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EXHIBIT 10.7
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), is made and
entered into this 3rd day of November,1999 between and among EARTHCARE COMPANY,
a Delaware Corporation ("EarthCare" or "Buyer"). EARTHCARE COMPANY OF TEXAS, a
Texas corporation ("Subsidiary"), which is a wholly-owned subsidiary of
EARTHCARE, LIQUID WASTE CONTROL SYSTEMS, INC., a Texas corporation ("LWCS" or
"Company"), Xxxxx Xxxxx, Xxxxx Xxxxx and Xxx Xxxxxxx ("Shareholders or
"Seller").
WITNESSETH:
1. The Shareholders own all of the outstanding capital stock of
Company.
2. The respective boards of directors of EarthCare, Subsidiary
and the Company have approved the merger of the Company with
and into Subsidiary (the "Merger") upon the terms and subject
to the conditions set forth herein and have approved this
Agreement as a "plan of reorganization" within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Internal
Revenue Code of 1986, as amended (the "Code").
3. EarthCare, the sole shareholder of Subsidiary, and the
Shareholders have approved the Merger upon the terms and
subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, and agreements herein contained, the parties agree as
follows:
1. MERGER.
A. Effect of the Merger. In accordance with the provisions of
this Agreement, and the Texas Business Corporation Act, at
the Effective Time (as defined in Section B hereof), the
Company shall be merged with and into Subsidiary; the
separate existence of the Company shall cease; and Subsidiary
as the surviving corporation shall continue its corporate
existence under the laws of the State of Texas. Pursuant to
the Merger, Subsidiary shall possess all the rights,
privileges, powers and franchises of the Company and shall be
subject to all the restrictions, disabilities, and duties of
the Company; all rights privileges, powers, and franchises of
the Company and all property, real, personal, and mixed,
belonging to the Company shall be vested in Subsidiary; and
all property, rights privileges, powers, and franchises and
every other interest shall be thereafter as effectually the
property of Subsidiary as they were of the Company, and the
title to any real estate vested by deed or otherwise in the
Company shall not revert or be in any way impaired by reason
of the Merger, provided that all rights of creditors and all
liens upon any property of the Company shall be preserved
unimpaired and all debts, liabilities, and duties of the
Company shall thenceforth attach to Subsidiary and may be
enforced against
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Subsidiary to the same extent as if said debts, liabilities,
and duties had been incurred or contracted by Subsidiary.
B. Effective Time of the Merger. The Merger shall become
effective when properly executed Articles of Merger are duly
filed with the Office of the Secretary of State of Texas;
which filing shall be made simultaneously with the closing of
the transactions contemplated by this Agreement in accordance
with Section E below. The date and time when the Merger shall
become effective is referred to as the "Effective Time".
C. Certificate of Incorporation and Bylaws. As a part of the
Merger, the Articles of Incorporation and Bylaws of
Subsidiary as in effect at the Effective Time, shall be the
Articles of Incorporation and Bylaws of Subsidiary
immediately after the Effective Time.
D. Officers and Directors. The officers and directors of
Subsidiary at the Effective Time shall be the officers and
directors of Subsidiary immediately after the Effective Time,
each to serve until his respective successor is duly elected
and qualified in the manner provided in the Articles of
Incorporation and Bylaws of Subsidiary, or until his earlier
resignation or removal, or as otherwise provided by law.
E. Time and Place. The closing the (the "Closing") of the
transactions contemplated in this Agreement shall occur no
later than November 3, 1999, but in any event as soon as
possible (the "Closing Date"), at 00000 Xxxxxx Xxxxx, Xxxxx
000, Xxxxxx, XX 00000.
2. CONVERSION AND EXCHANGE OF STOCK.
A. Conversion and Exchange of Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder:
1 All shares of capital stock of LCWS which immediately prior
to the Effective Time are held as treasury stock by LCWS
shall be canceled.
2 All shares of LCWS common stock, par value $.01 per share
(the "LCWS Common Stock"), other than shares to be canceled
pursuant to Section 2.A(1), shall be converted into the right
to receive the following property and securities (the "Merger
Consideration"), subject to adjustment as provided in Section
10.
(a) The Merger Consideration for the LWCS Common Stock is
$1,020,946. At the Closing, Buyer shall pay the Merger
Consideration as follows:
(1) Buyer shall deliver to Seller shares of
unregistered EarthCare Common Stock (the
"EarthCare Shares") in an amount equal to
$935,663.03 divided by the average
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closing sale price of a share of EarthCare
Common Stock on the NASDAQ system as
reported in the Wall Street Journal for the
5 trading days in the week preceding the
Closing (the "Closing Market Price"). If
the EarthCare Shares are registered
pursuant to a "piggy-back" registration
before June 1, 2000, then such shares shall
be subject to a lock-up agreement until
June 1, 2000. Seller may demand
registration of the EarthCare Shares,
unless sooner registered, on or after
January 1, 2001.
(2) Buyer shall pay liabilities of LWCS listed
on Schedule 3.B(2) attached hereto and
incorporated herein by this reference, in
the amount of $85,282.97.
Payment and Delivery of Merger Consideration. All of the Merger
Consideration except for 6,000 shares of EarthCare common stock, shall be paid
and delivered to the Shareholders at Closing. The remaining 6,000 shares shall
be held as security for Shareholders' indemnification obligations.
3. PROCEDURE AT THE CLOSING.
The parties hereto agree to take the following steps in the order
listed:
A. Seller shall deliver to the Buyer the LWCS Common Stock, and such bills
of sale, assignments and other instruments to transfer to the Buyer good and
marketable title to the LWCS Common Stock, free and clear of all liens, claims
and encumbrances.
