SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of January 25, 1996, by and between ENVIRONMENTAL SERVICES OF
AMERICA, INC., a Delaware corporation (the "Company"), and ERD WASTE CORP., a
Delaware corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, in connection with the proposed merger (the "Merger") of ENSA
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of
Purchaser ("EAC"), with and into the Company, the Company, Purchaser and EAC
have, simultaneously with the execution of this Agreement, entered into an
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement");
and
WHEREAS, subject to the terms and conditions set forth herein,
Purchaser desires to purchase from the Company, and the Company desires to
issue, sell and deliver to Purchaser (i) a promissory note having principal
amount of $500,000 (the "Note") in substantially the form attached hereto as
Exhibit A, and (ii) five hundred thousand (500,000) shares (the "Shares", and
together with the Note, the "Securities") of the Company's Common Stock, par
value $.02 per share (the "Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, hereby agree as follows:
ARTICLE I
Certain Definitions
For purposes of this Agreement, the following terms shall have the meanings
ascribed to them in this Section 1.
"Business Day" means any day that is not a Saturday or Sunday or a
legal holiday on which banks are authorized or required to be closed in New
York, New York.
"Certificates" shall have the meaning set forth in Section 2.1 hereto.
"Change of Control Event" means any (i) merger, consolidation or other
business combination involving the Company or any of its Subsidiaries, (ii) any
acquisition in any manner of a substantial equity interest in, or a substantial
portion of the assets of, the Company or any Subsidiary, provided, however that
no event described in either clause (i) or
clause (ii) above shall constitute a Change of Control Event if (x) Purchaser
shall have consented in writing to such event, or (y) the proceeds of such event
are used to repay amounts owing under (1) the UJB Loan Agreement, (2) any other
indebtedness that is secured by assets of the Company or any Subsidiary, or (3)
the Note.
"Closing" has the meaning set forth in Article III.
"Common Stock" has the meaning set forth in the second Whereas clause
of this Agreement.
"Company" has the meaning set forth in the preamble to this Agreement.
"Company Withdrawal Decision" means any decision by the Company not to
consummate the merger, provided, however that no such decision shall constitute
a Company Withdrawal Decision if (x) Purchaser shall have consented in writing
to such decision, or (y) such decision is based on Purchaser's having made a
material misrepresentation, material breach of its warranties or covenants, or
material failure to comply with its other obligations under the Merger Agreement
or (z) the stockholders or Disinterested Stockholders of the Company shall have
failed to vote to approve the Merger. The Company's termination of the Merger
Agreement after April 10, 1996, pursuant to Section 10.1(b) thereof, or after
any later date that Purchaser and the Company shall agree upon in writing
pursuant to such Section 10.1(b) (April 10, 1996 or any such agreed upon later
date, as the case may be, being hereinafter referred to as the "Termination
Date") shall not constitute a Company Withdrawal Decision, unless (i) in the
event Purchaser shall have been ready and willing to consummate the Merger on
the Termination Date, the Company's failure to consummate the Merger on such
Termination Date was not due to a Purchaser's having made a material
misrepresentation, material breach of its warranties or covenants, or material
failure to comply with its other obligations under the Merger Agreement, or (ii)
in the event the Company shall have been ready and willing to consummate the
Merger on the Termination Date, Purchaser's failure to consummate the Merger on
such Termination Date was due to the Company's having made an intentional
material misrepresentation, intentional material breach of its warranties or
covenants, or intentional material failure to comply with its other obligations
under the Merger Agreement.
"Encumbrances" means pledges, liens, charges, encumbrances, easements,
defects, security interests, claims, options and restrictions of every kind.
"Escrow Agent" means, Kramer, Levin, Naftalis, Nessen, Xxxxx & Xxxxxxx.
"Escrow Agreement" means the escrow agreement, in substantially the
form attached hereto as Exhibit B, to be entered into at the Closing by and
among the Company, Purchaser and the Escrow Agent.
"Event of Default" has the meaning set forth in Article IX of this
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Final Payment" shall have the meaning set forth in Section 5.1 of this
Agreement.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership or
profit interest, warrants, rights, options obligations or other securities of
such Person, any capital contribution to such Person or any other investment in
such Person.
"Material Adverse Effect" means a material adverse effect on the
financial condition, assets, liabilities (contingent or otherwise), results of
operations, business or business prospects of the Company and the Subsidiaries
taken as a whole.
"Maturity Date" has the meaning set forth in Section 4.2 of this
Agreement.
"Merger" has the meaning set forth in the first Whereas clause of this
Agreement.
"Merger Agreement" has the meaning set forth in the first Whereas
clause of this Agreement.
"Note" has the meaning set forth in the second Whereas clause of this
Agreement.
"Person" means an individual, partnership, venture, unincorporated
association, organization, syndicate, corporation, limited liability company,
trust and trustee, executor, administrator or other legal or personal
representative or any government or agency or political subdivision thereof.
"Purchase Price" shall have the meaning set forth in Section 2.1
hereto.
