SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ENVIRONMENTAL SERVICES OF AMERICA, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.02 of the Registrant
Series B Preferred Stock, par value $.01, of the Registrant
Series C Preferred Stock, par value $.01, of the Registrant
2) Aggregate number of securities to which transaction applies:
3,806,722 shares of Common Stock of the Registrant
10,257.78 shares of Series B Preferred Stock of the Registrant
3,200 shares of Series C Preferred Stock of the Registrant
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
$1.69 per share of Common Stock
$100.00 per share of Series B Preferred Stock
$100.00 per share of Series C Preferred Stock
The per unit price of securities to which the transaction applies is based
upon the unit price to be received by holders of such securities if the
transaction is consummated.
4) Proposed maximum aggregate value of transaction: $7,779,138
5) Total fee paid: $1,555.83
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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ENVIRONMENTAL SERVICES OF AMERICA, INC.
Corporate Offices, Building #2
937 East Hazelwood Avenue
Rahway, NJ 07065
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
to be held on March 22, 1996
February 13, 1996
A Special Meeting of Shareholders of Environmental Services of America, Inc.
(the "Company"), a Delaware corporation, will be held at the offices of the
Company, located at 937 East Hazelwood Avenue, Rahway, New Jersey, on Friday,
March 22, 1996, at 10:00 a.m. (local time), for the following purposes:
1. To consider and vote upon a proposal to merge the Company with ENSA
Acquisition Corp. ("EAC") pursuant to an Agreement and Plan of Merger,
dated January 25, 1996, by and among the Company, ERD Waste Corp.
("ERD") and EAC, a copy of which is attached as Annex A to the Proxy
Statement accompanying this Notice of Special Meeting (the "Proxy
Statement"), as a result of which each outstanding share of the
Company's Common Stock, Series B Preferred Stock and Series C Preferred
Stock (other than treasury shares and shares owned by ERD) will be
converted into the right to receive $1.69 per share of Common Stock,
$100.00 per share of Series B Preferred Stock, and $100.00 per share
of Series C Preferred Stock.
2. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock, Series B Preferred Stock
and Series C Preferred Stock at the close of business on February 6, 1996, are
entitled to notice of, and to vote at, the Special Meeting. As described in the
Proxy Statement, the affirmative votes of a majority of all votes entitled to be
cast at the Special Meeting are required to approve the Merger under the
Delaware General Corporation Law, and approval of the Merger by a majority vote
of "disinterested shareholders" of the Company is a condition to closing under
the Agreement and Plan of Merger. Thus, each shareholder's vote will be
important, and shareholders are urged to vote either in person at the Special
Meeting or by Proxy. All shareholders are invited to attend the Special Meeting
in person, but whether or not you plan to attend, the Company's Board of
Directors requests that you ensure that your vote is counted by completing,
signing and returning the enclosed proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ JOSEPH T. JACOBSEN
JOSEPH T. JACOBSEN
Executive Vice President and Secretary
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ENVIRONMENTAL SERVICES OF AMERICA, INC.
Corporate Offices, Building #2
937 East Hazelwood Avenue
Rahway, NJ 07065
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
to be held March 22, 1996
A Special Meeting of the shareholders of Environmental
Services of America, Inc. (the "Company") will be held at the offices of the
Company, located at 937 East Hazelwood Avenue, Rahway, New Jersey, on Friday,
March 22, 1996, at 10:00 a.m. (local time) (the "Special Meeting" or "Meeting").
The sole purpose of the Meeting is for shareholders of the Company to consider
and vote upon a proposal to merge the Company with ENSA Acquisition Corp.
("EAC"), a wholly-owned subsidiary of ERD Waste Corp., Inc. ("ERD"), pursuant to
an Agreement and Plan of Merger dated January 25, 1996, by and among the
Company, EAC and ERD (the "Merger Agreement"). If the Company's merger with EAC
(the "Merger") is approved by the requisite vote of the Company's shareholders
(as described below) and consummated, (a) the Company will become a wholly-owned
subsidiary of ERD, (b) shares of the Company's Common Stock (other than treasury
shares and any shares owned by ERD) which are outstanding immediately prior to
the Merger will be converted into the right to receive $1.69 per share, and (c)
shares of the Company's Series B Preferred Stock and Series C Preferred Stock
(other than treasury shares and any shares owned by ERD) will be converted into
the right to receive $100.00 per share. Treasury shares and shares owned by ERD,
if any, will be cancelled. The Company's pre-Merger shareholders will have no
equity interest in the Company or in ERD following the Merger.
This Proxy Statement, accompanied by copies of the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, and the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, is being furnished on or about February 13, 1996, to shareholders of
record of the Company as of February 6, 1996 (the "Record Date") in connection
with the solicitation of proxies by the Board of Directors of the Company to be
used at the Special Meeting and at any postponement or adjournment thereof. All
expenses incurred in connection with this solicitation of proxies will be borne
by the Company. In addition to solicitation by mail, proxies may be solicited in
person by directors, officers and employees of the Company, without additional
compensation, by telephone, telegram, facsimile or similar method.
Holders of record of the Company's Common Stock, Series B
Preferred Stock and Series C Preferred Stock as of the Record Date will be
entitled to vote at the Meeting in person or by proxy, in the latter case by
filing a signed proxy with the Secretary of the Company prior to the Meeting. If
a proxy in the accompanying form is duly executed and returned, the shares
represented by such proxy will be voted as specified. If an executed proxy does
not contain specific voting instructions, the shares will be voted "FOR"
approval of the Merger. A properly executed proxy marked "ABSTAIN" will be
counted for the purpose of determining whether a quorum is present at the
Meeting, but will not be voted. Any proxy
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may be revoked at any time prior to its exercise by so notifying the Secretary
of the Company in writing, by delivering a duly executed proxy bearing a later
date, or by attending the Meeting and voting in person.
Arrangements will be made with brokerage firms and other
custodians, nominees and fiduciaries, to forward proxy materials to beneficial
owners of shares owned of record by such persons and firms in order to obtain
instructions as to the voting of such shares, and the Company, upon request,
will reimburse such persons and firms for reasonable expenses which they incur
in forwarding such materials.
VOTE REQUIRED TO APPROVE THE MERGER
Under the Delaware General Corporation Law (the "DGCL"), an
affirmative vote of holders of a majority of the outstanding stock of the
Company is required to approve the Merger. For this purpose, the Company's
Common Stock, Series B Preferred Stock and Series C Preferred Stock will vote as
a single class of stock. In connection with its providing the ERD Bridge Loan to
the Company (as described below), ERD received a proxy from certain affiliates
of directors of the Company to vote shares of Common Stock, Series B Preferred
Stock and Series C Preferred Stock owned by them, representing, in the
aggregate, approximately 24% of all votes eligible to be cast at the Special
Meeting, for approval of the Merger.
In addition to the requirements of the DGCL, closing under the
Merger Agreement is conditioned upon approval by a majority vote of
"disinterested stockholders" of the Company. For this purpose, the Merger
Agreement defines "disinterested shareholders" as all shareholders of the
Company other than ERD, the Company's directors in office at the time the Merger
Agreement was approved by the Company's Board of Directors, and their respective
"affiliates", as that term is defined in Rule 405 promulgated under the
Securities Act of 1933, as amended. As of the record date, the Company has
determined that, based upon filings with the Securities and Exchange Commission
by directors and certain of their affiliates, ___________ shares of the
Company's Common Stock, ________ shares of Series B Preferred Stock and no
shares of Series C Preferred Stock were owned by "disinterested shareholders".
If fewer shares of Common Stock are voted for approval of the
Merger than the number required by the DGCL or to satisfy the condition to
closing set forth in the Merger Agreement which requires majority approval of
the Merger by disinterested shareholders, it is expected that the Meeting will
be adjourned for the purpose of allowing additional time for soliciting and
obtaining additional proxies or votes. Shares represented by proxies which have
been voted against approval of the Merger, however, will not be voted in favor
of any postponement or adjournment of the Meeting for the purpose of allowing
additional time to solicit votes in favor of the Merger. At any subsequent
reconvening of the Meeting, all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the Meeting, except
for any proxies that have been revoked or withdrawn.
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THE PROPOSED MERGER
If the Merger is approved by the requisite vote of the
Company's shareholders and is consummated, (a) the Company will become a
wholly-owned subsidiary of ERD, (b) shares of the Company's Common Stock (other
than treasury shares and shares owned by ERD) outstanding immediately prior to
the Merger will be converted into the right to receive $1.69 per share, (c)
shares of the Company's Series B Preferred Stock (other than treasury shares and
shares owned by ERD) will be converted into the right to receive $100.00 per
share, and (d) shares of the Company's Series C Preferred Stock will be
converted into the right to receive $100.00 per share. The Company's pre-Merger
shareholders will have no equity interest in the Company or in ERD following the
Merger.
ERD is a publicly-held corporation, with executive offices
located at 356 Veterans Memorial Highway, Commack, NY 11725 (telephone:
516/543-0606), which specializes in the management and disposal of municipal
solid waste, industrial and commercial non-hazardous solid waste, and hazardous
waste. In its fiscal year ended January 31, 1996, approximately 50% of ERD's
revenues were derived from operation of an incineration facility in Long Beach,
New York, and the sale of electricity generated at that facility.
Background of the Merger; History of Negotiations
For approximately two years prior to the execution of the
Merger Agreement, the Company and ERD had limited business contacts as a result
of which Jon Colin, President of the Company, and Joseph Wisneski, President of
ERD, had met or spoken on a number of occasions to discuss general business
matters. In May 1995, following ERD's initial public offering, Messrs. Wisneski
and Colin agreed that it could be beneficial to ERD and the Company if a
business combination could be effected on mutually acceptable terms. At that
time, ERD had substantial cash resources available from its recently completed
public offering, and an interest in growth through acquisitions. Management of
the Company believed that the strategy of acquiring companies in related
environmental businesses was sound if properly managed and adequately financed,
and that competitive pressures in the environmental industry would continue to
force consolidation among smaller companies in the industry.
The Company and ERD exchanged public information and a meeting
between Mr. Colin and Robert Rubin, Chairman of ERD, was arranged later in May
1995 to discuss the possibility of a business combination and the potential
benefits to ERD and the Company of such a combination. In June 1995, Mr. Colin
and Walter Barandiaran, a director of the Company, met with Mr. Rubin and Mr.
Wisneski to explore possible frameworks for a business combination. Discussions
continued through June, during the course of which ERD expressed interest in a
merger in which shareholders of the Company would receive ERD debt and equity
securities, and the Company would become a wholly-owned subsidiary of ERD. ERD
indicated, however, that it was reluctant to issue a significant amount of new
shares of ERD common stock in a merger because of the dilutive effect which this
would have on ERD's earnings, and the potential negative impact on the market
price for ERD's common stock. Accordingly, ERD proposed limitations on the
rights of recipients of shares of ERD common stock issued in any such merger
(i.e., the Company's shareholders) to resell such shares, or that a hybrid
debt/equity security or combination of securities be used which would provide a
deferred payout to the Company's shareholders with limited transferability.
Messrs. Colin
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and Barandiaran also were concerned about the possibility that the market price
of ERD common stock might erode following a merger due to the substantial
increase in the shares available or to become available for sale, and that this
risk to the Company's shareholders could be exacerbated if limitations were
placed on their ability to sell ERD equity securities received in a merger, as
well as the risks to the Company's shareholders in accepting a deferred cash
payout in a business combination with ERD.
While discussions with ERD were under way, the Company also
was discussing other possible business combinations. On June 30, 1995, the
Company signed a 30-day "stand still" agreement with another publicly-owned
environmental company to consider the possibility of a business combination with
that company. ERD was informed about this development and further discussions
between the Company and ERD were suspended. At the end of the 30-day stand still
period, negotiations between the Company and this other potential acquisition
partner were discontinued and, in August 1995, negotiations resumed between Mr.
Colin and Mr. Wisneski. ERD requested an opportunity to visit certain of the
Company's operating facilities, and the Company arranged for visits by ERD
representatives to the Company's transfer, storage and disposal facilities in
New York and Indiana.
The Company continued to consider other possibilities and, in
September 1995, Mr. Barandiaran and Mr. Colin met with another publicly-owned
environmental company to discuss a business combination. In connection with
those discussions, Mr. Colin, Joseph Jacobsen and Schneur Genack, directors of
the Company, met in Chicago with Environmental Venture Fund L.P. ("EVF"), a
venture capital partnership which is one of the Company's principal investors,
to discuss a possible business combination with this new candidate, since EVF
also was a substantial investor in that candidate. After a thorough review of
this situation, the Company determined that such a business combination was not
feasible since the new candidate required substantial additional financing, EVF
was fully invested and not in a position to provide additional financing to
either the Company or the new candidate, and, in the opinion of management and
EVF, meeting the financial needs of the combined companies would be difficult.