B. In exchange for the LWCS Common Stock, Buyer shall deliver to Seller:
(1) The EarthCare Shares less 8,000 shares, which are
hereinafter referred to as the "Holdback Shares";
(2) Buyer shall pay liabilities of LWCS set forth on
Schedule 3.B(2), attached hereto.
C. The parties shall also exchange executed lock-up agreements and other
documents contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF SELLER. In order to induce the
Buyer to enter into this Agreement and to consummate the transactions
contemplated hereunder, the Seller hereby makes the following representations,
warranties, covenants and agreements:
A. ORGANIZATION AND EXISTENCE. The Company is a corporation duly organized
and legally existing in good standing under the laws of the State of Texas, and
has all requisite corporate power and authority to carry on its business as now
conducted. Seller has delivered to Buyer a true and correct copy of the
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Articles of Incorporation (duly certified by the Secretary of State of Texas)
and By-Laws of the Company (certified by its Secretary).
B. SUBSIDIARIES OR OTHER ENTITIES. Company has no investments or ownership
interests in any corporations, partnerships, joint ventures or other business
enterprises.
C. CAPITALIZATION. The Company is authorized to issue 1,000,000 shares of
common stock, $.01 par value, of which 1,000 are issued and outstanding at the
time of the execution of this Agreement. All of the issued and outstanding
shares of capital stock of the Company (the "LWCS Common Stock") have been duly
issued, are validly outstanding, are fully paid and nonassessable, and are held
of record and beneficially by Seller; there are no outstanding subscriptions,
options, warrants or rights to receive, purchase or subscribe to, or securities
convertible into or exchangeable for, any issued or unissued shares of the
capital stock of the Company. The Company has no liability for dividends
declared but unpaid. Prior to Closing, the Seller shall not, and shall not
permit the Company, to issue or enter into any subscriptions, options,
agreements or other commitments in respect of the issuance, transfer, sale or
encumbrance of any shares of the LWCS Common Stock.
D. STOCK OWNERSHIP. Seller has, and at the time of Closing will have, good
and marketable title to the LWCS Common Stock, and there are, and at the time
of Closing will be, no impediments to the sale and transfer of the LWCS Common
Stock to Buyer. Upon delivery of the LWCS Common Stock to Buyer, the LWCS
Common Stock (i) shall constitute all of the issued and outstanding shares of
capital stock of the Company, and (ii) shall be free and clear of all security
interests, liens, charges, pledges, mortgages, encumbrances or rights of third
parties whatsoever.
E. FINANCIAL CONDITION. Seller has furnished to Buyer copies of the
following financial statements of the Company, all of which are true and
complete in all material respects and have been prepared in accordance with
generally accepted accounting principles consistently applied (except to the
extent otherwise reported):
1. A Balance sheet ("Balance Sheet") of the Company as of December 31,
1998.
2. Statements of income and retained earnings of the Company for the
twelve (12) months ended December 31, 1998, and for the period January 1, 1999
through June 30, 1999. (Collectively, the Balance Sheet and statements of
income and retained earnings are hereinafter referred to as the "Financial
Statements").
The Financial Statements are complete and correct and in accordance with the
books of account and records of the Company and present fairly the financial
position of the Company's business and the income, stockholders' equity and
cash flow of the Company's business at the dates and for the periods indicated.
3. Seller warrants that current assets of the Company will be sufficient
to
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pay the current liabilities of the Company as of the Closing Date.
4. Seller warrants that the gross revenue of LWCS for the year ended
December 31, 1998 was not less than $1,000,000, and not less than $500,000 for
the period January 1, 1999 through June 30, 1999.
F. ASSETS.
1. The Company has good and marketable title to, and is in possession of,
all of its assets, equipment, vehicles, properties and rights, including all
properties, assets, vehicles and equipment listed on Schedule 4-F-1 attached
hereto and as shown on the Balance Sheet, free and clear of all liabilities,
mortgages, liens, pledges, security interests, restrictions, conditional sales
agreements, title retention agreements, charges or encumbrances except as shown
on the Balance Sheet. Seller represents that Schedule 4-F-1 sets forth a list
of all material items of equipment, vehicles, properties, containers,
machinery, shop equipment, welders, grinders, work benches, jacks, stands,
parts, office furniture, fixtures, computer hardware/software and equipment
owned by the Company as of the date of this Agreement and used in connection
with its business operations (hereinafter sometimes referred to as the
"Operating Equipment"); such list identifies the Operating Equipment by size,
manufacturer, model number and serial number, where available.
2. Except as set forth on Schedule 4-F-2, all of the Operating Equipment
is in good operating condition (normal wear and tear excepted), has been well
maintained, and is in adequate condition to service the Company's Customer
Accounts (as herein defined) and to conduct the operations of the Company as it
exists on the Closing Date.
3. There has not been any material change in the Operating Equipment, in
the aggregate, since the inspection of such Operating Equipment by Buyer on
July 29, 1999, and there shall not be any material change in the Operating
Equipment, in the aggregate, subsequent to a final inspection of the Operating
Equipment to be performed by Buyer and Seller prior to Closing.
4. Schedule 4-F-4 shall identify all assets and property of the Company
which shall be excluded from this Agreement.
G. LIABILITIES. Except as set forth in Schedule 4-G attached hereto or in
the Financial Statements submitted to Buyer, or in any other Exhibit delivered
pursuant hereto, neither the Company nor its assets or properties are subject
to any liabilities or obligations (accrued, absolute, contingent or otherwise),
except for liabilities incurred in the ordinary course of business affairs and
the Company is not in material default in respect of any material term or
condition of any material indebtedness or liability. The transactions
contemplated by this Agreement do not and will not subject the Company or the
Buyer to any claim or liability for any obligation, debt or contract other than
as specifically disclosed in this Agreement and the Schedules attached hereto.