"Purchaser" has the meaning set forth in the preamble to this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Shares" has the meaning set forth in the second Whereas clause of this
Agreement.
"Subsidiaries" has the meaning set forth in Section 6.4 of this
Agreement.
"Subsidiary Guaranty" means the Subsidiary Guaranty, in substantially
the form attached hereto as Exhibit C, to be executed and delivered by each
Subsidiary at the Closing.
"Taxes" means, all taxes of any kind, including, without limitation,
those on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment,
exercise, severance, stamp, occupation, premium, value added, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any governmental authority,
domestic or foreign.
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"UJB Loan Agreement" means that certain Loan Agreement, by and among
the Company, its Subsidiaries and United Jersey Bank, a New Jersey banking
corporation ("UJB"), dated June 23, 1994, or any extension or renewal thereof.
"UJB Obligations" has the meaning set forth in Section 4.5 hereof.
Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings ascribed to them in the Merger Agreement.
ARTICLE II
Purchase and Sale
Section 2.1 Purchase and Sale. Subject to and upon the terms and
conditions hereinafter set forth, at the Closing the Company shall, in reliance
upon the representations and warranties of Purchaser contained herein or made
pursuant hereto, issue, sell and deliver to Purchaser, free of all Encumbrances
(but subject to the terms and conditions set forth herein and in the Escrow
Agreement), and Purchaser shall, in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, purchase
from the Company, the Note and the Shares, for an aggregate purchase price (the
"Purchase Price") of Five Hundred Thousand Dollars ($500,000). At the Closing
the Company shall deliver to Purchaser (i) the Note, and (ii) two certificates
(the "Certificates"), each of which shall represent two hundred fifty thousand
(250,000) of the Shares and shall be duly registered in Purchaser's name,
against payment in full by Purchaser of the Purchase Price by delivery to the
Company of a check payable to the order of the Company. The Company shall be
liable for and shall pay all transfer taxes attributable to the issuance and
sale of the Shares.
Section 2.2 Allocation. The Company and Purchaser agree that the
Purchase Price shall be allocated $490,000 to the Note and $10,000 to the
Shares. The Company and Purchaser agree that interest on the Note is only the
stated interest thereon plus any Original Issue Discount that may result from
this allocation.
ARTICLE III
The Closing
Subject to the fulfillment or waiver of the conditions precedent set
forth in Articles X and XI, the closing of the transactions contemplated hereby
(the "Closing") shall be held at the offices of Kramer, Levin, Naftalis, Nessen,
Xxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on January 25, 1996
at 10:00 a.m., prevailing local time, or at such other place or on such other
date as Purchaser and the Company may agree upon in writing. The date on which
the Closing occurs is herein referred to as the "Closing Date."
ARTICLE IV
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Terms of the Note
Section 4.1 Incorporation by Reference. The terms and provisions of the
Note are hereby incorporated into this Agreement by reference.
Section 4.2 Maturity. Principal of, and any accrued and unpaid interest
on, the Note shall be due and payable in full on the Maturity Date. The
"Maturity Date" shall be the date which is the earliest of (i) the date of any
Change of Control Event , (ii) the date that is ten (10) days after any Company
Withdrawal Decision that does not occur between April 1, 1996 and Xxxxx 00,
0000, (xxx) April 10, 1996, where a Company Withdrawal Decision does occur
between April 1, 1996 and April 10, 1996 and (iv) December 31, 1996.
Notwithstanding anything else in this Agreement or the Note to the contrary,
Purchaser may postpone the Maturity Date of the Note in Purchaser's sole
discretion, by giving notice of such postponement (a "Postponement Notice") to
the Company at least five (5) days prior to the Maturity Date as in effect prior
to such postponement.
Section 4.3 Interest. The Company shall pay to Purchaser interest from
the date hereof accrued on the unpaid principal amount of the Note from time to
time outstanding at a rate of 8.5 % per annum, which rate represents the prime
rate as set forth in The Wall Street Journal on the Closing Date (the "Prime
Rate"). Interest shall be payable in arrears on the Maturity Date.
Section 4.4 Default Interest. Upon the occurrence and during the
continuance of any Event of Default, the Company shall pay interest at the Prime
Rate plus 4% per annum on (i) the unpaid principal amount of the Note from time
to time outstanding, payable on the maturity date and on demand, and (ii) to the
fullest extent permitted by law, the amount of any interest, fee or other amount
payable hereunder that is not paid when due, from the date such amount shall be
due until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full, and on demand.
Section 4.5 Optional Prepayment. The Company shall have the right to
prepay the principal amount of the Note at any time in whole or from time to
time in part, with accrued interest on the amount prepaid to the date of
prepayment without premium or penalty therefor.
Section 4.5 Subordination. The indebtedness of the Company to Purchaser
under the Note will be subordinated pursuant to a Subordination Agreement, among
the Company, Purchaser and UJB (the "Subordination Agreement") in substantially
the form of Exhibit D hereto.
