STOCK PURCHASE AGREEMENT ISLAND ENVIRONMENTAL SERVICES, INC.
EXHIBIT
10.29
STOCK
PURCHASE
AGREEMENT
ISLAND
ENVIRONMENTAL SERVICES, INC.
1
LIST
OF EXHIBITS AND SCHEDULES
EXHIBITS
|
Exhibit
A:
|
Promissory
Note in favor of SELLERS in the Amount of
$1,062,500
|
|
Exhibit
A-1
|
Promissory
Note in favor of NCT in the Amount of
$187,500
|
|
Exhibit
B:
|
Corporate
Guarantee of GEM Nevada for $1,062,500
Note
|
|
Exhibit
B-1
|
Corporate
Guarantee of GEM Nevada for $187,500
Note
|
|
Exhibit
C:
|
Form
of Contingent Promissory Notes
|
|
Exhibit
D:
|
Form
of Corporate Guarantee of GEM Nevada for Contingent
Notes
|
|
Exhibit
E:
|
Employment
Agreement
|
|
Exhibit
F:
|
Agreement
Not to Compete
|
|
Exhibit
G:
|
Premises
Lease
|
SCHEDULES*
|
Schedule
3:
|
EBITDA
Calculation Methodology
|
|
Schedule
3-A
|
Examples
of Calculation of Accelerated Note Payments and Contingent
Earn-Out
|
|
Schedule
16(g):
|
List
of Policies of Liability and Other Forms of Insurance Held by
ISLAND
|
|
Schedule
16(h):
|
Material
Contracts
|
|
Schedule
16(i)
|
List
of Pending Actions
|
|
Schedule
15(l)
|
Leased
Assets
|
|
Schedule
16(q)
|
Certain
Financial Information
|
|
Schedule
16(r):
|
Financial
Statements
|
|
Schedule
16(y):
|
List
of Permits, Licenses, Franchises, and Other Authorizations Held by Island
Environmental Services, Inc.
|
_____________________
THIS
STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into effective
as of August 31, 2008, by and among ISLAND ENVIRONMENTAL SERVICES, INC., a
California corporation (“ISLAND”), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (“▇▇▇▇▇”), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(“▇▇▇▇▇”), each in their individual capacities, (▇▇▇▇▇ and ▇▇▇▇▇ are sometimes
collectively referred to herein as “SELLERS”), NCF CORPORATION, a Florida
not-for-profit corporation, not individually but solely in its capacity as
Trustee of NCF CHARITABLE TRUST, a Florida wholly charitable trust and tax
exempt organization classified as a public charity (“NCT”) and GENERAL
ENVIRONMENTAL MANAGEMENT, INC. a Delaware corporation (“GEM” or
“BUYER”).
Introduction
▇▇▇▇▇,
▇▇▇▇▇ and NCT collectively own Ten Thousand (10,000) shares (the “Shares”) of
the common stock of ISLAND, which Shares represent all of ISLAND’s issued and
outstanding stock. GEM desires to acquire all of the Shares on the
terms and conditions set forth herein. ISLAND owns and operates
a waste removal business at leased premises located at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Premises”).
Terms
NOW,
THEREFORE, in consideration of the covenants and conditions contained herein,
the parties hereto agree as follows:
|
1.
|
Purchase of
the
Shares
|
At the
Closing, as defined in Section 9 herein, SELLERS and NCT shall deliver to
BUYER their respective stock certificates issued by ISLAND collectively
representing all of the Shares. SELLERS and NCT shall have duly executed either
the Stock Power of Assignment on the back of said certificates or an Assignment
Separate from Certificate in a form acceptable to BUYER for the purposes of
causing the Shares to be transferred to BUYER.
|
2.
|
Purchase
Price and
Purchase Price Adjustment.
|
In
consideration for the sale and delivery of the Shares, BUYER hereby agrees to
pay a total purchase price of $3,500,000.00 (the "Purchase Price") to SELLERS
and NCT, payable as follows:
|
|
(a)
|
BUYER
shall pay SELLERS the sum of $1,912,500.00 at Closing by check or wire
transfer of readily available
funds.
|
|
|
(b)
|
BUYER
shall pay NCT the sum of $337,500.00 at Closing by check or wire transfer
of readily available funds.
|
3
|
|
(c)
|
The
balance of the Purchase Price shall be paid pursuant to the terms of two
(2) Promissory Notes of BUYER (each, a “Note” and collectively, the
“Notes”) the first of which shall be payable to SELLERS in the amount of
$1,062,500.00 and the second of which shall be payable to NCT in the
amount of $187,500.00. The Notes shall bear interest at eight
percent (8%) with interest only payments payable quarterly and the entire
balance of interest and principal shall be all due and payable thirty six
(36) months after the Closing. The Notes shall have a Due on
Sale clause relative to any sale of all or substantially all of the assets
or stock of BUYER or BUYER’s parent, GENERAL ENVIRONMENTAL MANAGEMENT,
INC., a Nevada corporation (“GEM NEVADA”), or BUYER’s sale of ISLAND stock
to an entity in which BUYER or its affiliates do not have a controlling
interest. The Notes shall provide that there shall be a partial
principal payment at the end of the Contingent Period (as defined in
Section 3 below) of up to (i) $637,500 with respect to the Note in favor
of the SELLERS and (ii) $112,500 with respect to the Note in favor of
NCT. The Notes shall be guaranteed by GEM
NEVADA. The Note in favor of SELLERS shall be in the form of
Exhibit A attached hereto and GEM NEVADA’s Guarantee of such Note shall be
in the form of Exhibit B attached hereto. The Note in favor of
NCT shall be in the form of Exhibit A-1 attached hereto and GEM NEVADA’s
Guarantee of such Note shall be in the form of Exhibit B-1 attached
hereto.
|
|
3.
|
Accelerated Note
Payment and Contingent
Earn-Out
|
As
additional consideration for the sale and delivery of the Shares (i) SELLERS shall be entitled
to an accelerated payment of up to $637,500 of the balance owing under the
$1,062,500 Note, (ii) NCT shall be entitled to an accelerated payment of up to
$112,500 of the balance owing under the $187,500 Note (each of the accelerated
payments described in the forgoing clauses (i) and (ii), an “Accelerated Note
Payment” and together, the “Accelerated Note Payments”) and (iii) SELLERS and
NCT shall be entitled to a contingent earn-out payment (the “Contingent
Earn-Out”) of up to an aggregate amount of $3,750,000 as set forth in this
Section 3. The Accelerated Note Payments and the Contingent Earn-Out
shall be payable to SELLERS and NCT upon the recapture by ISLAND of EBITDA (as
defined below) in excess of $1,100,000 during the twelve (12) month period
following the Closing (the “Contingent Period”). The amount of the
Contingent Earn-Out payable to SELLERS and NCT (if any) shall be calculated by
multiplying the EBITDA Recapture Percentage (as defined below) by $3,750,000 (it
being understood that in no event shall the EBITDA Recapture Percentage exceed
100%) and the amount of the Accelerated Note Payments payable to SELLERS and NCT
(if any) shall be calculated as follows:
4
|
|
(a)
|
If
the amount of the Contingent Earn-Out is zero then (i) the amount of the
Accelerated Note Payment payable to SELLERS shall be $637,500 and (ii) the
amount of the Accelerated Note Payment payable to NCT shall be
$112,500.
|
|
|
(b)
|
If
the amount of the Contingent Earn-Out is between zero and $3,750,000 then
(i) the amount of the Accelerated Note Payment payable to SELLERS shall be
equal to eight-five percent (85%) of the aggregate Accelerated Amount (as
defined below) and (ii) the amount of the Accelerated Note Payment payable
to NCT shall be equal to fifteen percent (15%) of the aggregate
Accelerated Amount.
|
|
|
(c)
|
If
the Contingent Earn-Out is $3,750,000 then the amount of the Accelerated
Note Payments shall be zero.
|
For
purposes of this Agreement, (A) the term “EBITDA” shall mean the dollar figure
calculated pursuant to the accounting methods, principals and assumptions
described in Schedule 3 to this Agreement (B) the term “EBITDA Recapture
Percentage” shall mean the quotient (expressed as a percent) calculated by
dividing (1) the result obtained by subtracting $1,100,000 from ISLAND’s EBITDA
for the Contingent Period by (2) $1,400,000 and (C) the term “Accelerated
Amount” shall mean the dollar amount calculated by (1) subtracting the EBITDA
Recapture Percentage from one hundred percent (100%) and (2) multiplying such
resulting percentage by $750,000. Several examples of the calculation
of the Accelerated Note Payments and the Contingent Earn-Out are set forth in
Schedule 3-A attached to this Agreement.
It is
understood and agreed that the recapture by ISLAND of EBITDA for purposes of the
Contingent Earn-Out will be calculated by utilizing existing ISLAND customer
accounts and lines of business. To further ensure an accurate and
fair determination of the Contingent Earn-Out (if any) payable to SELLERS, BUYER
covenants that during the Contingent Period it will operate ISLAND and its
business substantially as conducted by SELLERS prior to the Closing and will not
transfer any ISLAND customer accounts, assets, lines of business or other
material aspects of such business to any of its affiliates or use any of its
affiliates to perform services for any existing ISLAND customer which services
could otherwise have been performed by ISLAND under one or more of the lines of
business engaged in by ISLAND immediately prior to the Closing; provided,
however that the foregoing shall not prevent BUYER from permitting any of its
affiliates from using any ISLAND assets to provide services such affiliates’
customers where such assets are not otherwise being used by ISLAND.
5
No later
than ninety (90) days following the end of the Contingent Period, BUYER shall
deliver to SELLERS and NCT, in writing, BUYER’s calculation (based on the
procedures described in Schedule 3 hereto) of the amount (if any) of the
Accelerated Note Payments and the Contingent Earn-Out payable to SELLERS and
NCT. SELLERS (individually and on behalf of NCT) shall have the right
to review BUYER’s calculation, and the books and records of BUYER and its
affiliates related thereto, for a period of ninety (90) days following the
receipt of such calculation to verify and confirm the accuracy
thereof. If after such review SELLERS agree with BUYER’s calculation,
SELLERS shall promptly notify BUYER and NCT of such agreement and the
Accelerated Note Payments and the Contingent Earn-Out shall be paid as set forth
below in accordance with such calculation. If after such review
SELLERS disagree with BUYER’s calculation, SELLERS shall promptly provide BUYER
and NCT with a statement indicating the basis for such disagreement and SELLERS
and BUYER shall meet and confer in an effort to resolve such disagreement in
good faith.