All required consents of creditors, if any have been, or by closing will be,
obtained for performance of this Agreement.
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H. CUSTOMER ACCOUNTS, MUNICIPAL CONTRACTS AND RELATED MATTERS.
1. Customer Accounts are the commercial, industrial, municipal, and
residential accounts of the Company pursuant to which the Company provides its
services. Said Customer Accounts are listed on Schedule 4-H-1 attached hereto.
(Each of the Customer Accounts listed in Schedule 4-H shall identify the name
and address of each of the Customer Accounts, and shall reflect as to each the
current monthly billing amount, frequency of service and size and type of
container.)
2. Schedule 4-H-2 is a true, accurate and complete listing of all written
service agreements, franchises, licenses or other contracts, if any, to which
the Company is a party and which relate to Customer Accounts. Original copies
of all such contracts shall be delivered by the Seller to the Buyer no later
than the Closing Date, and such copies shall be true, accurate and complete and
shall include all amendments, supplements or other modifications to such
contracts. Except as disclosed in Schedule 4-H-2, to the knowledge of the
Seller, neither the Company nor any other party to any of the Company's
municipal contracts or Customer Accounts is in material default or alleged to
be in material default thereunder and there exists no condition or event which,
after notice or the lapse of time or both, would constitute such a default. The
sale, transfer and assignment of the LWCS Common Stock will not result in a
breach, violation or default of any of the Company's municipal contracts or
Customer Accounts, and all of the Company's municipal contracts and Customer
Accounts will remain in full force and effect as if there had been no sale,
transfer and assignment thereof.
3. Except as otherwise disclosed in Schedule 4-H-3, the Seller knows of no
oral or written communication, fact, event or action which exists or has
occurred within 90 days prior to the date of execution of this Agreement, which
would tend to indicate that any current customer of the Company intends to
terminate its business relationship with the Company.
I. MATERIAL CONTRACTS. Attached hereto as Schedule 4-I is a list and brief
description, as of the date of this Agreement, of certain leases, contracts,
commitments, agreements and other documents to which the Company is a party or
by which it is bound and which is related to the operation of its business.
Except for contracts and documents listed in Schedule 4-I, the Company is not a
party to or bound by any written or oral (i) contracts not made in the ordinary
course of business; (ii) employment contracts, other than those terminable at
the will of the Company; (iii) contracts with any labor union or association;
(iv) bonus, pension, profit sharing, retirement, hospitalization, insurance or
other plan providing employee benefits; (v) leases with respect to any
property, real or personal, whether as lessor or lessee; (vi) continuing
contracts for the future purchase of materials, supplies or equipment in excess
of the requirements of its business now booked; (vii) contracts or commitment
for capital expenditures; (viii) contracts continuing over a period of more
than six (6) months from its date; or (ix) material contracts necessary to
conduct the operations and business of the Company. A true copy of each
contract, commitment and agreement listed on Schedule 4-I will be furnished to
Buyer prior to Closing.
J. EMPLOYEES - LABOR MATTERS. The Company has generally enjoyed a
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good employer-employee relationship with its employees. Attached hereto as
Schedule 4-J is a complete list of all employees of the Company whose duties
are related to the operation of the business of the Company. Seller warrants
there exists no pending or threatened actions by any employees alleging sex,
age, race, or other discriminatory practices, no current effort to organize
these employees into collective bargaining units, and no collective bargaining
agreement is now in effect. There are no contracts, written or oral, between
the Company and any of its employees, except as specifically disclosed in
Schedule 4-J.
K. INSURANCE. The Company maintains in effect insurance covering its
assets and businesses and any liabilities relating thereto in an amount
believed adequate by the Seller, and such insurance coverage shall be
maintained by the Company through the Closing Date. Between the date hereof and
the Closing Date, the Seller shall cause the Company to furnish to the Buyer
such information as the Buyer shall reasonably request regarding the Company's
insurance. Except as set forth in Schedule 4-K attached hereto, there are no
pending material property damage or personal injury claims against the Company
or any of its assets.
L. LICENSES AND PERMITS. The Company possesses all licenses and other
required governmental or official approvals, permits or authorizations, if any,
the failure to possess which would have a material adverse effect on the
businesses, financial condition or results of operations of the Company
including, without limitation, all common carrier rights, certificates of
public need, waste material transportation permits, trademarks and trade names
necessary to carry on its business as now being conducted, without known
conflict with valid licenses, permits, trademarks and trade names of others.
All such licenses and permits are in full force and effect, and no violations
are or have been recorded in respect to any thereof, and no proceeding is
pending, or to the knowledge of Seller threatened, to revoke, suspend or
otherwise limit such licenses or permits. All licenses and permits will survive
the closing of the transactions contemplated by this Agreement.
M. TAX MATTERS. The Company has timely filed all federal, state, sales
tax, franchise tax, and other tax returns which are required to be filed by it
and has paid or has made provision for the payment of all taxes which have or
may become due pursuant to said returns. All taxes, including, without
limitation, withholding and social security taxes due with respect to the
Company's employee, federal and state income tax liabilities, corporate
franchise taxes, sales, use, excise and ad valorem taxes, due, payable or
accrued by the Company on or before the Closing Date have or will be paid. The
Company has filed all reports required to be filed by it with all such taxing
authorities. Seller shall be responsible for any tax liability attributable to
operations of the Company prior to Closing. Buyer and Seller agree to cause the
Company to make the election provided by Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended and Treas. Reg ss.1.338(h)(10)-1(d)(1), and in
connection therewith, the parties agree that the allocation of the purchase
price as set forth on Schedule 4-M shall be used in connection with the
preparation of tax returns reflecting the sale and purchase contemplated
hereby.