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ARTICLE V
Escrow of Shares; Grant of Proxy; Registration Rights
Section 5.1 Escrow of Shares. (a) Purchaser agrees that, at the
Closing, it shall deliver to the Escrow Agent, pursuant to the terms of the
Escrow Agreement, the Certificates representing the Shares, together with an
undated stock power for each such Certificate, duly executed in blank.
(b) The parties agree that under the circumstances described herein,
and subject to the terms of the Escrow Agreement, the Shares shall be released
from escrow and either delivered to Purchaser or returned to the Company as
follows:
(i) upon the occurrence of a Change of Control Event or on the
Maturity Date following a Company Withdrawal Decision, if the Company
shall not have paid in full all of its obligations under the Note (the
"Final Payment") on or before such date all the Shares still in escrow
shall be released from escrow and delivered to Purchaser;
(ii) if no Change of Control Event or Company Withdrawal
Decision shall have occurred, and the Company shall not have made the
Final Payment on or before December 31, 1996, 250,000 of the Shares
shall be released from escrow and delivered to Purchaser;
(iii) if no Change of Control Event or Company Withdrawal
Decision shall have occurred, and the Company shall not have made the
Final Payment on or before June 30, 1997, the remaining 250,000 Shares
shall be released from escrow and delivered to Purchaser;
(iv) if an Event of Default shall have occurred, other than an
Event of Default based solely on the Company's failure to pay when due
any principal or interest on the Note, and if Purchaser exercises its
option to declare the Note immediately due and payable, all of the
Shares still in escrow shall be released from escrow and delivered to
Purchaser;
(v) whenever the Final Payment is made, all of the Shares still
in escrow shall be released from escrow and returned to the Company;
provided, however, that if an event entitling Purchaser to the delivery
of some or all of the Shares (the "Deliverable Shares") as set forth in
any of clauses (i), (ii), (iii) or (iv) of this subsection 5.1(b) has
occurred prior to the making of the Final Payment, but the Escrow Agent
is, pursuant to the terms of the Escrow Agreement, still holding such
Deliverable Shares, such Deliverable Shares shall not be delivered to
the Company pursuant to this clause 5.1(b)(v), but shall instead be
disposed of pursuant to the terms of Section 2(a) of the Escrow
Agreement; and provided, further that in no event shall any of the
Shares be released from escrow and returned to the Company until
Purchaser has received reasonably satisfactory assurances from UJB that
at the time the Final Payment was made an event of default with respect
to the UJB Loan, as defined therein, (x) had not
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occurred and was not continuing, and (y) would not result from
the making of such Final Payment.
(c) Any and all dividends, cash, instruments, securities and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any of the Shares while such Shares are still in
escrow, shall be delivered to the Escrow Agent and held in escrow with such
Shares, and either delivered to Purchaser or returned to the Company, as the
case may be, together with such Shares, when such Shares are so delivered or
returned.
Section 5.2 Grant of Proxy; Irrevocability. Purchaser hereby agrees
that in the event that a vote of the stockholders of the Company shall be taken,
or the written consent of the stockholders shall be requested, for any purpose
other than the approval of a Change of Control Event or a Company Withdrawal
Decision, Purchaser shall appoint such Person or Persons as the Company shall
designate, proxy to vote all of the Shares that are still held in escrow and are
not Deliverable Shares as defined in Section 5.1(b)(v) above, in connection with
such vote or action by written consent.
Section 5.3 Registration Rights.
(a) If, at any time following the date of this Agreement, the Company
shall file a registration statement (other than any registration statement on
Form X-0, Xxxx X-0, or any successor form) with the SEC while any Registrable
Shares (as hereinafter defined) are outstanding, the Company shall give all the
then holders of any Registrable Shares (the "Eligible Holders") at least 30
days' prior written notice of the filing of such registration statement. If
requested by any Eligible Holder in writing within 20 days after receipt of any
such notice, the Company shall, at the Company's sole expense (other than the
fees and disbursements of counsel for the Eligible Holders and the underwriting
discounts, if any, payable in respect of the Registrable Shares sold by any
Eligible Holder), register or qualify all or, at each Eligible Holder's option,
any portion of the Registrable Shares of any Eligible Holders who shall have
made such request, concurrently with the registration of such other securities,
all to the extent necessary to permit the public offering and sale of the
Registrable Shares through the facilities of all securities exchanges and the
over-the-counter markets on which the Company's securities are traded, and will
use its best efforts through its officers, directors, auditors, and counsel to
cause such registration statement to become effective as promptly as
practicable. Notwithstanding the foregoing, if the managing underwriter of any
such offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Registrable Shares requested to be
included in the registration concurrently with the securities being registered
by the Company would materially adversely affect the distribution of such
securities by the Company for its own account, then any Eligible Holder who
shall have requested registration of his or its Registrable Shares shall not be
entitled to have such Eligible Holder's Registrable Shares (or the portions
thereof so designated by the managing underwriter) included in such registration
statement, provided that no such exclusion or reduction shall be made as to any
Registrable Shares if any securities of the Company are included in such
registration statement for the account of any person other than the Company and
any Eligible Holder unless the securities included in such
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registration statement for such other person shall have been reduced pro rata to
the reduction of the Registrable Shares which were requested to be included in
such registration. As used herein, "Registrable Shares" shall mean the Shares
and any other securities issued in exchange for, upon conversion of, as a
dividend on or otherwise in respect of such Shares which have not been
previously sold pursuant to a registration statement or Rule 144 promulgated
under the Act.
