.21 Information Supplied.......................... 26
SECTION 3.22 Section 203 of the DGCL Not Applicable........ 26
SECTION 3.23 Disclosure.................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ERD AND EAC........ 26
SECTION 4.1 Organization.................................. 26
SECTION 4.2 Corporate Authority........................... 27
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SECTION 4.3 No Violation; Consents and Approvals.......... 27
SECTION 4.4 Litigation.................................... 27
SECTION 4.5 Disclosure.................................... 27
ARTICLE V COVENANTS OF ENSA.................................... 28
SECTION 5.1 Regular Course of Business.................... 28
SECTION 5.2 Restricted Activities and Transactions........ 28
SECTION 5.3 Preparation of the Proxy Statement............ 30
SECTION 5.4 Stockholders' Meeting......................... 30
SECTION 5.5 Access to Information......................... 30
SECTION 5.6 Additional Agreements; Best Efforts........... 30
SECTION 5.7 No Solicitation............................... 30
SECTION 5.8 Advice of Changes; SEC Filings................ 31
SECTION 5.9 Actions at Request of ERD..................... 31
SECTION 5.10 Actions at Closing............................ 32
ARTICLE VI COVENANTS OF EAC AND ERD............................. 32
SECTION 6.1 Amendment of ERD Stock Option Plan............ 32
SECTION 6.2 Registration of Employee Stock Options on
Form S-8...................................... 32
SECTION 6.3 Best Efforts to Obtain Financing.............. 32
SECTION 6.4 Confidential Information...................... 32
SECTION 6.5 Actions at Closing............................ 32
ARTICLE VII MUTUAL COVENANTS..................................... 33
SECTION 7.1 Expenses...................................... 33
SECTION 7.2 Public Announcements.......................... 33
SECTION 7.3 Further Assurances............................ 33
SECTION 7.4 Preparation of Required Filings............... 33
SECTION 7.5 Representations to Remain Accurate............ 33
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF ERD AND EAC............. 34
SECTION 8.1 Representations and Warranties................ 34
SECTION 8.2 Performance of Covenants...................... 34
SECTION 8.3 Update Certificate............................ 34
SECTION 8.4 No Governmental or Other Proceeding or
Litigation.................................... 34
SECTION 8.5 Approval of Stockholders of ENSA.............. 34
SECTION 8.6 Opinion of Counsel............................ 35
SECTION 8.7 Employment Agreements......................... 36
SECTION 8.8 Investigation................................. 36
SECTION 8.9 No Material Adverse Change.................... 36
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF ENSA................ 36
SECTION 9.1 Representations and Warranties................ 36
SECTION 9.2 Performance of Covenants...................... 36
SECTION 9.3 Update Certificate............................ 37
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SECTION 9.4 No Governmental or Other Proceeding or
Litigation.................................... 37
SECTION 9.5 Opinion of Counsel............................ 37
SECTION 9.6 Approvals of Stockholders of ENSA............. 38
SECTION 9.7 Payment of Investment Banking Fee............. 38
ARTICLE X TERMINATION.......................................... 38
SECTION 10.1 Termination................................... 38
SECTION 10.2 Certain Liabilities........................... 39
ARTICLE XI POST CLOSING COVENANTS............................... 40
SECTION 11.1 Deposit of Funds with Exchange Agent.......... 40
SECTION 11.2 Mailing of Conversion Payments................ 40
ARTICLE XII SURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 40
SECTION 12.1 Survival of Representations and Warranties.... 40
ARTICLE XIII MISCELLANEOUS PROVISIONS............................. 40
SECTION 13.1 Entire Agreement.............................. 40
SECTION 13.2 Notices....................................... 41
SECTION 13.3 Amendment..................................... 41
SECTION 13.4 Nonwaiver..................................... 41
SECTION 13.5 Counterparts.................................. 41
SECTION 13.6 Assignment; Binding Nature; No
Beneficiaries................................. 42
SECTION 13.7 Headings...................................... 42
SECTION 13.8 Governing Law; Consent to Jurisdiction........ 42
SECTION 13.9 Specific Performance.......................... 42
SECTION 13.10 Severability.................................. 42
SECTION 13.11 Construction.................................. 43
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered
into on January __, 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, subject to and upon the terms and conditions set
forth herein, ENSA, ERD and EAC desire to merge EAC with and into ENSA (the
"Merger"); and
WHEREAS, ERD, EAC and ENSA intend, by approving the
resolutions authorizing this Agreement, that this Agreement be treated as a plan
of reorganization within the meaning of section 368(a) of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder;
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).