In the
event BUYER and SELLERS are unable to resolve a disagreement with respect to the
Accelerated Note Payments and the Contingent Earn-Out within thirty (30) days
following the date of SELLERS’ objection, the amount of the Accelerated Note
Payments and the Contingent Earn-Out shall be determined an independent firm of
certified public accountants as is mutually agreeable to SELLERS and BUYER (the
“Contingent Earn-Out Referee”). If issues in dispute are submitted to
the Contingent Earn-Out Referee for resolution, (i) each party shall furnish to
the Contingent Earn-Out Referee such work papers and other documents and
information relating to the disputed issues as the Contingent Earn-Out Referee
may request and are available to that party, and shall be afforded the
opportunity to present to the Contingent Earn-Out Referee any material relating
to the determination and to discuss the determination with the Contingent
Earn-Out Referee; (ii) the determination by the Contingent Earn-Out Referee of
amount of the Accelerated Note Payments and the Contingent Earn-Out, as set
forth in a notice delivered to both parties by the Contingent Earn-Out Referee,
will be binding and conclusive on the parties; and (iii) the fees and expenses
of the Contingent Earn-Out Referee for such determination shall be paid by the
parties based upon the degree to which the Contingent Earn-Out Referee accepts
the respective positions of the parties. For example, if SELLERS
contend that the adjustment owed is $300, BUYER contends that the adjustment
owed is $100 and the Contingent Earn-Out Referee determines that the adjustment
owed is $150, then SELLERS shall pay 75% (300-150 / 300-100) of the Contingent
Earn-Out Referee’s fees and expenses and BUYER shall pay 25% (150-100 / 300-100)
of the Contingent Earn-Out Referee’s fees and expenses. Other than
the expense of retaining the Contingent Earn-Out Referee, each party shall bear
its own expenses in, as applicable, preparing and reviewing the calculation of
the amount of the Accelerated Note Payment and the Contingent
Earn-Out.
6
The
parties acknowledge and agree that, other than its right to receive any
Accelerated Note Payment or any portion of the Contingent Earn-Out as determined
in accordance with this Section 3, NCT shall have no rights or responsibilities
with respect to, and shall have no role in connection with, the determination of
the amount of any such Accelerated Note Payment or Contingent Earn-Out and that
SELLERS shall for all purposes represent NCT’s interests in such
determination. Any agreement or consent by SELLERS as to the final
amount of any Accelerated Note Payment or Contingent Earn-Out shall be final and
binding upon NCT and NCT shall have no responsibility for (and SELLERS shall
indemnify NCT from and against) any fees and expenses of the Contingent Earn-Out
Referee for which SELLERS may be deemed responsible pursuant to the preceding
paragraph.
Upon the
final determination of the amount of the Accelerated Note Payments and the
Contingent Earn-Out, BUYER shall make the following payments to SELLERS and
NCT:
|
|
(x)
|
BUYER
shall pay the Accelerated Note Payments to SELLERS and NCT by certified
funds check or wire transfer of immediately available funds and, following
SELLERS’ and NCT’s receipt of such payments, the outstanding principal
amount of the Notes described in Sections 2(b) and 2(c) above shall be
reduced by the amount of the applicable
payment;
|
|
|
(y)
|
BUYER
shall pay the Contingent Earn-Out to SELLERS and NCT as
follows:
|
|
|
(i)
|
A
cash payment (to be paid by certified funds check or wire transfer of
immediately available funds) in an aggregate amount equal to the result
obtained by subtracting (A) the aggregate amount of the Accelerated Note
Payments payable to SELLERS and NCT under clause (x) above from (B)
$750,000. The amount of any cash payment payable pursuant to
this Section 3(y)(i) shall be paid eighty-five percent (85%) to SELLERS
and fifteen percent (15%) to NCT.
|
|
|
(ii)
|
The
remainder pursuant to the terms of a promissory note issued by BUYER to
each of SELLERS and NCT (the each, a “Contingent Note” and, together, the
“Contingent Notes”) in substantially the form attached hereto as
Exhibit C. The aggregate amount payable to SELLERS and NCT
pursuant to the Contingent Notes shall be paid eighty-five percent (85%)
to SELLERS and fifteen percent (15%) to NCT. The Contingent
Notes (if any) shall include the following
terms:
|
|
|
(A)
|
Each
Contingent Note shall bear interest at eight percent (8%) per year with
interest only payments payable
quarterly;
|
7
|
|
(B)
|
The
entire balance of principal and interest under each Contingent Note shall
all be due and payable thirty six (36) months after the end of the
Contingent Period.
|
|
|
(C)
|
The
Contingent Notes shall each have a Due on Sale clause relative to any sale
of all or substantially all of the assets or stock of GEM NEVADA or BUYER
or the sale of ISLAND stock to an entity in which BUYER or its affiliates
do not possess a controlling
interest.
|
|
|
(D)
|
The
Contingent Notes shall each be guaranteed by GEM NEVADA and each such
Guarantee shall be in the form of Exhibit D attached
hereto.
|
|
4.
|
Cash/Vehicles to
SELLERS
|
Notwithstanding
any other provision of this Agreement, at or prior to the Closing, SELLERS shall
have the right to cause ISLAND to make a distribution to SELLERS of all cash in
ISLAND’s existing cash and broker accounts; provided that SELLERS shall cause
there to be a general ledger book balance of at least one hundred thousand
dollars ($100,000.00) in ISLAND’S general ledger cash accounts as of the Closing
to cover ISLAND’s normal required operating capital needs following the
Closing. In addition, at or prior to the Closing, SELLERS shall have
the right to cause ISLAND to transfer title and distribute to SELLERS the Lexus
vehicle and the vehicle commonly known as the “old Suburban” used by SELLERS in
the operation of ISLAND’s business.
|
5.
|
Liabilities
|
SELLERS
represent and warrant that ISLAND has no liabilities, obligations or commitments
related to its business, assets or properties except (a) liabilities described
in this Agreement or the schedules and exhibits hereto, (b) liabilities
reflected on the balance sheet contained in the Financial Statements (as defined
in Section 16(r) below), (c) liabilities incurred in the ordinary course of
business since the date of the balance sheet described in clause (b) of this
Section 5 and (d) liabilities incurred in connection with the transactions
contemplated by this Agreement. BUYER acknowledges and agrees that
ISLAND shall continue to be responsible for and BUYER shall cause ISLAND to pay
when due all liabilities described in the foregoing clauses
(a)-(d).
|
6.
|
Leased Premises
|
SELLERS
and BUYER agree that in connection with the Closing ISLAND shall enter into a
new lease agreement (the “Lease”) with SELLERS or their affiliate with respect
to the Premises. The Lease shall be in substantially the form
attached as Exhibit G hereto. ISLAND’s performance under the Lease
shall be guaranteed by BUYER and GEM NEVADA pursuant to the form of Lease
Guarantee attached to the Lease.
8
|
7.
|
Closing of Corporate
Books for Accounting and Tax
Purposes
|
SELLERS
and BUYER agree that ISLAND’s books shall be closed as of the date of Closing
and, pursuant to Section 1.1368-1(g)(2)(i) of the Internal Revenue Code
Regulations, SELLERS and ISLAND shall elect to treat the tax year as if it
consisted of two separate years, the first of which will end on the date of
Closing and the second of which shall commence on the day after the Closing date
and will end on December 31, 2008. SELLERS, jointly and severally (but not NCT),
shall be responsible for all state and federal tax liability incurred prior to
the Closing including taxes incurred as a result of the first short year and
BUYER shall be responsible for the tax incurred as a result of the second short
year. The first short year tax data shall be made according to generally
accepted accounting principles and in the manner previously utilized in
preparing ISLAND’s Federal and California State Income Tax Returns by SELLERS’
Certified Public Accountant, ▇▇▇▇▇ & ▇▇▇▇▇ (“CPA ▇▇▇▇▇”). SELLERS
(and not NCT) shall pay the fees for CPA ▇▇▇▇▇ in connection with the
preparation of tax data for the first short year (i.e. the portion of the 2008
calendar prior to the Closing date). The second short year tax data
and the 2008 tax return of ISLAND (which shall include the first short year tax
data exactly as presented by CPA ▇▇▇▇▇) shall be the responsibility of BUYER;
provided that SELLERS shall have the right to review and approve ISLAND’s 2008
tax return prior to filing.
From and
after the Closing, BUYER shall not, and shall not permit ISLAND to, take any
action which could increase the SELLERS’ liability for
taxes. Additionally, neither BUYER nor any of its affiliates shall,
or shall permit ISLAND to, amend, re-file or otherwise modify any tax return
relating in whole or in part to ISLAND with respect to any taxable year or
period beginning before the Closing date without the prior written consent of
SELLERS which consent may not be unreasonably withheld by SELLERS .
|
8.
|
Intentionally
Omitted
|
|
9.
|
Closing
|
The
Closing of the Purchase and Sale of the Shares (the “Closing”) shall take place
at the offices of Bohm, Matsen, Kegel & Aguilera, LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ (or at such other place as the parties
may mutually agree) at 10:00 a.m. local time and shall be effective August 31,
2008. The effective date of the Closing may be postponed to a later
time and date by mutual agreement of the parties. If the effective
date of the Closing is postponed, all references to the Closing date in this
Agreement shall refer to the postponed date.
|
|
(a)
|
Documents to be
Delivered by SELLERS and NCT to BUYER at
Closing.
|
|
|
(1)
|
At
the Closing, SELLERS will deliver to BUYER the following
documents:
|
9
|
|
(A)
|
Stock
Certificates for the Shares held by SELLERS free and clear of all liens
claims charges, restrictions, equities or encumbrances of any kind which
Certificates shall be accompanied by duly executed stock powers or
assignments separate from certificate in form reasonably satisfactory to
BUYER;
|
|
|
(B)
|
The
corporate records and documentation described in Section 11 of this
Agreement;
|
|
|
(C)
|
The
written resignations of ▇▇▇▇▇ and ▇▇▇▇▇ from their positions as officers
and directors of ISLAND;
|
|
|
(D)
|
The
Agreement Not to Compete (in the form attached hereto as Exhibit F)
executed by ▇▇▇▇▇ and ▇▇▇▇▇; and
|
|
|
(E)
|
Such
other certificates and documents executed by SELLERS as BUYER or their
counsel may reasonably request.
|
|
|
(2)
|
At
the Closing, NCT will deliver to BUYER the following
documents:
|
|
|
(A)
|
Stock
Certificates for the Shares held by NCT free and clear of all liens claims
charges, restrictions, equities or encumbrances of any kind arising by,
under or through NCT, which Certificates shall be accompanied by duly
executed stock powers or assignments separate from certificate in form
reasonably satisfactory to BUYER;
and
|
|
|
(B)
|
Such
other certificates and documents executed by NCT as BUYER or their counsel
may reasonably request.
|
|
|
(b)
|
Documents and Payments
to be Delivered by BUYER to SELLERS and
NCT.
|
|
|
(1)
|
At
the Closing BUYER will deliver to SELLERS the following documents and
payments:
|
|
|
(A)
|
The
$1,912,500.00 cash payment described in Section 2(a) of this Agreement,
which amount shall be paid by certified funds check or wire transfer of
immediately available funds;
|
|
|
(B)
|
The
original of the Note for $1,062,500.00 (in the form attached as Exhibit A)
properly executed by BUYER;
|
10
|
|
(C)
|
The
properly executed Corporate Guarantee of GEM NEVADA (in the form attached
as Exhibit B) with respect to the $1,062,500
Note;
|
|
|
(D)
|
A
cash payment in an amount equal to the balance of all accounts payable of
BUYER to ISLAND as of the Closing Date (less the amount of any accounts
receivable owing by ISLAND to BUYER as of such date), which amount shall
be paid by certified funds check or wire transfer of immediately available
funds;
|
|
|
(E)
|
The
Employment Agreement between ISLAND and ▇▇▇▇▇ (in the form attached as
Exhibit E) properly executed by
ISLAND;
|
|
|
(F)
|
The
Lease for the Premises (in the form attached has Exhibit G) properly
executed by ISLAND;
|
|
|
(G)
|
The
Guarantee of BUYER and GEM NEVADA with respect to the Lease (in the form
attached to the Lease) properly executed by BUYER and GEM NEVADA;
and
|
|
|
(H)
|
Such
other certificates and documents as SELLERS and or their counsel may
reasonably request.
|
|
|
(2)
|
At
the Closing BUYER will deliver to NCT the following documents and
payments:
|
|
|
(A)
|
The
$337,500.00 cash payment described in Section 2(b) of this Agreement,
which amount shall be paid by certified funds check or wire transfer of
immediately available funds;
|
|
|
(B)
|
The
original of the Note for $187,500.00 (in the form attached as Exhibit A-1)
properly executed by BUYER;
|
|
|
(C)
|
The
original of the properly executed Corporate Guarantee of GEM NEVADA (in
the form attached as Exhibit B-1) with respect to the $187,500 Note;
and
|
|
|
(D)
|
Such
other certificates and documents as NCT and or its counsel may reasonably
request.
|
|
10.
|
Due
Diligence
|
BUYER
shall have until 5:00 p.m., Pacific Daylight Time, on August 31, 2008 (the "Due
Diligence Period"), to approve or disapprove, in its sole and absolute
discretion, all material facts relating to ISLAND which BUYER may discover in
the course its review and investigation of ISLAND, its assets, business and
operations.