(b) If, at any time after the Maturity Date, the Company shall receive
a written request from Eligible Holders who in the aggregate own a majority of
the total number of Registrable Shares (the "Majority Holders"), to register the
sale of all or part of such Registrable Shares, the Company shall, as promptly
as practicable, prepare and file with the Commission a registration statement
sufficient to permit the public offering and sale of the Registrable Shares
through the facilities of all securities exchanges and the over-the-counter
markets on which the Company's securities are traded, and will use its best
efforts through its officers, directors, auditors, and counsel to cause such
registration statement to become effective as promptly as practicable; provided,
however, that the Company shall only be obligated to file one such registration
statement. All expenses incurred in connection with such registration (other
than the fees and disbursements of counsel for the Eligible Holders and
underwriting discounts, if any, payable in respect of the Registrable Shares
sold by the Eligible Holders) shall be borne by the Company. The Company shall
not be obligated to effect any registration of its securities pursuant to this
Section 5.3(b) within six months after the effective date of a previous
registration statement prepared and filed in accordance with Section 5.3(a) (in
which Registrable Shares could have been included). Within ten business days
after receiving any request contemplated by this Section 5.3(b), the Company
shall send written notice to all the other Eligible Holders advising each of
them that the Company is proceeding with such registration and offering to
include therein all or any portion of any such other Eligible Holder's
Registrable Shares, provided that the Company receives a written request to do
so from such Eligible Holder within 20 days after receipt by him or it of the
Company's notice.
(c) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall use its best efforts to cause the Registrable
Shares so registered to be registered or qualified for sale under the securities
or blue sky laws of such jurisdictions as the Eligible Holder may reasonably
request; provided, however, that the Company shall not by reason of this Section
5.3(c) be required to qualify to do business in any state in which it is not
otherwise required to qualify to do business or to file a general consent to
service of process.
(d) The Company shall keep effective any registration or qualification
contemplated by this Section 5.3 and shall from time to time amend or supplement
each applicable registration statement, preliminary prospectus, final
prospectus, application, document, and communication for such period of time as
shall be required to permit the Eligible Holders to complete the offer and sale
of the Registrable Shares covered thereby. The Company shall in no event be
required to keep any such registration or qualification in effect for a period
in excess of six months from the date on which the Eligible Holders are first
free to sell such Registrable Shares; provided, however, that, if the Company is
required to keep any such
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registration or qualification in effect with respect to securities other than
the Registrable Shares beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the Registrable Shares
for so long as such registration or qualification remains or is required to
remain in effect in respect of such other securities.
(e) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall furnish to each Eligible Holder such reasonable
number of copies of the registration statement and of each amendment and
supplement thereto (in each case, including all exhibits), such reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment thereto (including each preliminary prospectus),
all of which shall conform to the requirements of the Act and the rules and
regulations thereunder, and such other documents, as any Eligible Holder may
reasonably request to facilitate the disposition of the Registrable Shares
included in such registration.
(f) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company shall furnish each Eligible Holder of any Registrable
Shares so registered with an opinion of its counsel (reasonably acceptable to
the Eligible Holders) to the effect that (i) the registration statement has
become effective under the Act and no order suspending the effectiveness of the
registration statement, preventing or suspending the use of the registration
statement, any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to the best knowledge of such counsel
has the SEC or any securities or blue sky authority of any jurisdiction
instituted or threatened to institute any proceedings with respect to such an
order, and (ii) the registration statement and the prospectus included therein
and any supplements or amendments thereto (except for financial statements and
related schedules and documents incorporated thereto by reference, as to which
such counsel need express no opinion) comply as to form in all material respects
with the Act and the rules and regulations of the SEC thereunder.
(g) In the event of a registration pursuant to the provisions of this
Section 5.3, the Company and each Eligible Holder shall enter into a
cross-indemnity agreement and a contribution agreement, each in customary form,
with each underwriter, if any, and, if requested, enter into an underwriting
agreement containing conventional representations, warranties, allocation of
expenses, and customary closing conditions, including, without limitation,
opinions of counsel and accountants' cold comfort letters, with any underwriter
who acquires any Registrable Shares.
(h) The Company agrees that until all the Registrable Shares have been
sold under a registration statement or pursuant to Rule 144 under the Act, it
shall keep current in filing all reports, statements and other materials
required to be filed with the Commission to permit holders of the Registrable
Shares to sell such securities under Rule 144.
(i) The Company will not grant to any persons the right to request the
Company to register any securities of the Company without the written consent of
the Majority Holders, provided that the Company may grant such registration
rights to other persons so long as such rights are pari passu or subordinate to
the rights of the holders of the Registrable Shares.
