Document:

Exhibit 10.3

 

EXECUTION
VERSION

 

January
31, 2017

 

Waste
Services Industries, LLC

333-B
Industrial Drive,

Petersburg,
Virginia 23803

Attn:
Charles A. Wilcox

President
and CEO

 

	 	Re:	Exclusivity Letter

 

Dear
Charles:

 

This
exclusivity letter (this “Exclusivity Letter”) sets forth the intention of the undersigned, Meridian Waste
Solutions, Inc., a New York corporation (“Meridian”), and Waste Services Industries, LLC, a Delaware limited
liability company (“WSI”), to discuss a potential transaction (the “Transaction”) pursuant
to which Meridian would purchase, and WSI would sell, all of the issued and outstanding membership interests of The CFS Group,
LLC, a Virginia limited liability company (“CFS Group”), The CFS Group Disposal & Recycling Services, LLC,
a Virginia limited liability company (“CFS Disposal”), and RWG5, LLC, a Virginia limited liability company
(“RWG5” and together with CFS Group and CFS Disposal, the “Companies” and each a “Company”).

 

		1.	Exclusivity.

 

		(a)	In
                                         order to allow Meridian sufficient opportunity to negotiate the terms of the Transaction,
                                         arrange for its financing, complete its due diligence review and prepare definitive agreements
                                         and other definitive documentation relating thereto, Meridian and WSI hereby agree that
                                         (i) Meridian will deliver to WSI payment in the amount of One Million Five Hundred Thousand
                                         Dollars ($1,500,000) (the “Exclusivity Payment”) on the date hereof
                                         and (ii) WSI agrees that neither it, nor any of the Companies, or any of their respective
                                         affiliates, shareholders, members, partners, officers, directors, managers, employees,
                                         agents or representatives, will, directly or indirectly, pursue, solicit, encourage or
                                         participate in negotiations, furnish information or enter into any agreement or commitments
                                         regarding any transaction involving the Companies by any potential purchaser or investor
                                         other than Meridian, or any merger, sale or other transaction resulting in the purchase,
                                         transfer, assignment or other conveyance of of all or substantially all of the assets
                                         or membership interests of any or all of the Companies during the Exclusivity Period
                                         (as defined below). During the Exclusivity Period, WSI will promptly (and in any event,
                                         within 24 hours) notify Meridian in writing of any third party offers (written or oral)
                                         with respect to the Companies or any assets or securities thereof outside of the ordinary
                                         course of business.

 

		(b)	The
                                         “Exclusivity Period” shall be the period beginning on the date hereof
                                         and ending on the Expiration Date. The “Expiration Date” shall be
                                         March 21, 2017.

 

    

     

    

 

		(c)	The
                                         Exclusivity Payment will be refundable in full to Meridian in the event that (1) (A)
                                         WSI does not negotiate with Meridian the terms and conditions of the Transaction in good
                                         faith, or (B) WSI does not enter into a Definitive Agreement (as defined below) within
                                         the Exclusivity Period or (C) WSI does not consummate the Closing (as defined below)
                                         pursuant to and in accordance with the Definitive Agreement and Meridian stands in good
                                         faith ready, willing and able to do so; or (2) WSI or any of the Companies, or any of
                                         their respective affiliates, shareholders, members, partners, officers, directors, managers,
                                         employees, agents or representatives does not comply with the exclusivity terms set forth
                                         in subsection (a) of this Section 1 above or commits any other breach of this Exclusivity
                                         Letter. If Closing of the Transaction does not occur for any reason other than those
                                         set forth in the preceding sentence, the Exclusivity Payment shall be retained by WSI
                                         as liquidated damages as WSI’s sole and exclusive remedy in such event.

 

		2.	Definitive
                                         Agreement. Consummation of the Transaction as contemplated hereby will be subject
                                         to the negotiation and execution of a mutually satisfactory definitive membership interest
                                         purchase agreement by Meridian and WSI (the “Definitive Agreement”),
                                         setting forth the specific terms and conditions of the Transaction. The total purchase
                                         price for the membership interests in the Companies will be set forth in the Definitive
                                         Agreement, but such purchase price will not exceed (i) $40,000,000 in cash and (ii) 500,000
                                         shares of Meridian’s common stock (which shares Meridian and WSI agree to have
                                         a value of $5,000,000). Such cash portion of the purchase price may be reduced as is
                                         necessary to reflect the Companies’ liabilities, pro-rations or other adjustments
                                         agreed upon in the course of negotiations and due diligence review. The closing of the
                                         Transaction pursuant to the Definitive Agreement (the “Closing”) shall
                                         be subject to the completion by Meridian of a satisfactory review of the legal, financial
                                         and business condition of the Companies and the parties’ completion of negotiations
                                         regarding the specific terms and conditions of the Transaction, including, without limitation,
                                         with respect to the Companies’ assets, contracts, liabilities and other key terms.
                                         The parties will negotiate in good faith such Definitive Agreement. At Closing, the Exclusivity
                                         Payment will be credited against the total purchase price for the membership interests
                                         in the Companies set forth in the Definitive Agreement.

