Pure Earth, Inc. December 21, 2007
Exhibit 2.8.5
December 21, 0000
Xxxxxxx X. Call
X.X. Xxx 00
Xxxxxxxxxxxxx, XX 00000
X.X. Xxx 00
Xxxxxxxxxxxxx, XX 00000
Re: Final Purchase Price
Gentlemen:
Reference is hereby made to that certain Stock Purchase Agreement dated as of February 13,
2007, among Pure Earth, Inc., (“Pure Earth”), Xxxxx Ecology Oil Salvage, Inc.
(“Xxxxx”), MidAtlantic Recycling Technologies, Inc. (“MART”), Rezultz, Incorporated
(“Rezultz”), Xxx Xxxxxx (“Mouser”) (pursuant to a certain Joinder to Stock Purchase
Agreement executed by Mouser), Xxxxx Xxxxx (“Xxxxx”) (pursuant to a certain Joinder to Stock
Purchase Agreement executed by Xxxxx; the “Xxxxx Joinder”) and Xxxxxxx X. Call
(“Call”), as amended by a certain First Amendment to Stock Purchase Agreement dated as of
February 28, 2007, a certain Second Amendment to Stock Purchase Agreement dated as of March 26,
2007, a certain Third Amendment to Stock Purchase Agreement, dated as of May 7, 2007, the Xxxxx
Joinder, and a certain Fourth Amendment to Stock Purchase Agreement, dated as of August 6, 2007(as
so amended, the “Stock Purchase Agreement”). Capitalized terms used in this letter and not
otherwise defined shall have the meaning ascribed to such terms in the Stock Purchase Agreement.
On June 20, 2007, Pure Earth delivered to Seller a letter (the “June 20 Letter”)
containing a proposed Closing Date Balance Sheet and Closing Schedule setting forth the Buyer’s Net
Asset Value Calculation. A series of letters were thereafter exchanged between Pure Earth and
Seller (either directly or through counsel), including the execution among the Sellers and Pure
Earth of the Third and Fourth Amendments to Stock Purchase Agreement. Pure Earth submitted to
Seller, under letter dated October 2, 2007 (the “October 2 Letter”) a revised Closing Date
Balance Sheet and Closing Schedule, which, subject to the further provisions of this letter, are
agreed to by Seller and Pure Earth. Pursuant to the provisions of Section 3.2(c) of the Stock
Purchase Agreement, Pure Earth and Seller have agreed to resolve the Objection and have agreed upon
the Final Net Asset Value as well as certain additional compromises and agreements, all as more
fully set forth herein.
This letter shall serve as a Fifth Amendment to Stock Purchase Agreement as well as a binding
agreement between Pure Earth and Seller (as the sellers of the Stock) and Call (in his capacity as
a creditor of the Companies in connection with the Shareholder Loan) with respect to the
determination of the Net Asset Value Shortfall and the A/R Shortfall. Intending to be legally
bound, the parties agree as follows:
1. Attached hereto as Exhibit A is the final Closing Date Balance Sheet.
2. Attached hereto as Exhibit B is the final Closing Schedule, setting forth a Net
Asset Value Shortfall of $6,982,164, which is hereby reduced by $219,126.92 to $6,763,037.10, in
order to account for an overstatement of the shareholder loan due to Call as of the Closing Date,
which was erroneously reflected at a value of $3,544,126.92.
3. The present outstanding principal balance of the Shareholder Loan (before any offsets
provided for herein) is $3,325,000, comprised of $2,425,000, memorialized by a certain Promissory
Note dated March 30, 2007 (the “First Call Note”) and $900,000, memorialized by a certain
Subordinated Promissory Note #2 in the original face amount of $1,000,000, dated March 30, 2007
(the “Second Call Note”), against which a $100,000 debit was applied on the Closing Date to
account for certain legal fees of Call advanced by the Companies in connection with the acquisition
by Pure Earth of the Companies.
4. The portion of the A/R & Equipment Shortfall relating to the Companies’ accounts
receivable (as contemplated by Section 3.4 of the Stock Purchase Agreement is $253,922 (the
“A/R Shortfall”). In satisfaction of Seller’s obligation to reimburse Pure Earth for the
A/R Shortfall, the Companies will and do hereby offset against the First Call Note, the amount of
$228,530 and Pure Earth will offset against and take and assign to its own account 5,078 of the
Xxxxx Pledged Shares.