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Section 5.4 Indemnification
(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Eligible Holder, its officers, directors,
partners, employees, agents, and counsel, and each person, if any, who controls
any such person within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act, from and against any and all loss, liability, charge, claim,
damage, and expense whatsoever (which shall include, for all purposes of this
Section 5.4, without limitation, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with any untrue statement or
alleged untrue statement of a material fact contained (A) in any registration
statement, preliminary prospectus, or final prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto, relating to
the sale of any of the Registrable Shares, or (B) in any application or other
document or communication (in this Section 5.4 collectively called an
"application") executed by or on behalf of the Company or based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify any of the Registrable Shares under the
securities or blue sky laws thereof, or filed with the SEC or any securities
exchange; or any omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Company with respect to such Eligible
Holder by or on behalf of such person expressly for inclusion in any
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under the Note.
If any action is brought against any Eligible Holder or any of its
officers, directors, partners, employees, agents, or counsel, or any controlling
persons of such person (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability under this Section 5.4(a) unless the Company shall
have been materially prejudiced by such failure or relieve the Company from any
liability other than pursuant to this Section 5.4(a)) and the Company shall
promptly assume the defense of such action, including the employment of counsel
(reasonably satisfactory to such indemnified party or parties) and payment of
expenses. Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the Company
in connection with the defense of such action or the Company shall not have
employed counsel reasonably satisfactory to such indemnified party or parties to
have charge of the defense of such action or such indemnified party or parties
shall have reasonably concluded that there may be one or more legal defenses
available to it or them or to other indemnified parties which are different from
or additional to those available to the Company, in any of which
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events such fees and expenses shall be borne by the Company and the Company
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this Section 5.4 to the contrary
notwithstanding, the Company shall not be liable for any settlement of any such
claim or action effected without its written consent, which shall not be
unreasonably withheld. The Company agrees promptly to notify the Eligible
Holders of the commencement of any litigation or proceedings against the Company
or any of its officers or directors in connection with the sale of any
Registrable Shares or any preliminary prospectus, prospectus, registration
statement, or amendment or supplement thereto, or any application relating to
any sale of any Registrable Shares.
(b) Purchaser agrees to indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall have signed any
registration statement covering Registrable Shares held by the Purchaser, each
other person, if any, who controls the Company within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, and its or their respective
counsel, to the same extent as the foregoing indemnity from the Company to the
Eligible Holders in Section 5.4(a), but only with respect to statements or
omissions, if any, made in any registration statement, preliminary prospectus,
or final prospectus (as from time to time amended and supplemented), or any
amendment or supplement thereto, or in any application, in reliance upon and in
conformity with written information furnished to the Company with respect to the
Purchaser by or on behalf of the Purchaser expressly for inclusion in any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, as the case may be. If
any action shall be brought against the Company or any other person so
indemnified based on any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any application,
and in respect of which indemnity may be sought against the Purchaser pursuant
to this Section 5.4(b), the Purchaser shall have the rights and duties given to
the Company, and the Company and each other person so indemnified shall have the
rights and duties given to the indemnified parties, by the provisions of Section
5.4(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section 5.4(a)
or 5.4(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in such case, or (ii) any indemnified or indemnifying party
seeks contribution under the Act, the Exchange Act or otherwise, then the
Company (including for this purpose any contribution made by or on behalf of any
director of the Company, any officer of the Company who signed any such
registration statement, any controlling person of the Company, and its or their
respective counsel), as one entity, and the Eligible Holders of the Registrable
Shares included in such registration in the aggregate (including for this
purpose any contribution by or on behalf of an indemnified party), as a second
entity, shall contribute to the losses, liabilities, claims, damages, and
expenses whatsoever to which any of them may be subject, on the basis of
relevant equitable considerations such as the relative fault of the Company and
such Eligible Holders in connection with the facts which resulted in such
losses, liabilities, claims, damages, and expenses. The relative fault, in the
case of an untrue statement,
- 11 -
alleged untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by such
Eligible Holders, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission or alleged omission. The Company and the Purchaser agree
that it would be unjust and inequitable if the respective obligations of the
Company and the Eligible Holders for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Eligible Holders and the other indemnified parties were
treated as one entity for such purpose) or by any other method of allocation
that does not reflect the equitable considerations referred to in this Section
5.4(c). In no case shall any Eligible Holder be responsible for a portion of the
contribution obligation imposed on all Eligible Holders in excess of its pro
rata share based on the number of shares of Common Stock owned by it and
included in such registration compared to the number of shares of Common Stock
owned by all Eligible Holders and included in such registration. No person
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation. For purposes of this Section 5.4(c), each
person, if any, who controls any Eligible Holder within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, and each officer, director,
partner, employee, agent, and counsel of each such Eligible Holder or control
person shall have the same rights to contribution as such Eligible Holder or
control person and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed any such registration statement,
each director of the Company, and its or their respective counsel shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this Section 5.4(c). Anything in this Section 5.4(c) to the
contrary notwithstanding, no party shall be liable for contribution with respect
to the settlement of any claim or action effected without its written consent.
This Section 5.4(c) is intended to supersede any right to contribution under the
Act, the Exchange Act or otherwise.
