Exhibit 10.1
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REORGANIZATION PLAN AND AGREEMENT OF
DONNO COMPANY, INC.
RESIDENTIAL SERVICE, INC.
SUFFOLK WASTE SYSTEMS, INC.
NRT REALTY CORP.
EASTERN WASTE OF L.I., INC.
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
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Page
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RECITALS .......................................................................
ARTICLE I ACQUISITION; CLOSING .................................................
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS ...........................
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER ........................
ARTICLE IV TITLE INSURANCE AND SURVEY ..........................................
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS .....................................
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER ..................................
ARTICLE VII CONDITIONS OF PURCHASER ............................................
ARTICLE VIII CONDITIONS OF SELLERS .............................................
ARTICLE IX INDEMNIFICATION .....................................................
ARTICLE X OTHER PROVISIONS .....................................................
SCHEDULES
1.3 COMPANY DEBT
1.5(A) ALLOCATION OF EESI SHARES
1.5(C) OPINION OF PURCHASER'S COUNSEL
1.5(D) EMPLOYMENT AGREEMENTS
1.6(C) RELEASE BY SELLERS
1.6(E) NON-COMPETE AGREEMENT
1.6(G) OPINION OF SELLERS' COUNSEL
2.1 SUBSIDIARIES
2.2 CAPITAL STOCK
2.3 CONTRACTS, PERMITS, MORTGAGES AND MATERIAL DOCUMENTS
2.4(A) FURNITURE AND EQUIPMENT
2.4(B) VEHICLES
2.4(C) CONTAINERS
2.4(D) INVENTORY AND TIRES
2.4(E) SHOP TOOLS
2.5 CUSTOMER LIST AND CONTRACTS
2.7 ADVERSE CHANGES
2.8(B) ACCOUNTS RECEIVABLE
2.8(C) ACCOUNTS PAYABLE
2.11 INSURANCE POLICIES, PERFORMANCE BONDS AND LETTERS OF CREDIT
2.12(A) CONTRACTS WITH EMPLOYEES
2.12(B) EMPLOYEES
2.12(C) BENEFIT PLANS
2.13(A) VIOLATIONS OF FEDERAL, STATE OR LOCAL LAWS AND REGULATIONS
2.13(B) VIOLATIONS OF ENVIRONMENTAL LAWS AND REGULATIONS
2.13(C) LANDFILLS AND TRANSFER STATIONS
2.13(F) LIST AND SYNOPSIS OF ALL LITIGATION
2.15 REQUIRED CONSENTS
2.18 RELATED PARTY TRANSACTIONS
8.3 GUARANTEES
REORGANIZATION PLAN AND AGREEMENT
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This Reorganization Plan and Agreement ("Agreement") is made as of December
31, 1996, by and among Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxx Donno (individually a
"Seller" and collectively the "Sellers"), Eastern Environmental Services, Inc.
("EESI"), and Eastern Waste of L.I., Inc. ("Purchaser").
RECITALS
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Each of the Sellers is an owner of one-third of the outstanding stock of
Donno Company, Inc., Residential Service, Inc., Suffolk Waste Systems, Inc., and
NRT Realty Corp. (collectively "Companies" and individually a "Company"). The
shares of stock in the Companies owned by the Sellers (the "Company Shares")
represent all of the stock issued by the Companies. The Companies are all New
York corporations. The Companies are in the business of collecting,
transporting and disposing of special waste and municipal service waste.
The parties hereto desire that all of the issued common stock of the
Companies be acquired by EESI and Purchaser in exchange solely for the voting
stock of EESI, the parent and sole shareholder of Purchaser, on the terms
contained herein. The parties intend that the transactions contemplated hereby
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
ARTICLE I
ACQUISITION; CLOSING
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Section 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this Agreement
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shall take place on January 10, 1997, subject to the conditions set forth in
Article VII and Article VIII being satisfied or waived, at the offices of Xxxxxx
X. Xxxxxx & Associates, 0000 Xxxxx Xxxxxx, Xxxx xx Xxxxxxx, Xxxxxxxxxxxx, 00000,
or such other place as the parties hereto may agree upon. The Closing Date
shall be extended, if the conditions set forth in Article VII and Article VIII
are not satisfied by January 10, 1997, to the date which is five days after the
date such conditions are satisfied. The date that Closing occurs is referred to
hereinafter as the "Closing Date" and the act of closing as "Closing." The
exact Closing Date shall be established by a written notice sent by Purchaser to
Sellers. The written notice must provide at least five days advance notice of
the Closing Date.
Section 1.3 Agreement to Sell Stock of Companies; Consideration. At the
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Closing, each of the Sellers agrees to transfer and deliver to Purchaser all of
the Company Shares owned by such Seller, as applicable, and Purchaser agrees to
purchase and pay for the Company Shares, the total consideration, subject to
adjustment as provided herein, of Ten Million Nine Hundred Fifty Thousand
Dollars ($10,950,000) payable as follows: (i) One Million One Hundred Thirty-
seven Thousand Nine Hundred and Fifty-one (1,137,951) shares of EESI's common
stock ("EESI Stock"), each share being valued ("Per Share Value") at Nine
Dollars ($9.00), the closing price for EESI's common stock at the close of
trading on the date of this Agreement; and (ii) Purchaser accepting the Company
Stock
with the Companies having total liabilities, excluding accounts payable, of
Seven Hundred Eight Thousand Four Hundred Forty Dollars ($708,440.00), as set
forth on Schedule 1.3 attached ("Company Debt"). If the Companies, at Closing,
have total liabilities less than or more than Seven Hundred Eight Thousand Four
Hundred Forty Dollars ($708,440.00), the EESI Stock to be delivered at Closing
shall be increased or decreased, dollar for dollar, by the amount by which the
principal and accrued interest owed on the Company Debt at Closing are less than
or exceed the principal amount and accrued interest owed on the date of this
Agreement. The increase or decrease, as applicable, shall be calculated by
valuing the EESI Stock at the Per Share Value. The Sellers shall receive the
shares of EESI Stock as allocated among the Companies and in the same
proportions that the Sellers own shares in each of the Companies.
Section 1.4 Term And Time For Closing. Following execution of this
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Agreement, EESI, Purchaser and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms within fifteen (15) days after
the conditions of Closing set forth in Article VII and Article VIII have been
satisfied or waived, time being of the essence. If the failure to conclude this
transaction is due to the refusal and failure of Sellers to perform their
obligations under this Agreement, Purchaser or EESI may seek to enforce this
Agreement with an action of specific performance, in addition to, and not in
limitation of, any other rights and remedies available to the Purchaser or EESI,
under this Agreement, or at law or in equity, including, without limitation an
action to recover their actual damages resulting from the default of Sellers.
If the failure to conclude this transaction is due to the refusal and failure of
Purchaser or EESI to perform their obligations under this Agreement, Sellers, or
any of them, may, in addition to and not in limitation of any other rights and
remedies available to the Sellers, or any of them, under this Agreement, or at
law or in equity, bring legal action to recover their actual damages resulting
from the default of Purchaser or EESI.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and Xxxxxx Donno, on behalf of the
Sellers;
(b) by EESI or Xxxxxx Donno, on behalf of the Sellers, by providing the
other parties with written notice thereof, if the Closing shall not have
occurred by January 31, 1997, or such other date as may be agreed to by the
parties hereto in writing, if such notifying party is ready, willing and able to
consummate the transactions contemplated by this Agreement and all of the
conditions to the other party's obligation to close as set forth in Article VII
or VIII, as applicable, shall have been satisfied and the other party fails to
consummate the transactions contemplated by this Agreement for any reason
whatsoever;
(c) by Xxxxxx Donno, on behalf of the Sellers, or EESI, on or prior to
January 31, 1997, or such other date as may be agreed to by the parties in
writing, in the event the other makes a material misrepresentation under this
Agreement or breaches a material covenant or agreement under this Agreement; or
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(d) by Xxxxxx Donno, on behalf of the Sellers or EESI, if the Closing
shall not have occurred by January 31, 1997, or such other date as may be agreed
to by the parties hereto in writing, due to the non-fulfillment of a condition
precedent to such party's obligation to close as set forth at Article VII or
VIII hereof, as applicable (through no fault or breach by the terminating
party).
In the event this Agreement is terminated as provided herein, this
Agreement shall become void and be of no further force and effect and no party
hereto shall have any further liability to any other party hereto, except that
Section 1.4, Article IX, Section 10.2, Section 10.3 and Section 10.16 shall
survive and continue in full force and effect, notwithstanding termination. The
termination of this Agreement shall not limit, waive or prejudice the remedies
available to the parties, at law or in equity, for a breach of this Agreement.