December 21, 2007
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5. In an effort to fully resolve and settle the Net Asset Value Shortfall and avoid the
unnecessary expenditures associated with the engagement of a third party to evaluate the parties’
calculations of the foregoing amounts, it is agreed as follows:
(a) the number of shares of Additional PEI Stock (315,000 shares) that would otherwise be
available to Seller (which includes the Xxxxx Additional PEI Stock (as such term is defined in the
Xxxxx Joinder)) is hereby reduced to zero and applied against and in reduction of the Net Asset
Value Shortfall at the Assumed Value (which is defined in the Stock Purchase Agreement as $5.00 per
share) (subject to a Clawback), reducing the Net Asset Value Shortfall by $1,575,000;
(b) Sellers (other than Xxxxx) will contemporaneously herewith deliver to Pure Earth 810,000
shares of the Initial PEI Stock (representing all of the Initial PEI Stock distributed to the
Sellers (other than Xxxxx), duly endorsed for transfer. Such shares will be applied against and in
reduction of the Net Asset Value Shortfall at the Assumed Value (subject to a Clawback), reducing
the Net Asset Value Shortfall by $4,050,000;
(c) pursuant to its rights under the Xxxxx Joinder and the related Stock Pledge Agreement
executed and delivered by Xxxxx to Pure Earth, Pure Earth will contemporaneously herewith take and
assign to its own account 53,922 of the Xxxxx Pledged Shares (as defined in the Xxxxx Joinder),
(representing Xxxxx’x pro rata share of the purchase price adjustment, with a credit back to Xxxxx
of 11,000 shares relating to the portion of the purchase price adjustment associated with the write
down of the Gross Xxxxx Receivable (as required by and defined in section 29(d) of the Xxxxx
Joinder)) to be applied against and in reduction of the Net Asset Value Shortfall at the Assumed
Value (subject to a Clawback), reducing the Net Asset Value Shortfall by $269,610;
(d) the Companies will and do ( effective as of November 15, 2007) hereby offset against the
First Call Note, the amount of $868,427.10, representing the remaining balance of the Net Asset
Value Shortfall.
6. Effective as of November 15, 2007 Xxxxx hereby sells, assigns and transfers to Call that
certain promissory note in the original principal amount of $206,092.92, dated December 31, 2005
made by Xxx Xxxxxx in favor of Xxxxx (the “Mouser Note”) in consideration of the aggregate
sum of $230,476, representing the outstanding principal amount thereof plus accrued unpaid interest
as of November 15, 2007, payment of which by Call to Xxxxx shall be made by offset against the
First Call Note. Xxxxx will execute an assignment of promissory note dated as of November 15, 2007
and deliver the original Mouser Note to Call within 15 business days hereafter.
7. After giving effect to the offsets against the First Call Note referenced in Sections 4,
5(d), and 6, (which for purposes of calculating interest accrued on such First Call Note will be
deemed to have occurred on and as of the Closing Date) the remaining principal balance of the First
Call Note is $1,097,566.90 and the aggregate principal plus accrued interest on the First Call Note
as of November 15, 2007 is $1,145,040.24.
8. The principal balance of the Second Call Note is $900,000 and the aggregate principal
balance plus accrued interest on the Second Call Note from the Closing Date through November 15,
2007 is $938,394.25.
9. Call and Pure Earth agree that the aggregate outstanding balance (principal and accrued
interest) of the First Call Note as of November 15, 2007 (net of the offsets set forth in this
agreement) plus the aggregate outstanding balance (principal and accrued interest) of the Second
Call Note as of November 15, 2007 is $2,083,434.40, of which $1,083,434.40 will be converted into
333,365 shares of unregistered commons stock of PEI (the “PEI Conversion Shares”) issued in
the name of Call, and the $1,000,000 balance of which will be memorialized by a promissory note
dated as of November 15, 2007, in the form of Exhibit C attached hereto (the
“Replacement Call Note”). Within fifteen (15 business days after the execution and
delivery of this agreement (but effective as of the date of this agreement), Pure Earth will
deliver the Conversion Shares and the Replacement Call Note to Call and Call will deliver the First
Call Note and the Second Call Note to Pure Earth, marked “SUPERSEDED AND CANCELLED”. The
Conversion Shares will be legended and restricted in a manner similar to the restrictions
applicable to the Initial PEI Stock and may not be sold or otherwise transferred during the
one-year period following the issuance thereof.