 

		3.	Conduct
                                         of Business. Prior to the execution of a Definitive Agreement and the Closing of
                                         the Transaction, the Companies will conduct their operations in the ordinary course consistent
                                         with past practice and will not make any distributions, dividends or other payments to
                                         any affiliate or member outside of the ordinary course of business, except as disclosed
                                         in or allowed by the Definitive Agreement or otherwise in connection with Closing the
                                         Transaction.

 

		4.	Due
                                         Diligence; Confidentiality Agreement. Each party and its representatives, officers,
                                         employees and advisors, including accountants and legal advisors, as applicable, will
                                         provide the other party and its representatives, officers, employees and advisors, including
                                         accountants and legal advisors, as applicable, with all information, books, records and
                                         property (collectively, “Transaction Information”) that such other
                                         party reasonably considers necessary or appropriate in connection with its due diligence
                                         inquiry. Meridian and WSI are parties to a Non-Disclosure Agreement dated September 12,
                                         2016 which remains in full force and affect, and each of the parties acknowledges and
                                         confirms that all Transaction Information shall be governed by and subject to such Non-Disclosure
                                         Agreement; provided, however, that nothing contained therein or in this Exclusivity Agreement
                                         will limit, restrict or prohibit Meridian from making disclosures as determined to be
                                         required under securities laws, in the sole discretion of Meridian and its counsel, nor
                                         will any such disclosure be deemed a breach or violation of the confidentiality obligations
                                         hereunder or thereunder.

 

    2

     

    

 

		5.	No
                                         Brokers. Each party represents and warrants to the other that there are no brokers
                                         or finders entitled to any compensation with respect to the execution of this Exclusivity
                                         Letter, and each agrees to indemnify and hold the other harmless from and against any
                                         expenses or damages incurred as a result of a breach of this representation and warranty.

 

		6.	Expenses.
                                         Each of the parties will be responsible for its own expenses in connection with the Transaction,
                                         including fees and expenses of legal, accounting and financial advisors.

 

		7.	Choice
                                         of Law. This Exclusivity Letter shall be governed by and construed in accordance
                                         with the internal substantive laws of the Commonwealth of Virginia, without regard to
                                         any principles of conflicts of law and except with respect to service of process methodology.
                                         Each of the parties hereby irrevocably consents and agrees that any legal or equitable
                                         action or proceeding arising under or in connection with this Exclusivity Letter shall
                                         be brought in any federal court located in the Northern District of Georgia or state
                                         court located in Fulton County, Georgia and delivery of this Exclusivity Letter, irrevocably
                                         submits to and accepts the jurisdiction of said courts, (iii) waives any defense that
                                         such court is not a convenient forum, and (iv) consent to any service of process method
                                         permitted by Georgia or federal law.

 

		8.	Counterparts.
                                         This Exclusivity Letter may be executed in counterparts, each of which shall be deemed
                                         an original, but all of which together shall constitute one and the same instrument.
                                         Fax or PDF copies of signatures shall be treated as originals for all purposes.

 

		9.	Effect.
                                         Meridian shall not have any obligation to continue discussions or negotiations relating
                                         to any proposed Transaction if Meridian determines (in its sole discretion) that such
                                         termination of discussions or negotiations is in Meridian’s best interests. Until
                                         the Definitive Agreement is executed and delivered by Meridian and WSI, Meridian shall
                                         not have any obligation to consummate the Transaction or any other liabilities to WSI,
                                         except as expressly provided in this Exclusivity Letter with respect to the Exclusivity
                                         Payment, subject in all respects to Section 1(c) hereof. Accordingly, Meridian may, in
                                         its sole discretion, abandon or terminate these discussions or any negotiations relating
                                         to a proposed Transaction at any time or for any reason, without liability to WSI for
                                         costs or expenses of any sort incurred by WSI in pursuing the proposed Transaction except
                                         as expressly provided in this Exclusivity Letter with respect to the Exclusivity Payment,
                                         subject in all respects to Section 1(c) hereof. This Exclusivity Letter does not constitute
                                         an offer to purchase or an offer to sell, or any purchase or sale of, any securities.
                                         This Exclusivity Letter contains the entire agreement by and among the parties to date
                                         with respect to the subject matter hereof and supersedes any and all prior agreements
                                         and understandings, oral or written, with respect to such matters.