N. LITIGATION. Except as disclosed in Schedule 4-N attached hereto, the
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Company has not received any notices of material default and is not in material
default of (i) any order, writ, injunction or decree of any court, or any
federal, state, municipal or other governmental department, commission, board,
bureau or instrumentality, or (ii) any agreement or obligation to which the
Company is a party or by which the Company is bound or to which the Company or
any of the property of the Company's may be subject. Except as disclosed in
Schedule 4-N, there are no material outstanding claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Seller,
threatened against the Company or which affect the Company or any of its assets
or property, at law or in equity before or by any federal, state, municipal
court or other governmental department, authority, commission, board, bureau,
agency or instrumentality.
O. COMPLIANCE WITH LAWS. Except as otherwise disclosed in Schedule 4-O
attached hereto, the Company is in compliance in all material respects with all
federal, state, and local laws, ordinances, regulations, rules, and orders
applicable to it or to its assets including, without limitation, all laws and
regulations relating to the protection of the environment, the safe conduct of
the Company's business, anti-competitive practices, discrimination, employment,
wage and hour practices and health. The Company has not received notification
of any asserted past or present failure to comply with any of such laws or
regulations.
P. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 4-P attached
hereto, there are no claims, actions, suits, proceedings or investigations
relating to any Environmental Law (as hereinafter defined) pending or
threatened against or affecting the Company. Except as set forth on Schedule
4-P attached hereto: (i) no release of any hazardous substance, medical waste,
toxic waste or controlled substance has occurred or is occurring as a result of
the business of the Company; (ii) the business, activities and processes
heretofore conducted by the Company comply in all material respects with all
applicable Environmental Laws; (iii) neither Seller nor the Company has
received any notice that the Company is liable or responsible, or potentially
liable or responsible, for any costs of any removal, remedial action or other
response under any Environmental Law as the result of the presence, release or
potential release of any hazardous substance, medical waste, toxic waste, or
controlled substance; and (iv) there is no pending litigation or administrative
proceeding (and neither Seller nor the Company knows or has reason to know of
any potential or threatened litigation or administrative proceeding) in which
it is asserted that the Company has violated or is not in compliance with any
material Environmental Law. "Environmental Law" means all laws, statutes or
acts of the United States of America, the State of Texas, or any political
subdivision thereof, that relate to the condition of the air, ground or surface
water, land or other parts of the environment, to the release or potential
release of any substance or radiation into the air, ground or surface water,
land or other parts of the environment, or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or other handling of
substances that might pollute, contaminate or be hazardous or toxic if present
in the air, ground or surface water, land, or other parts of the environment.
Q. NO BROKERS' OR AGENT'S FEES. No agent, broker, finder, representative
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or other person or entity acting pursuant to authority of the Seller will be
entitled to any commission or finder's fee in connection with the origination,
negotiation, execution or performance of the transactions contemplated under
this Agreement.
R. NO MATERIAL OR ADVERSE CHANGE. Except as otherwise disclosed in
Schedule 4-R attached hereto, since December 31, 1998, there has not been: (i)
any material adverse change in the financial condition, assets, liabilities,
business or results of operations of the Company; (ii) to the knowledge of the
Seller, any threatened or prospective event or condition of any character
whatsoever which could materially and adversely affect the business, financial
condition or results of operations of the Company; (iii) any sale or other
disposition of any of the Company's assets other than in the ordinary course of
business; or (iv) any damage, destruction or loss (whether or not insured)
materially and adversely affecting the property, business or prospects of the
Company.
S. DUE AUTHORIZATION AND ABSENCE OF BREACH. This Agreement and all other
agreements of the Seller contemplated hereunder constitute valid and binding
obligations of the Seller, enforceable in accordance with their respective
terms. Neither the execution and delivery of this Agreement (or any agreement
contemplated hereunder) nor the consummation of the transactions contemplated
hereby will: (i) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of the Company; (ii) conflict with or violate any
decree, writ, injunction or order of any court or administrative or other
governmental body which is applicable to, binding upon or enforceable against
the Company or Seller; or (iii) except as set forth on Schedule 4-S result in
any breach of or default (or give rise to any right of termination,
cancellation or acceleration) under any mortgage, contract, agreement,
indenture, will, trust or other instrument which is either binding upon or
enforceable against the Seller or the Company or its assets.
T. AUTHORITY TO CONTRACT. Seller has the full power, right and authority
to enter into and perform this Agreement without the consent of any person,
entity or governmental agency, and the consummation of the transactions
contemplated by this Agreement will not result in the breach or termination of
any provision of or constitute a default under any lease, indenture, mortgage,
deed of trust or other agreement or instrument or any order, decree, statute or
restriction to which Seller or the Company is a party or by which the Company
is bound or to which the outstanding shares of stock of the Company or any of
the properties of the Company is subject.
U. ACCURACY OF THE INFORMATION FURNISHED BY THE SELLER. No representation,
statement or information made or furnished by the Seller to the Buyer,
including those contained in this Agreement and the various exhibits attached
hereto and the other information and statements referred to herein, contains or
shall contain any untrue statement of any material fact.
5. REPRESENTATION AND WARRANTIES OF BUYER. In order to induce the Seller
to enter into this Agreement and to consummate the transactions contemplated
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hereunder, the Buyer hereby makes the following representations, warranties,
covenants and agreements:
A. ORGANIZATION AND EXISTENCE. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all the requisite corporate power and authority to carry on its
business as now conducted and to consummate the transactions contemplated by
this Agreement.