10. Intentionally left blank
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December 21, 2007
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11. Section 3.1(b) of the Stock Purchase Agreement is hereby amended and restated in its
entirety as follows:
(b) Contingent Post-Closing Stock Consideration. If, prior to May 29,
2009, Buyer shall obtain final unappealable permits from all applicable regulatory
agencies, for the installation of an indirect dryer and BDAT system (having a
minimum capacity of 125 tons per day) at the Real Property located at 0000 Xxxxxxxxx
Xxxxx, Xxxxxxxx, Xxx Xxxxxx, then within ninety (90) days thereafter, Buyer shall
issue to Seller (other than Xxxxx) an additional Four Hundred Thousand (400,000)
shares of unregistered common stock of PEI (the “Post Closing PEI Stock”).
Seller agrees not to sell, offer, transfer, agree to transfer, assign, pledge,
hypothecate or otherwise dispose of, directly or indirectly, any Post Closing PEI
Stock for a period of one (1) year after the date of such issuance to Seller. The
date on which all conditions precedent to the issuance of the Post-Closing PEI Stock
have been met, shall be referred to herein as the “Vesting Date” with
respect thereto.
12. (a) Notwithstanding the provisions of the Stock Purchase Agreement, as an inducement to
Call in connection with the conversion of a portion of the Shareholder Loan into the PEI Conversion
Shares, Pure Earth agrees to evaluate the status of certain specific accrued liabilities set forth
on the Closing Date Balance Sheet at a future date and to credit back to Call and Mouser the value
of any improvement in such accrued liabilities as of such future date, with such credit taking the
form of shares of unregistered common stock of Pure Earth. Specifically, the following accrued
liabilities are set forth on the Closing Date Balance Sheet:
NJDEP Fine |
$ | 624,300 | ||
Accrued Sales and Use Tax Liability |
$ | 503,000 | ||
Accounts Payable as per Exhibit D attached hereto (“Specified Accounts
Payable”) |
$ | 294,000 |
To the extent that the Accrued Sales and Use Tax Liability, as the same is reflected on the
Companies’ balance sheet as of June 30, 2008, is lower than the amount for such item set forth
above, the difference will be credited back to Call and Mouser (herein referred to as a
“Clawback”) by delivery to Call and Mouser on October 30, 2008 (the “Reconciliation
Date”), of the number of shares of unregistered Pure Earth common stock equal to the amount of
such difference, divided by the Assumed Value. To the extent that the NJDEP Fine and the Specified
Accounts Payable, as the same are reflected on the Companies’ balance sheet as of September 30,
2008, are lower (in the aggregate) than the aggregate amount for such items set forth above, the
difference will be credited back to Call (herein referred to as a “Clawback”) by delivery
to Call on the Reconciliation Date, of the number of shares of unregistered PEI common stock equal
to the amount of such difference, divided by the Assumed Value.
(b) Notwithstanding the provisions of the Stock Purchase Agreement, as an inducement to Call
in connection with the conversion of a portion of the Shareholder Loan into the PEI Conversion
Shares, Pure Earth agrees to share with Call 50% of the net insurance recovery finally collected in
connection with MART’s business interruption insurance claim, which was filed after the Closing
Date as a result of the Bag House fire. Upon final receipt of such insurance proceeds by MART,
Pure Earth will credit Call with the number of additional shares of unregistered common stock of
Pure Earth equal to one half of such insurance recovery, divided by the Assumed Value.
13. Notwithstanding the provisions of the Stock Purchase Agreement, in connection with the
final determination and settlement of the A/R Shortfall, Pure Earth agrees that on or as of March
31, 2008, it will evaluate the status of the specific accounts receivable that are the subject of
and comprise the A/R Shortfall and will credit back to Seller (including Xxxxx) (herein referred to
as a “Clawback”) the amount of such specific accounts receivable that have been collected
as of such date (the “Reconciled Collections”), with such credit taking the form of and by
delivery to Seller on the Reconciliation Date, of shares of unregistered common stock of Pure Earth
in such number as equals the amount of the Reconciled Collections, divided by the Assumed Value.