 

[-remainder
of page intentionally left blank-]

 

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This
Exclusivity Letter will terminate at 5:00 p.m. Eastern standard time on February 3, 2017 unless it has been duly executed by or
on behalf of the parties prior to such time.

 

	 	 	 	Very
    truly yours,
	 	 	 	 	 
	 	 	 	MERIDIAN
    WASTE SOLUTIONS, INC.
	 	 	 	 	 
	 	 	 	By:	/s/
    Jeffrey Cosman
	 	 	 	Name:	Jeffrey
    Cosman
	 	 	 	Title:	Chief
    Executive Officer
	 	 	 	 	 
	Agreed
    and acknowledged:	 	 	 
	 	 	 	 	 
	WASTE
    SERVICE INDUSTRIES, LLC	 	 	 
	 	 	 	 	 
	By:	/s/
    Charles Wilcox	 	 	 
	Name:	Charles
    A. Wilcox	 	 	 
	Title:	President
    and CEO	 	 	 

 

 

4Exhibit
10.1

 

SECOND
AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT
TO LOAN AND SECURITY AGREEMENT (“Amendment”)
is entered into as of April 3, 2017 (“Effective Date”), between NANOFILM, LTD., an Ohio
limited liability company (“Borrower”) and MACKINAC COMMERCIAL CREDIT ABL DIVISION OF MBANK, a Michigan
banking corporation and successor in interest to Mackinac Commercial Credit, LLC, a Michigan limited liability company (together
with its successors and assigns, the “Lender”).

 

RECITALS

 

A.
Lender and Borrower entered into a Loan and Security Agreement dated April 4, 2014, as amended by a First Amendment to Loan and
Security Agreement dated effective as of April 4, 2015 (as amended, the “Loan Agreement”). All capitalized
terms not defined herein shall have the same meanings ascribed to such terms in the Loan Agreement.

 

B.
Lender and Borrower have agreed to modify the terms and conditions of the Loan Agreement and Borrower and Lender wish to set forth
their agreement regarding the foregoing in this Amendment.

 

NOW,
THEREFORE, in consideration of the mutual covenants, conditions, and provisions as hereinafter set forth, the parties hereto
agree as follows:

 

1.
Restated Note. Concurrently with the execution and delivery of this Amendment, the Borrower shall execute and deliver
to the Lender an Amended and Restated Revolving Credit Loan Note, evidencing the Revolving Credit Loan in the principal amount
of $1,500,000 in form and substance satisfactory to the Lender (the “Restated Note”). Upon receipt by the Lender
of the Restated Note, the Revolving Credit Loan and all accrued and unpaid interest on that certain Revolving Credit Loan Note
dated April 4, 2014 in the original principal amount of $1,500,000 (the “Existing Revolving Note”) shall thereafter
be evidenced by the Restated Note; and all references to the “Revolving Credit Loan Note” or “Note” evidencing
the Revolving Credit Loan in the Loan Documents relating thereto shall thereafter be deemed to refer to the Restated Note. Without
duplication, the Restated Note shall not constitute a novation and shall in no way extinguish the Borrower’s unconditional
obligation to repay all indebtedness, including accrued and unpaid interest, evidenced by the Existing Revolving Note.

 

2.
Interest Rate. The definition of “Interest Rate” as set forth in Paragraph 2(c) of the Term Sheet to the
Loan Agreement is hereby amended to the “Prime Rate plus 3.0%”.

 

(a)
The following definition of “Prime Rate” is hereby added to Section 1 of the Loan Agreement in appropriate alphabetical
sequence:

 

“Prime
Rate” shall mean the U.S. prime rate of interest as published in the Money and Investing Section of the Wall Street
Journal (or other comparable publication if the Wall Street Journal is no longer being published, as determined by the Lender).
The Prime Rate is not necessarily the lowest rate of interest which may be available from the Lender on fluctuating rate loans.

 

3.
Maturity Date. The definition of “Maturity Date” as set forth in Paragraph 2(e) of the Term Sheet to the
Loan Agreement is hereby amended to the earlier of demand or April 4, 2018.

 

4.
Renewal. Section 2(e) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

(e)
Term; Automatic Renewal. The term of this Agreement and of the Loan shall be on Demand, but if Demand is not made, then
no later than the date set forth on the Term Sheet (the “Maturity Date”). Notwithstanding anything to the contrary
or inconsistent contained herein, provided no Default exists, the Maturity Date, as extended to April 4, 2018 pursuant to the
Second Amendment to Loan and Security Agreement dated April 3, 2017 will automatically be further extended one time for one (1)
year (“Renewal Term”), unless either party notifies the other party in writing of its intent not to so extend
the Maturity Date at least sixty (60) days prior to the original Maturity Date. If the Maturity Date is extended, Borrower shall
pay to Lender a renewal fee in the amount of one percent (1.0%) of the Maximum Loan Amount, which shall be due and payable on
or before the beginning of the Renewal Term.