On November 1, 1995, Messrs. Jacobsen and Colin met with
Messrs. Rubin and Wisneski at the Company's transfer, storage and disposal
facility in Indiana. At that time, Messrs. Rubin and Wisneski advised the
Company that, in view of the Company's negative position on restricting
subsequent resales of ERD common stock issued in any business combination
between ERD and the Company, ERD was prepared to make an all cash offer for the
Company based upon a valuation of $1.50 per share of the Company's common stock,
and a price for the Company's Preferred Stock based upon conversion of the
Preferred Stock into Common Stock in accordance with existing conversion ratios
which represented a substantial discount from the redemption value of the
Preferred Stock. Messrs. Colin and Jacobsen informed Mr. Rubin that, in their
opinions, that offer was inadequate, and invited ERD to reconsider its offer.
Following their meeting in Indiana, Mr. Colin and Mr. Rubin
had a number of telephone negotiations which resulted, on November 8, 1995, in
the Company receiving a proposed letter of intent from ERD which established a
$1.69 per share valuation for the Company's Common Stock, established a
valuation of Preferred Stock based upon the conversion of the Preferred Stock
into Common Stock valued at $1.69 per share, set forth proposed terms for a
pre-merger acquisition by ERD of the Common Stock and Series B and
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Series C Preferred Stock owned by EVF and Argentum Capital Partners, L.P.
("ACP"), and other terms and conditions of a proposed merger, including terms of
the post-merger employment of Mr. Colin by the surviving corporation. The
Company's Board of Directors met informally to discuss ERD's November 8, 1995
proposal, and further negotiations, principally between Messrs. Colin and
Barandiaran for the Company, and Messrs. Wisneski and Rubin for ERD, took place
over the next several days. On November 13, 1995, the Board met formally, with
counsel present, to consider a revised proposal from ERD dated November 10,
1995.
In the course of its deliberations on November 13, 1995, the
Board contacted ERD by telephone to further negotiate and clarify the proposals
set forth in ERD's November 10, 1995, proposed letter of intent. As a result of
these negotiations, a new letter of intent was developed which the Company
received on November 14, 1995. The terms of the November 14, 1995, proposed
letter of intent provided that all holders of Preferred Stock other than EVF and
ACP would be paid the full redemption price for their shares. EVF and ACP were
to receive a lower cash price, based upon a pre-merger conversion of their
Preferred Stock into Common Stock valued at $1.69 per share, with the difference
between the cash price received by EVF and ACP and the price received by other
Preferred Stockholders to be made up through the issuance of ERD common stock
purchase warrants to EVF and ACP. The Board reconvened on November 15, 1995, to
consider the latest ERD proposal and, following its deliberations, approved
execution of the letter of intent dated November 14, 1995.
The Company's execution of the November 14, 1995 letter of
intent did not create any legally binding obligations to proceed with the
proposed Merger, and negotiations between the officers and counsel for the
Company and ERD continued on numerous business and legal points in connection
with the drafting of a definitive merger agreement, as well as the terms of Mr.
Colin's and Mr. Jacobsen's post-Merger employment, the timing and terms of ERD's
purchase of Common Stock, Series B Preferred Stock and Series C Preferred Stock
owned by EVF and ACP, and terms of an Investment Banking Fee Agreement with The
Argentum Group, an affiliate of ACP and Mr. Barandiaran. See "RECOMMENDATION OF
BOARD OF DIRECTORS -- Interests of Management and Other Persons in the Merger."
In the course of negotiations following execution of the
November 14, 1995, letter of intent, the concept of a pre-Merger purchase of EVF
and ACP stock was abandoned, and ERD agreed that all Series B and Series C
holders would receive a cash price equal to the redemption value of such shares
upon consummation of the Merger. In addition, an interim $500,000 financing for
the Company from ERD was negotiated, as described below under the caption "ERD
Bridge Loan". On January 16, 1996, the Board of Directors of the Company met to
consider and act upon drafts of the Merger Agreement and ERD Bridge Loan
documentation. At this meeting, at which counsel for the Company was present,
the Board discussed the terms of the Merger Agreement and approved, in concept,
the terms of the Merger as set forth in the then current draft of the Merger
Agreement, subject to the resolution of certain issues relating to the Bridge
Loan - principally terms relating to the issuance of "compensation shares" to
ERD and the vesting of such shares. The meeting was adjourned, with agreement to
reconvene by telephone if a satisfactory resolution of the outstanding Bridge
Loan issues was achieved or if the Company was unable to obtain ERD's agreement
to a satisfactory resolution of these issues. Following further negotiations
between the attorneys for ERD and the Company, the Board met again on January
18, 1996, to consider proposed resolutions of the Bridge Loan issues, and
approved the new terms.
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The Board reconvened on January 25, 1996, at which time final forms of the
Merger Agreement and Bridge Loan documentation were reviewed and discussed.
Following these deliberations, the Board unanimously approved the Merger
Agreement and the Bridge Loan Agreement. Following the meeting of the Board, the
Merger Agreement was signed. The Board (with Mr. Barandiaran abstaining) also
approved the Investment Banking Fee Agreement between the Company and The
Argentum Group.
ERD Bridge Loan
In the course of negotiations of the Merger Agreement, the
Company requested and ERD agreed to provide a $500,000 loan to the Company (the
"ERD Bridge Loan" or "Bridge Loan") simultaneously with execution of the Merger
Agreement. The ERD Bridge Loan was funded by ERD on January 26, 1996, pursuant
to a Securities Purchase Agreement dated as of that date (the "Bridge Loan
Agreement"). The Bridge Loan generally is subordinated in right of payment to
the Company's indebtedness to its principal bank lender. Repayment of the Bridge
Loan is due on December 31, 1996, together with interest at the prime rate,
unless (a) the Company terminates the Merger Agreement before April 10, 1996,
for any reason other than a breach of the Merger Agreement by ERD, (b) there is
a change of control of the Company, as described in the Bridge Loan Agreement,
or (c) the Company commits an event of default under the Bridge Loan Agreement,
in any of which cases repayment of the ERD Bridge Loan and interest thereon will
become due immediately.
If the Merger is not consummated for any reason other than a
breach of the Merger Agreement by ERD, and the Bridge Loan is not paid by the
Company on or prior to December 31, 1996, ERD will earn, in addition to
interest, 250,000 shares of the Company's Common Stock as additional
compensation for extending the Bridge Loan. An additional 250,000 shares will be
earned on July 1, 1997, if the Bridge Loan is outstanding on that date. All
shares which ERD may earn under the Bridge Loan Agreement (the "compensation
shares") have been issued, and are being held in escrow by ERD's attorneys
pursuant to the terms of an Escrow Agreement and the Bridge Loan Agreement. ERD
cannot vote the compensation shares, however, until they are released from
escrow.
RECOMMENDATION OF BOARD OF DIRECTORS
The Company's Board of Directors (the "Board") believes that
the Merger is in the best interests of the Company's shareholders, and that the
financial terms of the Merger Agreement are fair to shareholders. The Board
unanimously has approved, and is recommending that shareholders approve, the
Merger Agreement and the Merger. In view of the variety of factors considered in
evaluating the Merger, the Board did not quantify or otherwise attempt to assign
relative weights to the factors which it considered in reaching its
determination. In addition to reviewing and evaluating these factors, which are
described below, shareholders should consider the information contained in the
Company's Annual Report on Form 10-K and Quarterly Report on Form 10-Q
accompanying this Proxy Statement, and any other information which they deem
relevant. Shareholders also should be aware that each director of the Company
voting to approve the Merger Agreement had interests in the Merger that are
different from or in addition to the interests of the holders of Company's
Common Stock, as discussed below under the caption "Interests of Management and
Other Persons in the Merger".
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Factors Considered by the Board/Reasons for the Merger
In reaching its decision to approve the Merger, the Board
considered primarily the Company's present financial position, including
projected capital needs in 1996; the development of the Company's business and
its present competitive position; prospects for further development of the
Company's business; the premium represented by the cash price to be paid by ERD
($1.69) over the market price for the Company's Common Stock on November 15,
1995 ($1.375), the day preceding the public announcement of the proposed Merger;
the recent price performance of the Company's Common Stock prior to the public
announcement of the proposed Merger; and the prospects for appreciation in the
value of shareholders' investments if the Company were to remain independent.
With respect to the Company's financial position, the Board
considered the fact that its credit facility with United Jersey Bank ("UJB")
must be renewed or replaced in April 1996. Although management considered the
Company's relationship with UJB to be satisfactory, the Board believed that the
present status of that relationship, particularly when considered with the
knowledge that UJB had expressed concern over the Company's operating loss in
the first three quarters of 1995, mandated a cautious view concerning the
Company's post-March 1996 banking relationships. The Board was aware that any
deterioration of the Company's relationship with UJB, or an inability to renew
or replace the Company's existing credit facility with UJB, could materially
adversely affect the Company's financial position.
Also bearing upon the Company's financial position, and
related to its banking relationship, the Board considered the problems posed by
the scheduled redemption of the Company's Series B and Series C Preferred Stock
in June 1996 at a capital cost to the Company of $1,445,778. UJB had required an
extension of the redemption date for the Series B Preferred Stock in connection
with the renewal of the UJB credit facility in June 1994, and the Board
concluded that, at a minimum, it was likely that any further renewal or
extension of UJB's credit facility would be conditioned upon a corresponding
extension of the Series B and Series C redemption dates. Representatives of the
Company's Series B and Series C Preferred stockholders had advised the Company
that these holders would require concessions from the Company in connection with
any further extension of the redemption dates for their shares, including a
reduction in the conversion price of the Preferred Stock (presently ranging from
$1.82 to $2.73) to reflect the current market price of the Company's Common
Stock. The Board considered that, based on the market price of the Common Stock
prior to the public announcement of the proposed Merger on November 15, 1995, a
reduction of the Series B Preferred and Series C Preferred conversion prices to
a market level would result in substantial dilution to existing holders of the
Company's Common Stock. The Board also considered that the market price of the
Company's Common Stock could trend lower based upon operating results in the
fourth quarter of 1995 and internal projections of results for the first quarter
of 1996, without regard to any adverse economic or financial market trends, and
that any further decrease in the market price for the Company's Common Stock
could lead to further dilution to holders of Common Stock if an adjustment of
the conversion prices for Series B and Series C Preferred Stock were required in
connection with a renewal or replacement of UJB's credit facility.
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From an operating standpoint, the Board considered reported
results for the first nine months of 1995, and preliminary indications of
results for the fourth quarter of 1995. The Board considered that management was
projecting improvements in results of operations in 1996 over 1995, assuming no
material adverse change in general economic conditions, primarily as a result of
aggressive cost cutting measures introduced by the Company in the second half of
1995. However, notwithstanding the range of possible results and the difficulty
of predicting with any degree of certainty the results that actually would be
achieved, the Board concluded that, based upon its assessment of the most likely
scenarios of future operating results, it was unlikely that the return to
stockholders in the foreseeable future would be as great if the Company were to
remain independent than if the Merger were approved and shareholders were able
to receive a substantial premium over the current market price in the case of
holders of Common Stock, and a price equal to the redemption/liquidation value
of the Preferred Stock, and to reinvest cash received in the Merger. In reaching
this determination, the Board considered the difficulty which the Company had
encountered in maintaining its margins and market position given the price and
other competition in the environmental industry.
In approving the November 14, 1995, letter of intent with ERD
the Board considered that the letter expressly left open the possibility of the
Company pursuing competing offers, and that the Company could terminate
negotiations with ERD without liability prior to signing definitive agreements.
In acting upon the final Merger Agreement in January 1996, the Board considered
the lack of success which the Company had had in pursuing other prospective
business combinations prior to the public announcement of the terms of the
proposed merger with ERD on November 15, 1995, and the absence of any inquiries
or overtures from other possible acquirors or merger partners following that
announcement.
The availability of the ERD Bridge Loan pending consummation
of the Merger, and favorable terms for repayment of the Bridge Loan if the
Merger were not consummated, also were considered by the Board in the final
stages of negotiation of the Merger Agreement, and in its decision to approve
the Merger Agreement.
Based upon its consideration of the above described and other
factors relating to the Company's past performance, financial condition and
future prospects, and of the amount and form of consideration to be received by
shareholders if the Merger were consummated, the Board determined that the terms
of the Merger were fair to the Company's shareholders from a financial point of
view, and that consummation of the Merger would be in the best interests of the
Company's shareholders.
The Board considered and decided against engaging an
independent investment banker or consultant to render an opinion on the fairness
of the price to be received by the Company's shareholders and other terms of the
Merger. In deciding not to obtain an independent opinion, the Board considered
the likely cost of a meaningful, well reasoned opinion; the fact that both
Messrs. Barandiaran and Genack had investment banking backgrounds and were well
informed about the Company's financial condition, business and prospects; that,
in the past five years, all members of management had participated in numerous
acquisitions by the Company of smaller companies in the environmental industry,
and were familiar with the valuations and other terms of such transactions; and
that majority approval of the Merger by the Company's "disinterested
shareholders", which include a
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number of institutional investors and other large holders who are well informed
of the Company's financial position and operations and about conditions in the
environmental industry, would be required in order to consummate the Merger.