<PAGE>
"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 C and properly executed in
accordance with the DGCL.
"Closing" has the meaning set forth in Section 2.4.
"Colin" means Jon Colin.
"Colin Employment Agreement" has the meaning set forth
in Section 2.5(ii).
"Colin Option Agreement" has the meaning set forth in
Section 2.5(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 and ENSA
Preferred 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 1.1(d).
"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" means shares of common stock of ENSA, par
value $0.02 per share.
"ENSA Disclosure Letter" means the letter so captioned,
dated as of the date of this Agreement, addressed to ERD, and
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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.
"ERD Disclosure Letter" means the letter so captioned, dated
as of the date of this Agreement, addressed to ENSA, and delivered by ERD to
ENSA at or prior to the signing 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 2.5.
"Jacobsen" means Joseph T. Jacobsen.
"Jacobsen Employment Agreement" has the meaning set forth in
Section 2.5(iii).
"Jacobsen Option Agreement" has the meaning set forth in
Section 2.5(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.
"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.
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"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 hereof.
"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 3.21.
"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" means shares of ENSA's Series B
Preferred Stock, par value $0.01 per share.
"Series C Preferred Stock" means shares of ENSA's Series C
Preferred Stock, par value $0.01 per share.
"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 1.1(a).
"Takeover Proposal" has the meaning set forth in
Section 5.7.
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"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 MERGER
SECTION 1.1 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.
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(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 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 1.2 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 1.3 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 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
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representing Series B 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.
SECTION 1.4 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 or Preferred Stock
shall thereafter be made on such stock transfer books.
ARTICLE II
COMMON STOCK CONVERSION AMOUNT;
SERIES B CONVERSION AMOUNT; CLOSING
SECTION 2.1 Payment of 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 $1.69 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
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forth in the Letter of Transmittal, cash in the amount of $100 per share of
Series B 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 Series B 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 or Series C Preferred Stock, as the case may be.
SECTION 2.4 Closing. Subject to the last sentence of this
Section 2.4 and Article 10 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 8.5 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 or IX 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 X.
SECTION 2.5 Actions to be Taken at the Closing. In addition to
the satisfaction of the conditions and the actions to be taken at the Closing as
set forth in Articles VIII and IX hereof, the following actions shall be taken
at the Closing, each of which shall be conditioned on completion of all other
actions to be taken at the Closing and all of which shall be deemed to have
taken place simultaneously:
(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
2.5(ii) (the "Colin Employment Agreement");
(iii) EAC and Jacobsen shall enter into an employment
agreement in the form attached hereto as Exhibit
2.5(iii) (the "Jacobsen Employment Agreement);
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(iv) ERD and Colin shall enter into a stock option
agreement in the form attached hereto as Exhibit
2.5(iv) (the "Colin Option Agreement");
(v) ERD and Jacobsen shall enter into a stock option
agreement in the form attached hereto as Exhibit
2.5(v) (the "Jacobsen Option Agreement");
(vi) The board of directors of ENSA shall resign and
shall appoint Joseph Wisneski and his designees to
serve as the directors of ENSA;
(vii) EAC shall file the Certificate of Merger with the
Secretary of State of the State of Delaware; and
(viii) 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 8.5 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
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the stockholders of ENSA in accordance with the applicable provisions of the
DGCL and in accordance with the provisions of Section 8.5 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 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,
3,806,722 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
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limitation, any redemption by ENSA thereof) (i) between or among ENSA and any of
its stockholders and (ii) to the best of the 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:
(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 1.1, (ii) the filing with
the SEC of the Proxy Statement, (iii) 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 (iv) such local consents, orders,
approvals, authorizations, registrations, declarations and filings
which, if not obtained or made, would not, individually or in the
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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 on Section 3.6 of the ENSA Disclosure Letter, ENSA has
timely filed with the 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
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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 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
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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.