11
The Due
Diligence Period shall commence upon the execution of this
Agreement. BUYER’S failure to disapprove in writing of any
information discovered by BUYER in the course of its due diligence investigation
prior to the expiration of the Due Diligence Period shall be deemed its approval
thereof for purpose of this Agreement. If BUYER disapproves of any of
said information before the expiration of the Due Diligence Period, then this
Agreement shall terminate.
|
11.
|
Records
|
At the
Closing, SELLERS shall turn over all corporate files and records and the
business files and records of ISLAND, including the original Minute Book, Stock
Certificate Book and other relevant corporate documentation, and all Federal and
State Income Tax Returns of ISLAND. SELLERS shall have the right to
retain copies of such records, files and documents and, from and after the
Closing, SELLERS shall retain the right to have access and inspection rights
with respect to such records and documents for any reasonable purpose including
the defending of any claim with respect to SELLERS' indemnity and any issue
dealing with Federal or California Income Tax. Such right of access
and inspection shall be upon reasonable notice to ISLAND during reasonable
business hours.
|
12.
|
Resignation of
Officers
|
At the
Closing, SELLERS shall provide ISLAND with the written resignations of ▇▇▇▇▇ and
▇▇▇▇▇ as officers and Directors of ISLAND.
|
13.
|
Employment
Agreement
|
Effective
immediately after the Closing, BUYER will cause ISLAND to enter in to an
Employment Agreement with ▇▇▇▇▇ in substantially the form of Exhibit E
attached hereto.
|
14.
|
Employees and Employee Benefit
Plans
|
At the
Closing, ISLAND shall retain its current employees in substantially the same
manner as they are currently employed. Except in the case of the
Island Environmental Services, Inc. Profit Sharing Plan dated January 1, 1999,
as amended (the “Profit Sharing Plan”), following the Closing, BUYER shall cause
ISLAND’s current 401k plan, medical plan, insurance and other employee benefit
plans (collectively, the “ISLAND Plans”) to be integrated into BUYER’S current
substantially similar plans. As of or as soon as practicable
following the Closing, BUYER shall cause ▇▇▇▇▇ and ▇▇▇▇▇ to be removed as
administrators of all ISLAND Plans and BUYER agrees indemnify and hold ▇▇▇▇▇ and
▇▇▇▇▇ harmless from any and all Losses (as defined in Section 19(a) below) they
may incur as a result of the administration or integration of such plans into
BUYER’s plans following the Closing. With respect to the Profit
Sharing Plan, the parties acknowledge and agree that such plan shall be
terminated effective as of or as soon as practicable following the Closing and
that BUYER shall use its commercially reasonable efforts to permit any ISLAND
employee who so desires to roll such employee’s cash balance in such plan into a
similar tax-deferred plan administered by BUYER (if any).
12
|
15.
|
Operation of the
Business Pending Closing
|
Pending
the Closing, SELLERS shall continue to operate the Business in its normal and
ordinary course and in substantially the same manner as SELLERS are presently
conducting it.
|
16.
|
Representations and
Warranties of SELLERS, ISLAND and
NCT
|
|
|
SELLERS
and ISLAND represent, warrant and agree as set forth in the following
Sections 16(a)-(ab). NCT represents, warrants and agrees as set
forth in the following Sections
16(ac)–(af).
|
|
|
(a)
|
ISLAND
is a corporation duly organized, validly existing and in good standing
under the laws of the State of California, and all of the shares of the
outstanding stock of ISLAND have been duly authorized and validly
issued. ISLAND has the corporate power and authority to carry
on its business and to own or lease its property as and in the places
where such business is now conducted and such properties are now owned,
leased or operated and ISLAND is duly qualified to do business and is in
good standing in California.
|
|
|
(b)
|
The
authorized capital stock of ISLAND consists of one hundred thousand
(100,000) shares of common stock, without par value, ten thousand (10,000)
shares of which have been validly issued and are outstanding as specified
previously herein.
|
|
|
(c)
|
ISLAND
does not have any commitments for issuance or sale of shares under
options, warrants or other rights. Other than as described in
Section 5 of this Agreement, at the Closing hereof, ISLAND had no
undisclosed liabilities, absolute or contingent. With respect
to the contracts and agreements described in Section 16(h) below, ISLAND
is not and will not be subject to any claims resulting from price
redetermination or from renegotiation with respect to amounts paid prior
to the date of this Agreement for work completed under any such agreement
prior to such date.
|
|
|
(d)
|
▇▇▇▇▇
is the lawful owner of three thousand seven hundred (3,700) of the Shares,
▇▇▇▇▇ is the lawful owner of four thousand eight hundred (4,800) of the
Shares and NCT is the lawful owner of one thousand five hundred (1,500) of
the Shares. Each of ▇▇▇▇▇ and ▇▇▇▇▇ (i) has full power and
authority to transfer all right, title and interest in and to the Shares
held by them without the consent of any other person and (ii) will
transfer to BUYER valid title to such Shares, free and clear of all liens,
equities, encumbrances and claims of every
kind.
|
13
|
|
(e)
|
Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in a violation or breach of
any agreement to which either SELLER is a party or by which the Shares
held by either SELLER are bound or give rise to any right in any third
party to terminate or modify any contract by which any of the Shares are
bound.
|
|
|
(f)
|
Neither
of the SELLERS is engaged in or a party to, or has reasonable basis to
anticipate, any legal action or other proceeding before any court or
administrative agency in connection with his or her Shares or the
transactions contemplated by this
Agreement.
|
|
|
(g)
|
Attached
hereto as Schedule 16(g) is a list of the policies of liability and
other forms of insurance held by ISLAND relative to its business
operations. Such policies will be outstanding and duly in force
at the Closing. Complete copies of each such policy have been
or will prior to the Closing be made available to
BUYER. SELLERS have no reason to believe that any such policy
will be cancelled or subject to a material modification prior to the
scheduled expiration thereof.
|
|
|
(h)
|
Schedule 16(h)
attached hereto lists all of the contracts and agreements to which ISLAND
is a party and which fall into the following
categories:
|
|
|
(i)
|
Contracts
or agreements involving the performance of services by ISLAND of an amount
or value in excess of $100,000
annually;
|
|
|
(ii)
|
Contracts
or agreements involving the payment by ISLAND to any other party of more
than $25,000 annually, unless terminable by ISLAND on not more than ninety
(90) days prior written notice;
|
|
|
(iii)
|
Real
property or equipment lease contracts or
agreements;
|
|
|
(iv)
|
Contracts
or agreements with employees of ISLAND (including employment agreements,
agreements relating to bonus or profit sharing obligations and agreements
that provide for the payment of bonus or severance upon
termination);
|
|
|
(v)
|
Contracts
or agreements under which ISLAND is obligated to make any capital
expenditure; and
|
|
|
(vi)
|
Contracts
or agreements relating to any indebtedness of the
business.
|
14
|
|
(i)
|
Except
as listed in Schedule 16(i) attached hereto, there are no actions, suits,
proceedings or investigations pending or, to the knowledge of SELLERS,
threatened against or affecting ISLAND, at law, or in equity or admiralty,
or before or by any federal, state, municipal, or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign. ISLAND is not in default with respect to any order,
writ, injunction or decree of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or
foreign.
|
|
|
(j)
|
To
the knowledge of SELLERS, ISLAND has complied in all material respects
with all laws, regulations and judicial or administrative tribunal orders
applicable to its business, except where any lack of such compliance has
not had and is not reasonably likely to result in a material adverse
change with respect to ISLAND.
|
|
|
(k)
|
All
federal, state or local tax obligations of any nature whatsoever required
to be paid by ISLAND on or before the date of this Agreement have been
duly paid or are being contested in good faith by ISLAND and/or the
SELLERS. Any contested obligations have been disclosed to
BUYER. Moreover, all federal, state and local tax returns
required to be filed by ISLAND as of the date of this Agreement have been
duly filed.
|
|
|
(l)
|
Except
for the leased assets described in Schedule 16(l), ISLAND has good and
marketable title to all of the properties and tangible and intangible
assets used by it in the conduct of its business, in each case free and
clear of all liens, encumbrances, security interests and
claims.
|
|
|
(m)
|
ISLAND
is not liable as guarantor, surety or endorser with respect to the
obligation of any other person or
persons.
|
|
|
(n)
|
ISLAND
has no equity investments in any other business entities or
subsidiaries.
|
|
|
(o)
|
Intentionally
Omitted.
|
|
|
(p)
|
The
execution and performance of this Agreement will not conflict with, or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any lien, charge
or encumbrance upon any of the properties or assets or outstanding stock
of ISLAND pursuant to any corporate charter, by-law, indenture, mortgage
or lease, or any other material agreement or instrument to which ISLAND or
any of its shareholders is a party or by which it is bound. The
execution and carrying out of this Agreement will not violate any
provision of applicable law.
|
15
|
|
(q)
|
To
the knowledge of SELLERS, the financial information regarding the Company
listed in Schedule 16(q) (which financial information has been previously
provided to BUYER) were prepared in good faith and are accurate in all
material respects as of the date produced by or for
SELLERS.
|
|
|
(r)
|
SELLERS
have delivered to BUYER an internally prepared unaudited balance sheet as
of December 31, 2007, a related unaudited statement of income for the
calendar year ending December 31, 2007, and an unaudited interim statement
of income for the six months ending June 30, 2008 (referred to herein
as the “Financial Statements”). To the knowledge of SELLERS,
the Financial Statements are complete in all material respects as of the
respective dates and for the respective periods above stated, are in
accordance with the books and records of ISLAND, have been prepared in
accordance with generally accepted accounting principles consistently
applied, and fairly present the financial position of ISLAND as of the
dates thereof and the results of operations for the periods
indicated. [Copies of the Financial Statements are attached
hereto as Schedule 16(r)].