Interests of Management and Other Persons in the Merger
In considering the recommendation of the Company's Board of
Directors that the Merger be approved, shareholders of the Company should be
aware that all directors of the Company who voted to approve the Merger and who
have recommended its approval by shareholders have interests in the Merger that
are different from, or in addition to, the interests of holders of the Company's
Common Stock and, with the exception of Schneur Z. Genack, the Company's Series
B and Series C Preferred Stock. Because of the presence of these interests,
which are described in the following paragraphs, the Merger Agreement includes,
as a condition to closing of the Merger, a requirement that the Merger be
approved by a majority vote of the Company's "disinterested shareholders".
Walter H. Barandiaran, a director of the Company, is the
President and principal stockholder of the corporate general partner of ACP, and
Mr. Genack is a principal of a firm which is a limited partner of EVF and one of
four firms which control the corporate general partner of EVF. Messrs.
Barandiaran and Genack originally were elected directors of the Company as
representatives of holders of the Company's Series A Preferred Stock, including
ACP and EVF. While the Company no longer has any Series A Preferred Stock
outstanding, Messrs. Genack and Barandiaran and/or their respective affiliates,
including ACP and EVF, are the principal holders of the Company's Series B and
Series C Preferred Stock, and a substantial majority of their respective
investments in the Company are represented by Series B and Series C Preferred
Stock. See "VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES".
In addition to his and his affiliates' interests arising
through ownership of the Company's Common Stock, Series B and Series C Preferred
Stock, Mr. Barandiaran is an officer and a principal shareholder of the general
corporate partner of The Argentum Group, an investment banking firm that is a
special limited partner of ACP. Pursuant to an Investment Banking Fee Agreement
with the Company entered into contemporaneously with the signing of the Merger
Agreement, The Argentum Group will receive a $100,000 investment banking fee,
payable at and contingent upon closing under the Merger Agreement, for
investment banking services rendered to the Company in connection with the
Merger.
Jon Colin, President, Chief Executive Officer and a director
of the Company, will enter into a three year employment agreement with EAC,
which will bind the Company effective at the Effective Time, pursuant to which
he will receive an annual salary of $225,000 as Executive Vice President of the
Company. Mr. Colin's present employment agreement with the Company provides for
a current base annual salary of $180,400. Because Mr. Colin will not be the
Chief Executive Officer or Chief Operating Officer of the Company following the
Merger, he also will receive a $400,000 severance payment from the Company in
respect of the termination of his existing employment contract, which will be
paid at Closing, notwithstanding that he will be employed after the Merger under
a new employment contract as the Company's Executive Vice President.
9
<PAGE>
Mr. Colin also will receive incentive stock options to
purchase 300,000 shares of ERD common stock at a price equal to the closing
price of ERD Common Stock in The NASDAQ Stock Market on the last trading day
immediately preceding the Effective Time. Mr. Colin's existing options to
purchase 65,000 shares of the Company's Common Stock at a price of $2.00 per
share will be cancelled.
Joseph T. Jacobsen, presently the Executive Vice President and
a director of the Company, will enter into a three year Employment Agreement
with EAC, which will bind the Company effective as of the Effective Time
pursuant to which he will receive an annual salary of $125,000 as President of
the Company's air and consulting group, a position presently held by Mr.
Jacobsen. Mr. Jacobsen's base annual salary pursuant to his present Employment
Agreement with the Company is $109,710. Mr. Jacobsen also will receive incentive
stock options to purchase 50,000 shares of ERD common stock at a price equal to
the closing price of ERD common stock in The NASDAQ Stock Market on the last
trading day immediately preceding The Effective Time. Mr. Jacobsen's existing
options to purchase 50,000 shares of the Company's Common Stock at a price of
$2.00 per share will be cancelled.
Certain Federal Income Tax Consequences
Holders of the Company's Common Stock and Preferred Stock will
recognize capital gain or loss equal to the difference between their tax basis
in the capital stock of the Company surrendered in the Merger and the amount of
cash received therefor (whether pursuant to the Merger Agreement or to the
exercise of appraisal rights under the DGCL). Such capital gain or loss will
constitute long term gain or loss in respect of capital stock held for more than
one year as of the Effective Time. Gain or loss must be calculated separately
for each "block" of the Company's securities (i.e., securities acquired at the
same time in a single transaction).
SUMMARY OF THE MERGER AGREEMENT
The following is a brief summary of the material provisions of
the Merger Agreement, a copy of which is attached as Annex A to this Proxy
Statement and is incorporated hereby by reference. This summary necessarily is
incomplete, and is qualified in its entirety by reference to the full and
complete text of the Merger Agreement.
The Merger
Pursuant to the Merger Agreement and subject to the terms and
conditions thereof, the Company will be merged with EAC. As a result of the
Merger, the Company will become a wholly-owned subsidiary of ERD, and
stockholders of the Company will receive the cash payments described below. The
closing of the transactions contemplated by the Merger Agreement is scheduled to
take place on the fifth business day following approval of the Merger by the
Company's stockholders. At the closing, a certificate of merger will be
forwarded to the Secretary of State of the State of Delaware for filing, and the
Merger will become effective upon such filing. The time at which the Merger
becomes effective is referred to as the "Effective Time".
10
<PAGE>
Conversion of Common Stock
Upon consummation of the Merger, each share of the Company's
Common Stock, except for treasury shares and shares, if any, held by ERD and
shares as to which the holders thereof have demanded appraisal (as described
below under the caption "Appraisal Rights"), which is issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive $1.69.
HOLDERS OF THE COMPANY'S COMMON STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING COMMON STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
APPROVED, A LETTER OF TRANSMITTAL WILL BE MAILED WITHIN FIVE DAYS AFTER THE
EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF SUCH SHARES IMMEDIATELY PRIOR
TO THE EFFECTIVE TIME. SHAREHOLDERS SHOULD SEND CERTIFICATES REPRESENTING COMMON
STOCK TO THE EXCHANGE AGENT IDENTIFIED IN THE LETTER OF TRANSMITTAL ONLY AFTER
THEY RECEIVE, AND IN ACCORDANCE WITH, THE INSTRUCTIONS CONTAINED IN THE LETTER
OF TRANSMITTAL.
Conversion of Series B and Series C Preferred Stock
Pursuant to the Merger Agreement, upon consummation of the
Merger, each share of Series B Preferred stock and Series C Preferred Stock
issued and outstanding immediately prior to the Effective Time, except for
shares, if any, held by ERD or shares as to which the holders thereof have
demanded appraisal, will be converted into the right to receive $100.00 in cash.
HOLDERS OF THE COMPANY'S PREFERRED STOCK SHOULD NOT SEND ANY CERTIFICATES
REPRESENTING PREFERRED STOCK WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
APPROVED, A LETTER OF TRANSMITTAL WILL BE MAILED WITHIN FIVE DAYS AFTER THE
EFFECTIVE TIME TO EACH PERSON WHO WAS A HOLDER OF SUCH SHARES IMMEDIATELY PRIOR
TO THE EFFECTIVE TIME. SHAREHOLDERS SHOULD SEND CERTIFICATES REPRESENTING
PREFERRED STOCK TO THE EXCHANGE AGENT IDENTIFIED IN THE LETTER OF TRANSMITTAL
ONLY AFTER THEY RECEIVE, AND IN ACCORDANCE WITH, THE INSTRUCTIONS CONTAINED IN
THE LETTER OF TRANSMITTAL.
Disposition of Stock Options
At the Effective Time, options presently held by Messrs. Colin
and Jacobsen will be cancelled in connection with their execution of new
employment agreements. All other outstanding options to purchase Common Stock of
the Company also will be cancelled effectively since the exercise price of all
such outstanding options is substantially above the cash amount which holders of
Common Stock are entitled to receive in the Merger.
Dividends
Regular quarterly dividends on the Company's Series B
Preferred Stock have been paid through November 1, 1995, and the Company
anticipates paying the quarterly dividend payable to holders of record at
February 1, 1996, on or about February 4, 1996. The Company does not anticipate
the declaration or payment of dividends other than the regular
11
<PAGE>
quarterly payment of dividends on the Company's Series B Preferred Stock prior
to the Effective Time.
Certain Representations and Warranties
The Merger Agreement contains customary representations and
warranties by the Company as to, among other things: (i) due organization and
good standing; (ii) corporate authority to enter into the Merger Agreement and
related agreements; (iii) authorized capital stock; (iv) ownership of
subsidiaries; (v) the lack of certain investments or interest; (vi) the
compliance of the Merger with charters, bylaws and the law; (vii) the absence of
certain material defaults or violations; (viii) the filing of certain documents
with the Securities and Exchange Commission; (ix) the accuracy of financial
statements; (x) the absence of certain litigation; (xi) the absence of material
changes or events; (xii) tax and environmental matters; (xiii) the absence of
material liabilities related to employee benefit plans; and (xiv) the absence of
material labor disputes.
Because ENSA's shareholders will not have an equity interest
in EAC, ERD or the Company following the Merger, the representations and
warranties of EAC and ERD generally are limited to (i) their due organization;
(ii) their authority to consummate the Merger, and (iii) their legal ability to
do so.
Certain Covenants
Conduct of Business Pending the Reorganization. Pursuant to
the Merger Agreement, the Company has made various customary covenants relating
to the Merger, including, among other things, agreement: (i) to preserve intact
its business organization, relationships and goodwill and to keep available the
services of its officers and employees; (ii) not to materially amend its
certificate of incorporation or bylaws; (iii) not to grant, confer or award any
bonuses or other forms of cash incentives to any officer, director or key
employee except consistent with past practice; (iv) not to increase any
compensation under any employment agreement with any of its present or future
officers, directors or employees, except for normal increases consistent with
past practice; (v) not to issue capital stock (except pursuant to the exercise
of contractual rights existing prior to the execution of the Merger Agreement),
grant, confer or award any option, warrant, conversion right or other right not
existing on the date of the Merger Agreement, to acquire any shares of its
capital stock, effect a stock split or change its current capitalization; (vi)
not to declare any dividends, other than regular dividends on Series B Preferred
Stock, or make any distributions with respect to its capital stock of redeem any
of its capital stock or stock of its subsidiaries; (vii) not to incur capital
costs outside the ordinary course of business in excess of stated amounts;
(viii) not to incur material indebtedness for borrowed money, other than in the
ordinary course of business, or in excess of stated amounts; and (ix) not to
mortgage or encumber any properties or assets except pursuant to existing credit
arrangements.
Meeting of Stockholders. Pursuant to the Merger Agreement, the
Company has agreed to take all necessary action, in accordance with applicable
law and its certificate of incorporation and bylaws, to promptly convene the
Special Meeting. The Board has agreed to recommend such approval and to take all
lawful action to solicit such approvals. However, the Board, in the exercise of
its good faith judgment and based on the advice of outside
12
<PAGE>
counsel as to its fiduciary duties to its stockholders imposed by law may
change its recommendation or withdraw its solicitation.
Other Actions. Pursuant to the Merger Agreement, both ERD and
the Company have agreed to use their reasonable efforts to take, or cause to be
taken, all other action and to do, or cause to be done, all other things
necessary, proper or appropriate to consummate the transactions contemplated by
the Merger Agreement.
Conditions to the Merger
The obligations of the Company, ERD and EAC to consummate the
Merger are conditioned on the fulfillment of the following conditions: (i)
approval, in the manner required by law, of the Company's stockholders, and by a
majority vote of "disinterested shareholders", of the Merger Agreement and all
transactions contemplated thereby; (ii) the absence of any proceeding, order,
etc. of any governmental commission, board or other regulatory body to enjoin or
threaten the effectiveness of the Merger; (iii) neither the Company, ERD or EAC
shall be subject to any order or injunction of a court of competent jurisdiction
which prohibits the consummation of the transaction contemplated in the Merger
Agreement; (iv) the performance by the Company, in all material respects, of its
obligations required to be performed on or prior to the Closing Date and
contained in the Merger Agreement including payment of a $100,000 fee to The
Argentum Group pursuant to an Investment Banking Fee Agreement, and $400,000 to
Mr. Colin pursuant to his existing employment agreement; (v) the representations
and warranties made by all parties to the Merger Agreement in such agreement
shall be true as of the Closing Date (except for changes specifically permitted
by the Merger Agreement); (vi) the receipt by ERD of an opinion from the
Company's counsel and by the Company of an opinion from ERD's counsel as to
certain matters; and (vii) no material adverse changes in the business,
financial condition or operations of the Company shall have occurred.
The Company is not aware of any governmental approvals or
consents required to consummate the Merger. UJB's approval of the Merger will be
required.
Termination of the Merger Agreement
The Merger Agreement is subject to termination by ERD at any
time on or prior to March 10, 1996 (45 days after execution of the Merger
Agreement) if its continuing due diligence investigation of the Company reveals
any fact or condition which, in ERD's good faith business judgment, reflects in
a material adverse way on the Company's business or finances. While this term of
the Merger Agreement gives ERD a way to avoid the Merger that is not available
to the Company, the Company believes that ERD's willingness to fund the ERD
Bridge Loan satisfactorily establishes ERD's present intention to complete the
Merger, and that the alternative to such a provision in the Merger Agreement
would have been a delay of an equivalent period of time prior to signing the
Merger Agreement to enable ERD's representatives to complete all aspects of
their due diligence.