Section 1.5. Deliveries by Purchaser and EESI. At the Closing,
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Purchaser and EESI shall deliver, all duly and properly executed, authorized and
issued (where applicable):
(a) The EESI Stock, as provided in Section 1.3 above, to be delivered to
the Sellers, and allocated for the common stock of each of the Companies as set
forth on Schedule 1.5(a);
(b) A certified copy of resolutions of the directors and shareholder of
Purchaser and the directors of EESI authorizing the execution and delivery of
this Agreement and each other agreement to be executed in connection herewith,
including, but not limited to the Employment Agreements (collectively, the
"Collateral Documents") and the consummation of the transactions contemplated
herein and therein;
(c) A favorable opinion from counsel for Purchaser, dated the Closing
Date in the form attached as Schedule 1.5(c);
(d) Employment Agreements with Xxxxxx Donno, Xxxxxx Xxxx and Xxxxxx Xxxxxx
in the form and content of the Employment Agreements attached hereto as Schedule
1.5(d) (the "Employment Agreements"); and
(e) The Certificate described at Section 8.1.
Section 1.6. Deliveries by Sellers. At the Closing, each of the Sellers,
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as applicable, shall deliver to Purchaser, all duly executed the following:
(a) Each of the Sellers, as applicable, shall deliver to Purchaser duly
executed certificates in valid form evidencing all of the Company Shares owned
by each such Seller, duly endorsed in blank or accompanied by duly executed
stock powers attached or otherwise executed in the presence of authorized
representatives of Purchaser;
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(b) Except as may be otherwise required by Purchaser, or as set forth
herein or in the Employment Agreements, the written resignations of all officers
and directors of each Company at the Closing Date;
(c) A release from each Seller, in the form attached as Schedule 1.6(c),
which provides that the Sellers are releasing the Companies from any and all
claims, causes of action, debts and obligations whatsoever existing on the
Closing Date;
(d) Each of the Sellers who are parties to the Employment Agreements with
Purchaser, in the form attached as Schedule 1.5(d) to this Agreement shall
execute such agreements, as applicable;
(e) Each of the Sellers shall execute the Covenant Not to Compete
Agreement attached to this Agreement as Schedule 1.6(e);
(f) The Sellers shall have delivered to Purchaser a current certificate of
good standing for each Company from the New York Secretary of State;
(g) A favorable opinion from counsel for the Sellers, dated the date of
the Closing, in form attached as Schedule 1.6(g);
(h) Each of the Sellers shall execute and deliver the Certificate
described at Section 7.1; and
(i) The books and records of the Companies, including, without limitation,
all original financial and operating records, the corporate minute books, the
corporate stock ledgers, and title documents.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
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Whenever the phrase "To Sellers' knowledge" or a similar phrase is used in
this Agreement, the phrase means the actual knowledge of any of the Sellers, and
the knowledge which can be imputed to any of the Sellers by reason of such
Seller being an officer, director, or shareholder of any of the Companies. With
knowledge that Purchaser is relying upon the representations, warranties and
covenants herein contained, all of the Sellers jointly and severally represent
and warrant to Purchaser and make the following covenants for Purchaser's
benefit:
Section 2.1 Organization and Standing. Each of the Companies is a
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corporation duly organized, legally existing and in good standing under the laws
of the state of its incorporation, with full power and authority to own its
properties and conduct its business as now being conducted. The Companies do
not own any stock or interest in any other corporation, partnership, or other
business organization, except as set forth on Schedule 2.1.
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Section 2.2 Company Stock. Each of the Companies has the authorized and
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kind of capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets
forth the number of shares of the capital stock of each of the Companies issued
and outstanding. The Company Shares each Seller owns in each Company are
legally and validly authorized and issued, fully paid and nonassessable. There
are no outstanding rights of any kind to acquire additional shares of any class
of stock from any Company.
Section 2.3 Contracts, Permits and Material Documents. The items listed
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in Schedule 2.3 attached, comprise all of the following with respect to each of
the Companies ("Material Documents"): (i) leases for real and personal
property, (ii) licenses, (iii) franchises, (iv) promissory notes, guarantees,
bond, mortgages, liens, pledges, and security agreements under which any of the
Companies are bound or under which any of the Companies are the beneficiary, (v)
collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of each Company's
business, and (viii) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 2.5) which are binding on any Company or any of its property
and pursuant to which any Company derives any material benefit or has imposed
upon it any material detriment. For purposes of this Section 2.3 a material
benefit or material detriment shall be anything which provides a benefit or
imposes a detriment having a value of $25,000 or more. The Material Documents
listed on Schedule 2.3 are organized under separate headings for each of the
Companies and under subheadings for each of the different type of documents
listed. Except as set forth on Schedule 2.3, no Company nor, to the knowledge
of the Sellers, any person or party to any of the Material Documents or bound
thereby is in material or knowing default under any of the Material Documents,
and, to the knowledge of the Sellers, no act or event has occurred which with
notice or lapse of time, or both, would constitute such a default. No Company
is a party to, and no Company's property is bound by, any agreement or
instrument which is material to the continued conduct of business operations of
the Companies, taken as a whole, as now being conducted, except as listed in
Schedule 2.3.
Section 2.4 Personal Property. Attached hereto, made a part hereof and
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marked Schedule 2.4, is a listing of all items described in subparagraphs "a"
through "i," organized by Company and by subparagraph.
(a) All furniture, office equipment, mobile and base radios, transfer
station equipment, recycling equipment, and other equipment used in each
Company's business operations, all of which are owned or leased by each Company,
are listed on Schedule 2.4(a) and all of which are, in all material respects, in
good condition, normal wear and tear excepted, except as noted on Schedule
2.4(a);
(b) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors and accessories and attachments to the rolling
stock used in each Company's business
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operations together with information as to the make, description of body and
chassis, model number, serial number and year of each such vehicle, all of which
are owned by each Company, are listed on Schedule 2.4(b) and, to the knowledge
of the Shareholders, all of the vehicles are, in all material respects, in good
condition, normal wear and tear excepted, except as noted on Schedule 2.4(b);
(c) All containers used in each Company's business operations
together with information as to container size and year of manufacture, all of
which are owned or leased by each Company, are listed on Schedule 2.4(c), and
all of the containers are in good condition, in all material respects, normal
wear and tear excepted, except as noted on Schedule 2.4(c);
(d) The inventory of parts, tires and accessories owned by each
Company is listed on Schedule 2.4(d), and all of the listed inventory is, in all
material respects, in good condition, normal wear and tear excepted, except as
noted on Schedule 2.4(d);
(e) The shop tools owned by each Company are listed on Schedule
2.4(e), and all the shop tools are, in all material respects, in good condition,
normal wear and tear excepted, except as noted on Schedule 2.4(e);
Section 2.5 Customers. The name and address of each customer each Company
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serves, together with information as to the services rendered to each such
customer, frequency of service and rates charged and the contractual rights of
each customer, whether oral or in writing, are listed on Schedule 2.5 attached
hereto. No Company nor, to the knowledge of the Sellers, any person or party to
the any of the customer contracts is in material or knowing default under any of
the customer contracts, and, to the knowledge of the Sellers, no act or event
has occurred which with notice or lapse of time, or both, would constitute such
a default.
Section 2.6 Title. Each Company has good and marketable title to, or a
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valid leasehold interest in all of its assets both real property and personal
property, each free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement ("Liens"), except the items set forth in subparagraphs (a) through
(c) below, and the items listed on Schedule 2.3 ("Permitted Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(b) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation; and
(c) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment.
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Section 2.7 Financial Statements. Sellers have delivered to Purchaser
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true and correct copies of the following financial statements of the Companies
prepared by __________________________________________ (the "Financial
Statements"):
(a) A combined balance sheet for the Companies as of December 31,
1995, and a statement of income, cash flow and retained earnings for the period
ended December 31, 1995, both prepared on an accrual basis; and
(b) A combined balance sheet for the Companies as of September 30,
1996 ("Most Recent Balance Sheet"), and a statement of income, cash flow and
retained earnings for the period ended September 30, 1996 ("Most Recent Income
Statement"), both prepared on an accrual basis. The Most Recent Balance Sheet
and Most Recent Income Statement are hereafter referred to as the "Most Recent
Financial Statements." The Financial Statements have been prepared by the
regular accountants of the Companies, in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis in accordance with
past custom and practice of the Companies. All notes and contingent labilities
required to be stated and reflected under GAAP applied on a consistent basis in
accordance with past custom and practice of the Companies are stated and
reflected on the Financial Statements. The balance sheets present fairly, in
all material respects, the financial condition of the Companies as of the dates
indicated thereon and the statements of income present fairly, in all material
respects, on an accrual basis the results of the operations of the Companies for
the periods indicated thereon. Since the date of the Most Recent Balance Sheet,
the Companies have not (i) made any material change in their accounting policies
or (ii) effected any prior period adjustment to, or other restatement of, its
financial statements for any period. The Financial Statements are consistent
with the books and records of Companies (which books and records are correct and
complete in all material respects). Since the date of the Most Recent Financial
Statements, except as set forth on Schedule 2.7, there has not been any material
adverse change in the income, expenses or assets of the Companies.