|
|
|
(s)
|
Except
as required by or disclosed in this Agreement and its exhibits and
schedules, since June 30, 2008 (the “Balance Sheet Date”) (i) there has
been no material adverse change in or to the business of ISLAND or to its
operations, earning, prospects, liabilities or relationships with
suppliers, distributors or customers, (ii) ISLAND has not entered into or
performed any material transaction other than in the ordinary course of
business and consistent with past practices and (iii) ISLAND has not
cancelled, terminated, amended or granted a waiver of any material
agreement or of any rights or claims of ISLAND arising
thereunder.
|
|
|
(t)
|
Intentionally
Omitted.
|
|
|
(u)
|
SELLERS
have no knowledge of any fact that is reasonably likely to result in a
material adverse change with respect to ISLAND or its business,
operations, assets, or financial
condition.
|
16
|
|
(v)
|
To
the knowledge of SELLERS, the business of ISLAND as currently conducted
does not violate in any material respect, and as conducted during the five
years prior to the date hereof did not violate in any material respect any
applicable law, ordinance, rule, prohibition or regulation relating,
respectively, to air quality, water quality, or noise pollution, or the
production, storage, labeling or disposition of any wastes or of hazardous
or toxic substances (collectively, “Environmental Laws”), or the health,
safety or environmental conditions on, beneath, or about any of the
properties used, owned, or leased by ISLAND. ISLAND has timely
filed all required reports, obtained all required data, documentation and
records under any applicable Environmental Laws. To the
knowledge of SELLERS, with respect to the operation of ISLAND’s business
there has been no unreported release of any Hazardous Material in
violation of any applicable Environmental Laws or Licenses, including any
“Hazardous Wastes,” “Hazardous Substances,” “Hazardous Materials,”
“Pollutants,” “Toxic Substance,” “Solid Wastes” or “Contaminants” (as such
terms are defined in any applicable Environmental Laws, including but not
limited to the Comprehensive Environmental Response, Compensation an
Liability Act of 1980, as amended (“CERCLA”); the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act; and the
Toxic Substances Control Act; from any storage tanks, surface
impoundments, septic tanks, pits, sumps or lagoons or any other location
at the Premises. Except as set forth above, such inventories
and wastes, if any, were stored or disposed of in accordance with
applicable laws and regulations and in a manner such that there was no
release of any such chemicals into the environment which could cause the
incurrence of material clean-up or other response costs under CERCLA or
any other applicable laws or regulations. ISLAND has not
received any notice from any governmental agency or private or public
entity advising it that it is or may be responsible, or potentially
responsible, for response costs with respect to a release, a threatened
release or clean-up of materials produced by, or resulting from, any
business, commercial or industrial activities, operations, or processes,
including but not limited to Hazardous Wastes, Hazardous Substances,
Hazardous Materials, Toxic Substances, Solid Wastes, Pollutants or
Contaminants. To the knowledge of SELLERS, there is no asbestos
or asbestos-containing material that requires current abatement or
encapsulation under Environmental Laws at the
Premises.
|
|
|
(w)
|
No Environmental
Remediation. Neither the execution of this Agreement nor
the consummation of the transactions contemplated hereby will result in
the requirement that ISLAND conduct any removal, response, or remediation
activities pursuant to any applicable Environmental Law or under any
permit issued to ISLAND.
|
|
|
(x)
|
Environmental
Reports. SELLERS have made available to BUYER copies of
any environmental assessment or audit reports or other similar studies or
analyses relating to the Premises which reports have been prepared by, or
on behalf of, or are otherwise in the possession of
SELLERS.
|
|
|
(y)
|
Permits. Set
forth on Schedule 16(y) is a list of all permits, licenses, franchises or
other authorizations held by ISLAND as of the date of this
Agreement. To knowledge of SELLERS, such permits, licenses,
franchises and other authorizations constitute all such authorizations as
are necessary for the operation of ISLAND’s business as presently
conducted. To knowledge of SELLERS, ISLAND is not in default
under, or in violation of the terms of, any such
authorization. To the knowledge of Sellers, all such permits,
licenses, franchises and other authorizations will remain in effect after
the sale of the Shares to BUYER.
|
17
|
|
(z)
|
Labor
Controversies. ISLAND is not a party to any collective
bargaining agreement. There are not any controversies between
ISLAND and any of its employees which might reasonably be expected to
materially adversely affect the conduct of its business, or any unresolved
labor union grievances or unfair labor practice or labor arbitration
proceedings pending or, to the knowledge of SELLERS, threatened relating
to ISLAND’s business and, to the knowledge of SELLERS, there are not any
organizational efforts presently being made or threatened involving any of
ISLAND’s employees. ISLAND has not received notice of any claim
that it has not complied with any laws relating to the employment of
labor, including any provisions thereof relating to wages, hours,
collective bargaining, the payment of social security and similar taxes,
equal employment opportunity, employment discrimination and employment
safety, or that ISLAND is liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the
foregoing.
|
|
|
(aa)
|
Intellectual
Property. The term “Intellectual Property” includes all
patents and patent applications, trademarks, service marks, trade names,
trademark, service ▇▇▇▇ and trade name registrations (and applications
therefore), copyrights, trade secrets, inventions, know-how and
formulations (and all licenses for any of the
foregoing). ISLAND has no registered copyrights, trademarks, or
service marks. To the knowledge of SELLERS, ISLAND’s
Intellectual Property is sufficient to conduct its business as presently
conducted and its rights under such Intellectual Property will not be
altered, limited or impaired by the sale of the Shares under this
Agreement. None of the past or present employees, officers,
directors, shareholders or affiliates of ISLAND has any rights in any such
Intellectual Property. ISLAND has not granted any outstanding
license or other rights to Intellectual Property owned by or licensed to
it, and is not liable, and has not made any contracts or arrangement
whereby it may become liable, to any person for any royalty or other
compensation for the use of any Intellectual Property. To the
knowledge of SELLERS, ISLAND’s business, as presently conducted, does not
infringe any Intellectual Property rights of others, and ISLAND has not
been charged or threatened to be charged with any such
infringement. Specifically, SELLERS acknowledge that the trade
name “Island Environmental Services” is a valuable asset of ISLAND and
agree not to use that name or any similar name in an environmental waste
management related business so long as BUYER operates ISLAND’s business
under that trade name.
|
|
|
(ab)
|
No Powers of
Attorney. ISLAND does not have any powers of attorney or
comparable delegations of authority
outstanding.
|
18
|
|
(ac)
|
NCT
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Florida and is the sole Trustee of NCF
Charitable Trust (the “TRUST”) on whose behalf NCT holds its
Shares. The TRUST is a wholly charitable trust duly organized,
validly existing and in good standing under the laws of the State of
Florida.
|
|
|
(ad)
|
Effective
August 29, 2008, NCT received one thousand five hundred (1,500) of the
Shares as a gift from ▇▇▇▇▇ and, to its knowledge, is the lawful owner of
such Shares as of the date of this Agreement. NCT (i) has full
power and authority to transfer all of its right, title and interest in
and to the Shares held by it without the consent of any other person and
(ii) will transfer to BUYER all of its title to such Shares, free and
clear of all liens, equities, encumbrances and claims of every kind
arising by, under or through NCT.
|
|
|
(ae)
|
Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in a violation or breach of
any agreement to which NCT is a party or, to the knowledge of NCT, by
which the Shares held by NCT are bound or give rise to any right in any
third party to terminate or modify any contract by which any of the Shares
are bound.
|
|
|
(af)
|
NCT
is not engaged in or a party to, nor does NCT have any reasonable basis to
anticipate, any legal action or other proceeding before any court or
administrative agency in connection with the Shares held by it or the
transactions contemplated by this
Agreement.
|
|
17.
|
Interim Covenants and
Agreements of SELLERS
|
|
|
SELLERS
hereby covenant and agree that from and after the date of execution
hereof, to and including the Closing, except as otherwise permitted or
required by this Agreement, SELLERS shall not, without the prior written
consent of BUYER (which consent shall not be unreasonably withheld), cause
ISLAND to:
|
|
|
(a)
|
Dispose
of any of its properties or assets or waive any of its rights except in
the ordinary course of business;
|
|
|
(b)
|
Fail
to keep ISLAND's property and assets insured consistent with its prior
practice.
|
|
|
(c)
|
Suffer
or incur any liabilities or encumbrances except in the ordinary course of
business.
|
|
|
(d)
|
Fail
to keep the business assets of ISLAND in good repair and order (subject to
ordinary wear and tear).
|
|
|
(e)
|
Amend
the Articles of Incorporation or Bylaws of
ISLAND.
|
19
|
|
(f)
|
Change
the authorized capital of ISLAND or the equity ownership of ISLAND or
grant any options, warrants, puts, calls, conversion rights or commitments
relating to the equity interests of
ISLAND.
|
|
|
(g)
|
Declare
or pay any dividend of ISLAND or indirectly purchase, redeem, or otherwise
acquire or retire for value or issue any shares of stock of
ISLAND.
|
|
|
(h)
|
Enter
into any contract or commitment or incur or agree to incur any liability
or make any capital expenditures in excess of an aggregate of Fifty
Thousand Dollars ($50,000.00).
|
|
|
(i)
|
Increase
the compensation payable or to become payable to any officer, director,
stockholder, employee, consultant or agent, or make any bonus or
management fee payable to any such person other than in connection with
any regularly schedule annual employment and/or salary reviews and in
amounts consistent with past
practice.
|
|
|
(j)
|
Create,
assume, or permit to exist any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or hereafter
acquired.
|
|
|
(k)
|
Sell,
assign, lease or otherwise transfer or dispose of any property or
equipment other than in the ordinary course of
business.
|
|
|
(l)
|
Merge
or consolidate or agree to merge or consolidate with or into any other
corporation or entity.
|
|
|
(m)
|
Breach
or permit a breach of, amend or terminate any material agreement, or any
permit (excluding violations cited by inspection), license or other
agreement or right to which Company is a
party.
|
|
|
(n)
|
Enter
into any other transaction outside the ordinary course of its business or
otherwise prohibited hereunder.
|
|
|
(o)
|
SELLERS
further agree to use their commercially reasonable efforts to prevent from
occurring any other action or omission, or series of actions or omissions,
by ISLAND or by ▇▇▇▇▇ and ▇▇▇▇▇ that would cause a warranty of the SELLERS
contained in this Agreement to be untrue on the Closing
Date.
|
|
18.
|
Representations,
Warranties and Covenants of BUYER
|
|
|
BUYER
represents and warrants to SELLERS and agrees as
follows:
|
|
|
(a)
|
BUYER
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all corporate right, power
and authority to enter into and perform this Agreement and any other
Agreements contemplated by this
Agreement.
|
20
|
|
(b)
|
The
execution, delivery and performance by BUYER of this Agreement have been
duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by BUYER and constitutes a
valid and binding agreement of BUYER enforceable against BUYER in
accordance with its terms.
|
|
|
(c)
|
The
execution, delivery and performance by BUYER of this Agreement and the
consummation by BUYER of the transactions contemplated hereby require no
action by or in respect of, or filing with, any governmental authority
other than any applicable requirements of the Securities and Exchange Act
of 1934.