 

    	1 

    	 

    

 

5.
Change in Name. Section 10(i) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

(i)
use any other corporate or fictitious name; provided however, that Borrower may change its entity name to “Pen Brands LLC”
on or prior to December 31, 2017 so long as it has provided Lender with 10 days’ prior written notice thereof. Upon the
effectiveness of such name change, any and all references herein or in the other Loan Documents to “nanoFILM, Ltd.”
or “Nanofilm, Ltd.” shall be deemed to refer to “Pen Brands, LLC.”

 

6.
Tri-Annual Exams. The first sentence of Section 5(a) of the Loan Agreement is hereby amended and restated in its entirety
to read as follows:

 

Lender
may, at all reasonable times, but no less than three times in any fiscal year, have access to, examine, audit, make extracts from
and inspect Borrower’s records, files, books of account and the Collateral.

 

7.
Conditions to Effectiveness. The effectiveness of this Amendment shall be subject to satisfaction of the following
conditions:

 

(a)
Amendment Documents. Borrower shall have executed and delivered, or cause to be executed and delivered to Lender, this
Amendment (including the acknowledgement and agreement to the amendments contained herein of the Guarantors), the Restated Note,
and all other documents and instruments required by Lender in connection with this Amendment.

 

(b)
Lender Expenses. Borrower shall have paid to Lender all of Lender’s legal fees and expenses incurred in connection
with the preparation, negotiation and closing of this Amendment.

 

8.
Effect of Amendment. Except for the amendments set forth in this Amendment, the Loan Agreement and all other Loan Documents
shall remain unchanged and in full force and effect. Nothing in this Amendment is intended, or shall be construed, to constitute
a novation or an accord and satisfaction of any of Borrower’s obligations under or in connection with the Loan Agreement
or any other Loan Document.

 

9.
Miscellaneous.

 

(a)
Entire Agreement. This Amendment, together with the Loan Agreement and other Loan Documents constitutes the entire agreement
and understanding among the parties relating to the subject matter hereof, and supersedes all prior proposals, negotiations, agreements
and understandings relating to such subject matter. In entering into this Amendment, Borrower acknowledges that it is relying
on no statement, representation, warranty, covenant or agreement of any kind made by the Lender or any employee or agent of Lender,
except for the agreements of Lender set forth herein.

 

(b)
Binding Effect. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns, provided that no party other than Lender may assign any of its rights or obligations hereunder without
the prior written consent of Lender.

 

(c)
Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
MICHIGAN APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE.

 

    	2 

    	 

    

 

(d)
Counterparts; Facsimile or Electronic Signatures. This Amendment may be executed in multiple counterparts, each of which
shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. A facsimile
or PDF signature shall be effective as an original signature.

 

IN
WITNESS WHEREOF,
the parties hereto have caused this Amendment to be executed and delivered as of the date first hereinabove set forth.

 

	BORROWER:	 
	 	 
	NANOFILM,  LTD.,

	 
	an
    Ohio limited liability company	 
	 	 	 
	By:	/s/
    Anne Marie Thomas 	 
	 	Anne
    Marie Thomas	 
	Title:	President	 

 

	LENDER:	 
	 	 
	MCC-ABL
    DIVISION OF MBANK,	 
	a
    Michigan banking corporation	 
	 	 	 
	By:	/s/
    Edward P. Lewan	 
	 	Edward
    P. Lewan	 
	Title:	President	 

 

ACKNOWLEDGEMENT
OF GUARANTOR

 

Scott
E. Rickert, guarantor under that certain Validity Guaranty dated April 4, 2014 in favor of Lender (the “Validity Guaranty”),
and PEN, Inc., a Delaware corporation, a guarantor under that certain Corporate Guaranty dated May 1, 2015 (the “Corporate
Guaranty”), each acknowledge the above Amendment and agrees that their respective Guaranty shall continue in full force
and effect.

 

	 	GUARANTOR:
	 	 
	 	 	/s/
    Scott E. Rickert
	 	 	 Scott
    E. Rickert, an individual
	 	 	 
	 	 PEN,
    INC.
	 	 a
    Delaware corporation
	 	 	 
	 	 By:
    	/s/
    Scott E. Rickert
	 	 	Scott
    E. Rickert
	 	 Title:	Chief
    Executive Officer

 

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