B. AUTHORITY TO CONTRACT. The execution, delivery and performance of this
Agreement by Buyer has been duly approved by its Board of Directors, and no
further corporate action is necessary on the part of Buyer to consummate the
transactions contemplated by this Agreement, assuming due execution of this
Agreement by the Parties.
C. NO BROKER'S OR AGENT'S FEES. No agent, broker, finder, representative
or other person or entity acting pursuant to the authority of the Buyer will be
entitled to any commission or finder's fee in connection with the origination,
negotiation, execution or performance of the transactions contemplated under
this Agreement.
D. ACCURACY OF INFORMATION FURNISHED BY BUYER. No representation,
statement or information made or furnished by Buyer to the Seller in this
Agreement, or in connection with the transactions contemplated hereby
including, without limitation copies of the Buyer's filings with the Securities
and Exchange Commission, contains, or shall contain any untrue statement of any
material fact or omits or shall omit any material fact necessary to make the
information contained herein true.
E. REGISTRATION. The EarthCare common stock delivered to Seller on the
Closing Date has been duly registered with the Securities and Exchange
Commission on Form S-1 effective December 9, 1998, and such registration
statement is true and correct in all material respects and does not omit to
state any material information necessary to make such registration statement
not misleading.
6. ADDITIONAL AGREEMENT OF THE SELLER. The Seller further agrees with the
Buyer as follows:
A. ACCESS TO OFFICES AND RECORDS. The Seller shall cause the Company to
afford representatives of the Buyer, from and after the date of execution of
this Agreement, full access, during normal business hours and upon reasonable
notice, to all offices, books, properties, contracts, documents and records of
the Company and to furnish to the Buyer or its representatives all additional
information, including financial or operating information with respect to the
business and affairs of the Company that the Buyer or its representatives may
reasonably request. Seller acknowledges that Buyer is a publicly-traded
corporation and that Buyer will be required under the applicable securities
laws to make public disclosure of detailed financial data concerning the
Company's operations. Prior to the Closing Date, Buyer has Seller's permission
to disclose publicly: (i) the amount of the Company's revenues; and (ii) such
other information as shall be included in any press release of Buyer which
Seller approves in advance of being released; such approval shall not be
unreasonably
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withheld. Provided, however, that any furnishing of such information to the
Buyer and any investigation by the Buyer shall not affect the right of the
Buyer to rely solely upon the representations and warranties made by the Seller
in or pursuant to this Agreement; and provided further, that the Buyer: (i)
will hold in strict confidence all documents and information concerning the
Company so furnished; and (ii) will promptly return all such documents and all
copies to the Company if this Agreement is not closed for any reason.
B. CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the execution
and delivery of this Agreement and until the Closing Date, except as otherwise
provided by the prior written consent or approval of the Buyer:
1. The Seller will cause the Company to conduct its business and
operations in the manner in which the same has heretofore been conducted and
Seller will use his best efforts to cause the Company to: (i) preserve the
Company's current business organization intact; (ii) keep available to the
Buyer the services of the Company's current employees and the Company's agents
and distributors; and (iii) preserve the Company's current relationships with
customers, suppliers and others having business dealing with the Company.
2. The Seller will cause the Company to maintain all of its properties in
customary repair, order and condition, reasonable wear and use excepted, and
will maintain its existing insurance upon all of its properties and with
respect to the conduct of its business in such amounts and of such kinds
comparable to that in effect on the date of this Agreement.
3. The Seller will take action to insure that the Company will not: (i)
pay any bonus or increase the rate of compensation of any of the Company's
employees or enter into any new employment agreement or amend any existing
employment agreement; (ii) make any general increase in the compensation or
rate of compensation payable or to become payable to the Company's hourly-rated
employees; (iii) sell or transfer any of the Company's assets; (iv) obligate
itself for capital expenditures other than in the ordinary course of business
and not unusual in amount; or (v) incur any material obligations or
liabilities, which are not in the ordinary course of business, or enter into
any material transaction.
4. The Seller shall not, and shall not permit the Company to, issue or
enter into any subscriptions, options, agreements or other commitments in
respect of the issuance, transfer, sale or encumbrance of any shares of the
LWCS Common Stock.
C. EXECUTION OF FURTHER DOCUMENTS BY SELLER. From and after the Closing,
upon the reasonable request of the Buyer, the Seller shall execute, acknowledge
and deliver such documents as may be appropriate to carry out the transactions
contemplated by this Agreement.
D. INDEMNIFICATION BY SELLER.
1. The Seller will indemnify and hold the Buyer harmless from and against
any and all damage, loss, cost, deficiency, assessment, liability or other
expense
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(including reasonable attorney's fees, costs of court and litigation expenses,
if any) suffered, incurred or paid by the Buyer as a result of:
(a) The untruth, inaccuracy, breach or violation of any
representation, warranty, covenant or other obligation of the Seller set forth
in or made in connection with this Agreement;
(b) The assertion against the Buyer or the Company of any material
liability or obligation of the Company or of any claim relating to the
operation of the Company's waste collection and transportation and disposal
business, prior to the Closing Date, whether absolute or contingent, matured or
unmatured, known or unknown as of the Closing Date, or
(c) The enforcement of the Buyer's right to indemnification under
this Agreement.