|
|
|
(d)
|
The
execution, delivery and performance by BUYER of this Agreement and the
consummation of the transactions contemplated hereby do not, and will not,
(i) contravene or conflict with BUYER’s charter documents, (ii) conflict
with or result in any breach of any of the terms, conditions or provisions
of, or constitute a default under or result in the creation of any lien,
charge or encumbrance upon any of the properties or assets of BUYER, (iii)
violate any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to BUYER, GEM NEVADA or any of their
respective affiliates (iv) constitute a default under (or an event which
with notice, the lapse of time or both would become a default) under or
give rise to a right of termination, cancellation or acceleration of any
right or obligation of BUYER, GEM NEVADA or any of their respective
affiliates or to a loss of any benefit to which BUYER, GEM NEVADA or any
of their respective affiliates is entitled to under any provision of any
agreement, contract or other instrument binding upon BUYER, GEM NEVADA or
their respective affiliates.
|
|
|
(e)
|
There
is no action, suit, claim, proceeding or other legal process pending or,
to the knowledge of BUYER, threatened against or BUYER, GEM NEVADA or any
of their respective affiliates that could adversely affect or restrict the
ability of BUYER to fully consummate the transactions contemplated by this
Agreement or that in any manner draws into question the validity of this
Agreement.
|
|
|
(f)
|
Prior
to the Closing, BUYER shall have (or shall have secured firm commitments
to receive as of the Closing) sufficient funding to pay the portion of the
Purchase Price payable at Closing in accordance with the terms of this
Agreement.
|
21
|
|
(g)
|
Investment for Own
Account. BUYER represents to SELLERS and NCT that the
shares to be received by it will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and that BUYER has no present intention
of selling, granting participation in, or otherwise distributing the same,
but subject nevertheless to any requirement of law that the disposition of
property shall at all times be within its control. By executing
this Agreement, BUYER further represents that it does not have any
contract, undertaking, agreement, or arrangement with any person to sell,
transfer, or grant participation to any such person, or to any third
person, with respect to any of the
shares.
|
|
|
(h)
|
Investor
Experience. BUYER
represents to SELLERS and NCT that it is experienced in evaluating,
investing in and acquiring companies such as ISLAND, is able to fend for
itself in the transactions contemplated by this Agreement, has such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of investment, and has the
ability to bear the economic risks of the
investment.
|
|
|
(i)
|
Personal Guarantees of
SELLERS. BUYER acknowledges that SELLERS have previously
executed certain personal guarantees in connection with their ownership of
ISLAND and the operation its business (collectively, the “Seller Personal
Guarantees”). Prior to and following the Closing, SELLERS shall
have the right to terminate any or all of the Seller Personal Guarantees
at any time to the extent permitted by the Seller Personal Guarantees.
BUYER agrees indemnify and hold SELLERS harmless from any and all Losses
(as defined in Section 19(a) below) they may incur with respect to the
Seller Personal Guaranties following the Closing. In addition,
for any time period following the Closing during which any Seller Personal
Guarantee is in effect, BUYER shall not (and BUYER shall not permit ISLAND
to) undertake or accept any further advance on any line of credit or other
obligation secured by any Seller Personal Guarantee without the prior
written consent of SELLERS.
|
|
19.
|
Indemnification.
|
|
|
(a)
|
By
SELLERS. In addition to any indemnification obligations
on the part of SELLERS set forth elsewhere in this Agreement, SELLERS,
jointly and severally, agree to indemnify and hold BUYER harmless from any
and all claims, demands, actions, losses or liabilities including, without
limitation, reasonable attorneys’ fees and costs (collectively, “Losses”)
arising out of or resulting from (i) any breach of any representation or
warranty made by SELLERS herein or (ii) any breach or default in the
performance by SELLERS of any covenant or agreement of SELLERS contained
herein.
|
22
|
|
(b)
|
By
NCT. NCT hereby agrees to indemnify and hold BUYER
harmless from any and all Losses arising out of or resulting from (i) any
breach of any representation or warranty made by NCT herein or (ii) any
breach or default in the performance by NCT of any covenant or agreement
of NCT contained herein.
|
|
|
(c)
|
By
BUYER. In addition to any indemnification obligations on
the part of BUYER set forth elsewhere in this Agreement, BUYER hereby
agrees to indemnify and hold SELLERS and NCT harmless from any and all
Losses arising out of or resulting from (i) any breach of any
representation or warranty made by BUYER herein or (ii) any breach or
default in the performance by BUYER of any covenant or agreement of BUYER
contained herein.
|
|
|
(d)
|
Separate Obligations
of SELLERS and NCT. Notwithstanding any other provision
of this Agreement, BUYER acknowledges and agrees that (i) NCT received
title its Shares effective August 29, 2008 pursuant to a charitable gift
from ▇▇▇▇▇, (ii) NCT does not currently, and never has had, any direct or
indirect role in the operation of ISLAND or its business, (iii) the
respective representations, warranties and covenants of SELLERS and NCT
under this Agreement are in all cases being made severally and not jointly
and any liability for any breach of such representations, warranties and
covenants shall be several not joint with respect to SELLERS and NCT, (iv)
in the event of any breach of any representation, warranty or covenant by
either SELLERS or NCT, BUYER shall look solely to the breaching party for
indemnification pursuant to this Section 19 and (v) NCT’s liability, if
any, for Losses under this Agreement shall be limited to, and BUYER
covenants that it shall not seek recovery from NCT for any amounts in
excess of, the aggregate cash amount actually paid by BUYER to NCT under
this Agreement (including amounts paid under the $187,500 Note issued to
NCT pursuant to Section 2(c) above) in connection with BUYER’s purchase of
NCT’s Shares.
|
|
|
(e)
|
Survival of
Representations, Warranties and Covenants. The rights of
the parties to assert a claim under clause (i) of Section 19(a), clause
(i) of Section 19(b) or clause (i) of Section 19(c) above shall survive
for a period of twelve (12) months following the Closing and thereafter
shall terminate and expire; provided that rights with respect to any claim
asserted in writing prior to the expiration of such twelve (12) month
period shall continue until such claim has been finally settled, decided
or adjudicated; and provided further that rights with respect to any claim
under clause (ii) of Section 19(a), clause (ii) of Section 19(b) or clause
(ii) of Section 19(c) in connection with a covenant or agreement to be
performed after the Closing shall survive until such covenant or agreement
has been fully performed.
|
23
|
|
(f)
|
Limitation on
Liability.
|
|
|
(1)
|
As Between SELLERS and
BUYER. The SELLERS shall not have any obligation to
indemnify BUYER, nor shall the BUYER have any obligation to indemnify
SELLERS pursuant to this Section 19 until the aggregate Losses for which
the indemnified party is entitled to indemnity exceed $35,000 (the
“Deductible Amount”) whereupon the indemnifying party shall be liable only
to the extent that such Losses exceed the Deductible Amount. In
addition, the maximum liability of the indemnifying party to indemnify the
indemnified party with respect to any claim for indemnification of Losses
under this Agreement shall not exceed the Purchase
Price.
|
|
|
(2)
|
As Between NCT and
BUYER. With respect to any claim for indemnity pursuant
to this Section 19 as between NCT and BUYER, the maximum liability of the
indemnifying party to indemnify the indemnified party with respect to any
claim for indemnification of Losses under this Agreement shall not exceed
the aggregate cash amount actually paid by BUYER to NCT under this
Agreement (including amounts paid under the $187,500 Note issued to NCT
pursuant to Section 2(c) above) in connection with BUYER’s purchase of
NCT’s Shares.
|
|
|
(g)
|
Claims for
Indemnification. All claims for indemnification under
Sections 19(a), 19(b) and 19(c) above shall be handled in accordance with
the procedures set forth in Schedule 19(g) attached
hereto.
|
|
|
(h)
|
Computation of
Losses. Notwithstanding anything in this Agreement to
the contrary, the amount of any Losses otherwise payable under Sections
19(a), (b) or (c) to an indemnified party shall be reduced by the amount
of net insurance proceeds actually received by such indemnified party
(giving effect to deductibles or self insured or co-insurance payments
made) as compensation for the damage or Losses caused by the act,
omission, fact or circumstance giving rise to the
Losses.
|
|
|
(i)
|
Exclusive
Remedy. From and after the Closing, the rights and
remedies of the parties under this Section 19 are the sole and exclusive
rights and remedies of the parties with respect to any dispute arising out
of this Agreement. EACH PARTY HEREBY WAIVES RELEASES AND
DISCHARGES ALL RIGHTS TO ALL PUNITIVE, SPECIAL, EXEMPLARY OR
CONSEQUENTIAL, DIRECT OR INDIRECT OR OTHER DAMAGES, HOWEVER CHARACTERIZED,
WHETHER IN CONTRACT OR IN TORT, AT LAW OR IN EQUITY, OTHER THAN THOSE
EXPRESSY SET FORTH UNDER THIS SECTION
19.
|
24
|
20.
|
Agreement Not to
Compete
|
As part
of the consideration herein rendered and as an express condition precedent
thereto, SELLERS, jointly and severally, shall enter into an Agreement Not to
Compete for a duration of five (5) years from the date of the Closing in the
form of Exhibit F attached hereto. BUYER acknowledges that NCT shall
have no obligation to enter into, and shall not be subject to the terms of, any
such Agreement not to Compete.
|
21.
|
Transition
|
Following
the Closing, SELLERS will not take any action that is designed or intended to
have the effect of discouraging any customer or business associate of ISLAND
from maintaining the same business relationships with ISLAND after the Closing
that it maintained with ISLAND before the Closing and SELLERS will refer all
customer inquiries they receive relating to the business to
BUYER. Further, SELLERS agree that for a period of ninety (90) days
following the Closing, SELLERS will reasonably assist BUYER, at BUYER’s request,
with the orderly transition of the operations of ISLAND from SELLERS to BUYER,
including, without limitation, recommendations, advice and interaction with
customers and potential customers of ISLAND and BUYER, and governmental
agencies.
|
22.
|
Conditions to
Obligations of BUYER
|
The
obligation of BUYER to proceed with the Closing under this Agreement is subject
to the satisfaction, on or prior to the Closing, of each of the following
conditions, each of which may be waived by BUYER:
|
|
(a)
|
All
the terms, covenants and conditions of this Agreement to be complied with
and performed by SELLERS and NCT on or before the Closing shall have been
fully complied with and performed in all material
respects;
|
|
|
(b)
|
Prior
to the expiration of the Due Diligence Period, BUYER shall not have
formally objected in writing to any matters of due diligence set forth in
Section 10 herein;
|
|
|
(c)
|
The
representations and warranties of each of SELLERS and NCT contained herein
shall be correct in all material respects on and at the Closing with the
same effect as though all such representations and warranties had been
made on and as of that date;
|
|
|
(d)
|
SELLERS
shall have delivered to BUYER the documents described in Section 9(a)(1)
of this Agreement along with such other documents or instruments as in the
reasonable opinion of BUYER may be necessary or desirable to effectuate
the transaction provided for in this Agreement;
and
|
|
|
(e)
|
NCT
shall have delivered to BUYER the documents described in Section 9(a)(2)
of this Agreement along with such other documents or instruments as in the
reasonable opinion of BUYER may be necessary or desirable to effectuate
the transaction provided for in this
Agreement.
|
25
|
23.