ARTICLE VI
Representations and Warranties of the Company
The Company represents and warrants to Purchaser that, except as is set
forth on the Company Disclosure Schedule, each of the statements contained in
this Article VI is true, correct and complete.
Section 6.1 Organization and Good Standing. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its organization and has full corporate
power and authority to enter into and carry out its obligations under this
Agreement, the Escrow Agreement and the Note.
Section 6.2 Authorization. The execution and delivery of this Agreement
and the Escrow Agreement by the Company, and the issuance of the Note and the
Shares by the Company, have been duly authorized by all necessary corporate
action required on the part
- 12 -
of the Company. All of the Shares, when issued, will be duly authorized, validly
issued, fully paid and non-assessable. This Agreement, the Escrow Agreement and
the Note have been duly executed and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or other laws affecting the rights
of creditors generally and by general principles of equity.
Section 6.3 No Conflict. Neither the execution and delivery of this
Agreement or the Escrow Agreement by the Company nor the issuance of the Note or
the Shares by the Company, nor the consummation of the transactions contemplated
hereby or thereby, will (i) conflict with, violate, result in the breach of any
term of, constitute a default under, require the consent of or any notice to or
filing with any third party or government authority under, or create an
Encumbrance on any of the Shares or the assets of the Company or any of its
Subsidiaries under, any note, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which they are bound, or any law, order, rule, regulation, decree, writ or
injunction of any governmental body having jurisdiction over the Company, its
Subsidiaries, or their respective properties; or (ii) conflict with or violate
the certificate of incorporation or by-laws, or equivalent organizational
documents, of the Company or any of its Subsidiaries.
Section 6.4 Subsidiaries. The Company has no direct or indirect
subsidiaries other than the Persons set forth on Schedule 6.4 hereto (the
"Subsidiaries"). The Company does not own, directly or indirectly, any capital
stock or other equity securities of, or have any direct or indirect equity or
ownership interest in, any Person other than the Subsidiaries.
ARTICLE VII
Representations and Warranties of Purchaser
Purchaser represents and warrants to the Company that each of the
statements contained in this Article VII is true, correct and complete.
Section 7.1 Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to enter into and
carry out its obligations under this Agreement.
Section 7.2 Authorization. The execution and delivery of this Agreement
and the Escrow Agreement by Purchaser have been duly authorized by all necessary
corporate action required on the part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes a valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the rights of creditors generally
and by general principles of equity.
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Section 7.3 Securities Laws. (a) Purchaser is purchasing the Securities
for its own account, for investment, and is not purchasing the Securities (i) in
connection with the offer or sale of the Securities to others, (ii) with a view
to the distribution of the Securities within the meaning of the Act, (iii) with
a view to underwriting any such distribution, or (iv) with a view to engaging in
conduct which may violate the registration requirements of the Act or any state
securities laws.
(b) Purchaser understands that the Securities will not be registered
under the Act and may not be sold or otherwise disposed of unless they are
registered or are sold or otherwise disposed of in a transaction that is exempt
from such registration. Purchaser understands that the Note and the certificates
representing the Shares will bear a restrictive legend similar or identical to
the following:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT (OR IN COMPLIANCE WITH AN EXEMPTION FROM SUCH
REGISTRATION) UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS."
ARTICLE VIII
Covenants of the Company
The Company hereby covenants and agrees as follows:
Section 8.1 Regular Course of Business. Except as otherwise consented
to in writing by Purchaser, prior to the Maturity Date, the Company shall carry
on its business diligently and in the ordinary course only and, without limiting
the generality of the foregoing, the Company shall use its reasonable best
efforts to (i) preserve its present business organization intact; (ii) keep
available the services of its executive officers and any management or sales
personnel and preserve its present relationships with distributors, customers,
suppliers and other persons having business dealings with it; (iii) maintain its
properties and assets (other than those disposed of in the ordinary course of
business consistent with prior practice) in good repair and condition, except
for ordinary wear and tear; and (iv) maintain its books of account and records
in accordance with GAAP and in the usual, regular and ordinary manner and
consistent with prior practice. Nothing in this Section 8.1 shall prevent the
Company from selling any assets or entering into any transaction that would
otherwise be prohibited by clauses (i) or (iii) of the preceding sentence if the
proceeds of such transaction are used to repay amounts owing under (1) the UJB
Loan Agreement, (2) any other indebtedness that is secured by assets of the
Company or any Subsidiary, or (3) the Note.
Section 8.2 New Subsidiaries. The Company shall cause any Person that
becomes a direct or indirect subsidiary of the Company to execute the Subsidiary
Guaranty.
- 14 -
Section 8.3 Advice of Changes; SEC Filings. The Company shall confer on
a regular and frequent basis with Purchaser, report on operational matters and
promptly advise Purchaser of any change or event having, or which, insofar as
can be reasonably foreseen, could have, a Material Adverse Effect on the
Company. The Company shall promptly provide Purchaser (or its counsel) with
copies of all filings made by it with the SEC.