The Merger Agreement also is subject to termination at the
option of either ERD or the Company (a) if the Merger is not consummated on or
before April 10, 1996, or (b) ERD or EAC (in case the Company) or the Company
(in case EAC or ERD) commits a material breach of the Merger Agreement, or (c)
with the mutual consent of ERD and the Company.
13
<PAGE>
Termination Fee
In the event that the Company receives a proposal for a
merger, consolidation, acquisition of stock or other business combination from
any person other than ERD prior to termination of the Merger Agreement and that
transaction is consummated and results in the receipt by the Company or its
shareholders of consideration which is greater than that proposed to be paid by
ERD under the Merger Agreement, the Company will be required to pay ERD a fee of
$100,000. Neither party is precluded from seeking damages for breach of the
Merger Agreement or, in the event of such breach, from pursuing any remedy at
law or in equity.
APPRAISAL RIGHTS
If the Merger is consummated, record holders of the Company's
Common Stock, Series B Preferred Stock and Series C Preferred Stock who wish to
do so and who comply with Section 262 of the DGCL will be entitled to appraisal
rights under the DGCL. A description of the procedural requirements of Section
262 of the DGCL which is set forth below, and the full text of Section 262 is
attached to this Proxy Statement as Annex B and incorporated herein by
reference.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE
LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS
ENTIRETY BY THE FULL TEXT OF SECTION 262 OF DGCL WHICH IS REPRINTED IN ITS
ENTIRETY AS ANNEX B TO THIS PROXY STATEMENT. ALL REFERENCES IN THIS SUMMARY TO A
"SHAREHOLDER" ARE TO THE RECORD HOLDER OF SHARES OF THE COMPANY'S COMMON STOCK,
SERIES B PREFERRED STOCK AND/OR SERIES C PREFERRED STOCK AS TO WHICH APPRAISAL
RIGHTS ARE ASSERTED, AND REFERENCES TO SHARES ARE TO SHARES OF SUCH SECURITIES
OWNED OF RECORD BY SUCH SHAREHOLDER.
Under the DGCL, shareholders who follow the procedures set
forth in Section 262 will be entitled to have their shares appraised by the
Delaware Court of Chancery and to receive payment of the "fair value" of such
shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, as determined
by such court.
Under Section 262, a corporation, not less than 20 days prior
to the meeting at which a proposed merger is to be voted on, must notify each of
its shareholders entitled to appraisal rights as of the record date of the
meeting that such appraisal rights are available and include in such notice a
copy of Section 262. This Proxy Statement constitutes such notice, and a copy of
Section 262 is attached hereto as Annex B. Any shareholder who wishes to
exercise appraisal rights or to preserve his right to do so should review the
following discussion and Annex B carefully because failure to comply timely and
properly with the procedures specified will result in the loss of appraisal
rights under the DGCL.
To exercise his appraisal rights, a shareholder must deliver
to the Company, as the surviving corporation in the Merger, prior to the taking
of the vote on the Merger, a written demand for appraisal of his shares. All
written demands for appraisal should be sent or delivered to the Company,
Corporate Offices Building #2, 937 East Hazelwood Avenue,
14
<PAGE>
Rahway, NJ 07065, Attention: Kathleen P. LeFevre, CFO. In addition, a
shareholder wishing to exercise appraisal rights must hold of record such shares
on the date the written demand for appraisal is made, must continuously hold
such shares until the Effective Time of the Merger, and must not vote such
shares in favor of the Merger.
Only a record holder of shares is entitled to assert appraisal
rights with respect to such shares. A demand for appraisal must be executed by
or on behalf of the holder of record, fully and correctly, as his name appears
on his share certificates. If the shares are owned of record in a fiduciary
capacity, such as by a trustee, execution of the demand should be made in that
capacity, and if the shares are owned of record by more than one person, as in a
joint tenancy and tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is acting as agent
for such owner or owners. A record holder, such as a broker, who holds shares as
nominee for several beneficial owners may exercise appraisal rights with respect
to the shares held for one or more beneficial owners while not exercising such
rights with respect to shares held for other beneficial owners; in such case,
the written demand should set forth the number of shares as to which appraisal
is sought. Where no number of shares is stated, the demand will be presumed to
cover all shares held in the name of the record owner. Shareholders who hold
their shares in brokerage accounts or other nominee forms and who wish to
exercise appraisal rights are urged to consult with their brokers to determine
the appropriate procedures for the making of a demand for appraisal by such a
nominee.
Within 120 days after the Effective Time, but not thereafter,
the Company or any shareholder who has properly and timely filed a written
demand for appraisal may file a petition in the Delaware Court of Chancery
demanding a determination of the "fair value" of the shares held by any such
shareholders. The Company is under no obligation to and has no present intention
to file a petition with respect to the appraisal of shares, and it is the
obligation of shareholders to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 262.
Within 120 days after the Effective Time, any holders of
shares who have complied with the requirements for exercise of appraisal rights
will be entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of shares with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such statement must be mailed to such holders within ten days after a written
request therefor has been received by the Company or within ten days after the
expiration of the period for delivery of demands for appraisal by holders of
shares described above, whichever is later.
If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Court of Chancery will determine the
shareholders entitled to appraisal rights and will appraise the "fair value" of
their shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the "fair value." Shareholders
considering seeking appraisal should be aware that the "fair value" of their
shares as determined under Section
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<PAGE>
262 could be more than, the same as or less than the consideration they would
receive pursuant to the Merger Agreement if they did not seek appraisal of their
shares.
The costs of an appraisal action may be determined by the
court and taxed upon the parties as the court deems equitable. The court may
also order that all or a portion of the expenses incurred by any shareholder in
connection with an appraisal, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares entitled
to appraisal.
Any holder of shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the Effective Time, be entitled to
vote the shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares as of a date on or
prior to the Effective Time).
If any shareholder who has demanded appraisal under Section
262 fails to perfect, or effectively withdraws or loses, his right to appraisal,
as provided in the DGCL, the shares of such shareholder will be converted into
the right to receive a cash payment in accordance with the Merger Agreement. A
shareholder will fail to perfect, or effectively lose or withdraw, his right to
appraisal if no petition for appraisal is filed within 120 days after the
Effective Time, or if the shareholder delivers to the Company a written
withdrawal of his demand for appraisal and acceptance of the Merger, except that
any such attempt to withdraw made more than 60 days after the Effective Time
will require the written approval of the Company.
VOTING SECURITIES AND PRINCIPAL
HOLDERS OF VOTING SECURITIES
Outstanding Shares and Voting Rights
As of the close of business on the Record Date for the
determination of stockholders entitled to notice of and to vote at the Meeting,
the Company had outstanding 3,806,722 shares of Common Stock, $.02 par value
("Common Stock"), 10,257.78 shares of Series B Preferred Stock, $.01 par value
("Series B Preferred") and 3,200 shares of Series C Preferred Stock, $.01 par
value ("Series C Preferred"). The Common Stock, Series B Preferred and Series C
Preferred are sometimes collectively referred to in this Proxy Statement as the
Company's "Voting Securities". The presence, in person or by proxy, of holders
of Voting Securities entitled to cast a majority of the votes to be cast at the
Meeting shall constitute a quorum as to each such matter.
On all matters which may be voted upon at the Meeting and any
adjournment or postponement thereof, each record holder of Common Stock will be
entitled to one vote per share. Record holders of 544.45 shares of Series B
Preferred will be entitled to 33 1/3 votes per share and record holders of
9,713.33 shares of Series B Preferred will be entitled to 41 2/3 votes per
share. Each record holder of Series C Preferred will be entitled to 55 votes
16
<PAGE>
per share. The votes of all Voting Securities will be counted as though all
Voting Securities constituted a single class of stock.
Security Ownership of Management and Other Principal Shareholders
The following table sets forth information as of February 6,
1996, with respect to the beneficial ownership of the Company's securities by
officers and directors of the Company, individually and as a group, and all
holders of more than 5% of the shares of any class of the Company's Voting
Securities. Calculations are based on 3,806,722 shares of Common Stock
outstanding. Unless otherwise indicated, all shares are beneficially owned and
sole investment and voting power is held by the beneficial owners indicated.
17
<PAGE>
<TABLE>
<CAPTION>
Amount Beneficially Owned Percentage of Class
-------------------------------------- -------------------------------
Name and Address Series Series Common Series Series Common
of Beneficial Owner B Pfd(1) C Pfd (2) Stock (3) B Pfd C Pfd Stock(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Environmental 5,222.22 1,000 760,119 (4) 50.9% 31.3% 18.5%
Venture Fund, L.P.
c/o First Analysis
Corporation
233 S. Wacker Drive
Chicago, IL 60606
Argentum Capital 2,700 2,200 334,750 (5) 26.3% 68.7% 8.3%
Partners, L.P.
The Chrysler Bldg.
405 Lexington Ave.
New York, NY 10174
Meryl R. Jackson -0- -0- 200,830 (6) -0- -0- 5.3%
1409 E. Lake Shore Dr.
Carriere, MS 39426
Eric Aynsley -0- -0- 213,832 (7) -0- -0- 5.6%
R.D. 1, Box 195 Z
Glenmoore, PA 19343
Kennedy Capital -0- -0- 270,600 -0- -0- 7.1%
Management, Inc.
425 N. New Ballas Road
St. Louis, MO 63141
Officers & Directors
- --------------------
Jon Colin -0- -0- 341,860 (8) -0- -0- 8.8%
119 Paris Street
Newark, NJ 07105
Joseph T. Jacobsen -0- -0- 172,064 (9) -0- -0- 4.5%
212 N. Main Street
Doylestown, PA 18901
Walter H. Barandiaran 277.78 -0- 56,642 (10) 2.7% -0- 1.5%
The Chrysler Bldg.
405 Lexington Ave.
New York, NY 10174
Schneur Z. Genack -0- -0- 3,750 (11) -0- -0- 0.1%
18 East 48th Street
Suite 1800
New York, NY 10017
Kathleen P. LeFevre -0- -0- 15,807 (12) -0- -0- 0.4%
119 Paris Street
Newark, NJ 07105
Officers and 277.78 -0- 590,123 2.7% -0- 15.0%
Directors as a
Group (5 Persons)
</TABLE>
18
<PAGE>
- ------------------------
(1) Of the 10,257.78 shares of Series B Preferred outstanding, 544.45
shares are convertible into Common Stock on the basis of 36.67 shares
of Common Stock per share of Series B Preferred, and 9,713.33 shares
of Series B Preferred (94.7% of the total outstanding) are convertible
into Common Stock on the basis of 45.83 shares of Common Stock per
share of Series B Preferred. The differences in conversion ratios of
Series B Preferred result from adjustments made in connection with a
solicitation by the Company in June 1990 of early exercise of
outstanding Common Stock Purchase Warrants.
(2) Holders of outstanding Series C Preferred are entitled to 55 votes per
share on all matters. Shares of Series C Preferred are convertible at
any time into 55 shares of Common Stock.
(3) In computing the number of shares and the percentage of outstanding
Common Stock "beneficially owned" by a person who owns shares of Series
B Preferred, Series C Preferred or currently exercisable options or
warrants, the shares issuable upon exercise of such rights to acquire
Common Stock owned by such person, but no other persons, are deemed to
be outstanding. Does not include 28,600 shares owned of record by the
Environmental Services of America, Inc. Salary Savings Plan (the
"401(K) Plan"), except to the extent that ownership has been allocated
to a participant's individual account as disclosed below.
(4) Includes 239,351 shares issuable upon conversion of Series B Preferred
and 55,000 shares issuable upon conversion of Series C Preferred. EVF is
a venture capital partnership whose sole general partner is a
partnership controlled by First Analysis Corporation, Felsen & Genack
Associates, William D. Ruckelshaus Associates and Robertson, Stephens &
Company. Schneur Z. Genack, a director of the Company, is a principal of
Felsen & Genack Associates and also holds a limited partnership interest
in EVF. See footnote (11) below.
(5) Includes 123,750 shares issuable upon conversion of Series B Preferred
and 121,000 shares issuable upon conversion of Series C Preferred. ACP
is a small business investment company.
19
<PAGE>
Its general partner is BR Associates, Inc., a corporation of which
Walter Barandiaran, a director of the Company, is president and a
principal stockholder. In addition, The Argentum Group ("Argentum
Group") is a special limited partner of ACP, and Mr. Barandiaran may be
deemed an indirect general partner of Argentum Group. Argentum Group and
Mr. Barandiaran disclaim beneficial ownership of shares of the Company
owned by ACP except to the extent of their proportionate interest in
such partnership.
(6) Includes 830 shares of Common Stock owned by the 401(K) Plan and
allocated to Mr. Jackson's account.
(7) Includes 832 shares of Common Stock owned by the 401(K) Plan and
allocated to Mr. Aynsley's account.