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.
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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 deferred gain or
loss, if any, allocable to ENSA arising out of any deferred
intercompany transaction (as such term is defined in Treas. Reg. ss.
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
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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.
SECTION 3.12 Employee Matters. (a) With respect to each
employee benefit plan (including, without limitation, any
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"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.
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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.
SECTION 3.14 Absence of Change or Event. Except as
contemplated by this Agreement or as disclosed in Section 3.14 of the 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;
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(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;
(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
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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 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
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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.
(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
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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 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
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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
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,
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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. ss.
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, 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
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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
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to ENSA's best knowledge, no such customer intends to cancel or otherwise
terminate its 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 Information Supplied. None of the information
supplied or to be supplied by ENSA for inclusion or incorporation by reference
in (i) the proxy statement in definitive form relating to the meeting of ENSA's
respective stockholders to be held in connection with the Merger (the "Proxy
Statement") will, at the date first mailed to stockholders, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of circumstances under which they are
made, not misleading and (ii) the Proxy Statement or any amendment thereof or
supplement thereto will, at the time of the meetings of ENSA's respective
stockholders to be held in connection with the Merger, contain any untrue
statement of a material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for such meeting of stockholders. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
SECTION 3.22 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 3.23 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
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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) 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
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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 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.
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 relation- ships 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
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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;
(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
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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.
SECTION 5.3 Preparation of the Proxy Statement. ENSA shall
promptly prepare and file with the SEC the Proxy Statement and shall use its
best efforts to cause the Proxy Statement to be mailed to the stockholders of
ENSA at the earliest practicable date.
SECTION 5.4 Stockholders' Meeting. ENSA shall call a meeting
of its stockholders to be held as promptly as practicable for the purpose of
voting upon the adoption of this Agreement. ENSA will, through its Board of
Directors, unanimously recommend to its stockholders approval of this Agreement
and to solicit proxies in favor of the adoption of this Agreement, and shall
take all other action necessary or advisable to secure the vote or consent of
stockholders required to effect the Merger.
SECTION 5.5 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.
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SECTION 5.6 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 5.7 No Solicitation. ENSA shall not, prior to April
10, 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 shall not be
considered a breach of this Section 5.7 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 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, 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.
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SECTION 5.8 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 5.9 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 5.10 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 [1,000,000] and
(ii) permit the grant of options to consultants, and shall recommend
ratification of such amendment by ERD's stockholders at the next meeting of its
stockholders.
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 Best Efforts to Obtain Financing. ERD shall use
its best efforts to obtain financing on terms reasonably satisfactory to ERD's
board of directors to enable ERD to pay the Common Stock Conversion Amount and
the Preferred Stock Conversion Amount.
SECTION 6.4 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
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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 6.5 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.
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 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 7.4 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
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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 7.5 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 TO OBLIGATIONS
OF ERD AND EAC
The obligations of ERD and EAC to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, or to the
waiver by them in the manner provided by Section 12.4, at or before the Closing,
of each of the following conditions:
SECTION 8.1 Representations and Warranties. The
representations and warranties of ENSA contained in this Agreement, including
any schedule, exhibit or certificate delivered pursuant hereto shall be complete
and correct as of the date when made, shall be deemed repeated at and as of the
Closing Date as if made on the Closing Date and shall then be complete and
correct.