|
Conditions to
Obligations of SELLERS and
NCT
|
The
obligation of SELLERS and NCT to proceed with the Closing under this Agreement
is subject to the satisfaction, on or prior to the Closing, of each of the
following conditions, each of which may be waived by SELLERS and
NCT:
|
|
(a)
|
All
the terms, covenants and conditions of this Agreement to be complied with
and performed by BUYER on or before the Closing Date shall have been fully
complied with and performed in all material
respects;
|
|
|
(b)
|
The
representations and warranties made by BUYER herein shall be correct in
all material respects, on and at the Closing, with the same force and
effect as though such representations and warranties had been made at the
Closing;
|
|
|
(c)
|
BUYER
shall have delivered to SELLERS the documents and payments described in
Section 9(b)(1) of this Agreement along with such other documents or
instruments as in the reasonable opinion of SELLERS may be necessary or
desirable to effectuate the transaction provided for in this Agreement;
and
|
|
|
(d)
|
BUYER
shall have delivered to NCT the documents and payments described in
Section 9(b)(2) of this Agreement along with such other documents or
instruments as in the reasonable opinion of NCT may be necessary or
desirable to effectuate the transaction provided for in this
Agreement.
|
|
24.
|
Termination
|
This
Agreement and the transactions contemplated herein may be terminated at any time
prior to Closing:
|
|
(a)
|
By
the mutual written consent of SELLER and
BUYER;
|
|
|
(b)
|
By
BUYER if there has been a breach of any representation, warranty, covenant
or agreement of SELLERS or NCT that has had or is reasonably likely to
result in a material adverse effect on the ability of SELLERS or NCT to
consummate the transactions contemplated hereby; provided that, as
applicable, SELLERS or NCT will have ten (10) days after receiving notice
from BUYER thereof to cure such
breach;
|
|
|
(c)
|
By
SELLERS if there has been a breach of any representation, warranty,
covenant or agreement of BUYER that has had or is reasonably likely to
result in a material adverse effect on the ability of BUYER to consummate
the transactions contemplated hereby; provided that BUYER will have ten
(10) days after receiving notice from SELLERS thereof to cure such breach;
or
|
26
|
|
(d)
|
By
either BUYER or SELLERS if the sale and purchase of the Shares
contemplated by this Agreement shall not have been consummated on or
before September 30, 2008; provided, however that the right to terminate
this Agreement under this Section 24(d) shall not be available to any
party whose breach of any obligation under this Agreement has been the
cause of, or resulted in, the failure of such transaction to occur before
such date.
|
The
termination of this Agreement pursuant to this Section 24 shall terminate all
obligations of the parties hereunder and this Agreement shall become void and
have no effect without any liability on the part of any party.
|
25.
|
Additional
Deliveries
|
After the
Closing, the SELLERS and NCT will execute and deliver such additional
instruments as BUYER or its counsel may reasonably request in order to carry out
the transactions contemplated by this Agreement, and BUYER will execute and
deliver such additional instruments as SELLERS or its counsel may reasonably
request in order to carry out the transactions contemplated by this
Agreement.
|
26.
|
Legal
Fees
|
In the
event it becomes necessary for any of the parties to this Agreement to engage
legal counsel to enforce the terms of this Agreement or ▇▇▇ for damages
hereunder, then the prevailing party shall be entitled to reasonable attorneys'
fees and court costs actually expended.
|
27.
|
Notices
|
All
notices, requests and other communications hereunder shall be in writing and
shall be deemed to have been given only if mailed, certified return receipt
requested, or if sent by Federal Express or other well recognized private
courier ("Courier") or if personally delivered to, or if sent by fax with the
original thereof sent by Courier to:
|
|
SELLER:
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
|
|
|
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
With
a copy to:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, Esq.
|
|
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Stiepel LLP
|
|
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Fax
(▇▇▇) ▇▇▇-▇▇▇▇
|
27
|
|
NCT:
|
NCF
CHARITABLE TRUST
|
|
|
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
With
a copy to:
|
NATIONAL
CHRISTIAN CHARITABLE FOUNDATION,
INC.
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
Attn: General
Counsel
|
|
|
Attn:
▇▇▇ ▇▇▇▇▇▇
|
|
|
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
Fax:
▇▇▇-▇▇▇-▇▇▇▇
|
|
|
With
a copy to:
|
▇▇▇▇▇▇▇
▇▇▇▇, Esq.
|
|
|
Bohm,
Matsen, Kegel & Aguilera, LLP
|
|
|
▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, #▇▇▇
|
|
|
▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Fax
(▇▇▇) ▇▇▇-▇▇▇▇
|
All
notices, requests and other communications shall be deemed received on the date
of acknowledgment or other evidence of actual receipt in the case of certified
mail, Courier delivery or personal delivery or, in the case of fax delivery,
upon the date of fax receipt provided that the original is delivered within
two (2) business days thereafter. Any party hereto may designate
different or additional parties for the receipt of notice, pursuant to notice
given in accordance with the foregoing.
|
28.
|
Certain
Definitions.
|
The
following terms shall have the following meanings when used in this
Agreement:
|
|
(a)
|
The
term “affiliate” when used with respect to a person or entity shall any
other person or entity controlling, controlled by or under common control
with the indicated person or
entity.
|
|
|
(b)
|
The
term “control” (including when used in a correlative form such as
“controlling,” “controlled by,” or “under common control with”), when used
with respect to any person or entity means the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of such person or entity, whether through the ownership of
voting securities or other ownership interest, by contract or
otherwise.
|
28
|
|
(c)
|
The
term “material adverse change” when used with respect to ISLAND shall mean
any change, effect, circumstance or event that is materially adverse to
the business, assets, operations or financial condition of ISLAND other
than as a result of (i) changes, conditions or events that are generally
applicable to the industry in which ISLAND conducts business, (ii)
seasonal fluctuations in the performance of ISLAND or (iii) the effects
including, without limitation, effects on relations and business with
customers, suppliers and employees, of any of the transactions
contemplated by this Agreement.
|
|
|
(d)
|
The
term “to the knowledge of” when used (i) with respect to SELLERS shall
mean to the actual knowledge of either ▇▇▇▇▇ or ▇▇▇▇▇ after reasonable
investigation and (ii) with respect to NCT shall mean to the actual
knowledge of NCT with no duty of
investigation.
|
|
29.
|
Successors and
Assigns
|
This
Agreement is binding on and inures to the benefit of the parties, their
executors, administrators, personal representatives and successors and assigns;
provided that no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent of
the other parties hereto.
|
30.
|
Applicable
Law;
Jurisdiction
|
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of California. Any action or proceeding seeking to
enforce any provision of, or based on any matter arising in connection with,
this Agreement or the transactions contemplated hereby may be brought against
any of the parties only in any state or federal court located in Orange County,
California and each of the parties hereby consents to the exclusive jurisdiction
of such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein.
|
31.
|
Entire
Agreement
|
This
Agreement and the exhibits and schedules hereto contains and constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements or understandings between the parties
hereto relating to such subject matter. ISLAND, SELLERS, and BUYER
hereby expressly agree that there are no direct or indirect agreements, options
or clandestine arrangements of any kind between the parties hereto or any
associates or relatives of the parties, nor do there exist any representations
or warranties by either party other than as stated herein.
|
32.
|
Covenant of
Cooperation and Fair Dealing
|
The
parties agree to cooperate in promptly and properly executing any and all
documents or making any and all requests for documents, clearances, etc. in
order to accomplish the consummation of this Agreement.
29
|
33.
|
Amendments and
Waivers
|
This
Agreement cannot be altered or amended except pursuant to an instrument in
writing signed by all of the parties hereto. No failure or delay by
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall nay single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege granted hereunder.
|
34.
|
Counterparts
|
This
Agreement may be executed in multiple counterparts, each of which shall be
binding against the party executing it and considered as an
original.
[Remainder of Page Intentionally Left
Blank – Signature Page Follows]
30
[Signature Page to Stock Purchase
Agreement]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of
the date first written above.
| SELLERS: |
NCT:
|
|||
|
NCF
CORPORATION, not individually but solely in its capacity as Trustee of NCF
CHARITABLE TRUST
|
||||
|
|
By: |
|
||
|
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, an
individual
|
Name: |
|
||
|
|
Title: |
|
|
|
|
|||
|
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an
individual
|
|
|||
|
|
|
|
ISLAND:
|
|||||
|
ISLAND
ENVIRONMENTAL SERVICES INC., a California Corporation
|
|||||
| By: |
|
|
|||
|
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
President
|
|
||||
|
BUYER:
|
|||||
|
GENERAL
ENVIRONMENTAL MANAGEMENT, INC. a Delaware Corporation
|
|||||
| By: |
|
|
|||
|
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and
Chief Executive Officer
|
|
||||
31
UNDERTAKING OF GEM
NEVADA
The
undersigned, General Environmental Management, Inc., a Nevada corporation, (“GEM
NEVADA”) hereby agrees to be responsible (as though it were a primary obligor
and not a guarantor) for and indemnify SELLERS against any Losses (as defined in
Section 19(a) of this Agreement) they may incur as a result of the breach by
BUYER of any of its representations, warranties or covenants under this
Agreement to the same extent as if GEM NEVADA were the “BUYER”
hereunder.
GENERAL
ENVIRONMENTAL MANAGEMENT, INC. a Nevada Corporation
| By: |
|
|
|||
| Name: |
|
|
|||
| Title: |
|
|
32
EXHIBIT
A
Promissory
Note in the Amount of $1,062,500
(Attached
hereto)
33
EXHIBIT
A-1
Promissory
Note in the Amount of $187,500
(Attached
hereto)
34
EXHIBIT
B
Corporate
Guaranty of GEM Nevada for the $1,062,500 Note
(Attached
hereto)
35
EXHIBIT
B-1
Corporate
Guaranty of GEM Nevada for the $187,500 Note
(Attached
hereto)
36
EXHIBIT
C
Form
of Contingent Promissory Note
(Attached
hereto)
37
EXHIBIT
D
Form
of Guaranty of GEM Nevada for Contingent Note
(Attached
hereto)
38
EXHIBIT
E
Employment
Agreement
(Attached
hereto)
39
EXHIBIT
F
Agreement
Not to Compete
(Attached
hereto)
40
EXHIBIT
G
Premises
Lease
[Attached
hereto]
41
Schedule
3
EBITDA
Calculation Methodology
EBITDA. “EBITDA”
shall mean all Earnings Before Interest, Taxes, Depreciation, and Amortization
of Island Environmental Services, Inc. as defined by Generally Accepted
Accounting Principles (GAAP), consistently applied.
Exclusions
from EBITDA will include the following:
Revenue,
costs, and expenses from new customers and/or new service offerings on existing
customer accounts obtained after the closing date. New divisions, departments,
geographies, regions or affiliates of existing customer accounts will not be
considered ‘new’ accounts nor will any prospective customer that prior to
closing has been provided a sales quote by Island for that quoted
business.
Any
costs, expenses, or overhead allocations from GEM, its subsidiaries, affiliates,
or shareholders, including closing costs related to the purchase of
Island.