Section 2.8 Liabilities; Accounts Receivable and Working Capital.
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(a) The Companies do not have any liabilities, fixed or contingent,
other than:
(i) the Company Debt;
(ii) liabilities fully reflected in the Most Recent Balance
Sheet, except for liabilities not required to be disclosed therein in accordance
with GAAP; and
(iii) liabilities arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice under contracts or other agreements, disclosed in the
Schedules referred to in this Agreement or not required to be disclosed therein
by reason of amount or other qualifications contained in the representations and
warranties of this Agreement.
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(b) All accounts receivable of the Companies are, and all accounts
receivable arising since the date of Schedule 2.8(b), will be valid accounts
receivable, and will be fully collectable in the ordinary course of business,
less an amount not exceeding $50,000 for a bad accounts reserve. Each Company's
accounts receivable, as of the date of this Agreement, are attached hereto, made
a part hereof and marked as Schedule 2.8(b). Schedule 2.8(b) give the aging of
each accounts receivable, is organized by Company and accurately reflects the
books and records of the Companies. All accounts receivable have been generated
in the ordinary course of each Company's business consistent with past practice.
To Sellers' knowledge, there are no defenses or set-offs to any of the accounts
receivable. On the Closing Date, the accounts receivable of the Companies shall
exceed the accounts payable of the Companies.
(c) Each Company's accounts payable, as of the date of this
Agreement, are attached hereto, made a part hereof and marked Schedule 2.8(c).
Schedule 2.8(c) gives the aging of each of the accounts payable and is organized
by Company. Schedule 2.8(c) accurately reflects the books and records of the
Companies as of the date of Schedule 2.8(c).
(d) On the Closing Date, the Companies on a combined basis will have
an aggregate of no less than One Million Four Hundred Thousand Dollars
($1,400,000) in working capital. For purposes of this warranty, the Companies'
working capital is agreed to consist of cash, marketable securities, pre-paid
expenses, the cash surrender value of any life insurance policies owned by the
Companies, and the amount by which the accounts receivable of the Companies
exceeds the accounts payable of the Companies on the Closing Date.
Section 2.9 Fiscal Condition of Each Company. Since the date of the
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Most Recent Balance Sheet, there has not (except as otherwise specifically
permitted by this Agreement or as set forth in the Schedules to this Agreement)
been:
(a) Any material change in the financial condition, business
organization or personnel of any Company or in the relationships of any Company
with suppliers, customers or others;
(b) Any disposition by any Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by any Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock;
(c) Any sale or other disposition of any asset owned by any Company
at the close of business on the date of the Most Recent Balance Sheet, or
acquired by it since that date, other than in the ordinary course of business
consistent with past practice or valued at $50,000 or less in the aggregate;
(d) Any expenditure or commitment by any Company for the acquisition
of any single asset, except in the ordinary course of business consistent with
past practices and having an acquisition price of $100,000 or less;
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(e) Any damage, destruction or loss (whether or not insured)
adversely affecting the property, business or prospects of any of the Companies,
except damage, destruction or loss which does not exceed $100,000 in the
aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by any Company to any officer or key employee;
(g) Any loans or advances to any Company other than renewals or
extensions of existing indebtedness;
(h) Any change in accounting method or practice.
Section 2.10 Tax Returns. Each Company has filed all Federal and other
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tax returns for all periods on or before the due date of such return (as may
have been extended by any valid extension of time) and has paid all taxes due
for the periods covered by the said returns. The Companies are Subchapter "S"
corporations under the Internal Revenue Service Code. Sellers warrant that they
will pay with their own funds any and all federal, state and local taxes due and
payable by the Companies with respect to all periods prior to the Closing, to
the extent such taxes exceed the reserves for taxes established on the Companies
Most Recent Balance Sheet, including, without limiting the generality of the
foregoing, all federal, state and local income, sales, use, franchise, excise
and property taxes. The reserves for all taxes reflected in the Most Recent
Balance Sheet, if any, are adequate to cover all taxes, interest and penalties
in connection therewith that may be assessed with respect to the property and
business operations for the period(s) ending on the Closing Date and for all
prior periods. The Companies have filed, and will file (if due), in a timely
manner all requisite federal, state, local and other tax returns due for all
fiscal periods ended on or before the date hereof, and as of the Closing shall
have filed in a timely manner all such returns due for all periods ended on or
before the Closing Date.
Section 2.11 Policies of Insurance. All insurance policies, performance
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bonds, and letters of credit insuring the Companies or which the Companies have
had issued and which have not expired are listed on Schedule 2.11 attached
hereto. Schedule 2.11 includes, the names and addresses of the insurers and
sureties, policy and bond numbers, types of coverage or bond, time periods or
projects covered and the names and addresses of all known agents or agencies
with respect to each listed insurance policy, performance bond and letter of
credit. Each Company's current insurance policies, performance bonds and
letters of credits are in force and effect and the premiums thereon are not
delinquent. No Company has received notification from any insurance carrier
denying or disputing any claim made by the Company or denying or disputing any
coverage for any such claim or denying or disputing the amount of any claim. No
Company has a claim against any of its insurance carriers under any of policies
insuring it pending or anticipated and there has been no occurrence of any kind
which would give rise to any such claim.
Section 2.12 Employees, Pensions and, ERISA.
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(a) The Companies do not have any contract of employment with any
officer or other employee, except as listed on Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), no employee of the
Company is represented by any union. The name, address and social security
number and current rate of compensation of each of the Company's employees and
capacity to which each person is employed is listed on Schedule 2.12(b)
attached. There is no pending or, to the knowledge of the Sellers, threatened
dispute between any Company and any of its employees which might materially and
adversely affect the continuance of the Company's business operations, taken as
a whole, except for the potential claim for additional wages set forth in the
letter from Xxxxxx X. Xxxxxxx, Esq., to Xxxxxx Donno dated December 23, 1996.
(c) Attached hereto made a part hereof and marked Schedule 2.12(c)
lists all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which are currently maintained
and/or were established or sponsored by any Company (whether or not they are now
terminated) or to which any Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Companies.
(d) The Company has delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii) true
and complete copies of the most recent financial statements with respect to the
Plans, (iii) true and complete copies of all annual reports for any Plan
prepared within the past 5 years, and (iv) all material filings submitted to and
any correspondence received from any government agency relating to any Plan
within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a)
and exempt from tax under Section 501(a) of the Code has been determined by the
IRS to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which may
adversely affect such qualification or exemption, or result in the imposition of
excise taxes or tax on unrelated business income under the Code or ERISA. No
Plan is funded, through a trust intended to be exempt from tax under Section
501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law
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applicable to such Plans, and, in all material respects, have been administered,
operated and managed in substantial accordance with the governing documents of
the Plan and the requirements of ERISA.
(g) There is no matter, action, audit, suit or claim pending or, to
the knowledge of Sellers, threatened relating to any Plan, fiduciary of any Plan
or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any
liability under the Plans because of an acceleration of any rights or benefits
to which any employee may be entitled thereunder.
Section 2.13 Legality of Operation. In regard to each Company:
---------------------
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and
except as to Environmental Laws, as hereinafter defined, each Company is in
material compliance with all Federal, state and local laws, rules and
regulations including, without limitation, the following laws: land use laws;
payroll, employment, labor, or safety laws; or federal, state or local "anti-
trust" or "unfair competition" or "racketeering" laws such as but not limited to
the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act,
or Racketeer Influenced and Corrupt Organization Act ("Law"). Except as
disclosed in Schedule 2.13(a), each Company is in material compliance with all
permits, franchises, licenses, and orders that have been issued with respect to
the Laws and are or may be applicable to the Companies' property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
2.13(a), with respect to any Law there are no claims, actions, suits,
investigations or proceedings pending, or, to the knowledge of the Sellers
threatened against or affecting any Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which would result
in an material change in the financial condition or business of the Companies or
which would invalidate this Agreement or any action taken in connection with
this Agreement. Except as disclosed in Schedule 2.13(a), no Company has received
notification of any past or present failure by the Company to comply with any
Law applicable to it or its assets. As used in this Section 2.13(a), "material"
shall mean any single event or number of events causing a loss to the Companies
of $15,000 for an individual event or $50,000 for all events in the aggregate.