14. Pure Earth will within fifteen (15) business days hereafter, issue 332,572 shares of
unregistered Pure Earth common stock (the “Purchase Price Adjustment Settlement Shares”) to
Seller (including Xxxxx) as part of
the final settlement of the determination of the final Closing Date Balance Sheet and the Net Asset
Value Shortfall. Seller agrees not to sell, offer, transfer, agree to transfer, assign, pledge,
hypothecate or otherwise dispose of, directly or indirectly, any Purchase Price Adjustment
Settlement Shares for a period of one (1) year after the date of such issuance to Seller. The
parties agree that in lieu of issuing the Purchase Price Adjustment Settlement Shares, they shall
permit the Sellers to retain an equivalent number of the Initial PEI Shares.
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December 21, 2007
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15. Section 8.9(c) of the Stock Purchase Agreement is hereby amended and restated in its
entirety as follows:
(c) Attendance at Directors Meetings. Buyer hereby agrees that
following the Closing, during the term of the Employment Agreement with Call, and
provided that Call is not in default thereunder, Call may notify the Buyer in
writing that he desires to thereafter be permitted to attend Buyer’s regularly
scheduled Board of Directors meetings (“Notice of Attendance”). Such Notice
of Attendance shall be addressed to the Chief Executive Officer of the Company and
delivered in the manner set forth in Section 14.3 herein. Call acknowledges that
upon providing such Notice of Attendance to Buyer, Buyer will thereupon and
thereafter provide Call with notice of any such regularly scheduled Board of
Directors meetings and permit Call to attend such meetings. Call acknowledges that
if he provides Notice of Attendance to Buyer, Buyer will thereupon and thereafter
treat Call as an “insider” and Call will thereafter be subject to all of the Buyer’s
rules and limitations relating to the ownership, purchase and sale of Buyer’s
securities, including without limitation the imposition of blackout periods,
lockups, and applicable Securities and Exchange Commission rules and regulations.
If Call gives such Notice of Attendance his attendant rights to attend Buyer’s Board
of Directors meetings, will nevertheless be coterminous with his Employment
Agreement.
The parties hereto recognize and agree that, consistent with the terms and conditions of the
Stock Purchase Agreement, any determinations herein and as may be set forth in the Closing Date
Balance Sheet, the Closing Schedule, are made without prejudice to Pure Earth’s rights under the
Stock Purchase Agreement to indemnification from and against Adverse Consequences, as contemplated
by Section 11.1(a) therein, including without limitation Adverse Consequences relating to matters
addressed herein or in the Closing Date Balance Sheet, or the Closing Schedule, as to which
additional or conflicting information is hereafter obtained or otherwise becomes known to Pure
Earth.
The parties acknowledge and agree that the transactions contemplated herein are effective as
of the date hereof (except with respect to those matters that are intended to be effective as of
November 15, 20070.
Please indicate your agreement and acceptance of all of the foregoing by executing this letter
in the space provided below and returning it to the undersigned.
| Very truly yours, |
||||
| /s/ Xxxx Xxxxxxxxx | ||||
| PURE EARTH, INC. | ||||
ACCEPTED AND AGREED TO:
Xxxxxxx Call, on behalf of himself and all
Sellers under the Stock Purchase Agreement
Sellers under the Stock Purchase Agreement
By:
|
/s/ Xxxxxxx X. Call
|
4
Exhibit A
Closing Date Balance Sheet
Closing Date Balance Sheet
[Omitted]
Exhibit B
Closing Schedule
Closing Schedule
[Omitted.]
EXHIBIT C
Form of Replacement Call Note
SUBORDINATED PROMISSORY NOTE
| $1,000,000.00 | November 15, 2007 |
For value received and intending to be legally bound, Xxxxx Ecology Oil Salvage, Inc., a New
Jersey corporation, MidAtlantic Recycling Technologies, Inc., a Delaware corporation, and Rezultz,
Incorporated, a New Jersey corporation (collectively, “Maker”), hereby jointly and severally
promise to pay, to the order of Xxxxxxx X. Call (“Payee”), the principal sum of One Million Dollars
($1,000,000) lawful money of the United States of America, in accordance with the terms and
conditions set forth below, together with interest from and after the date hereof on the
outstanding principal balance at a rate per annum of six and seventy seven one hundredths percent
(6.77%) (the “Interest Rate”).