2. The Buyer shall give written notice to the Seller of any claim, action,
suit or proceeding relating to the indemnity herein provided by Seller not
later than ten (10) days after Buyer has received notice thereof. Seller shall
have the right, at his option, to compromise or defend, at his own expense and
by his own counsel (which counsel shall be reasonably satisfactory to Buyer),
any such action, suit or proceeding. Buyer and Seller agree to cooperate in any
such defense or settlement and to give each other full access to all
information relevant thereto.
3. The Holdback Shares shall constitute security for Seller's
indemnification. If Buyer makes no claim of breach of any of Seller's
representations, warranties or covenants, or of any deficiency resulting from
uncollectible Receivables, then the Holdback Shares shall be delivered in full
to Seller within ninety days of the Closing Date.
4. If within such ninety day period Buyer asserts there has been a breach
of any of Seller's representations, warranties or covenants or asset loss or
damage due to uncollectible Receivable, then Buyer shall notify Seller in
writing within such period setting forth the nature of the breach and/or the
amount of loss, damage, cost or expense, as provided above. A claim or claims
by Buyer against Seller must total at least five thousand dollars ($5,000.00)
in the aggregate before Seller is liable for indemnification; however, once
Buyer's claim(s) total at least five thousand dollars ($5,000.00) in the
aggregate, then Seller shall be liable for the full amount of such claim(s) and
not just for the incremental amount above $5,000.00. The balance of the
Holdback Shares shall be delivered to Seller on the date on which any
unresolved claim asserted by Buyer against Seller is finally resolved.
5. Except as herein expressly provided, the remedies provided in paragraph
6.D hereof shall be cumulative and shall not preclude assertion by the Buyer of
any other rights or the seeking of any other remedies available against the
Seller at law or in equity.
7. ADDITIONAL AGREEMENT OF THE BUYER.
A. EXECUTION OF FURTHER DOCUMENTS BY BUYER. From and after the Closing,
upon
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reasonable request of Seller, Buyer shall execute, acknowledge and deliver to
Seller all such further documents as may be appropriate to carry out the
transactions contemplated by this Agreement.
B. INDEMNIFICATION BY BUYER.
1. The Buyer will indemnify and hold the Seller harmless from and against
any and all damages, loss, cost, deficiency assessment, liability or other
expense (including reasonable attorney's fees, costs of court and costs of
litigation, if any) suffered, incurred or paid by the Seller as a result of:
(a) The untruth, inaccuracy, breach or violation of any
representation, warranty, covenant or other obligation of the Buyer set forth
in or made in connection with this Agreement;
(b) The assertion against the Seller of any liability or
obligation of the Buyer or the Company or of any claim relating to the
operation of the Company's waste collection and transportation business
subsequent to the Closing Date (including, without limitation, customer claims
or disputes); or
(c) The enforcement of the Seller's right to indemnification under
this Agreement.
2. The Seller shall give written notice to the Buyer of any claim, action,
suit or proceeding relating to the indemnity herein provided by Buyer not later
than ten (10) days after Seller has received notice thereof. Buyer shall have
the right, at its option, to compromise or defend, at its own expense and by
its own counsel (which counsel shall be reasonably satisfactory to Seller), any
such action, suit or proceeding. Seller and Buyer agree to cooperate in any
such defense or settlement and to give each other full access to all
information relevant thereto.
3. Except as herein expressly provided, the remedies provided in Paragraph
7.B hereof shall be cumulative and shall not preclude assertion by the Seller
of any other rights or the seeking of any other remedies available against the
Buyer at law or in equity.
8. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer to
effect the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing Date of each of the following
conditions:
A. VALIDITY OF SELLER'S REPRESENTATIONS. All representations and
warranties of the Seller contained in this Agreement or otherwise made in
writing pursuant to this Agreement shall have been true and correct at and as
of the date hereof and they shall be true and correct at and as of the Closing
Date, with the same force and effect as though made at and as of the Closing
Date.
B. PRE-CLOSING OBLIGATIONS. The Seller shall have performed and complied
with all the obligations and conditions required by this Agreement to be
performed or complied
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with by Seller at or prior to the Closing Date, including the execution and
delivery of all documents and contracts required to be delivered at or before
the Closing Date pursuant to this Agreement.
C. OPINION OF COUNSEL FOR SELLER. The Buyer shall have received a
favorable opinion from counsel for the Seller dated the date of the Closing, in
form satisfactory to counsel for the Buyer, to the effect that:
1. The Company is a corporation, duly organized and legally existing under
the laws of the State of Texas, and it has the corporate power and authority to
carry on its business as now being conducted and to own or hold under lease, or
otherwise, its assets.
2. This Agreement has been duly executed and delivered by the Seller, and
constitutes a valid, enforceable and binding obligation of the Seller pursuant
to the terms of this Agreement.
3. Except as otherwise disclosed in this Agreement, counsel does not know
of any action, suit, investigation or other legal, administrative or
arbitration proceeding pending against the Seller or the Company, or which
questions the validity or enforceability of this Agreement or of any action
taken or to be taken pursuant to or in connection with this Agreement or any
agreement contemplated herein.
4. To the knowledge of such counsel, no consent, authorization, license,
franchise, permit, approval or order of any court or governmental agency or
body, other than those obtained by Seller and delivered to the Buyer prior to
or on the date of the opinion, is required for the sale of the LWCS Common
Stock by the Seller pursuant to this Agreement.
5. The execution and performance of this Agreement by the Seller will not
violate: (i) the Articles of Incorporation or the By-Laws of the Company, or
(ii) any order of any court or other agency of government known to said
counsel.
6. The instruments of conveyance and assignments executed by the Seller to
the Buyer pursuant to this Agreement are adequate to convey the ownership to
the LWCS Common Stock, free and clear of all liens, claims or encumbrances
known to such counsel after conducting a UCC-1 lien search with the offices of
the Secretary of State for the State of Texas, and the offices of the County
Clerk for the County of Dallas, in the State of Texas.