42
Schedule
3-A
Examples
of Calculation of Accelerated Note Payments and Contingent Earn-Out
Example
#1
a. Assumption:
EBITDA Recapture Percentage = 0%
b. Amounts
Due:
|
|
(i)
|
Accelerated
Note Payment = $750,000 to be split 85%/15% between SELLER and NCT (see
Section 3(a) of the Agreement).
|
|
|
(ii)
|
Contingent
Earn-Out = $0.00
|
Example
#2
a. Assumption: EBITDA
Recapture Percentage = 25%
b. Amounts
Due:
|
|
(i)
|
Accelerated
Note Payment = $562,500 (.75 x $750,000) to be split 85%/15% between
SELLER and NCT.
|
|
|
(ii)
|
Contingent
Earn-Out = $937,500 (.25 x $3,750,000) payable to SELLERS and NCT as
follows:
|
|
|
(A)
|
Cash
Payment of $187,500 ($750,000 - $562,500) to be split 85%/15% between
SELLER and NCT
|
|
|
(B)
|
Contingent
Notes in the aggregate amount of $750,000 ($937,500 - $187,500) to be
split 85%/15% between SELLER and
NCT
|
Example
#3
a. Assumption: EBITDA
Recapture Percentage = 50%
b. Amounts
Due:
|
|
(i)
|
Accelerated
Note Payment = $375,000 (.50 x $750,000) to be split 85%/15% between
SELLER and NCT.
|
|
|
(ii)
|
Contingent
Earn-Out = $1,875,000 (.50 x $3,750,000) payable to SELLERS and NCT as
follows:
|
|
|
(A)
|
Cash
Payment of $375,000 ($750,000 - $375,000) to be split 85%/15% between
SELLER and NCT
|
|
|
(B)
|
Contingent
Notes in the aggregate amount of $1,500,000 ($1,875,000 - $375,000) to be
split 85%/15% between SELLER and
NCT
|
Example
#4
a. Assumption: EBITDA
Recapture Percentage = 75%
b. Amounts
Due:
|
|
(i)
|
Accelerated
Note Payment = $187,500 (.25 x $750,000) to be split 85%/15% between
SELLER and NCT.
|
|
|
(ii)
|
Contingent
Earn-Out = $2,812,500 (.75 x $3,750,000) payable to SELLERS and NCT as
follows:
|
|
|
(A)
|
Cash
Payment of $562,500 ($750,000 - $187,500) to be split 85%/15% between
SELLER and NCT
|
|
|
(B)
|
Contingent
Notes in the aggregate amount of $2,250,000 ($2,812,500 - $562,500) to be
split 85%/15% between SELLER and
NCT
|
[Exhibit Continues on Next
Page]
43
Example
#5
a. Assumption: EBITDA
Recapture Percentage = 100%
b. Amounts
Due:
|
|
(i)
|
Accelerated
Note Payment = $0 (0 x $750,000)
|
|
|
(ii)
|
Contingent
Earn-Out = $3,750,000 (1.0 x $3,750,000) payable to SELLERS and NCT as
follows:
|
|
|
(A)
|
Cash
Payment of $750,000 ($750,000 - $0) to be split 85%/15% between SELLER and
NCT
|
|
|
(B)
|
Contingent
Notes in the aggregate amount of $3,000,000 ($3,750,000 - $750,000) to be
split 85%/15% between SELLER and
NCT
|
44
Schedule
16(g)
Policies
of Insurance
|
Company
Name
|
Insurance
Type
|
Start
Date
|
End
Date
|
Amount
Covered
|
|
Zurich
American Insurance Company
|
General
Liability
|
3/15/2008
|
3/15/2009
|
$2,000,000.00
|
|
Zurich
American Insurance Company
|
Automobile
Liability & Physical Damage
|
3/15/2008
|
3/15/2009
|
$1,200,000.00
|
|
Steadfast
Insurance Company
|
Excess
Liability
|
3/15/2008
|
3/15/2009
|
$4,000,000.00
|
|
General
Star Insurance Company
|
Commercial
Property
|
3/15/2008
|
3/15/2009
|
$880,000.00
|
|
Zurich
American Insurance Company
|
California
Workers' Compensation
|
12/31/2007
|
12/31/2008
|
$1,000,000.00
|
|
Steadfast
Insurance Company
|
Professional
Environmental Consultant's Liability
|
3/15/2008
|
3/15/2009
|
$1,000,000.00
|
|
HCC
Surety Group
|
Bidder's
Bonds
|
7/09/2008
|
10/01/2008
|
$10,000.00
|
|
Arch
Insurance Company
|
Bidder's
Bonds
|
3/21/2008
|
10%
of Bid
|
|
|
American
Contractors Indemnity Company
|
Bidder's
Bonds
|
7/09/2008
|
$10,000.00
|
|
|
American
Contractors Indemnity Company
|
ERISA
Bond
|
11/27/2007
|
11/27/2010
|
$150,000.00
|
|
Economy
Bonds & Insurance Services
|
Contractors
Bond
|
10/02/2007
|
11/01/2010
|
$12,500.00
|
|
American
Contractors Indemnity Company
|
Bond
of Qualifying Individual
|
10/02/2007
|
10/02/2009
|
$10,000.00
|
|
American
Contractors Indemnity Company
|
Waste
Tire Hauler Bond
|
11/02/2005
|
Yearly
|
$10,000.00
|
45
Schedule
16(h)
Material
Contracts
Customer
Contracts:
|
Customer
Name
|
Contract
Number
|
Start
Date
|
End
Date
|
Contract
Value
|
|
Anaheim,
City Of
|
MA
106 400372
|
03/01/2008
|
02/28/2009
|
Per
Unit
|
|
▇▇▇▇▇▇▇
Hills, City of
|
99-08
|
06/23/2008
|
12/19/2008
|
$111,114.00
|
|
Caltrans
|
07A2046
A01
|
07/17/2008
|
09/12/2008
|
$2,498,000.00
|
|
Caltrans
|
12a1118
|
12/01/2007
|
11/30/2010
|
$58,100.00
|
|
Caltrans
|
07A2226
|
09/01/2007
|
06/30/2009
|
$363,800.00
|
|
The
Dial Corporation
|
4750003847
|
01/01/2008
|
12/31/2008
|
$15,600.00
|
|
Los
Angeles County: Internal Services Dept.
|
PO-15-32000
|
08/04/2008
|
06/30/2009
|
$318,000.00
|
|
Los
Angeles County Sheriff
|
DPO-SH-36505732-2
|
07/17/2008
|
$87,500.00
|
|
|
Los
Angeles County Sheriff
|
DPO-SH-36505734
|
07/01/2008
|
06/30/2009
|
$19,500.00
|
|
Orineco
|
11/9/2006
|
11/9/2008
|
Vendor
Contracts:
|
Vendor
Name
|
Start
Date
|
End
Date
|
Contract
Service
|
|
Penske
Truck Leasing
|
01/01/2008
|
N/A
|
Leased
Vehicles
|
|
Arch
Insurance Company
|
06/30/2006
|
N/A
|
Bond
Services
|
|
▇▇▇▇
▇▇▇▇▇▇ Companies
|
01/01/2008
|
N/A
|
Short
Term Rental of Vehicles
|
|
Athens
Services
|
03/31/2007
|
N/A
|
Trash
Service
|
|
GSM
Insurance Services
|
03/01/2008
|
N/A
|
Insurance
Broker Services
|
|
Airgas
|
02/19/2008
|
N/A
|
Dry
Ice
|
|
California
Drug Testing Associates
|
03/24/2008
|
N/A
|
Drug/Alcohol
Testing Program
|
|
HCC
Surety Group
|
07/09/2008
|
08/31/2008
|
Bond
Services
|
|
Recycle
Service Agreement
|
05/06/2005
|
N/A
|
Disposal
Services
|
|
MB
Trucking
|
09/14/2004
|
N/A
|
Trucking
Subcontractor
|
|
▇▇▇▇▇▇
Trucking
|
09/26/2007
|
N/A
|
Trucking
Subcontractor
|
[Schedule
continues on next page]
46
|
Vendor
Name
|
Start
Date
|
End
Date
|
Contract
Service
|
|
Southbound
Transportation
|
09/18/2007
|
N/A
|
Trucking
Subcontractor
|
|
GoDaddy
|
01/15/2005
|
N/A
|
Email
Services
|
|
▇▇▇▇▇▇
Mailing Systems and Solutions
|
10/26/2005
|
12/31/2008
|
Postage
Meter
|
|
Paetec
Communications
|
10/22/2004
|
N/A
|
Phone
Services and T1 LAN Line
|
|
@Road
|
11/19/2004
|
N/A
|
GPS
Service in Trucks
|
|
ADP
|
05/18/2005
|
N/A
|
Payroll
Services
|
|
U.S.
Health Works
|
07/13/2006
|
N/A
|
Health
Exam Services
|
|
▇▇▇▇▇
Tanks
|
06/22/2006
|
N/A
|
Truck
Rentals
|
|
Benefit
Consulting Group
|
11/10/2006
|
N/A
|
Benefits
Administration Profit
Sharing Plan
|
|
Occuscreen
|
03/15/2007
|
N/A
|
Employment
Screening
|
|
Cintas
|
02/01/2007
|
N/A
|
Uniform
Rental
|
|
▇▇▇▇▇'▇
Landscape Maintenance
|
08/28/2007
|
N/A
|
Lawn
Maintenance
|
|
Citistreet
|
04/30/2008
|
N/A
|
401.K
Administration
|
|
GE
Capital
|
06/20/2008
|
06/20/2010
|
Copier
Machines
|
Agreements
with Employees:
ISLAND
has in place at-will employee agreements in standard form with all of its
employees, copies of which have been made available to BUYER.
ISLAND
also has in place agreements for bonuses for the following
employees:
A. ▇▇▇▇▇▇▇▇
▇▇▇▇▇, 5% of net profits on Caltrans Projects
B. ▇▇▇▇ ▇▇▇▇▇▇, 5% of net
profits on Caltrans and construction projects
See
Section 16(l) regarding equipment leases
47
Schedule
16(i)
Pending
Actions
1. In
process of audit by L.A. County Tax Assessor’s Office – 57lL (Busines
Property)
2. Worker’s
Comp Claims Still Open:
A. ▇▇▇▇ ▇▇▇▇▇▇ –
DOI 1/17/06 – Back Injury
B. ▇▇▇▇ ▇▇▇▇▇▇ – DOI 8/15/07
– Hernia Repair
C. ▇▇▇▇▇ Suits –
DOI 8/21/07 - Back Injury
48
Schedule
16(l)
Leased
Assets
1. 2006
Freightliner (Unit #99) – Leased from Penske
2. 3
Konica Copiers – Leased from GE Capital
3. Postage
Meter – Leased from ▇▇▇▇▇▇▇
49
Schedule
16(q)
Certain
Financial Information
|
1.
|
Schedules
included in IES 12-31-07 binder which includes balance sheets, income
statements, reconciliations of EBITDA and supporting financial
data.
|
|
2.
|
Schedules
included in IES 9-30-06 binder which includes balance sheets, income
statements, reconciliations of EBITDA and supporting financial
data.
|
|
3.
|
Schedules
included in IES 12-31-06 binder which includes balance sheets, income
statements, reconciliations of EBITDA and supporting financial
data.
|
|
4.
|
Schedules
included in IES 9-30-05 binder which includes balance sheets, income
statements, reconciliations of EBITDA and supporting financial
data.
|
|
5.
|
Check
Register for pay date 01/14/05
|
|
6.
|
Payroll
Register for pay date 01/13/06
|
|
7.
|
Payroll
Register for pay date 01/12/07
|
|
8.
|
Vacation
schedules12/2004 through 07/2008
|
|
9.
|
Balance
Sheet at 03/31/08
|
|
10.
|
Balance
Sheet and Income Statement at
05/31/08
|
|
11.