(8) Includes (i) 115,600 shares of Common Stock, (ii) 1,260 shares of
Common Stock owned by the ENSA 401(K) Plan, of which Mr. Colin is a
Trustee, and allocated to Mr. Colin's account, (iii) 160,000 shares of
common stock owned by Mr. Colin's four sons (40,000 shares each), and
(iv) a presently-exercisable option issued pursuant to the Company's
1990 Performance Incentive Stock Option Plan (the "1990 Plan") to
acquire an additional 65,000 shares of Common Stock exercisable at a
price of $2.00 per share. Does not include shares in the name of the
ENSA 401(K) Plan which Mr. Colin, as a Trustee, may have the right to
vote under certain circumstances, but which are allocated to accounts
of other beneficiaries.
(9) Includes (i) 121,000 shares of Common Stock (ii) 1,034 shares of Common
Stock owned by the ENSA 401(K) Plan, of which Mr. Jacobsen is a
Trustee, and allocated to Mr. Jacobsen's account and (iii) a
presently-exercisable option issued pursuant to the Company's 1990 Plan
to acquire an additional 50,000 shares of Common Stock exercisable at
a price of $2.00 per share. Does not include shares in the name of the
ENSA 401(K) Plan which Mr. Jacobsen, as a Trustee, may have the right
to vote under certain circumstances, but which are allocated to
accounts of other beneficiaries.
(10) Includes (i) 5,000 shares held in Mr. Barandiaran's individual
retirement account, (ii) 5,000 shares held in the individual retirement
account of Mr. Barandiaran's wife and (iii) 10,184 shares issuable upon
conversion of Series B Preferred. Does not include (i) 90,000 shares
of Common Stock, (ii) 123,750 shares of Common Stock issuable upon
conversion of Series B Preferred or (iii) 121,000 shares of Common
Stock issuable upon conversion of Series C Preferred owned by Argentum
Capital Partners. See footnote (5) above. Mr. Barandiaran disclaims
beneficial ownership of the shares owned by ACP or Argentum Group,
except to the extent of his proportionate interest in those entities.
(11) Includes 2,100 shares of Common Stock owned of record by Mr. Genack's
wife. Does not include the following shares owned by the EVF (see
footnote (4) above): (i) 465,768 shares of Common Stock, (ii) 239,351
shares issuable upon conversion of Series B Preferred and (iii) 55,000
shares issuable upon conversion of Series C Preferred. Mr. Genack
disclaims beneficial ownership of the shares owned by the EVF except to
the extent of his proportionate interest therein.
(12) Includes (i) 5,200 shares of Common Stock owned jointly by Ms. LeFevre
with her husband, (ii) 607 shares of Common Stock owned by the 401(K)
Plan and allocated to Ms. LeFevre's
20
<PAGE>
account and (iii) a presently-exercisable option issued pursuant to the
Company's 1990 Plan to acquire an additional 10,000 shares of Common
Stock, exercisable at a price of $3.00 per share.
SELECTED HISTORICAL FINANCIAL DATA
The following selected income statement data for the years 1994, 1993
and 1992 and balance sheet data for 1994 and 1993 have been derived from the
Company's audited consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994, a copy of which
is being furnished to shareholders with this Proxy Statement and which is
incorporated herein by reference. The selected income statement data for the
years 1991 and 1990 and balance sheet data for 1992, 1991 and 1990 have been
derived from the Company's audited consolidated financial statements previously
filed with the Securities and Exchange Commission, but which are not
incorporated herein by reference. The following selected income statement and
balance sheet data at and for the three month and nine month periods ended
September 30, 1995 and September 30, 1994 have been derived from the Company's
unaudited consolidated financial statements included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995, a copy of which is
being furnished to shareholders with this Proxy Statement and which is
incorporated herein by reference. The selected historical consolidated financial
data shown below should be read in conjunction with the consolidated financial
statements, the related notes and the audit report included in the documents
incorporated herein by reference.
21
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA (1)
(Amounts in thousands except per share data)
STATEMENT OF
OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
Years Ended (unaudited) (unaudited)
-------------------------------------------------------
1994 1993 1992 1991 1990 1995 1994 1995 1994
------ ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenue $32,784 $23,766 $22,951 $21,229 $16,906 $10,056 $8,978 $27,922 $22,608
Gross Margin 11,944 9,187 8,944 8,250 6,010 3,786 3,452 9,952 8,347
Gross Margin
Percentage 36.4% 38.7% 38.9% 38.9% 35.5% 37.6% 38.4% 35.6% 36.9%
Operating Cash Flow
("EBIDA") 2,132 1,072 1,652 2,273 2,395 1,028 713 1,344 1,482
Net Income (Loss) 293 32 390 1,160 1,270 (215) 125 (635) 172
Net Income (Loss)
Per Common Share .07 .01 .10 .29 .37(2) (0.05) 0.03 (0.14) 0.04
Weighted Avg No.
of Common Shares
Outstanding 4,312 3,964 4,048 4,018 3,402 4,426 4,182 4,426 4,091
Cash Dividends
per Common Share -0- -0- -0- -0- -0-
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
December 31, September 30,
------------------------------------------------------ ------------------
(unaudited)
1994 1993 1992 1991 1990 1995 1994
------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Working Capital $ 1,474 $ 2,288 $ 3,278 $ 3,641 $2,463 $ 1,098 $ 1,963
Total Assets 22,313 15,050 11,813 10,232 8,374 21,298 21,396
Total Liabilities 13,799 7,779 4,387 3,338 3,061 13,419 13,063
Shareholders' Equity 8,514 7,271 7,426 6,894 5,313 7,879 8,334
Net Book Value
per Common Share(3) $ 1.97 $ 1.83 $ 1.83 $ 1.72 $ 1.56 $ 1.78 $ 2.04
</TABLE>
See footnotes on the following page.
22
<PAGE>
Footnotes to Selected Historical Financial Data
(1) The consolidated financial information in the preceding table includes
the following acquisitions:
August, 1994 Earth Science Technologies, Inc., a midwestern
consulting and remediation business.
April, 1994 Two treatment, storage and disposal facilities in
Indiana and Missouri.
March, 1992 Tri-S, Incorporated, an environmental
remediation and consulting service provider
with locations in New England.
June, 1991 The Almega Corporation, an air quality monitoring,
testing and consulting business with offices in
Pennsylvania, Illinois and California.
March, 1991 Scott Environmental Technology, an air quality
monitoring, testing and consulting business located
in Pennsylvania.
The Almega Corporation acquisition was accounted for as a pooling of
interests, and financial results of the Company prior to the
acquisition have been restated to include the operating results of The
Almega Corporation. All of the other acquisitions were accounted for as
purchases, with net assets of the acquired entities recorded at fair
market value as of the date of the acquisition, and results of
operations of the acquired entities reflected in the Company's results
of operations following the acquisitions.
(2) Adjusted to give effect to the Company's one for two reverse stock
split, which became effective on November 29, 1990.
(3) Calculated as shareholders' equity divided by the weighted average
number of shares and equivalent shares of Common Stock then
outstanding, including shares of Common Stock issuable upon conversion
of outstanding shares of Series B and Series C Preferred Stock.
23
<PAGE>
ADDITIONAL INFORMATION
The firm of Cooper, Selvin & Strassberg, Great Neck, New York,
independent public accountants, have audited the Company's financial statements
for the fiscal year ending December 31, 1994. The Company expects a
representative of that firm to be present at the Special Meeting. The Company's
Chief Executive Officer and Chief Financial Officer also will be available at
the Meeting to respond to appropriate questions from shareholders concerning the
Company's financial statements and other information contained in this Proxy
Statement.
Management does not expect any matter, other than the Merger,
to come before the Meeting. However, if any other matters properly come before
the Meeting, the persons named in the enclosed proxy will vote, or otherwise
act, in accordance with their judgment on such matters.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
A copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, and Quarterly Report on Form 10-Q for the three
month and nine month periods ended September 30, 1995, accompany this Proxy
Statement and are incorporated by reference herein. In addition, the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, and June
30, 1995 are incorporated by reference herein. Additional copies of these
reports may be obtained upon written or oral request from the Company, Corporate
Offices, Building #2, 937 East Hazelwood Avenue, Rahway, NJ 07065, Attention:
Edward Thomas, Telephone (908) 381-9229. To ensure timely delivery of these
documents, any request should be made prior to March 15, 1996.
In addition, all documents filed by the Company pursuant to
Section 13(a) or 15(d) of the Exchange Act after the date hereof and prior to
the Special Meeting shall be deemed to be incorporated by reference herein and
to be a part hereof from the respective dates of the filing of such documents.
Any statements contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
Dated: February 13, 1996
24
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
ERD WASTE CORP.
ENSA ACQUISITION CORP.
AND
ENVIRONMENTAL SERVICES OF AMERICA, INC.
Dated January 25, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C> <C>
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
-i-
<PAGE>
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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<PAGE>
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
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is entered
into on January 25, 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
- 2 -
<PAGE>
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.
- 3 -
<PAGE>
"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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<PAGE>
"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.
- 5 -
<PAGE>
(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
- 6 -
<PAGE>
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
- 7 -
<PAGE>
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.
Section 300.5, or defined as such by, or regulated as such
under, any Environmental Law.
"Release" means, when used as a noun, any release, spill,
emission, discharge, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the
indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including
the movement of Hazardous Substances, Oils, Pollutants or
Contaminants through or in the air, soil, 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 relationships with distributors, customers, suppliers and other
persons having business dealings with it; (iii) maintain its properties and
assets (other than those disposed of in the ordinary course of business
consistent with prior practice) in good repair and condition, except for
ordinary wear and tear; and (iv) maintain its books of account and records in
accordance with GAAP and in the usual, regular and ordinary manner and
consistent with prior practice.
SECTION 5.2 Restricted Activities and Transactions. Except as
specifically consented to in writing by ERD, prior to the Effective Time of the
Merger, ENSA shall not:
(a) amend its certificate of incorporation or by-laws;
(b) except pursuant to conversion rights or options in existence on
the date hereof, (none of which conversion rights or options were issued
or created since the end of ENSA's last fiscal year) issue, sell or
deliver, or agree to issue, sell or deliver, any shares of any class of
capital
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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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<PAGE>
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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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
--------------------------------
Jon Colin
/s/ JOSEPH T. JACOBSON Title: President
- -----------------------------------
Secretary
Address:
937 East Hazelwood Avenue
Building #2
Rahway, N.J. 07065
Attn: President
Facsimile No.: 908-381-7887
ERD WASTE CORP.
By /s/ JOSEPH WISNESKI
-----------------------------
Joseph Wisneski
Title: President
Address:
356 Veterans Memorial Highway
Commack, NY 11725
Attn: President
Facsimile No.: 516-543-0678
ENSA ACQUISITION CORP.
By /s/ JOSEPH WISNESKI
-----------------------------
Joseph Wisneski
Title: President
Address:
356 Veterans Memorial Highway
Commack, NY 11725
Attn: President
Facsimile No.: 516-543-0678
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<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), effective as of
_______________, 1996, by and between ENSA ACQUISITION CORP. (hereinafter the
"Company"), a Delaware corporation, and Jon Colin (hereinafter "Employee").
WHEREAS, the Company is a party to an agreement and plan of merger among
the Company, ERD Waste Corp. ("ERD") and "ENSA" Acquisition Corp. ("EAC") (the
"Merger Agreement") pursuant to which EAC shall be merged with and into the
Company (the "Merger");
WHEREAS, the Merger Agreement contemplates that the Company will enter
into an employment agreement with Employee;
WHEREAS, the Company desires to employ the Employee on the terms and
conditions provided in this Agreement;
WHEREAS, the Employee desires to accept such employment and to render
services to the Company on the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
1. EMPLOYMENT: The Company shall employ Employee and Employee shall
accept such employment and shall render services under the conditions and terms
set forth herein. During the period of his employment, Employee shall devote his
full time, attention, energy, knowledge and skill to the business and interests
of the Company, from offices of the Company to be maintained in the Central New
Jersey area, and the Company shall be entitled to the profits and other benefits
arising from or incident to the work, services and advice of Employee. Employee
shall render services to the Company as an Executive Vice President with the
primary responsibility of seeking out and consulting on potential mergers and
acquisitions to be undertaken by the Company, and shall perform such other
duties and responsibilities as may be assigned to the Employee from time to time
by the board of directors (the "Directors"), Chief Executive Officer or
President of the Company. Employee shall abide by the practices and policies of
the Company governing the conduct of employees.
2. TERM: The term of Employee's employment under this Agreement shall
commence at the Effective Time of the Merger, as provided in the Merger
Agreement (the "Effective Date") and shall end on the third year anniversary
date of the Effective Date, unless sooner terminated as provided in this
Agreement.
3. COMPENSATION:
a. During the term of his employment hereunder, the Company shall pay
Employee a base salary at the rate
Exhibit 2.5 (ii) to Agreement and Plan of Merger
<PAGE>
of Two Hundred Twenty Five Thousand ($225,000) Dollars per year.Employee's
base salary shall be paid in equal, bi-weekly installments commencing with the
first pay period immediately following the Effective Date.
b. In addition to his base salary, Employee shall be awarded options to
acquire 300,000 shares of Common Stock of ERD under ERD's 1994 Stock Option Plan
pursuant to a stock option agreement (the "Stock Option Agreement") effective on
the date hereof.