11
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, each
Company is in material compliance with all Federal, state and local laws, rules
and regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.13(b), with
respect to any Environmental Law, each Company is in material compliance with
all permits, licenses, and orders related thereto or issued thereunder, as are
or may be applicable to the Companies' property and operations, including,
without limitation, any order, decree or directive of any court or federal,
state, municipal, or other governmental department, commission, board, bureau,
agency or instrumentality wherever located. Except as set forth on Schedule
2.13(b), there are no Environmental Law related claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers, threatened against or
affecting any Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which would result in an adverse change in
the financial condition or business of the Companies of $15,000 or more or which
would invalidate this Agreement or any action taken in connection with this
Agreement. To the knowledge of the Sellers, except as set forth on Schedule
2.13(b), no Company has transported, stored, treated or disposed, nor has any
Company allowed any third persons, on its behalf, to transport, store, treat or
dispose waste to or at (i) any location other than a site lawfully permitted to
receive such waste for such purpose or, (ii) any location currently designated
for remedial action pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any similar federal or state
statute; nor has any of the Companies performed, arranged for or allowed by any
method or procedure such transportation or disposal in contravention of state or
federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and no Company has disposed, nor
has any Company knowingly allowed third parties to dispose of waste upon
property owned or leased by any of the Companies other than as permitted by, and
in conformity with, applicable Environmental Law. Except as disclosed in
Schedule 2.13(b), no Company has received notification of any past or present
failure by such Company to comply with any Environmental Law applicable to it or
its operations or its assets. Without limiting the generality of the foregoing,
no Company has received any notification (including requests for information
directed to such Company or, to the knowledge of the Sellers, an owner thereof)
from any governmental agency asserting that the business is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of CERCLA, or any
similar federal or state statute assigning responsibility for the costs of
investigating or remediating releases of contaminants into the environment. No
Company has received hazardous waste as defined in the Resource Conservation and
Recovery Act, 42 USCA Section 6901 et seq., or in any similar federal or state
-- ---
statute. As used in this Section 2.13(b), "material" shall mean any single event
or number of events causing a loss to the Companies of $15,000 or more.
(c) Except as set forth on Schedule 2.13 (c), the Companies have
never owned, operated, had an interest in, engaged in and/or leased a waste
transfer, recycling, treatment, storage, landfill or other disposal facility.
The Companies have obtained and maintained, when required to do so under
applicable Environmental Laws, trip tickets, signed by the applicable waste
generators demonstrating the nature of all waste deposited and or transported by
the Companies. No employee,
12
contractor or agent of the Companies has, in the course and scope of employment
with the Companies, been harmed by exposure to hazardous materials, as defined
under the Environmental Laws. No liens with respect to environmental liability
have been imposed against the Companies under CERCLA, any comparable New York
State statute or any other applicable Environmental Law, and no facts or
circumstances exist which would give rise to the same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of
Laws and Environmental Laws which existed within the past ten years and all
outstanding unremedied notices of violations issued to any of the Companies by
any federal, state or local regulatory agency.
(e) To the knowledge of Sellers, none of the Sellers are under
investigation by the Attorney General of the State of New York, the District
Attorney of any County of the State of New York, or any United States Attorney
for the violation of any Laws, including, without limitation, the violation of
any anti-trust, racketeering, or unfair competition Laws.
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Companies, or their assets
or liabilities, and a description of all such proceedings is set forth on
Schedule 2.13(f) attached.
Section 2.14. Corrupt Practices. The Companies have not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Companies (except in conformity with Law) for the purpose of attracting business
to the Companies or any foreign or domestic governmental official, political
party or candidate for government office or any of their respective employees or
representatives, nor have the Companies otherwise taken any action which would
cause them to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
Section 2.15 Legal Compliance. Each Company and the Sellers have the
----------------
right, power, legal capacity and authority to enter into, and perform their
respective obligations under this Agreement, and, except as set forth in
Schedule 2.15, no approvals or consents of any other persons are necessary in
connection with the transactions contemplated by this Agreement. Except as
disclosed in Schedule 2.15 to this Agreement, the execution and performance of
this Agreement will not result in a material breach of or constitute a material
default or result in the loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which any
Company or any Seller is a party or by which such Company, Seller or any of
their property is bound; or
(b) Any decree, order or rule of any court or governmental authority
which is binding on any Company or on any property of any Company.
Section 2.16 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Company or any Seller is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
13
Section 2.17 Intellectual Property. To the knowledge of the Sellers, no
---------------------
Company has infringed and is not now infringing, on any trade name, trademark,
service xxxx or copyright belonging to any person, firm or corporation
("Intellectual Property") and to the knowledge of the Sellers no one has or is
infringing any Intellectual Property right of any Company.
Section 2.18 Competition. Except as set forth on Schedule 2.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of any Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of such Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company is doing business which interest adversely or materially affects the
business of any Company.
Section 2.19 Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II Agreement, or in any Exhibit or Schedule or
other document delivered by the Sellers or the Companies pursuant hereto, do not
contain any untrue statement of a material fact, or omit any statement of a
material fact necessary to make the statements contained not misleading. If,
prior to Closing, the Sellers become aware of any inaccuracy or
misrepresentation or omission in any of the Schedules, they shall immediately
advise Seller in writing of the inaccuracy, misrepresentation or omission.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND EESI
----------------------------------------------------
Purchaser and EESI, jointly and severally, represent and warrant to the
Sellers that:
Section 3.1 Structure. Purchaser and EESI are corporations duly
---------
organized and legally existing in good standing under the laws of Delaware.
Purchaser is qualified to do business in New York State.
Section 3.2 Authorization to Proceed with this Agreement. Purchaser and
--------------------------------------------
EESI have by proper corporate proceedings duly authorized the execution,
delivery and performance of this Agreement and no other corporate action is
required by law or the Certificate of Incorporation or by-laws of Purchaser or
EESI.
Section 3.3 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against the Companies or against the Sellers for any commission or finder's fee
in connection with the transactions contemplated by this Agreement.
Section 3.4 Public Reports. EESI has delivered to Sellers true,
--------------
accurate, complete and current, for the quarter ending September 30, 1996 and
for the year ended June 30, 1996, historical filings made by EESI on Forms 10-K,
10-Q and 8-K for calendar year 1996 and all amendments thereto. Since October
31, 1996, there has not been any material adverse change in the income,
14
expenses, assets, results of operation or financial condition of EESI. Such
filings accurately and completely described, in all material respects, EESI's
financial status, business operations and prospects as of the date of such
filings and do not omit any material fact(s) necessary to make the information
contained in the filings not misleading. All of such information provided to
Sellers is correct, complete and does not omit any material information that a
prudent investor would like to know.
Section 3.5 Authorized Stock. The Purchaser is a corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as now
conducted and to own or lease and operate the assets and properties now owned or
leased and operated by it. The total authorized capital stock of EESI consists
of 50,000,000 shares of Common Stock, par value $.01 per share, and 10,000,000
shares of Class A Common Stock, par value $.01 per share. As of November 13,
1996, the outstanding shares of capital stock of the EESI consisted solely of
11,744,388 shares of Common Stock, par value $.01. The Purchaser has 1,000
shares of no-par-value common stock authorized and 100 shares issued, all of
which are owned by EESI. All of such issued and outstanding shares of EESI and
Purchaser have been duly authorized and validly issued, are fully paid and
non-assessable and were issued in compliance with all federal and state
securities laws.
Section 3.6 EESI Stock. All of the shares of EESI stock to be issued to
----------
the Sellers as contemplated by this Agreement and the Collateral Documents will,
upon delivery, be duly authorized and validly issued, fully paid and non-
assessable and issued in compliance with federal and state securities laws, free
and clear of all liens, charges, restrictions, mortgages, security interests or
claims of any kind.
Section 3.7 Authorization. The Purchaser and EESI have the power and
-------------
authority to enter into this Agreement and each of the Collateral Documents and
to carry out the transactions contemplated hereby and thereby. This Agreement
and each of the Collateral Documents to which the Purchaser and EESI are
parties, as applicable, constitutes the legal, valid and binding obligation of
the Purchaser and EESI, as applicable, enforceable in accordance with its terms.
The Purchaser and EESI have the power and authority to own and lease their
respective properties and to carry on their respective businesses as now
conducted.
Section 3.8 Contravention; Consents and Approvals. No filing, action,
-------------------------------------
consent or approval of any person, entity or governmental body is required by
the Purchaser or EESI for the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. The execution and delivery
of this Agreement by the Purchaser and EESI and the consummation of the
transactions contemplated hereby by the Purchaser and EESI will not result in a
breach of the terms or conditions of, or constitute a default under, or violate,
(a) any provision of any law, regulation or ordinance, (b) any agreement, lease,
mortgage or other instrument or undertaking, oral or written, to which the
Purchaser or EESI is a party or by which any of their properties or assets is or
may be bound or affected, or (c) any judgment, order, writ, injunction or decree
of any court, administrative agency or governmental body.