SECTION 8.2 Performance of Covenants. ENSA shall have
performed and complied in all material respects with each covenant, agreement
and condition required by this Agreement to be performed or complied with by
them prior to or on the Closing Date.
SECTION 8.3 Update Certificate. ERD shall have received
favorable certificates, dated the Closing Date, signed by the President of ENSA
as to the matters set forth in Sections 8.1 and 8.2.
SECTION 8.4 No Governmental or Other Proceeding or Litigation.
No order of any court or administrative agency shall be in effect that restrains
or prohibits any transaction contemplated hereby or that would limit or affect
EAC's or ENSA's ownership or operation of the business of ENSA; no suit, action,
investigation, inquiry or proceeding by any governmental body or other person or
entity shall be pending or threatened against
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ERD, EAC or ENSA that challenges the validity or legality, or that seeks to
restrain the consummation, of the transactions contemplated hereby or that seeks
to limit or otherwise affect ERD's or EAC's right to own or operate the business
of ENSA; and no written advice shall have been received by ERD, EAC, ENSA or by
any of their respective counsel from any governmental body, and remain in
effect, stating that an action or proceeding will, if the Merger is consummated
or sought to be consummated, be filed seeking to invalidate or restrain the
Merger or limit or otherwise affect ERD's or EAC's ownership or operation of
ENSA.
SECTION 8.5 Approval of Stockholders of ENSA. The Merger shall
have been approved by the requisite number of shares of ENSA, including the
approval of a majority of shares held by Disinterested Stockholders of ENSA.
SECTION 8.6 Opinion of Counsel. ENSA shall have delivered to
ERD an opinion of Connolly, Epstein, Chicco, Foxman, Engelmyer and Ewing, dated
the Closing Date and addressed to ERD, as to the following matters:
(i) ENSA and each of its subsidiaries are
corporations duly organized, validly existing and in good standing
under the laws of their respective states of incorporation.
(ii) ENSA has all requisite corporate power and
authority to execute, deliver and perform its obligations under the
Agreement and Plan of Merger and all other agreements, certificates or
instruments to be executed by ENSA in connection therewith (the "Other
Agreements"). The execution, delivery and performance of the Agreement
and Plan of Merger and the Other Agreements and the consummation of the
transactions contemplated thereby have been duly authorized by all
requisite corporate action by ENSA.
(iii) Each of the Agreement and Plan of Merger and the
Other Agreements has been duly executed and delivered by ENSA and
(assuming each of the Agreement and Plan of Merger and the Other
Agreements has been duly authorized, executed and delivered by each
other party thereto) constitutes the valid and binding obligation of
ENSA enforceable against ENSA in accordance with its terms, except that
(i) enforceability may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other laws affecting
creditors' rights generally or by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law), and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
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(iv) To the best of our knowledge after due inquiry, no
approval, authorization, consent, license, clearance or order of,
declaration or notification to, or filing or registration with, any
governmental or regulatory authority is required in order to permit
ENSA to perform its obligations under the Agreement and Plan of Merger
and/or the Other Agreements.
(v) Neither the execution, delivery and performance
of the Agreement and Plan of Merger or the Other Agreements, nor the
consummation by ENSA of the transactions contemplated by the Agreement
and Plan of Merger and the Other Agreements will conflict with, or
result in a breach or violation of, any provision of the articles of
incorporation or By-Laws of ENSA.
SECTION 8.7 Employment Agreements. Colin shall have executed
and delivered to EAC the Colin Employment Agreement. Jacobsen shall have
executed and delivered to EAC the Jacobsen Employment Agreement.
SECTION 8.8 Investigation. Neither any investigation of ENSA
by ERD to be completed 45 days from the date hereof, nor the schedules or
exhibits to this Agreement, nor any other document delivered to ERD as
contemplated by this Agreement, shall have revealed any facts or circumstances
which, in the good faith judgment of ERD, reflect in a material adverse way on
the assets, business, condition, financial or otherwise, or results of
operations or prospects of ENSA; provided, however, that if ERD does not advise
ENSA of such facts or circumstances prior to the 46th day from the date hereof
the condition to Closing set forth in this Section 8.8 shall be deemed to be
waived by ERD.