4. OTHER BENEFITS:
a. The Company shall pay Employee for ordinary and reasonable business
expenses incurred by him in the performance of services pursuant to this
Agreement, upon submission of receipts or other evidence of such expenditures
that is satisfactory to the Company. In addition, during the term of Employee's
employment hereunder, the Company shall provide Employee with a Company-owned or
leased automobile for his use or reimburse Employee for his costs in leasing
such automobile, generally on the same basis as the Company has heretofore
provided an automobile or reimbursement to Employee. Employee shall keep such
records and shall deliver to the Company such documentation covering such
expenses as the Company shall require.
b. During the term of his employment, Employee shall be entitled to
participate in any medical, health, disability and accident or other
hospitalization or insurance plan established by the Company for its employees
generally and the employee benefits provided to Employee by the Company shall
be no less than his present benefits at the Company.
c. During each full year of the term of Employee's employment hereunder
(such year being determined by reference to the first day of the calendar month
following the Effective Date, and ending twelve months thereafter) Employee
shall be entitled to five (5) weeks paid vacation which shall not be cumulative
from year to year.
5. TERMINATION:
a. Subject to the terms and conditions set forth in this Agreement, the
Company may, at any time, with or without cause, terminate Employee's employment
hereunder, upon delivery of written notice of termination to Employee.
b. If Employee's employment is terminated for cause, (i) Employee shall
be entitled to receive his base salary through the date of termination in full
satisfaction of all obligations of the Company to Employee, (ii) all of
Employee's unexercised options granted pursuant to the Stock Option Agreement,
whether vested or unvested, shall be cancelled and (iii) Employee shall no
longer be entitled to the benefits provided in Section 4, above. For purposes of
this Agreement, "for Cause" shall mean
2
Exhibit 2.5 (ii) to Agreement and Plan of Merger
<PAGE>
and be limited to embezzlement of Company funds, theft of Company property
or any comparable act of dishonesty or fraud in connectionwith Employee's
employment by the Company or other comparable action materially harmful to the
Company.
c. If Employee's employment is terminated without cause (i) the Company
shall be obligated to pay Employee's base salary when payment of Employee's base
salary would otherwise be due and without interruption, as provided in Section
3(a) for the entire term of this Agreement such payment shall be in full
satisfaction of all of the obligations of the Company to Employee under Sections
3(a) and 4(a), (b) and (c) other than previously unreimbursed expenses to which
Employee is entitled under Section 4(a); and (ii) all of Employee's unvested
options granted pursuant to the Stock Option Agreement shall immediately vest
and shall be exercisable as provided in the Stock Option Agreement.
6. NON-SOLICITATION: If Employee's employment is terminated at any time
during the term hereof for any reason other than Employee's death, the Company,
at its election, by notice to Employee given not later than ten (10) days after
such termination and referring specifically to this subparagraph, shall have the
right to require for one (1) year from the date of termination (the "restricted
period") that Employee not directly or indirectly solicit the business of any
customer of the Company or the employment of any employee of the Company, and,
if the Company so elects, Employee agrees not to solicit such business or
employment, provided that in the case of termination of Employee by the Company
that is not for cause, (i) the Company continues to pay to Employee during the
restricted period, when payment of Employee's base salary would otherwise be due
and without interruption, an amount equal to one hundred (100%) percent of
Employee's base salary in effect immediately prior to termination. Any failure
by the Company to make the payments required hereunder as and when due, shall
constitute a full and irrevocable waiver of the Company's rights under this
paragraph 6.
7. ASSIGNMENT: This Agreement is personal in its nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder, except that the Company
may assign or transfer this Agreement to a successor organization in the event
of merger, consolidation, or transfer of sale of all or substantially all of the
assets of the Company, in which case the term Company shall mean such successor,
provided that in the case of any such assignment or transfer, the obligations of
this Agreement are assumed by such successor or are binding upon and inure to
the benefit of such successor as a matter of law.
8. NOTICES: All notices hereunder shall be in writing and shall be
deemed to have been given at the time when mailed in any general or branch
United States Post Office enclosed
3
Exhibit 2.5 (ii) to Agreement and Plan of Merger
<PAGE>
in a certified post-paid envelope, addressed to the respective parties
stated below, or to such changed address as such party may fix by notice as
aforesaid:
To the Company: ENSA ACQUISITION CORP.
c/o ERD WASTE CORP.
Attn: Board of Directors
356 Veterans Memorial Highway
Commack, New York 11725
Attn: Joseph Wisneski,
President; and
To Employee: Jon Colin
13 Meadow Lane
Old Bridge, NJ 08853
9. GOVERNING LAW: This Agreement and all performance under this
Agreement shall be governed by the laws of the State of New York.
10. WAIVER, MODIFICATION: No waiver or modification of this Agreement or
of any covenant, condition or limitation contained herein shall be valid or
effective unless it is in writing and duly executed by Employee and the Company.
11. RESOLUTION OF DISPUTES: Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, including without limitation a
claim for declaratory relief or relief which is equitable in nature, shall be
settled by arbitration in the City of New York, New York, by an arbitrator
selected by Employee and the Company. The arbitrator shall have the power to
award injunctive as well as other relief to carry out the terms of this
Agreement. If the Company and Employee cannot agree an the appointment of an
arbitrator within ten (10) days after a request for arbitration made by either
party, then such arbitrator shall be an attorney-at-law with no prior
professional association with any of the parties or their affiliates who is
selected in accordance with procedures established and implemented by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except as may
be otherwise provided in this paragraph 10. All costs of the arbitration,
including reasonable attorney's fees, shall be borne as the Arbitrator shall
direct. Judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction over the parties. Any award of the arbitrator may
include interest at a rate or rates considered just under the circumstances by
the arbitrator.
4
Exhibit 2.5 (ii) to Agreement and Plan of Merger
<PAGE>
IN WITNESS WHEREOF, Employee has signed his name and the Company, by the
signatures of its duly authorized officers, has executed this Agreement, as of
the date and year mentioned at the top of page one.
ENSA ACQUISITION CORP.
(CORPORATE SEAL)
By:
--------------------------
Attest:----------------------
Secretary
WITNESS:
-----------------------------
Jon Colin
5
Exhibit 2.5 (ii) to Agreement and Plan of Merger
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), effective as of
_______________, 1996, by and between ENSA ACQUISITION CORP. (hereinafter the
"Company"), a Delaware corporation, and Joseph T. Jacobsen (hereinafter
"Employee").
WHEREAS, the Company is a party to an agreement and plan of merger
among the Company, ERD Waste Corp. ("ERD") and ENSA Acquisition Corp. ("EAC")
(the "Merger Agreement") pursuant to which EAC shall be merged with and into the
Company (the "Merger");
WHEREAS, the Merger Agreement contemplates that the Company will
enter into an employment agreement with Employee;
WHEREAS, the Company desires to employ the Employee on the terms and
conditions provided in this Agreement;
WHEREAS, the Employee desires to accept such employment and to
render services to the Company on the terms and conditions provided in this
Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
1. EMPLOYMENT: The Company shall employ Employee and Employee shall
accept such employment and shall render services under the conditions and terms
set forth herein. During the period of his employment, Employee shall devote his
full time, attention, energy, knowledge and skill to the business and interests
of the Company, from offices of the Company to be maintained in the Central
Bucks County, Pennsylvania area, and the Company shall be entitled to the
profits and other benefits arising from or incident to the work, services and
advice of Employee. Employee shall render services to the Company as the
President of the Company's air and consulting group with the primary
responsibility of running the air and consulting group of the Company, and shall
perform such other duties and responsibilities as may be assigned to the
Employee from time to time by the board of directors (the "Directors"), Chief
Executive Officer or President of the Company. Employee shall abide by the
practices and policies of the Company governing the conduct of employees.
2. TERM: The term of Employee's employment under this Agreement
shall commence at the Effective Time of the Merger, as provided in the Merger
Agreement (the "Effective Date") and shall end on the third year anniversary
date of the Effective Date, unless sooner terminated as provided in this
Agreement.
3. COMPENSATION: a. During the term of his employment hereunder, the
Company shall pay Employee a base salary at the rate
Exhibit 2.5 (iii) to Agreement and Plan of Merger
<PAGE>
of One Hundred Twenty Five Thousand ($125,000) Dollars per year. Employee's
base salary shall be paid in equal, bi-weekly installments commencing with the
first pay period immediately following the Effective Date.
b. In addition to his base salary, Employee shall be awarded options
to acquire 50,000 shares of Common Stock of ERD under ERD's 1994 Stock Option
Plan, as amended, pursuant to a stock option agreement(the "Stock Option
Agreement") effective on the date hereof.
4. OTHER BENEFITS:
a. The Company shall pay Employee for ordinary and reasonable
business expenses incurred by him in the performance of services pursuant to
this Agreement, upon submission of receipts or other evidence of such
expenditures that is satisfactory to the Company. In addition, during the term
of Employee's employment hereunder, the Company shall provide Employee with a
Company-owned or leased automobile for his use or reimburse Employee for his
costs in leasing such automobile, generally on the same basis as the Company has
heretofore provided an automobile or reimbursement to Employee. Employee shall
keep such records and shall deliver to the Company such documentation covering
such expenses as the Company shall require.
b. During the term of his employment, Employee shall be entitled to
participate in any medical, health, disability and accident or other
hospitalization or insurance plan established by the Company for its employees
generally and the employee benefits provided to Employee by the Company shall be
no less than his present benefits at the Company.
c. During each full year of the term of Employee's employment
hereunder (such year being determined by reference to the first day of the
calendar month following the Effective Date, and ending twelve months
thereafter) Employee shall be entitled to five (5) weeks paid vacation which
shall not be cumulative from year to year.
5. TERMINATION:
a. Subject to the terms and conditions set forth in this Agreement,
the Company may at any time, with or without cause, terminate Employee's
employment hereunder upon delivery of written notice of termination to Employee.
b. If Employee's employment is terminated for cause, (i) Employee
shall be entitled to receive his base salary through the date of termination in
full satisfaction of all obligations of the Company to Employee, (ii) all of
Employee's unexercised options granted pursuant to the Stock Option Agreement,
whether vested or unvested, shall be cancelled and (iii) Employee shall no
longer be entitled to the benefits provided in Section 4,
Exhibit 2.5 (iii) to Agreement and Plan of Merger
2
<PAGE>
above. For purposes of this Agreement, "for Cause" shall mean and be
limited to embezzlement of Company funds, theft of Companyproperty or any
comparable act of dishonesty or fraud in connection with Employee's employment
by the Company or other comparable action materially harmful to the Company.
c. If Employee's employment is terminated without cause (i) the
Company shall be obligated to pay Employee's base salary when payment of
Employee's base salary would otherwise be due and without interruption, as
provided in Section 3(a) for the entire term of this Agreement such payment
shall be in full satisfaction of all of the obligations of the Company to
Employee under Sections 3(a) and 4(a), (b) and (c) other than previously
unreimbursed business expenses to which Employee is entitled under Section 4(a);
and (ii) all of Employee's unvested options granted pursuant to the Stock Option
Agreement shall immediately vest and shall be exercisable as provided in the
Stock Option Agreement.
6. NON-SOLICITATION: If Employee's employment is terminated at any
time during the term hereof for any reason other than Employee's death, the
Company, at its election, by notice to Employee given not later than ten (10)
days after such termination and referring specifically to this subparagraph,
shall have the right to require for one (1) year from the date of termination
(the "restricted period") that Employee not directly or indirectly solicit the
business of any customer of the Company or the employment of any employee of the
Company, and, if the Company so elects, Employee agrees not to solicit such
business or employment, provided that in the case of termination of Employee by
the Company that is not for cause, (i) the Company continues to pay to Employee
during the restricted period, when payment of Employee's base salary would
otherwise be due and without interruption, an amount equal to one hundred (100%)
percent of Employee's base salary in effect immediately prior to termination.
Any failure by the Company to make the payments required hereunder as and when
due, shall constitute a full and irrevocable waiver of the Company's rights
under this paragraph 6.
7. ASSIGNMENT: This Agreement is personal in its nature and neither
of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, except that the
Company may assign or transfer this Agreement to a successor organization in the
event of merger, consolidation, or transfer of sale of all or substantially all
of the assets of the Company, in which case the term Company shall mean such
successor, provided that in the case of any such assignment or transfer, the
obligations of this Agreement are assumed by such successor or are binding upon
and inure to the benefit of such successor as a matter of law.
8. NOTICES: All notices hereunder shall be in writing and shall be
deemed to have been given at the time when mailed in any general or branch
United States Post Office enclosed
3
Exhibit 2.5 (iii) to Agreement and Plan of Merger
<PAGE>
in a certified post-paid envelope, addressed to the respectiveparties
stated below, or to such changed address as such party may fix by notice as
aforesaid:
To the Company: ENSA ACQUISITION CORP.
c/o ERD WASTE CORP.
Attn: Board of Directors
356 Veterans Memorial Highway
Commack, New York 11725
Attn: Joseph Wisneski,
President; and
To Employee: Joseph T. Jacobsen
1521 Brook Lane
Jamison, PA 18929
9. GOVERNING LAW: This Agreement and all performance under this
Agreement shall be governed by the laws of the State of New York.
