EX-10.40 27 d86156ex10-40.txt AGREEMENT AND PLAN OF REORGANIZATION 12/30/2000 1 EXHIBIT 10.40 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION ("Agreement"), dated as of December 30, 2000 between EarthCare Company, a Delaware corporation ("EarthCare"), and James Waters, an individual, and Solid Waste Ventures, Inc., a Arkansas corporation, ("SWV") (Mr. Waters and SWV are hereinafter referred to jointly as ("Shareholders")), being the owners of record of certain of the issued and outstanding stock of EarthCare Resource Management of Florida, Inc., a Florida corporation, f/k/a/ Liberty Waste Management, Inc. ("ERC"). WHEREAS, EarthCare previously acquired 356,000 shares of the then issued and outstanding common stock of ERC, and desires to increase its ownership of ERC to 100% of the total of the issued outstanding shares; and, the Shareholders wish to transfer shares of the issued and outstanding stock of ERC described in Section 1.1 below in a transaction intended to qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended; and, NOW, THEREFORE, EarthCare and the Shareholders adopt this plan of reorganization and agree as follows: SECTION 1. EXCHANGE OF STOCK 1.2 Number of Shares. The Shareholders agree to transfer to EarthCare at the Closing an aggregate of 520,100 shares, and any and all right, title and interest therein, of common stock of ERC, $.01 par value per share (the "Shares"), of the issued and outstanding shares of ERC as of the date hereof, in exchange for an aggregate of 520,100 shares of registered voting common stock of EarthCare, $.0001 par value per share, to be issued at the Closing to the Shareholders by way of unregistered certificates as described more fully in Sections 1.2 and 3.14, below. The numbers of shares to be transferred by each of the selling Shareholders is set forth in Schedule 1.1 hereto. 1.2 Delivery of Certificates by Shareholders. The transfer of Shares by the Shareholders shall be effected by the delivery to EarthCare at the Closing of the certificate(s) representing the Shares, endorsed in blank or accompanied by stock powers executed in blank, with signature guaranteed and with all necessary transfer tax and other revenue stamps, acquired at the Shareholders' expense, affixed. 1 2 1.3 Further Assurances. At the Closing, and from time to time thereafter, the Shareholders shall execute such additional instruments and take such other action as EarthCare may request in order more effectively to sell, transfer and assign the Shares to EarthCare and to confirm EarthCare's title thereto. 1.4 Changes in EarthCare's Capitalization. If between the date of this Agreement and the Closing, the outstanding shares of EarthCare common stock are, without the receipt of new consideration by EarthCare, increased, decreased, changed into or exchanged for a different number or kind of shares or securities of EarthCare through reorganization, reclassification, stock dividend, stock split, reverse stock split or similar change in EarthCare's capitalization, EarthCare will issue and deliver to the Shareholders in addition to or in lieu of the EarthCare shares specified in Section 1.1, voting stock of EarthCare in equitably adjusted amounts. In the event of any such change in EarthCare's capitalization, all references to EarthCare shares herein shall refer to the number of EarthCare shares as thus adjusted. SECTION 2. CLOSING The Closing contemplated by Section 1.1 shall be held at the principal offices of EarthCare, 14901 Quorum Drive, Suite 200, Dallas, TX 75240 on December 8, 2000, unless another place or time is agreed upon in writing by the parties. SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SHAREHOLDERS The Shareholders jointly and severally represent and warrant to, and covenant with, EarthCare as follows: 3.1 Corporate Status. ERC is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida and is licensed or qualified as a foreign corporation in all states in which the nature of its business or the character or ownership of its properties makes such licensing or qualification necessary. 3.2 Capitalization. The authorized capital stock of ERC consists of 1,000,000 shares of capital stock, having a par value of $.01 per share, of which 876,100 shares are issued and outstanding, all fully paid and nonassessable. Seventy thousand (70,000) additional shares will vest to Mr. Water's benefit in two equal installments, effective July 7, 2001 and July 7, 2002, which shares and all rights and title therein and thereto are assigned to EarthCare hereby; pursuant to Section 3.10, below, the parties agree to cause ERC to effect full vesting of such shares prior to the Closing. 2 3 3.3 Financial Statements. To Shareholders' knowledge, the financial statements of ERC furnished to EarthCare, consisting of balance sheets as of December 31, 1998 and December 31, 1999 and related statements of income for the periods then ended, and the balance sheet as of September 30, 2000 ("ERC's Latest Balance Sheet") and the related statements of income, are correct and fairly present the financial condition of ERC as of the dates and for the periods involved, and such statements were prepared in accordance with generally accepted accounting principles consistently applied. 3.4 Undisclosed Liabilities. To Shareholders' knowledge: ERC has no liabilities of any nature except to the extent reflected or reserved against in ERC's Latest Balance Sheet, whether accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities and interest due or to become due; and, ERC's accounts receivable are collectible in accordance with the terms of such accounts, except to the extent of the reserve therefor in ERC's Latest Balance Sheet. 