15
Section 3.9 Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchaser and EESI in this Agreement do not contain any
untrue statement of a material fact, or omit any statement of a material fact
necessary to make the statements contained therein not misleading.
ARTICLE IV
TITLE INSURANCE AND SURVEY
--------------------------
Section 4.1 Title Policy. Sellers have ordered a preliminary title
------------
commitment with respect to all real property owned by the Companies ("Title
Commitments") and will deliver a copy of the Title Commitments to Purchaser as
soon as the Title Commitments are received by Sellers. EESI may terminate this
Agreement, if EESI cannot obtain title insurance, satisfactory to EESI in EESI's
sole discretion, insuring the Companies' interest in and to any real property
owned by Companies. EESI may exercise its right of termination by sending
written notice to Seller within fifteen (15) days from the date Purchaser
receives all Title Commitments and all documents noted as exceptions to title on
the Title Commitments.
Section 4.2 Survey. Sellers shall cooperate with Purchaser in obtaining
------
as-built surveys of all real property owned by the Companies. EESI may terminate
this Agreement if any survey reflects that any improvements constructed on any
real property encroach upon any adjacent real estate or that any of the real
properties do not have legal access to public roads. EESI may exercise its right
of termination by sending written notice to Seller within fifteen (15) days of
receiving the as-built survey.
Section 4.3 Costs. Companies shall pay for the cost of obtaining the
-----
policies of title insurance and the surveys required by this Article IV.
ARTICLE V
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
Section 5.1 Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------------------
Stock delivered to Sellers at Closing is not registered under the Securities Act
of 1933, the Sellers understand and agree that the following restrictions and
limitations are applicable to the Seller's purchase and resale or other transfer
of the EESI Stock, pursuant to the ("Act"). Under Section 6.2, EESI is obligated
to have the EESI Stock registered under the Act after Closing, if EESI delivers
unregistered stock at the Closing.
(a) Sellers agree that the EESI Stock shall not be sold or otherwise
transferred, unless the EESI Stock is registered under the Act and state
securities laws or is exempt therefrom.
16
(b) Until the EESI Stock is registered under the Act, a legend in
substantially the following form will be placed on the certificates evidencing
the EESI Stock to be issued to the Sellers:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities
act. These shares have been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless (i) they shall have
been registered under the Securities Act of 1933 and any applicable
states securities act or (ii) Eastern Environmental Services, Inc.,
shall have been furnished with an opinion of counsel, reasonably
satisfactory to counsel for Eastern Environmental Services, Inc., that
registration is not required under any such acts."
(c) Stop transfer instructions will be imposed with respect to the
EESI Stock issued to Sellers pursuant to this Agreement so as to restrict resale
or other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 5.2 Pooling Restrictions. Purchaser, EESI and Sellers have
--------------------
agreed that a material factor in their execution of this Agreement is that the
transactions contemplated by this Agreement be treated as a "pooling of
interests" for accounting purposes. If for any reason a provision in this
Agreement would prevent the transaction being accounted for as a "pooling of
interests," the parties agree to negotiate in good faith to modify the Agreement
so the transaction can be accounted for as a "pooling of interests," as long as
the economics of the transaction are not changed. Notwithstanding any other
provision of this Agreement, prior to the publication and dissemination by EESI
of consolidated financial results which include results of combined operations
of the Companies and EESI for at least 30 days on a consolidated basis following
the Closing Date, Sellers shall not sell or otherwise transfer or dispose of, or
in any way reduce his or her or its risk relative to, any shares of the EESI
Stock received by Sellers (including by way of example and not limitation,
engaging in put, call, short-sale, straddle or similar market transactions).
EESI agrees that such consolidated financial results shall be published and
disseminated no later than 120 days after the Closing Date. The Securities
Exchange Commission ("SEC") has issued Accounting Series Release Nos. 130 and
135, as amended (collectively, the "ASRs"), setting forth certain restrictions
applicable to the availability of "pooling-of-interests" accounting treatment in
transactions of the type contemplated by this Agreement. Sellers therefore
covenant and agree with Purchaser to hold the EESI Stock and to comply with the
ASRs until the requirements of the ASRs have been met. In addition, the
certificates evidencing the EESI Stock to be received by Sellers will bear a
legend substantially in the form set forth below:
"The shares represented by this certificate may not be sold,
transferred or assigned, and Eastern Environmental Services, Inc.,
shall not be required to give effect to any attempted sale, transfer
or assignment prior to the publication and dissemination of financial
statements by Eastern Environmental Services, Inc., which include the
results of at least 30 days of combined operations of Eastern
Environmental Services, Inc., and the companies acquired by Eastern
Environmental Services, Inc., for which these
17
shares are issued. Upon the written request of the holder hereof
directed to Eastern Environmental Services, Inc., the issuer agrees to
remove this restrictive legend (and any stop order places with the
transfer agents) when the requirements of Accounting Series Releases
Nos. 130 and 135, as amended, of the Securities Exchange Commission
have been met."
Section 5.3 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all the outstanding stock of the Companies solely in exchange for
the voting stock of EESI in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(b) of the Internal
Revenue Code of 1986, as amended ("Code"), and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to take
no action inconsistent with the treatment of such exchange as a reorganization
under Code (S)368(a)(1)(b) and to comply with all IRS filing and other
requirements for such exchange. Purchaser, EESI and Sellers have agreed that a
material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement shall constitute a "plan of reorganization"
within the meaning of the Code. If for any reason a provision in this Agreement
would prevent the transaction from qualifying as a reorganization within the
meaning of the Code, the parties agree to negotiate in good faith to modify the
Agreement so the transaction can qualify as a reorganization, as long as the
economics of the transaction are not changed.
Section 5.4 Representations as to Private Offering. The EESI Stock is
--------------------------------------
being delivered to the Sellers in a private placement under Section 4.2 of the
Act and under Regulation D promulgated under the Act. To induce Purchaser to
issue the EESI Stock, each Seller represents and warrants as follows:
(a) Each Seller maintains their residence in New York.
(b) Each Seller acknowledges that they have received a copy of EESI's
Annual Report on Form 10-K and Form 10-K(a) for the fiscal year ended June 30,
1996, EESI's Quarterly Reports on Form 10-Q for the quarter ended September 30,
1996, EESI's proxy statement for the annual meeting of stockholders held on
February 29, 1996, EESI's proxy statement for the special meeting of
stockholders held on August 8, 1996, EESI's Current Reports on Form 8-K dated
June 21, 1996, July 2, 1996, and September 27, 1996, and press releases dated
November 12, 1996, and October 28, 1996, concerning an acquisition and potential
acquisition made and to be made by EESI.
(c) The Sellers represent and warrant that the EESI Stock is being
acquired for their own account without a view to public distribution or resale
and that the Sellers have no contract, undertaking, agreement or arrangement to
sell or otherwise transfer or dispose of EESI Stock, or any portion thereof, to
any other person.
(d) The Sellers represent and warrant that, in determining to acquire
the EESI Stock, they have relied solely upon their independent investigation,
including the advice of their legal counsel and accountants or other financial
advisers or purchaser representatives, and have, during the course
18
of discussions concerning their acquisition of the EESI Stock, been offered the
opportunity to ask such questions and inspect such documents concerning EESI and
its business and affairs as they have requested so as to more fully understand
the nature of the investment and to verify the accuracy of the information
supplied.
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE EESI STOCK
INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can bear
the economic risk of the acquisition of the EESI Stock, including the total loss
of their investment.
(f) The Sellers represent and warrant that (i) they have adequate
means of providing for their current needs and financial contingencies, (ii)
they have no need for liquidity in this investment, (iii) they have no debts or
other obligations, and cannot reasonably foresee any other circumstances, that
are likely in the future to require them to dispose of the EESI Stock, and (iv)
all their investments in and commitments to non-liquid investments are, and
after their acquisition of the EESI Stock will be reasonable in relation to
their net worth and current needs.
(g) The Sellers understand that no federal or state agency has
approved or disapproved the EESI Stock or made any finding or determination as
to the fairness of the EESI Stock for investment.
(h) The Sellers understand that the EESI Stock is being offered and
sold in reliance on specific exemptions from the registration requirements of
federal and state securities laws and that Purchaser is relying upon the truth
and accuracy of the representations, warranties, agreements, acknowledgements
and understandings set forth herein in order to determine the applicability of
such exemption and the suitability of Seller to acquire the EESI Stock.
(i) The Sellers each acknowledge that they are officers and directors
of the Companies. The Sellers further represent and warrant that they are
familiar with the business and financial affairs of the Companies, and have had
access to all financial statements prepared by the Companies.