7. To the knowledge of such counsel (after reasonable investigation),
Seller owns all of the issued and outstanding shares of capital stock of the
Company.
D. RECEIPT BY THE BUYER OF NECESSARY CONSENTS. All necessary consents or
approvals of third parties to any of the transactions contemplated hereby shall
have been obtained, and satisfactory evidence of such consents or approvals
shall have been delivered to the Buyer at Closing.
E. RESIGNATION OF OFFICERS AND DIRECTORS. Buyer shall have received such
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resignations of officers and directors of the Companies as shall have been
requested by Buyer.
9. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller
to effect the transactions contemplated by this Agreement shall be subject to
the fulfillment at or prior to the Closing Date of each of the following
conditions:
A. VALIDITY OF BUYER'S REPRESENTATIONS. All representations and warranties
of the Buyer contained in this Agreement or otherwise made in writing pursuant
to this Agreement shall have been true and correct at and as of the date hereof
and they shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date.
B. PRE-CLOSING OBLIGATIONS. The Buyer shall have performed and complied
with all the obligations and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date, including
the execution and delivery of all documents and contracts required to be
delivered at or before the Closing Date pursuant to this Agreement.
C. CORPORATE AUTHORITY OF BUYER. The execution and performance of this
Agreement by the Buyer shall have been duly and legally authorized in
accordance with applicable law, and the Buyer shall have furnished to counsel
for the Seller certified copies of resolutions adopted by the Board of
Directors of the Buyer authorizing and proving the execution and delivery of
this Agreement and performance of the transactions contemplated hereunder.
D. OPINION OF COUNSEL FOR BUYER. The Seller shall have received a
favorable opinion from counsel for the Buyer dated the date of the Closing, in
form satisfactory to counsel for the Seller, to the effect that:
1. The Buyer is a corporation, duly organized and legally existing in good
standing under the laws of the State of Delaware, and it has the corporate
power and authority to carry on its business as now being conducted and to
carry out the transactions and agreements contemplated hereby.
2. All corporate and other proceedings required to be taken by or on the
part of the Buyer in order to authorize it to perform its obligations hereunder
have been duly and properly taken, including any necessary approval or
authorization by the Board of Directors of the Buyer.
3. This Agreement has been duly executed and delivered by the Buyer and
constitutes a valid, enforceable and binding obligation of the Buyer pursuant
to the terms of this Agreement.
4. Except as otherwise disclosed in this Agreement, said counsel does not
know of any action, suit, investigation or other legal, administrative or
arbitration
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proceeding which questions the validity or enforceability of this Agreement or
of any action taken or to be taken pursuant to or in connection with this
Agreement or any agreement contemplated herein.
5. The execution and performance of this Agreement by the Buyer will not
violate: (i) the Articles of Incorporation or the By-Laws of the Buyer; or (ii)
any order of any court or other agency of government known to said counsel.
10. ADJUSTMENT TO PURCHASE PRICE.
A. The Purchase Price shall be adjusted as follows:
1 If the Company's current assets as of the Closing Date exceed the
Company's liabilities as of such date, then Buyer shall issue
additional shares of EarthCare Common Stock to Seller in an amount
equal to the difference between the Company's current assets and
liabilities divided by the average of the closing sale price of a
share of EarthCare Common Stock on the NASDAQ system as reported in
the Wall Street Journal for the period beginning five trading days
preceding the Adjustment Date and ending on the trading day
immediately preceding the Adjustment Date (as hereafter defined).
2. If the Company's liabilities as of the Closing Date exceed the
Company's current assets as of such date, then Seller shall return
shares of EarthCare Common Stock to Buyer in an amount equal to the
difference between the Company's liabilities and current assets
divided by the average of the closing sale price of a share of
EarthCare Common Stock on the NASDAQ system as reported in the Wall
Street Journal for the period beginning five trading days preceding
the Adjustment Date and ending on the trading day immediately
preceding the Adjustment Date (as hereafter defined).
B. The adjustment to be made under this paragraph shall be made January
31, 2000 ("the Adjustment Date"). Current assets and liabilities shall be
determined in accordance with generally accepted accounting principles except
that accounts receivable, including unbilled services rendered to the date of
closing and billed thereafter, will be considered current assets only if
collected prior to the Adjustment Date or are otherwise accepted in writing by
Buyer.
C. The adjustment shall be made hereunder as follows:
1. If there is an excess of current assets over liabilities, the excess,
to the extent of cash collected, shall be paid to Seller on the Adjustment
Date. To the extent such excess is in the form of yet uncollected accounts
receivable, Buyer shall cause the Company to continue to collect such
outstanding receivables and Buyer shall pay to Seller, monthly, receivables
thereafter collected. Payment on account of such receivables shall be made by
the 10th day of each month for collections received during the preceding month
and shall be accompanied by a statement of accounts collected.
2. All payment received after Closing in respect of Customer Accounts
shall
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be applied to the oldest receivables then outstanding. In addition, the Seller
shall cause the Company to collect all accounts receivable in its normal course
provided that the Seller shall not be required to cause the Company to pursue
the collection of accounts receivable for the direct or indirect benefit of
Seller unless Seller shall have agreed to bear the costs thereof.