10. WAIVER, MODIFICATION: No waiver or modification of this
Agreement or of any covenant, condition or limitation contained herein shall be
valid or effective unless it is in writing and duly executed by Employee and the
Company.
11. RESOLUTION OF DISPUTES: Any controversy or claim arising out of
or relating to this Agreement or the breach thereof, including without
limitation a claim for declaratory relief or relief which is equitable in
nature, shall be settled by arbitration in the City of New York, New York, by an
arbitrator selected by Employee and the Company. The arbitrator shall have the
power to award injunctive as well as other relief to carry out the terms of this
Agreement. If the Company and Employee cannot agree an the appointment of an
arbitrator within ten (10) days after a request for arbitration made by either
party, then such arbitrator shall be an attorney-at-law with no prior
professional association with any of the parties or their affiliates who is
selected in accordance with procedures established and implemented by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except as may
be otherwise provided in this paragraph 10. All costs of the arbitration,
including reasonable attorney's fees, shall be borne as the Arbitrator shall
direct. Judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction over the parties. Any award of the arbitrator may
include interest at a rate or rates considered just under the circumstances by
the arbitrator.
4
Exhibit 2.5 (iii) to Agreement and Plan of Merger
<PAGE>
IN WITNESS WHEREOF, Employee has signed his name and the Company, by
the signatures of its duly authorized officers, has executed this Agreement, as
of the date and year mentioned at the top of page one.
ENSA ACQUISITION CORP.
(CORPORATE SEAL)
By:
--------------------------
Attest:
-----------------------
Secretary
WITNESS:
- ------------------------------------ ------------------------------
Joseph T. Jacobsen
5
Exhibit 2.5 (iii) to Agreement and Plan of Merger
<PAGE>
ERD WASTE CORP.
STOCK OPTION AGREEMENT
AGREEMENT (this "Agreement") dated as of the ____ day of ___________,
1996 (the "Date of Grant"), by and between ERD WASTE CORP., a Delaware
corporation, having offices at 356 Veterans Memorial Highway, Commack, New York
11725 (the "Company") and Jon Colin, an individual residing
at____________________ (the "Optionee");
W I T N E S S E T H:
WHEREAS, on March 2, 1994, the Board of Directors of the Company (the
"Board") and the stockholders of the Company adopted the ERD Waste Corp. 1994
Stock Option Plan (the "Plan"), the terms and conditions of which are
incorporated herein by reference; and
WHEREAS, on __________, 1996, the Plan was amended to increase the
number of shares of common stock of the Company, $.001 par value per share (the
"Common Stock") that may be subject to options granted thereunder and to
authorize the issuance of nonqualified stock options;
WHEREAS, the Committee has determined that the Optionee is a person who
is eligible for the grant of a stock option under the Plan, and that it is in
the best interests of the Company to grant such a stock option on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereby agree as follows:
1. Grant and Designation of Incentive Stock Option.
(a) Subject to the terms and conditions of this Agreement and the Plan,
the Company hereby grants to the Optionee the right and option (the "Option") to
purchase up to [300,000] shares of Common Stock (the "Option Shares") at a price
per share equal to the closing price per share for the Common Stock at the close
of trading on the Exercise Price Determination Date (as hereinafter defined), as
reported by NASDAQ, or, if the Common Stock shall not trade on such date the
mean between the high bid and low asked prices on NASDAQ on that date. The
"Exercise Price Determination Date" shall be the last business day immediately
preceding the date on which the Certificate of Merger is filed with the
Secretary of State of the State of Delaware with respect to the merger of
Environmental Services of America, Inc. with and into ENSA Acquisition Corp., a
wholly owned subsidiary of the Company.
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
(b) With respect to ________ of the shares of Common Stock subject
hereto, the Option is intended to be, and shall be treated as, an "incentive
stock option" as such term is defined under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). With respect to the remaining _____
shares, the Option is intended not to qualify as an "incentive stock option."*
(c) The Option may not be exercised during the period ending one year
from the Date of Grant with respect to an aggregate number of Option Shares in
excess of 33 percent of the total number of Option Shares subject hereto, or
during the period ending two years from the Date of Grant with respect to an
aggregate number of Option Shares in excess of 66 percent of the number of
Option Shares subject hereto, such computations under this clause being subject
to the adjustments made in accordance with the provisions of Section 4 below.
The schedule set forth in this Section 1(c) shall apply separately to the
portion of the Option that is an incentive stock option and to the portion of
the Option that is not an incentive stock option.
(d) To the extent that the aggregate fair market value (determined as
of the Date of Grant) of the stock with respect to which the Option is first
exercisable by the Optionee during any calendar year shall exceed $100,000, or
such higher amount as may be permitted from time to time under section 422 of
the Code, such options shall be treated as nonqualified stock options.
Otherwise, Options shall be treated as incentive stock options subject to
Section 1(b). In applying this provision, there shall be taken into account the
Option and any other incentive stock options granted to the Optionee under this
Plan and under all other plans of the Company and any subsidiary thereof.
2. Duration of Option.
Subject to prior termination in accordance with Section 7 below, the
Option shall expire and all rights to purchase Option Shares pursuant hereto (to
the extent not previously exercised) shall cease and terminate on that date
which is the day before the fifth anniversary of the Date of Grant set forth
above (the "Expiration Date").
3. Exercise of Option.
The Optionee may exercise this Option in whole at any time, or in part
from time to time, by delivering to the Company at the address of its office
first set forth above (or any other office hereafter designated by the Company
for the purpose of receiving notices), directed to the attention of the
President of the
- ---------------
* Maximum number of ISO shares = $400,000 divided by fair market value per
share at grant date.
- 2 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
Company (or any other officer hereafter designated by the Company for the
purpose of receiving notices), written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the Exercise Price for such shares. Such payment shall be
made (a) in cash or by certified check or bank draft to the order of the
Company; provided, or (b) by the exchange of shares of Common Stock of the
Company (i) then owned of record by the person entitled to exercise the Option
or (ii) as to which Optionee acquires beneficial ownership through exercise of
the Option, and having a fair market value (as determined by the Committee) on
the date of exercise equal to the price for which the shares of Common Stock may
be purchased pursuant to the Option, or (c) in such other manner as the
committee administering the Stock Option Plan may approve.
4. Adjustments.
(a) The number of shares of Common Stock covered by the Option, and the
Exercise Price, shall be proportionately adjusted for any increase or decrease
in the number of outstanding shares of Common Stock resulting from a stock
split, recapitalization or other subdivision or consolidation of shares or other
capital adjustment, or the payment of a stock dividend in respect of the Common
Stock; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated.
(b) From time to time as and when any adjustments may be required
pursuant to this Section 4, the Company shall endeavor to give written notice to
the Optionee of the event requiring such adjustment, which notice shall further
set forth the Company's calculation of the required adjustment to the number of
shares of Common Stock covered by the Option, and the Exercise Price therefor.
5. Merger, Consolidation, etc.
In the event that the Company shall, pursuant to action by the Board, at
any time propose to merge into, consolidate with, or sell or otherwise transfer
all of its assets to, another corporation and provision is not made pursuant to
the terms of such transaction for (a) the assumption by the surviving, resulting
or acquiring corporation of the Option, (b) the substitution of a new option
therefor, or (c) the payment of cash or other consideration in respect thereof,
then the Committee shall cause written notice of the proposed transaction to be
given to the Optionee not less than thirty (30) days prior to the anticipated
effective date of the proposed transaction.
6. Non-Transferability.
(a) The Option shall not be transferable other than by will or the
laws of descent and distribution, and during the
- 3 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
Optionee's lifetime may not be exercised by anyone other than the Optionee;
provided, however, that if the Optionee dies or becomes incapacitated, the
Option may be exercised by the Optionee's estate, legal representative or
beneficiary, as the case may be, subject to all other terms and conditions
herein.
(b) In no event and under no circumstances shall the Optionee or any
other person entitled to exercise the Option pledge, hypothecate, or grant a
lien upon or security interest in any interest in this Agreement or the Option,
and any purported such pledge, hypothecation, lien or security interest shall be
void and of no force or effect.
7. Termination of Employment; Competition. The following provisions
shall apply in the event of the Optionee's engaging in competition with the
Company, or in the event of the termination of the Optionee's employment with
the Company or any of its subsidiaries:
(a) In the event of termination of the Optionee's employment at the
Company for any reason, including the death or disability of the Optionee, the
Option shall terminate on the first anniversary of the termination of
employment, or on the Expiration Date, whichever shall first occur.
(b) Anything contained in this Section 7 to the contrary
notwithstanding, this Option may only be exercised following the Optionee's
termination of employment with the Company or any of its subsidiaries for
reasons other than death, disability or retirement if, and to the extent that,
the Option was exercisable immediately prior to or as a result of such
termination of employment.
(c) The Optionee's transfer of employment between the Company and any
of its subsidiaries or between subsidiaries shall not constitute a termination
of employment, and the Committee shall determine in each case whether an
authorized leave of absence for professional education, military service or
otherwise shall constitute a termination of employment.
(d) This Section 7 shall supersede the provisions of Section 6(g) of
the Plan.
8. No Rights as Stockholder or to Continued Employment.
The Optionee shall not have any rights as a stockholder of the Company
with respect to any shares covered by the Option prior to the date of issuance
to the Optionee of the certificate or certificates for such shares. Neither the
Plan nor the Option confers upon the Optionee any right to continued employment
by the Company or any of its subsidiaries, or interferes in any way with the
right of the Company or of its subsidiaries to terminate
- 4 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
the employment of the Optionee (subject to the terms and conditions of any
applicable employment agreement between the Company or any of its subsidiaries
and the Optionee).
9. Issuance of Shares; Restrictions.
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 9, the Company shall, within thirty (30) business days
after the Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 9,
including but not limited to a "stop transfer" legend pursuant to Section 10(b)
below.
(b) Unless the shares subject to the Option have been registered under
the Securities Act of 1933, as amended (the "Act") (and, if the person
exercising the Option may be deemed an "affiliate" of the Company as such term
is defined in Rule 405 under the Act, such shares have been registered under the
Act for resale by such person), or the Company has determined that an exemption
from registration under the Act is available, (i) any exercise of the Option
shall be deemed a confirmation by the person effecting such exercise that he or
she is acquiring the subject Option Shares for his or her own account for
investment, and not with a view to the resale or distribution of all or any part
thereof, and (ii) the Company may require, prior to and as a condition of the
issuance of any shares of Common Stock pursuant to such exercise, that the
person exercising the Option furnish the Company with a further written
representation in a form prescribed by the Committee to the effect that (A) such
person is acquiring such shares solely with a view to investment for such
person's own account and not with a view to the resale or distribution of all or
any part thereof, and (B) such person will not dispose of any of such shares
otherwise than in accordance with the provisions of Rule 144 under the Act
unless and until either the sale or distribution of such shares is registered
under the Act or the Company is satisfied that an exemption from such
registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obliged to sell or issue any shares of Common Stock
pursuant to the exercise of the Option unless and until the Company is satisfied
that such sale or issuance complies with all applicable provisions of the Act
and all other laws and/or regulations by which the Company is bound or to which
the Company or such shares are subject; and the Company reserves the right to
delay the delivery of Option Shares for such period of time as may be required
in order to effect
- 5 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
compliance with the applicable provisions of the Act and all other applicable
laws and/or regulations as aforesaid.
10. Acknowledgement.
The Optionee hereby acknowledges receipt of a copy of the Plan. All
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Plan.
11. Reservation of Common Stock.
The Company shall at all times reserve and keep available for issuance
upon the exercise of the Option such number of shares of Common Stock (whether
unissued or treasury or both) as shall be sufficient to permit the full exercise
of the Option.
12. Expenses.
The Company shall pay any and all expenses, transfer taxes and other
charges, including all costs associated with the preparation, issuance and
delivery of stock certificates, that may be incurred in respect of the issuance
or delivery of Option Shares upon any exercise of the Option.
13. Registration of Common Stock.
The Company shall use its best efforts to register, as promptly as
practicable, the shares of Common Stock issuable upon exercise of the Option
under the Securities Act of 1933.
14. Miscellaneous.
(a) No provision hereof, in the absence of affirmative action by the
Optionee (or other person entitled to exercise the Option at such time) to
effect any exercise hereunder, shall give rise to any liability of the Optionee
(or any such other person) for the Exercise Price or as a stockholder of the
Company, regardless of whether such liability is asserted by the Company or by
any creditor or creditors of the Company.
(b) Neither this Agreement nor any of the terms or conditions hereof
may be waived, amended or modified, except with the written consent of the
Company and the Optionee.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(d) The captions and Section headings used in this Agreement are for
convenience of reference only, and shall not affect or be referred to in
connection with any interpretation or construction hereof.
- 6 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Date of Grant first set forth above.
ERD WASTE CORP.
By: _____________________________
Joseph Wisneski
President
______________________________
Jon Colin
Optionee
- 7 -
Exhibit 2.5(iv) to Agreement and Plan of Merger
<PAGE>
ERD WASTE CORP.