Section 5.5 Access to Records. The Sellers will cause the Companies to
-----------------
give to Purchaser and its representatives, from the date hereof until the
Closing Date, full access during normal business hours to all of the properties,
books, contracts, documents and records of the Companies, and to make available
to Purchaser and its representatives all additional financial statements of and
all information with respect to the business and affairs of the Companies that
Purchaser may reasonably request.
Section 5.6 Continuation of Business. The Sellers will operate the
------------------------
Companies until the Closing Date in the ordinary course of business, consistent
with past practice, so as to preserve their business organizations intact, to
assure, to the extent possible, the availability to Purchaser of the present key
employees of the Companies, and to preserve for Purchaser the relationships of
the
19
Companies with suppliers, customers, and others, except if it is determined in
the judgment of the Companies to be in the best interest of the Companies.
Section 5.7 Continuation of Insurance. The Sellers will cause the
-------------------------
Companies to keep in existence all policies of insurance insuring the Companies
against liability and property damage, fire and other casualty through the
Closing Date, consistent with the policies currently in effect.
Section 5.8. Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the Companies
and the Sellers will not directly or indirectly solicit offers for the Company
Shares or the assets of the Companies or for a merger or consolidation involving
the Companies, or respond to inquiries from, share information with, negotiate
with or in any way facilitate inquiries or offers from, third parties who
express or who have heretofore expressed an interest in acquiring the Companies
by merger, consolidation or other combination or acquiring any of Companies'
assets; nor will the Sellers permit the Company to do any of the foregoing.
Section 5.9 Audited Financial Statements. Sellers agree to cause the
----------------------------
Companies to prepare audited balance sheets for the Companies as of December 31,
1993, December 31, 1994, and December 31, 1995, and statements of income, cash
flow and retained earnings for the Companies for the twelve-month periods ended
December 31, 1993, December 31, 1994, and December 31, 1995 ("Historical
Financial Statements"), as rapidly as possible, but no later than the Closing
Date. Sellers shall also cause the Companies to prepare audited balance sheets
of the Companies as of the September 30, 1996, and audited statements of income,
cash flow and retained earnings for the period ending September 30, 1996
("Interim Financial Statements"). The Interim Financial Statements are to be
delivered by the Companies no later than thirty (30) days after the Closing
Date.
ARTICLE VI
ADDITIONAL AGREEMENTS OF PURCHASER AND EESI
-------------------------------------------
Section 6.1 Payment of Expenses. EESI will pay all expenses incurred by
-------------------
EESI and Purchaser in connection with the negotiation, execution and performance
of this Agreement. The Companies, on or before the Closing Date, will pay all
reasonable legal and accounting expenses incurred by the Sellers in connection
with the negotiation, execution and performance of this Agreement.
Section 6.2 Registration Rights.
-------------------
(a) If the EESI Stock delivered at Closing is not registered under
the Act ("Unregistered Stock"), as soon as practical following the Closing Date
but in any event within one hundred twenty (120) days after the Closing Date,
EESI shall file a registration statement to register the Unregistered Stock
under the Act for sale to the public pursuant to a "shelf registration" on Form
S-3 or other appropriate form, if Form S-3 is not available under Rule 415 of
the Act. Within the same time, EESI shall also file whatever notices or
registration statements, if any, as are required by
20
any applicable "blue sky" laws. EESI will give written notice to the Seller of
the "shelf registration" at least 15 days before the registration statement is
filed. After receiving the notice of the "shelf" registration, each Seller will
advise EESI in writing of the intended method of disposition of the Unregistered
Stock to be registered, as required by the Act. Notwithstanding the above,
EESI's obligation to file the shelf registration and/or keep the shelf
registration continuously effective shall be suspended during any period that
there exists material, non-public information relating to EESI. EESI shall keep
such registration statement current and effective, until such time as all of the
shares may be sold by the Sellers at any time without restriction or pursuant to
the provisions of Rule 144, without volume restrictions, or until such earlier
date as all of the shares registered pursuant to such registration statement
shall have been sold or otherwise transferred to a third party. EESI shall also
prepare and file with the Securities and Exchange Commission such amendments and
supplements to such registration statement (and the prospectus used in
connection therewith) as may be necessary to update and keep such registration
statement current and effective for such period and to comply with the
provisions of the Act with respect to the sale of all securities covered by such
registration statement.
(b) With respect to the registration of the Unregistered Stock, EESI
will, as expeditiously as possible: (i) furnish to the Sellers such number of
prospectuses, including copies of preliminary prospectuses, prepared in
conformity with the requirements of the Act, and such other documents, as the
Sellers may reasonably request in order to facilitate the public sale or other
disposition of the securities to be sold by the Sellers; and (ii) before filing
the registration statement, prospectus or amendments or supplements thereto,
furnish to counsel for Sellers copies of all such documents proposed to be
filed.
(c) Upon any registration under the Act of any of the Unregistered
Stock, EESI shall indemnify Sellers in accordance with the provisions of Article
IX from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing, or necessary in order to make the statements therein not misleading or
(iii) any violation or alleged violation by EESI to which such Seller may become
subject under the Act, or other Federal or state laws or regulations, at common
law or otherwise. Notwithstanding the above, EESI shall not be liable to Sellers
if and to the extent that any Security Liability arises out of or is based upon
any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to EESI by Sellers
which is stated in writing to be specifically intended for such use; and
provided further, that EESI shall not be required to indemnify Sellers against
any Security Liability which arises out of the failure of Sellers to deliver.
21
(d) All expenses incurred in effecting the registrations provided for
in this Section 6.2 shall be paid by EESI, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for EESI, fees and disbursement of counsel for Sellers (up to $3,000 per
year), underwriting expenses (other than commissions or discounts which shall be
shared by the parties registering shares of EESI's common stock in proportion to
the number of shares registered in each particular offering), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or "blue sky" laws of any jurisdictions.
ARTICLE VII
CONDITIONS OF EESI AND PURCHASER
--------------------------------
The obligations of EESI and Purchaser to effect the transaction
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of each of the following items which are conditions to the
Closing:
Section 7.1 Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers at or prior to the Closing Date.
All representations and warranties of Sellers contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement, and the Purchaser and EESI shall have
received a Certificate duly executed by each of the Sellers as to the foregoing.
Section 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Companies or the business the Companies operate, taken as a whole,
which, as a result of the transaction contemplated by this Agreement, might
affect such right as to Purchaser or any affiliate thereof subsequent to the
Closing Date and which, in the judgment of the Board of Directors of Purchaser,
made in good faith and based upon advice of its counsel, makes it inadvisable to
proceed with the transaction contemplated by this Agreement.
Section 7.3 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Companies, taken as a whole, or any Company, and each Company
shall have not suffered any material loss or damage or any of its properties or
assets, whether or not covered by insurance, since the date of the Most Recent
Balance Sheet.
Section 7.4 Opinion of Counsel. The Sellers shall have delivered to the
------------------
Purchaser the opinion of counsel, dated the Closing Date, in the form annexed
hereto as Schedule 1.6(g).
22
Section 7.5 Releases. The Sellers shall have delivered to the Purchaser a
--------
release from each Seller, in a form and content annexed hereto as Schedule
1.6(c), which provides that the Sellers are releasing the Companies from any and
all claims, causes of action, debts and obligations whatsoever.
Section 7.6 Employment Agreements. Xxxxxx Donno, Xxxxxx Xxxx, and Xxxxxx
---------------------
Xxxxxx shall have executed and delivered to Purchaser the Employment Agreements.
Section 7.7 Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Purchaser shall have
been furnished with appropriate evidence, reasonably satisfactory to Purchaser
and its counsel, of the granting of such approvals, authorizations and consents.
Section 7.8 Financial Statements. The Companies shall have delivered to
---------------------
Purchaser the Historical Financial Statements and the Interim Financial
Statements as set forth in Section 5.9.
ARTICLE VIII
CONDITIONS OF SELLERS
---------------------
The obligations of the Sellers to transfer the Company Shares in accordance
with this Agreement shall be subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
Section 8.1 Compliance by Purchaser. The Purchaser and EESI shall have
-----------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date. All representations and warranties of Purchaser and EESI
contained in this Agreement shall be true and correct at and as of the Closing
Date, with the same force and effect as though made at and as of the Closing
Date, except for changes expressly permitted by this Agreement, and the Sellers
shall have received a Certificate duly executed by an officer of Purchaser and
EESI as to the foregoing.
Section 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Companies or the business the Companies operate which, as a result of
the transaction contemplated by this Agreement, might affect such right as to
Purchaser or any affiliate thereof subsequent to the Closing Date and which, in
the judgment of the Sellers, made in good faith and based upon advice of their
counsel, makes it inadvisable to proceed with the transaction contemplated by
this Agreement.