11. SELLER'S NON-COMPETE AND NON-SOLICITATION AGREEMENT. As inducement to
Buyer to enter into this Agreement and perform its obligations hereunder, and
in consideration of the payments to Seller pursuant to this Agreement, the
Seller agrees that Seller will not, for a period of five (5) years from the
Closing Date, directly or indirectly (whether as owner, partner, shareholder,
agent, employee, independent contractor, consultant or otherwise): (i) engage
in any business which directly or indirectly competes with business of the
Buyer, or with any subsidiary of Buyer, in each case, within the County of
___________ and the County of ___________________, State of Texas; (ii) solicit
any party who is or was a customer or supplier of the Company on the Closing
Date or at any time during the 12 month period immediately prior thereto for
services of any type or quality being provided by the Company; (iii) solicit
for employment any person who was or is an employee of the Company on the
Closing Date, or at any time during the 12 month period immediately prior
thereto; or (iv) either directly or indirectly, divulge, disclose, or
communicate to any person, firm or corporation in any manner whatsoever any
confidential information relating to the business of Buyer, or the Company. The
term, "confidential information", as used herein means all information of a
business or technical nature relative to the business of Buyer, the business of
any customers of the Company or any business of any person, firm or corporation
which consults with, or is affiliated with, Buyer or the Company. The term
"confidential information" shall not include information so generally known as
to be part of the public domain.
Each of the covenants contained in this Article are separate and independent.
The Seller acknowledges and agrees that Buyer's and Company's remedies at law
may be inadequate in the event of a breach or threatened breach of the
covenants set forth herein, and in such event, Buyer and the Company shall be
entitled to have an injunction issued by any court of competent jurisdiction,
enjoining and restraining each and every party concerned therewith from the
creation or continuation of such breach.
12. OTHER PROVISIONS.
A. EMPLOYMENT AGREEMENTS. At Closing, Buyer will enter into written
Employment Agreements with key employees of Company in a form reasonably
satisfactory to Buyer and such employees.
B. INCOMPLETE EXHIBITS. The parties hereto acknowledge and agree (a) that
many, if not all, of the schedules to be attached to this Agreement will not
have been prepared by the time of execution of this Agreement, and (b) that
consummation of the transactions contemplated by this Agreement are subject to
the completion of such exhibits by Seller (to the extent that an exhibit is to
be completed by Seller, such exhibit must be reasonably acceptable to Buyer) or
Buyer ( to the extent that an exhibit is to be completed by Buyer, it must be
reasonably acceptable to Seller) as the case may be, prior to or at the
Closing,
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pursuant to the terms of this Agreement.
C. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, obligations and agreements of the parties contained in this
Agreement, or in any writing delivered pursuant to provisions of this
Agreement, shall survive the Closing for a period of eighteen (18) months with
the exception of representations and warranties concerning Paragraph 4.M.
hereof, Tax Matters and Paragraph 4.P. hereof, Environmental Matters, which
will survive for as long as any claims may be asserted under the applicable
periods of limitation for violations of any tax or environmental law, rule or
regulation.
D. WAIVER OR EXTENSION OF CONDITIONS. The Seller or the Buyer may extend
the time for or waive the performance of any of the obligations of the other
party, waive any inaccuracies in the representations or warranties by the other
party, or waive compliance by the other party with any of the covenants or
conditions contained in this Agreement. Any such extension or waiver shall be
in writing and signed by the Seller and the Buyer. Any such extension or waiver
shall not act as a waiver or an extension of any other provisions of this
Agreement.
E. NOTICES. Any notice, request or other document shall be in writing and
sent by registered or certified mail, return receipt requested, postage prepaid
and addressed to the party to be notified at the following addresses, or such
other address as such party may hereafter designate by written notice to all
parties, which notice shall be effective as of the date of posting:
(i) If to the Buyer:
EarthCare Company
00000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Copy to: Xxxxxx X. Xxxx, Esq.
00000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000-0000
(ii) If to the Seller
Xxxxx Xxxxx
PMB 963
0000 X. Xxxxxxx #000
Xxxxxxxxx, XX 00000
Copy to: Xxxxxxx X. Xxxxx
000 Xxxxxxxx Xxxxx
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
F. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Texas.
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G. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
representatives, successors and assigns.
H. HEADINGS. The subject headings of the Sections of this Agreement are
included for purposes of convenience only and shall not affect the construction
or interpretation of any of its provisions.
I. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
J. ARBITRATION. Any controversy or claim arising out of, in connection
with, or relating to this Agreement or a breach thereof shall be settled by
binding arbitration in Dallas, Texas. The arbitration panel shall be comprised
of three arbitrators. Each party shall appoint one arbitrator for the panel and
the two so appointed shall appoint a third. The panel shall resolve the dispute
within sixty (60) days of the appointment of the panel and shall notify the
parties of its findings in writing. Each party agrees to bear its own costs of
arbitrators and to split equally the cost of the third arbitrator.
K. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the schedules
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attached hereto) and the documents delivered pursuant hereto constitute the
entire agreement and understanding between the parties, and supersede any prior
agreements and understandings relating to the subject matter hereof. This
Agreement may be modified or amended by a written instrument executed by all
parties hereto.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.
"Seller"
/s/ XXXXX XXXXX
--------------------------------
Xxxxx Xxxxx
/s/ XXXXX XXXXX
--------------------------------
Xxxxx Xxxxx
/s/ XXX XXXXXXX
--------------------------------
Xxx Xxxxxxx
"Buyer"
EarthCare Company
By: /s/ XXXXX XXXXXXX
-----------------------------
Xxxxx Xxxxxxx
Liquid Waste Control Systems
By: /s/ XXXXXX XXXXXXX
-----------------------------
Xxxxxx Xxxxxxx
EarthCare Company of Texas
By: /s/ XXXXX XXXXXXX
-----------------------------
Xxxxx Xxxxxxx
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