ARTICLE IX
Events of Default
Section 9.1 Events of Default. Any of the following shall constitute an
Event of Default hereunder:
(a) (i) the Company shall fail to pay when due any principal or
interest on the Note, or (ii) the Company shall fail to pay when due any other
amount payable hereunder, and such failure shall remain uncured for a period of
five (5) days;
(b) any representation, warranty or certification of the Company made
or deemed to be made under this Agreement or any other writing or certificate
required to be furnished by the Company to the Purchaser pursuant to this
Agreement is or shall be incorrect when made or deemed to be made in any
material respect;
(c) the Company or any of the Subsidiaries shall fail to observe or
perform any covenant or agreement contained in this Agreement other than a
failure to pay described in Section 9.1(a)(i) or (ii), and such failure to
observe or perform shall remain uncured ten (10) days after Purchaser shall have
given notice of such failure to the Company;
(d) the Company or any Subsidiary shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall take any corporate action to authorize any of
the foregoing; or
(e) an involuntary case or other proceeding shall be commenced against
the Company or any of its Subsidiaries seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 30 days; or an order for
relief shall be entered against the Company or any of its Subsidiaries under any
bankruptcy, insolvency or other similar law now or hereafter in effect.
- 15 -
Section 9.2 Acceleration. Upon the occurrence of any Event of Default
the Purchaser may, by notice to the Company, declare the Note (together with
accrued interest thereon) to be, and the Note shall thereupon become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company; provided, however
that if any Event of Default specified in paragraph (d) or (e) above occurs with
respect to the Company, without any notice to the Company or any other act by
the Purchaser, the Note (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Company. Notwithstanding the
foregoing, Purchaser shall have available to it all other remedies at law or
equity. The failure of the Purchaser to exercise the option described in the
preceding sentence at any time shall not constitute a waiver of the Purchaser's
right to exercise such option at any other time.
ARTICLE X
Conditions Precedent to Obligations of Purchaser
The obligations of Purchaser under Article II of this Agreement shall
be subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by Purchaser:
Section 10.1 Representations and Warranties. Each and every
representation and warranty of the Company contained in this Agreement, any
Schedule attached hereto or any certificate delivered pursuant hereto shall be
true and accurate as of the date when made, shall be deemed repeated at the time
of the Closing and shall then be true and accurate in all material respects.
Section 10.2 Compliance with Covenants. The Company shall have
performed and observed in all material respects all covenants and agreements to
be performed or observed by the Company under this Agreement at or before the
Closing.
Section 10.3 Consents of Third Parties. All consents of third parties
to any contracts, and all material approvals and consents of regulatory
authorities that are required to carry out the transactions contemplated in this
Agreement shall have been received.
Section 10.4 Execution of Other Documents. The Escrow Agreement, the
Subsidiary Guaranty and the Merger Agreement shall have been entered into by all
parties thereto.
Section 10.5 Secretary's Certificates. Purchaser shall have received
from the Company and each Subsidiary a certificate of its Secretary or an
Assistant Secretary, in form and substance satisfactory to Purchaser, dated the
Closing Date, as to the following:
(i) resolutions of the Company's or such Subsidiaries' Board of
Directors then in full force and effect authorizing (x) in the case of
the Company, the execution, delivery and performance of this Agreement
and the Escrow Agreement,
- 16 -
and the issuance and sale of the Note and the Shares, and (y) in
the case of the Subsidiaries, the execution, delivery and performance
of the Subsidiary Guaranty; and
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to (x) in the case of the Company, this
Agreement, the Escrow Agreement, the Note, and the Merger Agreement,
and (y) in the case of each Subsidiary, the Subsidiary Guaranty.
ARTICLE XI
Conditions Precedent to Obligations of the Company
The obligations of the Company under Article II of this Agreement shall
be subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by the Company:
Section 11.1 Representations and Warranties. Each and every
representation and warranty of Purchaser contained in this Agreement, any
Schedule attached hereto or any certificate delivered pursuant hereto shall be
true and accurate as of the date when made, shall be deemed repeated at the time
of the Closing and shall then be true and accurate in all material respects.
Section 11.2 Compliance with Covenants. Purchaser shall have performed
and observed in all material respects all covenants and agreements to be
performed or observed by Purchaser under this Agreement at or before the
Closing.
Section 11.3 Consents of Third Parties. All consents of third parties
to any contracts, and all material approvals and consents of regulatory
authorities that are required to carry out the transactions contemplated in this
Agreement shall have been received.
Section 11.4 Execution of Other Documents. The Escrow Agreement, the
Subsidiary Guaranty and the Merger Agreement shall have been entered into by all
parties thereto.
Section 11.5 Secretary's Certificate. The Company shall have received
from Purchaser a certificate of its Secretary or an Assistant Secretary, in form
and substance satisfactory to the Company, dated the Closing Date, as to the
following:
(i) resolutions of Purchaser's Board of Directors then in full
force and effect authorizing the execution, delivery and performance of
this Agreement, the Escrow Agreement and the Merger Agreement; and
(ii) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement, the Escrow Agreement,
the Note, and the Subsidiary Guaranty.