Section 8.3 Guarantees. The Sellers shall be released from any liability
----------
they have under guarantees they have made with respect to the Companies' debts
or obligations, including only those
23
guarantees set forth on Schedule 8.3. If after a good faith attempt Purchaser
cannot obtain the release of the Sellers from the described guarantees, this
condition shall be waived and Purchaser and EESI will indemnify Sellers from any
and all liability, expense and claims made against Sellers with respect to
guarantees the Sellers have made of the Companies' debts.
Section 8.4 Payment. The Purchaser shall have delivered to each of the
-------
Sellers, as applicable, the EESI Stock in accordance with Section 1.5.
Section 8.5 Employment Agreements. The Purchaser shall have executed and
---------------------
delivered the Employment Agreements for Xxxxxx Donno, Xxxxxx Xxxx, and Xxxxxx
Xxxxxx.
Section 8.6 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, and the Sellers shall have been
furnished with appropriate evidence, reasonably satisfactory to them and their
counsel, of the granting of such approvals, authorizations and consents.
Section 8.7 Opinion of Counsel. The Purchaser shall have delivered to the
------------------
Sellers the opinion of counsel to the Purchaser and EESI, dated the Closing
Date, in the form annexed hereto as Schedule 1.5(c).
Section 8.8 Material Adverse Change. There shall not have been, and on
------------------------
the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be expected to result in, any material adverse
change in the condition (financial or otherwise), assets, real property,
personal property, results of operations, business or prospects of EESI and its
subsidiaries taken as a whole.
ARTICLE IX
INDEMNIFICATION
---------------
Section 9.1. Indemnification by Sellers. The Sellers each agree that they
--------------------------
will each, jointly and severally, indemnify, defend, protect and hold harmless
Purchaser, EESI and their officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, successors
and assigns from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, from: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by Sellers, set forth in this Agreement or in the Schedules attached
to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Sellers
made in this Agreement and to be performed
24
by Sellers before or after the Closing Date; (c) violation of the requirements
of any governmental authority relating to the reporting and payment (to the
extent payment exceeds the amount reserved for in the Most Recent Financial
Statement) of federal, state, local or other income, sales, use, franchise,
excise or property tax liabilities of the Companies arising or accrued prior to
the Closing Date; (d) any violation of any federal, state or local "anti-trust,"
"racketeering," or "unfair competition law," including, without limitation, the
Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, the Racketeer Influenced or
Corrupt Organizations Act, or the Federal Trade Commission Act; or (e) any claim
by a third party that, if true, would mean that a condition for indemnification
set forth in subsections (a), (b), (c) or (d) of this Section 9.1 of this
Agreement has occurred.
Section 9.2. Indemnification by Purchaser and EESI. EESI and Purchaser,
-------------------------------------
jointly and severally, agree that they will indemnify, defend, protect and hold
harmless each Seller, each of the Companies, and each of their respective
officers, directors, divisions, subdivisions, affiliates, subsidiaries, parents,
heirs, legal representatives, successors and assigns, as applicable, from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, penalties, costs and expenses whatsoever (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by them, or any of them, as a result of or incident to:
(a) any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties of Purchaser or EESI set forth in this Agreement
or in the Schedules attached to this Agreement or in the Collateral Documents;
(b) nonfulfillment of any agreement, covenant or condition on the part of
Purchaser or EESI made in this Agreement or in the Collateral Documents; (c) any
Security Liability; (d) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections (a), (b), or (c)
of this Section 9.2 has occurred; or (e) any of the Guarantees.
Section 9.3. Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims
------
(a) If any third party shall notify a party to this Agreement
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other party to
this Agreement (the "Indemnifying Party") under this Article IX, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within ten days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party pursuant to the provisions of Article IX, as
applicable, from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys' fees
and related expenses) the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Indemnifying Party provides
25
the Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only monetary damages and does
not seek an injunction or equitable relief, (iv) settlement of, or adverse
judgment with respect to the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party,
and (v) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 9.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in (but not control) the defense of the Third Party Claim, (ii)
the Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (which will not be unreasonably
withheld), and (iii) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party (which will not be
unreasonably withheld). In the case of (c)(ii) or (c)(iii) above, any such
consent to judgment or settlement shall include, as an unconditional term
thereof, the release of the Indemnifying Party from all liability in connection
therewith.
(d) If the conditions set forth in Section 9.3(b) above is or
becomes unsatisfied, (i) the Indemnified Party may defend against, and consent
to the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim and any matter it may deem appropriate and the Indemnified
Party need not consult with, or obtain any consent from, any Indemnifying Party
in connection therewith, (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the cost of defending against
the Third Party Claim (including attorneys' fees and expenses) and (iii) the
Indemnifying Party will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Article IX.
Section 9.4. Procedure for Non-Third Party Claims. If Purchaser or
------------------------------------
Sellers wish to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 9.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no
26
Indemnification Objection is sent within thirty (30) days after the
Indemnification Demand is sent, the Indemnifying Party shall be deemed to have
acknowledged the correctness of the claim or claims specified in the
Indemnification Demand and shall pay the full amount claimed in the
Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to anti-trust Laws, unfair
competition Laws and racketeering Laws, including, without limitation, the
representations and warranties set forth in Section 2.13(a), shall survive for
thirty months after the Closing Date, (ii) all representations and warranties
pertaining to Environmental Laws, including, without limitation, the
representations and warranties set forth in Section 2.13(b), shall survive for
twenty-four months after the Closing Date, (iii) all representations and
warranties pertaining to federal, state and local taxes, including, without
limitation, the representations and warranties set forth in Section 2.10 shall
survive until the expiration of the applicable statute of limitations on any
claim which can be brought against the Companies by tax authorities or
governmental agencies or governmental units, and (iv) all representations and
warranties other than set forth in (i), (ii) and (iii) above shall survive until
eighteen months from the Closing Date. Notwithstanding the prior sentence which
provides that the representations and warranties expire after certain stated
periods of time, if within the stated period of time, a notice of a claim for
indemnification or Indemnification Demand is given, or a suit or action based
upon representation or warranty is commenced, the Indemnified Party shall not be
precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.
Section 9.6 Limitation of Liability. Notwithstanding anything else to the
-----------------------
contrary contained herein, neither the Purchasers nor any other party entitled
to indemnification pursuant to Section 9.1 hereof shall be entitled to assert
any claim for indemnification contained in Section 9.1 unless and until such
time as claims of indemnification thereunder, exceed ("Basket") (i) One Hundred
Dollars ($100), in the aggregate, for claims made regarding the falsity of the
representations and warranties of Sellers made in Section 2.10, or (ii) One
Hundred Thousand Dollars ($100,000) in the aggregate for claims made regarding
the falsity of any other representation or warranty of Sellers made in this
Agreement. Purchasers shall only be entitled to assert claims for
indemnification that exceed the applicable Basket; it being understood and
agreed that the applicable Basket amount shall be excluded from the
indemnification contained in Section 9.1 and shall be borne 100% by the
Purchaser and the parties entitled to be indemnified thereunder so that the
Sellers, as applicable, shall have no liability with respect thereto.
Notwithstanding anything else contained herein to the contrary, the obligations
of the Sellers pursuant to the indemnification contained in Section 9.1 shall be
limited to an aggregate dollar amount equal to (i) the dollar amount received by
Sellers for any of the EESI Stock sold by
27
them in bona fide sales, plus (ii) the market value of the EESI Stock not sold
---- ----
by Sellers in bona fide sales as of the date Sellers first assert a limitation
---- ----
of their liability pursuant to this Section 9.6.
ARTICLE X
OTHER PROVISIONS
----------------
Section 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Companies such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Companies. Sellers agree that for a period of ten (10)
years from the Closing Date they will not disclose such confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of the Companies,
unless (i) such information becomes known to the public generally through no
fault of Sellers, (ii) the Sellers are compelled to disclose such information by
a governmental entity or pursuant to a court proceeding, or (iii) the Closing
does not take place. In the event of a breach or threatened breach by Sellers
of the provisions of this Section, Purchaser shall be entitled to an injunction
restraining Sellers from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Sellers from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
Section 10.2 Nondisclosure by Purchaser and EESI. Purchaser and EESI
-----------------------------------
recognize and acknowledge that they have in the past, currently have, and prior
to the Closing Date, will have access to certain confidential information of the
Companies, such as lists of customers, operational policies, and pricing and
cost policies that are valuable, special and unique assets of the Companies.