Interest hereunder shall be computed on the basis of actual days elapsed over the period of a
360-day year.
From the date hereof until December 31, 2009, interest shall accrue hereunder at the Interest
Rate and shall accrete to and thereby increase and become a part of the principal amount of this
Note (hereinafter the “Accreted Principal Balance”).
Commencing on January 1, 2010, the Accreted Principal Balance of this Note, shall accrue
interest at the Interest Rate and such interest on the Accreted Principal Balance, will be paid
monthly, in arrears until all obligations under this Note have been fully paid, satisfied and
discharged.
The Accreted Principal Balance of this Note shall be paid as follows: (i) Three Hundred Thirty
Three Thousand Dollars ($333,000) shall be due and payable on December 31, 2009, and (ii) the
remaining Accreted Principal Balance shall be due and payable on December 31, 2010, together with
any accrued unpaid interest as of such date.
Maker shall have the right to prepay this Note in whole or in part at any time without premium
or penalty.
Each of the following events (each, an “Event of Default”) shall constitute an event of
default hereunder: (a) Maker shall fail to perform any of the terms of this Note; or (b) the
filing of a petition in bankruptcy by or against Maker which is not discharged within sixty (60)
days.
Upon the occurrence of an Event of Default, the entire unpaid principal balance of this Note
shall, at the option of Payee, become due and payable immediately and payment of the same may be
enforced and recovered in whole or in part.
Maker hereby waives presentment for payment, demand, notice of nonpayment, notice of protest
and protest of this Note, and all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note.
Notwithstanding anything to the contrary set forth herein, Payee hereby agrees that all
payments on account of the principal and interest indebtedness under this Note (i) are subject to
the right of setoff by Maker under that certain Stock Purchase Agreement entered into among Maker
and Payee on February 13, 2007, as amended, and (ii) shall be subordinate and subject in right of
payment and priority to the Senior Indebtedness. As used herein, “Senior Indebtedness” shall mean
any indebtedness, liabilities and other obligations of Pure Earth, Inc., Maker and their respective
subsidiaries (whether as primary obligor or as guarantor) to any person with respect to any working
capital, revolving credit or other line of credit facility, any term loan facility, or any other
extension of credit by a bank, insurance company or other financial institution engaged in the
business of lending money (collectively, “Financial Institutions”). The terms “indebtedness,”
“liabilities” and “obligations” are used herein in their most comprehensive sense and include any
and all advances, debts, obligations and liabilities, now existing or hereafter arising, whether
voluntary or involuntary and whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined. In furtherance of the foregoing, Payee hereby agrees to
execute and deliver such subordination agreements as may be requested by Maker or its Financial
Institutions from time to time.
If any provision hereof is found by a court of competent jurisdiction to be prohibited or
unenforceable, it shall be ineffective only to the extent of such prohibition or unenforceability,
and such prohibition or
unenforceability shall not invalidate the balance of such provision to the extent it is not
prohibited or unenforceable, nor invalidate the other provisions hereof.
This Note may not be assigned or pledged by either Maker or Payee.
This Note shall be construed and enforced in accordance with and governed by the laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts of laws.
IN WITNESS WHEREOF, Maker has duly executed this Note as of the day and year first above
written.
| MIDATLANTIC RECYCLING TECHNOLOGIES, INC. | ||||
By:
|
|
|||
| XXXXX ECOLOGY OIL SALVAGE, INC. | ||||
By: |
||||
| Xxxxx Xxxxxxxxxx, Treasurer | ||||
| REZULTZ, INCORPORATED | ||||
By: |
||||
| Xxxxx Xxxxxxxxxx, Treasurer | ||||
Title: |
||||
| AGREED AND ACCEPTED: | ||||
| Xxxxxxx X. Call | ||||
Exhibit D
Specified Accounts Payable
Specified Accounts Payable
[Omitted.]