SECTION 8.9 No Material Adverse Change. Prior to the Closing
Date, there shall be no material adverse change in the assets, business,
condition, financial or otherwise, results of operations or prospects of ENSA,
whether in the ordinary course of business or otherwise, for any reason
whatsoever, including, without limitation, as a result of any legislative or
regulatory change, revocation of any license or rights to do business, fire,
explosion, accident, casualty, labor trouble, flood, drought, riot, storm,
condemnation or act of God or other public force or otherwise, and ENSA shall
have delivered to ERD a certificate, dated the Closing Date, to such effect.
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ARTICLE IX
CONDITIONS TO THE OBLIGATIONS
OF ENSA
The obligations of ENSA to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction, or to the
waiver by ENSA in the manner contemplated by Section 12.4, at or before the
Closing, of each of the following conditions:
SECTION 9.1 Representations and Warranties. The
representations and warranties of ERD and EAC contained in this Agreement,
including any schedule, exhibit or certificate delivered pursuant hereto shall
be complete and correct as of the date when made, shall be deemed repeated at
and as of the Closing Date as if made on the Closing Date and shall then be
complete and correct.
SECTION 9.2 Performance of Covenants. ERD shall have performed
and complied in all material respects with each covenant, agreement and
condition required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
SECTION 9.3 Update Certificate. ENSA shall have received a
favorable certificate, dated the Closing Date, signed by [the President of ERD]
as to the matters set forth in Sections 9.1 and 9.2.
SECTION 9.4 No Governmental or Other Proceeding or Litigation.
No order of any court or administrative agency shall be in effect that restrains
or prohibits any transactions contemplated hereby; no suit, action,
investigation, inquiry or proceeding by an governmental body or other person or
entity shall be pending or threatened against ERD, EAC or ENSA that challenges
the validity or legality, or that seeks to restrain the consummation, of, the
Merger; and no written advice shall have been received by ERD, EAC, ENSA or
their respective counsel from any governmental body, and remain in effect,
stating that an action or proceeding will, if the Merger is consummated or
sought to be consummated, be filed seeking to invalidate or restrain the Merger.
SECTION 9.5 Opinion of Counsel. ERD shall have delivered to
ENSA an opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, dated the
Closing Date and addressed to ENSA, as to the following matters:
(i) ERD is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
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(ii) EAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(iii) Each of ERD and EAC has all requisite corporate
power and authority to execute, deliver and perform its obligations
under the Agreement and Plan of Merger and all other agreements,
certificates or instruments to be executed by ERD or EAC in connection
therewith (the "Other Agreements"). The execution, delivery and
performance of the Agreement and Plan of Merger and the Other
Agreements and the consummation of the transactions contemplated
thereby have been duly authorized by all requisite corporate action by
each of ERD and EAC.
(iv) Each of the Agreement and Plan of Merger and the
Other Agreements has been duly executed and delivered by ERD and EAC
and (assuming each of the Agreement and Plan of Merger and the Other
Agreements has been duly authorized, executed and delivered by each
other party thereto) constitutes the valid and binding obligation of
each of ERD and EAC enforceable against each of them in accordance with
its terms, except that (i) enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
laws affecting creditors' rights generally or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law), and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(v) To the best of my knowledge after due inquiry, no
approval, authorization, consent, license, clearance or order of,
declaration or notification to, or filing or registration with, any
governmental or regulatory authority is required in order to permit ERD
or EAC to perform their respective obligations under the Agreement and
Plan of Merger and/or the Other Agreements, except those which have
previously been obtained.
(vi) Neither the execution, delivery and performance of
the Agreement and Plan of Merger or the Other Agreements, nor the
consummation by ERD or EAC of the transactions contemplated by the
Agreement and Plan of Merger and the Other Agreements will conflict
with, or result in a breach or violation of, any provision of the
articles of incorporation or By-Laws of ERD or EAC.