3.5 Interim Changes. To Shareholders' knowledge, between September 30, 2000 and the date of this Agreement, there have not been (1) any changes in ERC's financial condition, assets, liabilities or business which, in the aggregate, have been or could be materially adverse; (2) any damage, destruction or loss of or to ERC's property, whether or not covered by insurance; (3) any declaration or payment of any dividend or other distribution in respect of ERC capital stock, or any direct or indirect redemption, purchase or other acquisition of any such stock; or (4) any increase paid or agreed to in the compensation, retirement benefits or other commitments to employees. 3.6 Title to Property. To Shareholders' knowledge, ERC has good and marketable title to all properties and assets, real and personal, reflected on ERC's Latest Balance Sheet, except as since sold or otherwise disposed of in the ordinary course of business, and ERC's properties and assets are subject to no mortgage, pledge, lien or encumbrance, except for liens shown thereon, with respect to which no default exists. 3.7 Litigation. There is no litigation or proceeding pending, or to Shareholders' knowledge threatened, against or relating to ERC, its properties or business, except as set forth in a list certified by the President of ERC and delivered to EarthCare. 3.8 Access to Records, etc.. From the date of this Agreement to the Closing, the Shareholders will cause ERC (1) to give to EarthCare and its representatives full access during normal business hours to all of its offices, books, records, contracts and other corporate documents and properties so that EarthCare may inspect and audit them; and, (2) to furnish such information concerning ERC's properties and affairs as EarthCare may reasonably request. 3 4 3.9 Confidentiality. Until the Closing (and permanently if there is no Closing), the Shareholders and their representatives will keep confidential any information which they obtains from EarthCare concerning its properties, assets and business. If the transactions contemplated by this Agreement are not consummated by January 1, 2001, the Shareholders will return to EarthCare all written matter with respect to EarthCare obtained by them in connection with the negotiation or consummation of this Agreement. 3.10 Title to Shares. The Shareholders are the owners, free and clear of any liens and encumbrances, of the Shares which the Shareholders has contracted hereby to exchange. To the extent that any of the Shares have not vested as of the date hereof, the Shareholders and EarthCare will undertake all actions and steps required to effect such vesting prior to the Closing. 3.11 Tax Matters. To Shareholders' knowledge: ERC 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 ERC's employees, federal and state income tax liabilities, corporate franchise taxes, sales, use, excise and ad valorem taxes, due, payable or accrued by ERC on or before the Closing Date have or will be paid. ERC has filed all reports required to be filed by it with all such taxing authorities. 3.12 Environmental Matters. To Shareholders' knowledge: Except as disclosed to EarthCare in writing, there are no claims, actions, suits, proceedings or investigations relating to any Environmental Law (as hereinafter defined) pending or threatened against or affecting ERC. Except as disclosed to EarthCare in writing: (i) no release of any hazardous substance, medical waste, toxic waste or regulated substance has occurred or is occurring as a result of the business of ERC; (ii) no hazardous substance, medical waste, toxic waste or regulated substance is currently present at, or has been previously generated, stored, treated or disposed of at any landfill by ERC or through the conduct of the business of ERC except deminimis amounts mixed with household waste; (iii) no underground or partially underground storage tank has been or is currently located at any facility of ERC; (iv) the business, activities and processes heretofore and/or presently conducted by ERC complied and presently comply in all material respects with all applicable Environmental Laws; (v) no facility of ERC is listed on any list, registry or other compilation of sites that require, or potentially require, removal, remedial action or any 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 regulated substance; (vi) ERC has not received any notice that ERC is liable or responsible, or potentially 4 5 liable or responsible, for any costs of any removal, remedial action or release of any hazardous substance, medical waste, toxic waste or regulated substance; and (vii) there is no pending litigation or administrative proceeding ( and Shareholders do not have reason to know of any potential or threatened litigation or administrative proceeding) in which it is asserted that ERC has violated or is not in compliance with any material Environmental Law. For the purposes of this Agreement, "Environmental Law" means any law, statute or act of the United States of America, the State of Florida, or any political subdivision thereof, that relates 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. ERC has not received any notice to the effect that the landfills and other disposal sites to which waste material transported by ERC has been delivered are not properly licensed pursuant to applicable Environmental Laws to receive the material disposed of therein. 3.13 No Brokers or Agents Fees. No agent, broker, finder, representative or other person or entity acting pursuant to the authority of ERC or Shareholders will be entitled to any commission or finders fee in connection with the origination, negotiation, execution or performance of the transactions contemplated under this Agreement. 