STOCK OPTION AGREEMENT
AGREEMENT (this "Agreement") dated as of the ____ day of ___________,
1996 (the "Date of Grant"), by and between ERD WASTE CORP., a Delaware
corporation, having offices at 356 Veterans Memorial Highway, Commack, New York
11725 (the "Company") and Joseph T. Jacobsen, an individual residing
at____________________ (the "Optionee");
W I T N E S S E T H:
WHEREAS, on March 2, 1994, the Board of Directors of the Company (the
"Board") and the stockholders of the Company adopted the ERD Waste Corp. 1994
Stock Option Plan (the "Plan"), the terms and conditions of which are
incorporated herein by reference; and
WHEREAS, on __________, 1996, the Plan was amended to increase the
number of shares of common stock of the Company, $.001 par value per share (the
"Common Stock") that may be subject to options granted thereunder and to
authorize the issuance of nonqualified stock options;
WHEREAS, the Committee has determined that the Optionee is a person who
is eligible for the grant of a stock option under the Plan, and that it is in
the best interests of the Company to grant such a stock option on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereby agree as follows:
1. Grant and Designation of Incentive Stock Option.
(a) Subject to the terms and conditions of this Agreement and the Plan,
the Company hereby grants to the Optionee the right and option (the "Option") to
purchase up to 50,000 shares of Common Stock (the "Option Shares") at a price
per share equal to the closing price per share for the Common Stock at the close
of trading on the Exercise Price Determination Date (as hereinafter defined), as
reported by NASDAQ, or, if the Common Stock shall not trade on such date the
mean between the high bid and low asked prices on NASDAQ on that date. The
"Exercise Price Determination Date" shall be the last business day immediately
preceding the date on which the Certificate of Merger is filed with the
Secretary of State of the State of Delaware with respect to the merger of
Environmental Services of America, Inc. with and into ENSA Acquisition Corp., a
wholly owned subsidiary of the Company.
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
(b) With respect to ________ of the shares of Common Stock subject
hereto, the Option is intended to be, and shall be treated as, an "incentive
stock option" as such term is defined under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"). With respect to the remaining _____
shares, the Option is intended not to qualify as an "incentive stock option."*
(c) The Option may not be exercised during the period ending one year
from the Date of Grant with respect to an aggregate number of Option Shares in
excess of 33 percent of the total number of Option Shares subject hereto, or
during the period ending two years from the Date of Grant with respect to an
aggregate number of Option Shares in excess of 66 percent of the number of
Option Shares subject hereto, such computations under this clause being subject
to the adjustments made in accordance with the provisions of Section 4 below.
The schedule set forth in this Section 1(c) shall apply separately to the
portion of the Option that is an incentive stock option and to the portion of
the Option that is not an incentive stock option.
(d) To the extent that the aggregate fair market value (determined as of
the Date of Grant) of the stock with respect to which the Option is first
exercisable by the Optionee during any calendar year shall exceed $100,000, or
such higher amount as may be permitted from time to time under section 422 of
the Code, such options shall be treated as nonqualified stock options.
Otherwise, Options shall be treated as incentive stock options subject to
Section 1(b). In applying this provision, there shall be taken into account the
Option and any other incentive stock options granted to the Optionee under this
Plan and under all other plans of the Company and any subsidiary thereof.
2. Duration of Option.
Subject to prior termination in accordance with Section 7 below, the
Option shall expire and all rights to purchase Option Shares pursuant hereto (to
the extent not previously exercised) shall cease and terminate on that date
which is the day before the fifth anniversary of the Date of Grant set forth
above (the "Expiration Date").
3. Exercise of Option.
The Optionee may exercise this Option in whole at any time, or in part
from time to time, by delivering to the Company at the address of its office
first set forth above (or any other office hereafter designated by the Company
for the purpose of receiving notices), directed to the attention of the
President of the
- --------
* Maximum number of ISO shares will be determined. Any
excess will not qualify as ISO shares.
- 2 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
Company (or any other officer hereafter designated by the Company for the
purpose of receiving notices), written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the Exercise Price for such shares. Such payment shall be
made (a) in cash or by certified check or bank draft to the order of the
Company; provided, or (b) by the exchange of shares of Common Stock of the
Company (i) then owned of record by the person entitled to exercise the Option
or (ii) as to which Optionee acquires beneficial ownership through exercise of
the Option, and having a fair market value (as determined by the Committee) on
the date of exercise equal to the price for which the shares of Common Stock may
be purchased pursuant to the Option, or(c) in such other manner as the committee
administering the Stock Option Plan may approve.
4. Adjustments.
(a) The number of shares of Common Stock covered by the Option, and the
Exercise Price, shall be proportionately adjusted for any increase or decrease
in the number of outstanding shares of Common Stock resulting from a stock
split, recapitalization or other subdivision or consolidation of shares or other
capital adjustment, or the payment of a stock dividend in respect of the Common
Stock; provided, however, that any fractional shares resulting from any such
adjustment shall be eliminated.
(b) From time to time as and when any adjustments may be required
pursuant to this Section 4, the Company shall endeavor to give written notice to
the Optionee of the event requiring such adjustment, which notice shall further
set forth the Company's calculation of the required adjustment to the number of
shares of Common Stock covered by the Option, and the Exercise Price therefor.
5. Merger, Consolidation, etc.
In the event that the Company shall, pursuant to action by the Board, at
any time propose to merge into, consolidate with, or sell or otherwise transfer
all of its assets to, another corporation and provision is not made pursuant to
the terms of such transaction for (a) the assumption by the surviving, resulting
or acquiring corporation of the Option, (b) the substitution of a new option
therefor, or (c) the payment of cash or other consideration in respect thereof,
then the Committee shall cause written notice of the proposed transaction to be
given to the Optionee not less than thirty (30) days prior to the anticipated
effective date of the proposed transaction.
6. Non-Transferability.
(a) The Option shall not be transferable other than by will or the laws
of descent and distribution, and during the
- 3 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
Optionee's lifetime may not be exercised by anyone other than the Optionee;
provided, however, that if the Optionee dies or becomes incapacitated, the
Option may be exercised by the Optionee's estate, legal representative or
beneficiary, as the case may be, subject to all other terms and conditions
herein.
(b) In no event and under no circumstances shall the Optionee or any
other person entitled to exercise the Option pledge, hypothecate, or grant a
lien upon or security interest in any interest in this Agreement or the Option,
and any purported such pledge, hypothecation, lien or security interest shall be
void and of no force or effect.
7. Termination of Employment; Competition. The following provisions
shall apply in the event of the Optionee's engaging in competition with the
Company, or in the event of the termination of the Optionee's employment with
the Company or any of its subsidiaries:
(a) In the event of termination of the Optionee's employment at the
Company for any reason, including the death or disability of the Optionee, the
Option shall terminate on the first anniversary of the termination of
employment, or on the Expiration Date, whichever shall first occur.
(b) Anything contained in this Section 7 to the contrary
notwithstanding, this Option may only be exercised following the Optionee's
termination of employment with the Company or any of its subsidiaries for
reasons other than death, disability or retirement if, and to the extent that,
the Option was exercisable immediately prior to or as a result of such
termination of employment.
(c) The Optionee's transfer of employment between the Company and any of
its subsidiaries or between subsidiaries shall not constitute a termination of
employment, and the Committee shall determine in each case whether an authorized
leave of absence for professional education, military service or otherwise shall
constitute a termination of employment.
(d) This Section 7 shall supersede the provisions of Section 6(g) of the
Plan.
8. No Rights as Stockholder or to Continued Employment.
The Optionee shall not have any rights as a stockholder of the Company
with respect to any shares covered by the Option prior to the date of issuance
to the Optionee of the certificate or certificates for such shares. Neither the
Plan nor the Option confers upon the Optionee any right to continued employment
by the Company or any of its subsidiaries, or interferes in any way with the
right of the Company or of its subsidiaries to terminate
- 4 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
the employment of the Optionee (subject to the terms and conditions of any
applicable employment agreement between the Company or any of its subsidiaries
and the Optionee).
9. Issuance of Shares; Restrictions.
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 9, the Company shall, within thirty (30) business days
after the Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 9,
including but not limited to a "stop transfer" legend pursuant to Section 10(b)
below.
(b) Unless the shares subject to the Option have been registered under
the Securities Act of 1933, as amended (the "Act") (and, if the person
exercising the Option may be deemed an "affiliate" of the Company as such term
is defined in Rule 405 under the Act, such shares have been registered under the
Act for resale by such person), or the Company has determined that an exemption
from registration under the Act is available, (i) any exercise of the Option
shall be deemed a confirmation by the person effecting such exercise that he or
she is acquiring the subject Option Shares for his or her own account for
investment, and not with a view to the resale or distribution of all or any part
thereof, and (ii) the Company may require, prior to and as a condition of the
issuance of any shares of Common Stock pursuant to such exercise, that the
person exercising the Option furnish the Company with a further written
representation in a form prescribed by the Committee to the effect that (A) such
person is acquiring such shares solely with a view to investment for such
person's own account and not with a view to the resale or distribution of all or
any part thereof, and (B) such person will not dispose of any of such shares
otherwise than in accordance with the provisions of Rule 144 under the Act
unless and until either the sale or distribution of such shares is registered
under the Act or the Company is satisfied that an exemption from such
registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obliged to sell or issue any shares of Common Stock
pursuant to the exercise of the Option unless and until the Company is satisfied
that such sale or issuance complies with all applicable provisions of the Act
and all other laws and/or regulations by which the Company is bound or to which
the Company or such shares are subject; and the Company reserves the right to
delay the delivery of Option Shares for such period of time as may be required
in order to effect
- 5 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
compliance with the applicable provisions of the Act and all other applicable
laws and/or regulations as aforesaid.
10. Acknowledgement.
The Optionee hereby acknowledges receipt of a copy of the Plan. All
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Plan.
11. Reservation of Common Stock.
The Company shall at all times reserve and keep available for issuance
upon the exercise of the Option such number of shares of Common Stock (whether
unissued or treasury or both) as shall be sufficient to permit the full exercise
of the Option.
12. Expenses.
The Company shall pay any and all expenses, transfer taxes and other
charges, including all costs associated with the preparation, issuance and
delivery of stock certificates, that may be incurred in respect of the issuance
or delivery of Option Shares upon any exercise of the Option.
13. Registration of Common Stock.
The Company shall use its best efforts to register, as promptly as
practicable, the shares of Common Stock issuable upon exercise of the Option
under the Securities Act of 1933.
14. Miscellaneous.
(a) No provision hereof, in the absence of affirmative action by the
Optionee (or other person entitled to exercise the Option at such time) to
effect any exercise hereunder, shall give rise to any liability of the Optionee
(or any such other person) for the Exercise Price or as a stockholder of the
Company, regardless of whether such liability is asserted by the Company or by
any creditor or creditors of the Company.
(b) Neither this Agreement nor any of the terms or conditions hereof
may be waived, amended or modified, except with the written consent of the
Company and the Optionee.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(d) The captions and Section headings used in this Agreement are for
convenience of reference only, and shall not affect or be referred to in
connection with any interpretation or construction hereof.
- 6 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Date of Grant first set forth above.
ERD WASTE CORP.
By: _____________________________
Joseph Wisneski
President
_____________________________
Joseph T. Jacobsen
Optionee
- 7 -
Exhibit 2.5(v) to Agreement and Plan of Merger
<PAGE>
ENVIRONMENTAL SERVICES OF AMERICA, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF SHAREHOLDERS
MARCH 22, 1996, AT 10:00 A.M.
The undersigned shareholder of Environmental Services of
America, Inc. (the "Company") hereby appoints Jon Colin and Joseph T. Jacobsen,
and each of them, as attorneys and proxies, each with full power of substitution
and revocation, to represent the undersigned at the Special Meeting of
Shareholders of the Company to be held March 22, 1996, and at any adjournments
or postponements thereof (the "Special Meeting"), with authority to vote all
shares of Common Stock, Series B Preferred Stock and Series C Preferred Stock of
the Company held or owned by the undersigned on February 6, 1996, in accordance
with the directions indicated herein.
1. Merger. Approval of the Merger of the Company with ENSA Acquisition Corp
("EAC") pursuant to the Agreement and Plan of Merger dated January 25, 1996,
by and among the Company, EAC and ERD Waste Corp. ("ERD") described in the
Company's Proxy Statement dated February 13, 1996, and attached as Annex A
thereto.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. Other Matters. Grant of discretionary authority to vote upon such other
matters as are properly brought before the Meeting.
AUTHORITY GRANTED [ ] AUTHORITY WITHHELD [ ]
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR ITEM 1 AND THE AUTHORITY
PROVIDED BY ITEM 2 WILL BE DEEMED GRANTED.
[Shareholder name and PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
address information.] HEREON. If more than one owner, each should
sign. If signing in any fiduciary or
representative capacity, give full title as
such. Proxies executed by a corporation or
partnership should be signed in full
corporate or partnership name by an
authorized partner or officer.
---------------------------------------------
(signature)
----------------------------------------------
(second signature, if required)
Date:___________________________________, 1996
PLEASE SIGN AND DATE YOUR PROXY IMMEDIATELY, AND RETURN IT TO THE COMPANY USING
THE PREADDRESSED ENVELOPE PROVIDED.