SECTION 9.6 Approvals of Stockholders of ENSA. The Merger
shall have been approved by the requisite number of shares
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of ENSA, including the approval of a majority of shares held by Disinterested
Stockholders of ENSA.
SECTION 9.7 Payment of Investment Banking Fee. At the Closing,
ENSA shall have paid to The Argentum Group $100,000 pursuant to the terms of the
Investment Banking Agreement .
ARTICLE X
TERMINATION
SECTION 10.1 Termination.
This Agreement may be terminated:
(a) by the mutual consent in writing of ERD and ENSA;
(b) by ERD or by ENSA, at any time after April 10, 1996, (or
such later date as shall have been agreed to in writing by ERD and
ENSA) unless, prior to termination under this Section 10.1(b), this
Agreement is terminated by ERD or ENSA pursuant to Section 10.1(c)
below; or
(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; or
(d) by ERD, within 45 days after the date hereof, if its due
diligence investigation shall disclose to ERD any fact or circumstances
which, in the good faith judgment of ERD, reflect in a material adverse
way on the assets, business, condition, financial or otherwise, or
results of operations of ENSA as a result of which ERD shall determine,
not to close hereunder. Failure or delay by ENSA in furnishing
information reasonably requested by ERD pursuant to Section 5.5 shall
extend such 45-day period for an amount of time equal to any such
delay.
The exercise of the power of termination provided in this Section 10.1 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 X, the Merger shall be abandoned without further action by ENSA or ERD.
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SECTION 10.2 Certain Liabilities. In the event of a
termination pursuant to Section 10.1(a) or 10.1(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 10.1 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 XI
POST CLOSING COVENANTS
SECTION 11.1 Deposit of Funds with Exchange Agent. Within five
(5) business days following the Closing, EAC and ERD shall deposit with the
Exchange Agent sufficient funds to pay to ENSA stockholders the amounts to which
they are entitled to receive upon surrender of the certificates representing
ENSA's Common Stock and Series B Preferred Stock ("Conversion Payments"), and
shall cause the Letter of Transmittal to be mailed to each holder of record of
ENSA Common Stock and Series B Preferred Stock, other than ERD and holders of
Dissenting Shares.
SECTION 11.2 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 XII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND COVENANTS; INDEMNITY
SECTION 12.1 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
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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 XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 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 13.2 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 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 13.3 Amendment. This Agreement may be modified or
amended only by an instrument in writing, duly executed by all of the parties
hereto.
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SECTION 13.4 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 13.5 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 13.6 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.
SECTION 13.7 Headings. The headings in this Agreement are
inserted for convenience only and shall not constitute a part hereof.
SECTION 13.8 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 13.9 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 enti- tled to an injunction or
injunctions to prevent breaches of the
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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 13.10 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 13.11 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 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.
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[SIGNATURE PAGE TO FOLLOW]
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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.
Attest: By /s/ Jon Colin
----------------------------
/s/ Jon Colin
- ---------------------------- Title:
Assistant Secretary
Address:
Attn:
Facsimile No.:
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<PAGE>
ERD WASTE CORP.
Attest: By /s/ Joseph Wisneski
--------------------------
/s/ Joseph Wisneski
- -------------------------- Title:
[Assistant] Secretary
Address:
Attn:
Facsimile No.:
ENSA ACQUISITION CORP.
Attest: /s/ Joseph Wisneksi
By --------------------------
/s/ Joseph Wisneski
- -------------------------- Title:
Assistant Secretary
Address:
Attn:
Facsimile No.:
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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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"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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"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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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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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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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,
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alleged untrue statement, 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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<PAGE>
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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<PAGE>
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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<PAGE>
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.
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<PAGE>
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.
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
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<PAGE>
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 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/
-------------------------------------------------
Name:
Title:
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/
-------------------------------------------------
Name:
Title:
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.