3.14 Investment Intent. The Shareholders are acquiring the EarthCare common stock described herein for their own respective accounts (and not for the account of others) for investment and not with a view to the distribution thereof. The Shareholders will not sell or otherwise dispose of such shares without registration under the Securities Act of 1933, as amended (the "Securities Act"), or an exemption therefrom, and the certificate or certificates representing such shares may contain a legend to the foregoing effect. The Shareholders have had access to sufficient financial and other information about EarthCare, including (without limitation) copies of periodic reports filed with the Securities and Exchange Commission. The Shareholders understand that they may not sell or otherwise dispose of such shares in the absence of either a registration statement under the Securities Act or an exemption from the registration provisions of the Securities Act. Nothing contained herein shall be deemed to preclude the Shareholders from disposing the shares acquired under this Agreement in accordance with applicable federal and state securities laws. 5 6 SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EARTHCARE EarthCare represents and warrants to, and covenants with, the Shareholders as follows: 4.1 Corporate Status. EarthCare is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is licensed or qualified as a foreign corporation in all states in which the nature of its business or the character or ownership of its properties makes such licensing or qualification necessary. 4.2 Authority to Contract. The execution, delivery and performance of this Agreement by EarthCare has been duly approved by its Board of Directors, and no further corporate action is necessary on the part of EarthCare to consummate the transactions contemplated by this Agreement, assuming due execution of this Agreement by the parties hereto. 4.3 No Brokers or Agents Fees. No agent, broker, finder, representative or other person or entity acting pursuant to the authority of EarthCare will be entitled to any commission or finders fee in connection with the origination, negotiation, execution or performance of the transactions contemplated under this Agreement. 4.4 Accuracy of Information Furnished by EarthCare. No representation, statement or information made or furnished by EarthCare to ERC in this Agreement, or in connection with the transactions contemplated hereby including, without limitation copies of EarthCare'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. 4.5 Reports. EarthCare has filed, and prior to the closing of the transactions contemplated hereby shall have filed, all required Securities and Exchange Commission filings, all of which have complied, or at the date of filing shall comply, subject to any required post filing amendments, in all material respects with all applicable requirements of the Securities and Exchange Act. As of their respective dates of filing, and subject to any such post filing amendments, none of such filings contained, or shall contain, any untrue statement of a material fact or omitted or shall omit a material fact, required to be disclosed therein. The shares of EarthCare to be issued to the Shareholder hereunder are, or will be, registered pursuant to an effective Form S-3 Registration Statement 6 7 SECTION 5. CONDUCT OF ERC PENDING THE CLOSING From and after the execution and delivery of this Agreement except in the ordinary course of business and until the Closing Date, except as otherwise provided by the prior written consent or approval of EarthCare: 5.1 Conduct of Business. The Shareholders will cause ERC to conduct its business and operations in the manner in which the same has heretofore been conducted and the Shareholders will use their best efforts to cause ERC to: (i) preserve ERC's current business organization intact; (ii) keep available to EarthCare the services of ERC's current employees and ERC's agents and distributors and (iii) preserve ERC's current relationship with customers, suppliers and others having business dealings with ERC. 5.2 Maintenance of Property. The Shareholders will cause ERC 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. 5.3 Extraordinary Actions. The Shareholders will take action to insure that ERC will not: (i) pay any bonus or increase the rate of compensation of any of ERC'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 ERC's hourly-rated employees; (iii) sell or transfer any of ERC'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. 5.4 Capitalization, etc. The Shareholders shall not permit ERC 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 ERC common stock, or to declare or pay any dividend or other distribution. 5.5 Articles of Incorporation, Bylaws. The Shareholders will take action to insure that ERC will not amend its Articles of Incorporation or Bylaws. 7 8 SECTION 6. CONDITIONS PRECEDENT - EARTHCARE All obligations of EarthCare under this Agreement are subject, at EarthCare's option, to the fulfillment, before or at the Closing, of each of the following conditions: 6.1 Representations and Warranties True at Closing. The Shareholders's representations and warranties contained in this Agreement shall be deemed to have been made again at and as of the Closing and shall then be true in all material respects. 6.2 Due Performance. The Shareholders shall have performed and complied with all the terms and conditions required by this Agreement to be performed or complied with by him before the Closing. 6.3 Books and Records. The Shareholders shall have caused ERC to make available to EarthCare all books and records of ERC, including minute books and stock transfer records. 