|
Balance
Sheet and Income Statement at
06/30/08
|
|
12.
|
Balance
Sheet and Income Statement at
07/31/08
|
|
13.
|
Trial
balance from 01/01/08 – 03/31/08
|
|
14.
|
Accounts
Receivable Aging Detail Report at
03/31/08
|
|
15.
|
Income
Statement by month for FYE 12/31/07
|
|
16.
|
Income
Statement by month for FYE 12/31/06
|
|
17.
|
Reviewed
Financial Statement at 12/31/07
|
|
18.
|
Equipment
List at 04/01/08
|
|
19.
|
Accounts
Payable Journal from 03/01/08 –
03/31/08
|
|
20.
|
Account
Balance Statement for profit sharing plan from 10/01/06 –
09/30/07
|
|
21.
|
Fixed
Asset Detail at 12/31/06
|
|
22.
|
Balance
Sheet, Income Statement, Trial Balance, Payroll Accrual, Vacation Accrual,
Fixed Asset Detail, AR Aging Summary, AP Aging Summary for FYE
12/31/05
|
|
23.
|
Balance
Sheet, Income Statement, Trial Balance, Payroll Accruals for FYE
12/31/06
|
|
24.
|
Income
Statement, Balance Sheet, Trial Balance at
09/30/07
|
|
25.
|
Balance
Sheet, Income Statement, Trial Balance at
09/30/06
|
|
26.
|
Balance
Sheet, Income Statement at 09/30/04
|
|
27.
|
Island
Stormwater Services Income Statement at
09/30/06
|
|
28.
|
Balance
Sheet, Income Statement at 09/30/03
|
|
29.
|
Property
Tax form 571L for 2008
|
|
30.
|
Vendor
information on K-Pure Waterworks, Pacific Resource Recovery, Rain for
Rent, and US Ecology & Remedy
Environmental
|
|
31.
|
AR
& AP Aging Detail at 07/31/08
|
|
32.
|
Fixed
Asset GL Transaction Register at
07/2008
|
50
Schedule
16(r)
Financial
Statements
[Attached
hereto]
51
Schedule
16(y)
Permits,
Licenses, Franchises, etc.
|
Name
of Permitting/Licensing Agency
|
Expiration
Date
|
|
ENVIRONMENTAL
PROTECTIVE AGENCY IDENTIFICATION NUMBER
|
N/A
|
|
MOTOR
CARRIER PERMIT
|
N/A
|
|
HAZARDOUS
MATERIALS CERTIFICATE OF REGISTRATION
|
06/30/09
|
|
U.S.
DOT IDENTIFICATION #465272
|
N/A
|
|
U.S.
DOT MOTOR CARRIER SAFETY RATING CERTIFICATE OF ACHIEVEMENT
|
N/A
|
|
STATE
OF CALIFORNIA, DEPT OF TOXIC SUBSTANCES CONTROL
|
10/31/08
|
|
METROPOLITAN
TRANSPORTATION AUTHORITY
|
12/11/09
|
|
WMBE
CLEARING HOUSE - CITY
OF LOS ANGELES
|
01/24/09
|
|
COUNTY
OF LOS ANGELES - OFFICE OF AFFIRMATIVE ACTION COMPLIANCE
|
11/29/09
|
|
STATE
OF CALIFORNIA CERTIFICATION OF
STATUS
|
02/28/09
|
|
CALIFORNIA
HIGHWAY PATROL - HAZARDOUS
MATERIAL TRANSPORTATION
|
03/31/09
|
|
CALIFORNIA
STATE BOARD OF EQUALIZATION - SELLER'S PERMIT
|
N/A
|
|
CITY
OF LOS ANGELES - TAX
REGISTRATION CERTIFICATE
|
N/A
|
|
CALIFORNIA
STATE BOARD OF EQUALIZATION USE
FUEL TAX PERMIT
|
N/A
|
|
INTERNATIONAL
FUEL TAX AGREEMENT
|
12/31/08
|
|
DEPARTMENT
OF FOOD & AGRICULTURE
|
12/31/08
|
|
CITY
OF POMONA
|
06/30/08
|
|
CITY
OF FULLERTON
|
04/01/09
|
|
CITY
OF INGLEWOOD
|
12/31/08
|
|
STATE
OF CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS
|
11/29/09
|
|
STATE
OF CALIFORNIA DEPARTMENT OF INDUSTRIAL RELATIONS
|
11/29/09
|
|
LOS
ANGELES COUNTY FIRE DEPARTMENT
|
12/31/08
|
|
NATIONAL
MOTOR FREIGHT TRAFFIC ASSOCIATION, INC.
|
06/30/09
|
|
CITY
OF RENO
|
02/28/09
|
|
DEPARTMENT
OF GENERAL SERVICES OFFICE
OF SMALL BUSINESS CERTIFICATION AND RESOURCES
|
07/31/09
|
|
ALLIANCE
FOR UNIFORM HAZMAT TRANSPORTATION PERMIT
|
12/31/08
|
|
METROPOLITAN
TRANSPORTATION AUTHORITY
|
10/12/08
|
|
CALIFORNIA
DRUG TESTING ASSOCIATES
|
12/31/08
|
|
UTAH
DEPT. OF TRANSPORTATION
|
UNKNOWN
|
|
ARKANSAS
HAZARDOUS WASTE TRANSPORTATION
PERMIT
|
01/05/09
|
|
CALIFORNIA
UNIFIED CERTIFICATION PROGRAM (MTA-CERT DBE/MBE)
|
06/01/08
|
|
CITY
OF RIVERSIDE
|
06/21/09
|
|
GENERAL
ENGINEERING A. CONTRACTORS
STATE LICENSE BOARD
|
10/31/08
|
52
|
STATE
OF CALIFORNIA, DEPT. OF TOXIC SUBSTANCE CONTROL
(TTU)
|
06/12/09
|
|
STATE
WATER RESOURCES CONTROL BOARD DIV.
OF WATER QUALITY
|
N/A
|
|
COUNTY
OF LOS ANGELES DEPT.
OF HEALTH SERVICES
|
06/30/08
|
|
COUNTY
OF LOS ANGELES DEPT.
OF HEALTH SERVICES
|
06/30/08
|
|
ARIZONA
DEPARTMENT OF ENVIRONMENTAL
QUALITY
|
12/31/07
|
|
STATE
OF NEW MEXICO TAXATION
& REVENUE DEPT.
|
12/31/08
|
|
CALIFORNIA
INTEGRATED WASTE MANAGEMENT BOARD
|
12/31/08
|
|
OREGON
DEPARTMENT OF TRANSPORTATION
|
12/31/08
|
|
CALIFORNIA
REGIONAL WATER QUALITY CONTROL BOARD
|
08/01/08
|
|
CALIFORNIA
REGIONAL WATER QUALITY CONTROL BOARD
|
08/01/08
|
|
LOS
ANGELES COUNTY FIRE DEPT. – CUPA
|
12/11/08
|
|
LICENSED
CONTRACTOR’S INSURANCE AGENCY
|
10/02/09
|
|
CITY
OF SANTA FE SPRINGS
|
07/31/08
|
|
US
DEPT. OF TRANSPORTATION MOTOR
CARRIER PERMIT – FEDERAL
|
N/A
|
|
U.S.
DEPT. OF TRANSPORTATION (PIPELINE & HAZARDOUS MATERIALS SAFETY
ADMINISTRATION)
|
04/30/09
|
|
COUNTY
OF LOS ANGELES, DEPARTMENT OF HEALTH SERVICES
|
06/28/08
|
|
COUNTY
OF LOS ANGELES, DEPARTMENT OF PUBLIC HEALTH
|
04/28/08
|
|
BOND
SERVICES OF CALIFORNIA
|
11/02/08
|
|
STATE
OF CALIFORNIA, SECRETARY OF STATE
|
02/29/08
|
|
DIESEL
AIR FLEET SERVICE
|
06/09/08
|
|
UNIFORM
INTERMODAL INTERCHANGE & FACILITIES ACCESS AGREEMENT
(UIIA)
|
11/15/08
|
|
COUNTY
SANITATION DISTRICTS OF LOS
ANGELES COUNTY
|
12/31/08
|
|
COUNTY
SANITATION DISTRICTS OF LOS
ANGELES COUNTY
|
12/31/08
|
|
COUNTY
OF RIVERSIDE, COMMUNITY
HEALTH AGENCY DEPT.
OF ENVIRONMENTAL HEALTH
|
12/31/08
|
|
SANTA
▇▇▇ WATERSHED PROJECT AUTHORITY
(SAWPA)
|
05/27/10
|
53
Schedule
19(g)
Indemnification
Claim Procedures
Claims for
Indemnity. Whenever a claim for Losses shall arise for which
one party the (the “Indemnified Party”)
shall be entitled to indemnification hereunder, the Indemnified Party shall
notify the other party (the “Indemnifying Party”)
in writing describing the claim and the basis therefor; provided however, that
the failure to give notice shall not affect the right of the Indemnified Party
to indemnification hereunder except to the extent that such failure prejudices
the ability of the Indemnifying Party to defend any claim. The right
of the Indemnified Party to indemnification, as set forth in this notice, shall
be deemed agreed to by the Indemnifying Party unless, within thirty (30) days
after the mailing of such notice, the Indemnifying Party shall notify the
Indemnified Party in writing that it disputes the right of the Indemnified Party
to indemnification. If the Indemnified Party shall be duly notified
of such dispute, the parties shall attempt to settle and compromise the
same.
Defense of
Claims. Upon receipt by the Indemnifying Party of a notice
from the Indemnified Party with respect to any claim of a third party against
the Indemnified Party, and acknowledgment by the Indemnifying Party (whether
after resolution of a dispute or otherwise) of the Indemnified Party’s right to
indemnification hereunder with respect to such claim, the Indemnifying Party
shall assume the defense of such claim with counsel reasonably satisfactory to
the Indemnified Party and the Indemnified Party shall cooperate to the extent
reasonably requested by the Indemnifying Party in defense or prosecution
thereof, provided that the Indemnified Party is reimbursed by the Indemnifying
Party for its costs in connection with such cooperation. If the
Indemnifying Party shall acknowledge the Indemnified Party’s right to
indemnification and elect to assume the defense of such claim, the Indemnified
Party shall have the right to employ its own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of the Indemnified
Party, unless there is, under applicable standards of conduct, a conflict on any
significant issue between Indemnifying Party and the Indemnified Party that
makes it improper for one counsel to represent both parties, in which case the
reasonable fees and expenses of such counsel shall be at the expense of the
Indemnifying Party. If the Indemnifying Party has assumed the defense
of any claim against the Indemnified Party, the Indemnifying Party shall have
the right to settle any claim for which indemnification has been sought and is
available hereunder; provided that, to the extent that such settlement requires
the Indemnified Party to take, or prohibits the Indemnified Party from taking,
any action or purports to obligate the Indemnified Party, then the Indemnifying
Party shall not settle such claim without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld. If the Indemnifying Party does not assume the defense of a
third party claim and disputes the Indemnified Party’s right to indemnification,
the Indemnifying Party shall have the right to participate in the defense of
such claim through counsel of its choice, at the Indemnifying Party’s expense,
and the Indemnified Party shall have control over the litigation and authority
to resolve such claim subject to this Schedule 19(e).
54