- 17 -
ARTICLE XII
Miscellaneous
Section 12.1 Entire Agreement. This Agreement, the Note and the Escrow
Agreement, together with the other documents and certificates delivered
hereunder or thereunder, states the entire agreement of the parties, and merges
all prior negotiations, agreements and understandings.
Section 12.2 Notices. All notices and demands of any kind which any
party hereto may be required or desire to serve upon another party under the
terms of this Agreement or the Note shall be in writing and shall be delivered
to such other party: (a) by hand delivery to such other party at such other
party's address set forth on the signature pages of this Agreement; or (b) by
mailing a copy thereof by certified or registered mail, postage prepaid, with
return receipt requested, addressed to such other party at the address of such
other party set forth on the signature pages of this Agreement; or (c) by
sending a copy thereof by Federal Express or equivalent courier service,
addressed to such other party at the address of such other party set forth on
the signature pages of this Agreement; or (d) by sending a copy thereof by
facsimile to such other party at the facsimile number, if any, of such other
party set forth on the signature pages of this Agreement.
In case of delivery by Federal Express or equivalent courier service or
by facsimile or by personal delivery, such delivery shall be deemed complete
upon receipt. In the case of delivery by mail, such delivery shall be deemed
complete upon reasonable proof of receipt. The addresses and facsimile numbers
to which, and persons to whose attention, notices and demands shall be delivered
or sent may be changed from time to time by notice delivered, as hereinabove
provided, by any party upon the other parties.
Section 12.3 Amendment. This Agreement may be modified or amended only
by an instrument in writing, duly executed by all of the parties hereto.
Section 12.4 Nonwaiver. No waiver by any party of any term, provision,
covenant, representation or warranty contained in this Agreement (or any breach
thereof) shall be effective unless it is in writing executed by the party
against which such waiver is to be enforced; no waiver shall be deemed or
construed as a further or continuing waiver of any such term, provision,
covenant, representation or warranty (or breach) on any other occasion or as a
waiver of any other term, provision, covenant, representation or warranty (or of
the breach of any other term, provision covenant, representation or warranty)
contained in this Agreement on the same or any other occasion.
- 18 -
Section 12.5 Counterparts. For the convenience of the parties, any
number of counterparts hereof may be executed, each such executed counterpart
shall be deemed an original and all such counterparts together shall constitute
one and the same instrument.
Section 12.6 Assignment; Binding Nature; No Beneficiaries. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement may not be transferred, assigned, pledged or hypothecated by any party
hereto, other than by operation of law. This Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns.
Section 12.7 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
Section 12.8 Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York applicable to contracts made and to be entirely performed
therein. In the event of any controversy or claim arising out of or relating to
this Agreement or any agreement entered into in connection herewith or the
breach or alleged breach hereof or thereof, each of the parties hereto agrees
that service of process or of any other papers upon such party by registered
mail at the address to which notices are required to be sent to such party under
Section 12.2 shall be deemed good, proper and effective service upon such party.
Section 12.9 Specific Performance. Each of the parties hereto
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the covenants contained in this Agreement and the agreements
entered into in connection herewith are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the parties
hereto agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the covenants contained in this Agreement and
the agreements entered into in connection herewith and to enforce specifically
this Agreement and the agreements entered into in connection herewith in
addition to any other remedy to which such other parties may be entitled at law
or in equity, without proving damages or that monetary damages would not be an
adequate remedy for such breach. The remedies provided for or permitted by this
Agreement shall be cumulative and the exercise by any party of any remedy
provided for herein or available hereunder shall not preclude the assertion or
exercise by such party of any other right or remedy provided for herein or
available hereunder.
Section 12.10 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases, or to
- 19 -
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid and unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
Section 12.11 Expenses. Whether or not the transactions contemplated
hereby are consummated each party hereto shall pay all costs and expenses
incurred by such party in respect of the transactions contemplated hereby.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Securities Purchase Agreement as of the day and year first above set forth.
ENVIRONMENTAL SERVICES OF AMERICA, INC.
By: /s/
-------------------------------------------------
Name:
Title:
Address: Environmental Services of America, Inc.
Xxxxxxxxx Xxxxxxx, Xxxxxxxx #0
Xxxxxx, XX 00000
Phone: 000 000-0000
Fax: 000 000-0000
ERD WASTE CORP.
By: /s/
-------------------------------------------------
Name:
Title:
Address: ERD Waste Corp.
000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxx, Xxx Xxxx 00000
Phone: 000 000-0000
Fax: 000 000-0000
- 20 -
Schedule 6.4
ENVIRONMENTAL SERVICES OF AMERICA, INC.
Subsidiaries - each 100% owned by ENSA
ENSA Environmental, Inc.
ENSI, Inc.
Northeast Environmental Services, Inc.
Tri-S, Incorporated
ENSA/Government Services, Inc.
Environmental Services of America - IN, Inc.
Environmental Services of America - MO, Inc.
ENSI of Pennsylvania, Inc.
ENSI/South Jersey, Inc.