6.4 Revocation of Prior Authorizations. The Shareholders shall have delivered to EarthCare certified copies of resolutions of ERC's Board of Directors revoking as of the Closing all prior authorizations, powers of attorney, designations and appointments relating to the signing of checks, borrowing of funds, access to corporate safe-deposit boxes and other similar matters, to the extent requested by EarthCare. 6.5 Resignations. There shall have been delivered to EarthCare the signed resignations of such directors of ERC as EarthCare shall request, dated as of the Closing. SECTION 7. CONDITIONS PRECEDENT - THE SHAREHOLDERS All obligations of Shareholders under this Agreement are subject, at Shareholders' option, to the fulfillment, before or at the Closing, of each of the following conditions: 7.1 Representations and Warranties True at Closing. EarthCare's representations and warranties contained in this Agreement shall be deemed to have been made again at and as of the Closing and shall then be true in all material respects. 7.2 Due Performance. EarthCare shall have performed and complied with all the terms and conditions required by this Agreement to be performed or complied with by it before the Closing. 8 9 SECTION 8. INDEMNIFICATION 8.1 Indemnification of EarthCare. The Shareholders agree to indemnify EarthCare against any loss, damage or expense (including reasonable attorney's fees) suffered by EarthCare from (1) any breach by the Shareholders of this Agreement; or (2) any inaccuracy in or breach of any of the representations, warranties or covenants by the Shareholders herein. 8.2 Indemnification of Shareholders. EarthCare agrees to indemnify the Shareholders against any loss, damage or expense (including reasonable attorney's fees) suffered by any of the Shareholders from (1) any breach by EarthCare of this Agreement; or (2) any inaccuracy in or breach of any of EarthCare's representations, warranties or covenants herein. 8.3 Defense of Claims. Upon obtaining knowledge thereof, the indemnified party shall promptly notify the indemnifying party of any claim which has given or could give rise to a right of indemnification under this Agreement. If the right of indemnification relates to a claim asserted by a third party against the indemnified party, the indemnifying party shall have the right to employ counsel acceptable to the indemnified party to cooperate in the defense of any such claim. So long as the indemnifying party is defending any such claim in good faith, the indemnified party will not settle such claim. If the indemnifying party does not elect to defend any such claim, the indemnified party shall have no obligation to do so. SECTION 9. TERMINATION This Agreement may be terminated (1) by mutual consent in writing; (2) by either the Shareholders or EarthCare if there has been a material misrepresentation or material breach of any warranty or covenant by the other party; or, (3) by either the Shareholders or EarthCare if the Closing shall not have taken place, unless adjourned to a later date by mutual consent in writing, by July 30, 2001. SECTION 10. GENERAL PROVISIONS 10.1 Survival of Representations and Warranties Indemnifications. The representations, warranties, indemnifications, 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 3 years with the exception of (i) representations and warranties concerning Section 3.12 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 environmental law, rule or regulation, and (ii) the representations and warranties concerning Section 3.11, Tax 9 10 Matters, which will survive for the full period of any applicable statutes of limitations. 10.2 Waiver or Extension of Conditions. The Shareholders or EarthCare may, but need not, 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 Shareholders and EarthCare. Any such extension or waiver shall not act as a waiver or an extension of any other provisions of this Agreement. 10.3 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, substitute; or alternatively by hand delivery or complete fax transmission. Notices are effective upon receipt. (i) If to EarthCare: Attention: President EarthCare Company 14901 Quorum Drive Suite 200 Dallas, TX 75240 Copy to: Peter H. Trembath General Counsel 14901 Quorum Drive Suite 200 Dallas TX 75240 (ii) If to Shareholders: -------------- -------------- -------------- -------------- Copy to: -------------- -------------- -------------- 10 11 10.4 Governing Law. This Agreement shall be governed by the laws of the State of Texas. 10.5 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 10.6 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. 10.7 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 one and the same instrument. 10.8 Entire Agreement; Modification. This Agreement (including the schedules 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. 11 12 IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. SHAREHOLDERS: Solid Waste Ventures,Inc. By: ---------------------------- Its: ------------------------------- James Waters EARTHCARE EarthCare Company By: ---------------------------- William W. Solomon Jr. Vice President and Chief Financial Officer 12 13 SCHEDULE 1.1 The Shareholders will respectively sell and transfer at the Closing the numbers of Shares set forth opposite their respective names:
ShareHolder Shares: ----------- ------- Solid Waste Ventures, Inc. 450,100 James Waters 70,000
As noted in Section 3.2 of the Agreement, the Shares to be sold and transferred by Mr. Waters are scheduled to vest in two equal installments on July 7, 2001 and July 7, 2002. The parties agree to take all necessary steps and actions to cause ERC to effect such vesting prior to the Closing rather than according to the existing schedule. 13