Purchaser and EESI, jointly and severally agree that neither will utilize such
information in the business or operation of Purchaser, EESI or any of their
affiliates of disclose such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
unless (i) such information becomes known to the public generally through no
fault of Purchaser or EESI or any of their Affiliates, (ii) Purchaser or EESI is
compelled to disclose such information by a governmental entity or pursuant to a
court proceeding, or (iii) Closing takes place. In the event of a breach or
threatened breach by Purchaser or EESI of the provisions of this Section, the
Sellers shall be entitled to an injunction restraining Purchaser and EESI from
utilizing or disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting Sellers from pursuing
any other available remedy for such breach or threatened breach, including,
without limitation, the recovery of damages.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of EESI or Purchaser) and shall be binding upon
and shall inure to the benefit of the parties hereto, the successors of
Purchaser, EESI and Sellers. This Agreement, upon execution and delivery,
constitutes
28
a valid and binding agreement of the parties hereto enforceable in accordance
with its terms and may be modified or amended only by a written instrument
executed by all parties hereto.
Section 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 10.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 10.6. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchaser, addressed to it at:
President
0000 Xxxxxxxx Xxxxx
Xx. Xxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxxx & Assoc., P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
(b) If to Sellers, addressed to
Xxxxxx Donno
000 Xxxx Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
with a copy to:
Xxxxxxx Xxxxxxx, Esq.
29
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement.
Section 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
Section 10.13 Extension or Waiver of Performance. Either Xxxxxx Donno on
----------------------------------
behalf of the Sellers or Purchaser may extend the time for or waive the
performance of any of the obligations of
30
the other, waive any inaccuracies in the representations or warranties by the
other, or waive compliance by the other with any of the covenants or conditions
contained in this Agreement, provided that any such extension or waiver shall be
in writing and signed by Xxxxxx Donno on behalf of the Sellers and the
Purchaser.
Section 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
31
Section 10.15 Disclosure on Schedules. For purposes of this Agreement, a
-----------------------
disclosure by any party hereto of any fact on any Schedule shall be deemed a
disclosure on every Schedule of any party hereto to the extent such disclosure
properly could have been made thereon but was not made. The parties acknowledge
that notwithstanding the provisions of the Agreement stating all Schedules and
Exhibits to this Agreement are attached to the Agreement, none of the Schedules
have been attached and certain of the Exhibits have not been attached. Sellers
will deliver to Purchasers all Schedules to be attached to this Agreement as
soon as reasonably possible but no later than ten (10) days from the date of
this Agreement. Purchasers will have five (5) days from the date of delivery of
the Schedules to review the Schedules and terminate the Agreement by sending
written notice to Companies, if Purchasers are not satisfied with any material
matter revealed by any Schedule. The parties hereto shall use their best
efforts to agree upon and attach to this Agreement all Exhibits not attached to
this Agreement on the date of this Agreement's execution. If the parties, in
the exercise of reasonable discretion, can not agree upon any Exhibits not
attached to this Agreement by January 10, 1997, any of the parties may terminate
this Agreement by sending written notice of termination to the other parties.
Once the Schedules are produced and the Exhibits agreed upon, the parties hereto
shall execute a signature page which states that attached to the signature page
are the Schedules and Exhibits to this Agreement.
Section 10.16 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in accordance with the commercial
rules (the "Rules") of the American Arbitration Association then obtaining, in
New York, New York, and judgment upon the award rendered in such arbitration
shall be final and binding upon the parties and may be confirmed in any court
having jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
arbitrate shall not bar any party from seeking temporary or provisional remedies
in any Court having jurisdiction. Notice of the demand for arbitration shall be
filed in writing with the other party to this Agreement, which such demand shall
set forth in the same degree of particularity as required for complaints under
the Federal Rules of Civil Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with reasonable
particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statutes
of limitations.
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would aid
and assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan
32
outlining the desired documents to be produced, the depositions to be take, if
ordered by the arbitrators in accordance with the Rules, and any other discovery
action sought in the arbitration proceeding. After a preliminary hearing, the
arbitrators shall fix the scope and content of each party's discovery plan as
the arbitrators deem appropriate. The arbitrators shall have the authority to
modify, amend or change the discovery plans of the parties upon application by
either party, if good cause appears for doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchaser, EESI and the Sellers in connection with
the negotiation of and consummation of the transactions under this Agreement
shall be entitled to represent their respective party in any and all proceedings
under this Section or in any other proceeding (collectively, "Proceedings").
The Purchaser, EESI and the Sellers, respectively, waive the right and agree
they shall not seek to disqualify any such counsel in any such Proceedings for
any reason, including but not limited to the fact that such counsel or any
member thereof may be a witness in
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
33
any such Proceedings or possess or have learned of information of a confidential
or financial nature of the party whose interests are adverse to the party
represented by such counsel in any such Proceedings.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
/s/ Xxxxxx Donno
-------------------------------
Xxxxxx Donno
/s/ Xxxxxx Xxxx
-------------------------------
Xxxxxx Xxxx
/s/ Xxxxxx Xxxxxx
-------------------------------
Xxxxxx Xxxxxx
EASTERN ENVIRONMENTAL SERVICES, INC.
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
Its: Vice President
EASTERN WASTE OF L.I., INC.
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
Its: Vice President
34
XXXXXX XXXX
XXXXXX DONNO
XXXXXX XXXXXX
January 31, 1997
Xxxxx X. Xxxxxxx, Xx.
President
Eastern Environmental Services, Inc.
0000 Xxxxxxxx Xxxxx
Xx. Xxxxxx, X.X. 00000
Dear Xx. Xxxxxxx:
Reference is made to that certain Reorganization and Plan of Agreement
dated as of December 31, 1996, among Eastern Environmental Services, Inc.
("EESI"), Eastern Waste of L.I., Inc. ("Eastern Waste"), Xxxxxx Xxxx, Xxxxxx
Donno and Xxxxxx Xxxxxx (the "Agreement"). All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
The undersigned hereby request EESI and Eastern to consent to the
amendments to the Agreement set forth below:
1. Section 2.8(d) of the Agreement is hereby amended by
deleting the phrase "One Million Four Hundred Thousand Dollars ($1,400,000) in
working capital" and substituting therefor the phrase "One Million One Hundred
Fifty Thousand Three Hundred Nine Dollars ($1,150,309) in working capital".
2. Section 6.1 of the Agreement is hereby amended by deleting
the second sentence therefrom and substituting therefor the following new
sentence: "The Companies promptly after the Closing Date shall pay legal fees
not to exceed $30,000 to Xxxxxxx, Xxxxxxx & Xxxxxxx, accounting fees not to
exceed $30,000 to Xxxxxxxxxxx, Xxxxxxxx & DeFriettis, Certified Public
Accountants, and transfer taxes not to exceed $11, 428 to the New York State
Department of Taxation and Finance in connection with the negotiation, execution
and performance of this Agreement. The payment of the amounts of expenses set
forth herein shall not be included in the calculation of working capital
pursuant to Section 2.8(d) of the Agreement, provided however, that any expenses
in excess of the amounts set forth herein shall be deemed to have been incurred
prior to the Closing and shall be included in the calculation of working capital
The undersigned hereby request that Section 9.1 of the Agreement
specifically exclude the cost and expenses which may be incurred in connection
with uncovering, cleaning, removing, transporting or site remediation in
connection with the underground storage tanks described on the attached report
of American Resource Consultants, Inc. dated January 30, 1997 and addressed to
Xx. Xxxxxxx, re: Donno Company, Inc. ARC Project No. 20297-001 (the "ARC
Report") at the following locations referred to in said report: 000-000 Xxxx
Xxxxx xxx 000 Xxxx Xxxxx, 000-000 Xxxxx Xxxxxx and 000 Xxxxxxxx ("Excluded Tank
Liabilities"). The undersigned confirm and agree that except for the specific
Excluded Tank Liabilities referred to in this paragraph, the indemnities set
forth in Section 9.1 of the Agreement, shall cover all liabilities, including
without limitation, any and all other liabilities associated with the sites
referred to in the ARC Report and that except for the exclusion for the Excluded
Tank Liabilities, Section 9.1 of the Agreement remains in full force and effect.
Except for the amendments to Sections 2.8(d), 6.1 and 9.1 set forth
herein and the substitution of pages referred to in the paragraph above, all
terms and conditions of the Agreement remain in full force and effect. All
reference in the Agreement or in any document executed in connection with the
Agreement to the Agreement shall mean the Agreement as amended hereby.
Please indicated your agreement with the foregoing by executing a copy
of this letter an returning it to the undersigned.
Very truly yours,
/s/ Xxxxxx Xxxx
-----------------------------
Xxxxxx Xxxx
/s/ Xxxxxx Donno
-----------------------------
Xxxxxx Donno
/s/ Xxxxxx Xxxxxx
-----------------------------
Xxxxxx Xxxxxx
Accepted and agreed to this
31st day of January 1997
Eastern Environmental Services, Inc.
By: /s/ Xxxx Xxxxxx
--------------------------------
Eastern Waste of L.I., Inc.
By: /s/ Xxxx Xxxxxx
--------------------------------
