REORGANIZATION PLAN AND AGREEMENT OF
APEX WASTE SERVICES, INC.
XXXXXX X. XXXXXXX
XXXXX X. XXXXXX
XXXXXX X. XXXXX
XXXXXXX X. XXXXXXXX
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
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Page
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RECITALS.................................................. 1
ARTICLE I ACQUISITION; CLOSING............................ 1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS...... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER... 14
ARTICLE IV TITLE INSURANCE AND SURVEY..................... 15
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS................ 16
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER............. 20
ARTICLE VII CONDITIONS OF PURCHASER....................... 21
ARTICLE VIII CONDITIONS OF SELLERS........................ 22
ARTICLE IX INDEMNIFICATION................................ 23
ARTICLE X OTHER PROVISIONS................................ 26
SCHEDULES
1.3 Company Debt
1.5(a) Allocation of EESI Shares
1.5(c) Opinion of Purchaser's Counsel
1.5(d) Employment Agreement
1.5(e) Consulting Agreement
1.6(c) Release by Sellers
1.6(f) Noncompetition Agreement
1.6(h) 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(e) Equipment
2.5 Customer List and Contracts
2.7(a) Receivables Schedule
2.7(b) Payables Schedule
2.7(c) Current Assets Schedule
2.7(d) Accrued Liabilities Schedule
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
REORGANIZATION PLAN AND AGREEMENT
This Reorganization Plan and Agreement ("Agreement") is made as of March
31, 1997, by and among Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxx,
Xxxxxxx X. Xxxxxxxx (each individually a "Seller" and collectively the
"Sellers"), Apex Waste Services, Inc. ("Company"), and Eastern Environmental
Services, Inc. ("EESI" or "Purchaser").
RECITALS
Each of the Sellers is an owner of the outstanding stock of the Company.
The shares of stock in the Company owned by the Sellers (the "Company Shares")
represent all of the stock issued by the Company. The Company is a Pennsylvania
corporation. The Company is 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
Company be acquired by EESI in exchange solely for the voting stock of EESI, 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 March 31, 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 March 31, 1997, to the date which is ten 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 ten days advance notice of
the Closing Date.
Section 1.3 Agreement to Sell Stock of Company; 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 payable as
follows: (i) Seven Hundred Ninety-four Thousand Four Hundred and Forty-five
(794,445) shares of EESI's common stock ("EESI Stock"); and (ii) Purchaser
accepting the Company Stock with the Company having total long-term liabilities,
including capitalized leases and the current portion of such long-term
liabilities ("Company Debt"), as set forth on Schedule 1.3 attached. If the
Company, at Closing, has Company Debt of less than or more than Fifteen Million
Dollars ($15,000,000), the EESI Stock to be delivered at Closing shall be
increased or decreased,
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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 $15,000,000. The
increase or decrease, as applicable, shall be calculated by valuing the EESI
Stock at the closing price for the stock on the trading day which is five
trading days prior to the Closing Date ("Per Share Value"). The Sellers shall
receive the shares of EESI Stock in the same proportions that the Sellers own
shares in the Company. EESI shall repay all Company Debt at Closing and the
amount outstanding on the Company's line of credit with Dauphin Deposit Bank and
Trust Company ("Line of Credit Amount").
Section 1.4 Term And Time For Closing. Following execution of this
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Agreement, Purchaser and Sellers shall be obligated to conclude the transaction
strictly in accordance with its terms within ten (10) 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 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 under this Agreement, or at law or in
equity, including, without limitation an action to recover its actual damages
resulting from the default of Sellers. If the failure to conclude this
transaction is due to the refusal and failure of Purchaser to perform its
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.
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 Xxxxx, on behalf of the
Sellers;
(b) by EESI or Xxxxxx Xxxxx, on behalf of the Sellers, by providing the
other parties with written notice thereof, if the Closing shall not have
occurred by March 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 Xxxxx, on behalf of the Sellers, or EESI, on or prior to
March 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
(d) by Xxxxxx Xxxxx, on behalf of the Sellers, or EESI, if the Closing
shall not have occurred by March 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).
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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 10.1, Section 10.2 and Section 10.15 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 EESI. At the Closing, EESI shall deliver,
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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 the Company as set forth on
Schedule 1.5(a);
(b) A certified copy of resolutions of the directors of EESI authorizing
the execution and delivery by EESI of this Agreement and each other agreement to
be executed in connection herewith, including, but not limited to the Employment
Agreement, the Consulting Agreement, and the Noncompetition 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) An employment agreement with Xxxxxx Xxxxx in the form and content of
the employment agreement attached hereto as Schedule 1.5(d) (the "Employment
Agreement") and the Incentive Stock Option Agreement;
(e) A consulting agreement with Xxxxxxx Xxxxxxxx in the form and content
of the consulting agreement attached hereto as Schedule 1.5(e) (the "Consulting
Agreement") and the Warrant Agreement; and
(f) The Certificate described at Section 8.1.
(g) Employment agreements with key personnel of the Company identified by
Xxxxxx Xxxxx having terms acceptable to Xxxxxx Xxxxx and EESI.
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 Agreement, the written resignations of all officers
and directors of the 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 Company from any and all
claims, causes of action, debts and obligations whatsoever existing on the
Closing Date, except obligations of the Company to occur after Closing pursuant
to this Agreement;
(d) An Employment Agreement with Purchaser, in the form attached as
Schedule 1.5(d), executed by Xxxxxx Xxxxx;
(e) A Consulting Agreement, in the form attached as Schedule 1.5(e),
executed by Xxxxxxx Xxxxxxxx;
(f) Each of the Sellers not party to the Employment Agreement or the
Consulting Agreement shall execute the Noncompetition Agreement attached as
Schedule 1.6(f);
(g) The Sellers shall have delivered to Purchaser a current certificate of
good standing for the Company from the Pennsylvania Secretary of State;
(h) A favorable opinion from counsel for the Sellers, dated the date of
the Closing, in form attached as Schedule 1.6(h);
(i) Each of the Sellers shall execute and deliver the Certificate
described at Section 7.1; and
(j) A certified copy of resolutions of the directors and shareholders of
the Company authorizing the execution and delivery of this Agreement and each
other agreement to be executed in connection herewith, including, but not
limited to the Collateral Documents and the consummation of the transactions
contemplated herein and therein;
(k) The books and records of the Company, 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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Certain of the following representations and warranties are made "to
Sellers' knowledge" or "to Sellers' actual knowledge." When so used, these
phrases shall have the following meanings:
"Seller's knowledge" shall mean "Seller's actual knowledge" (as hereinafter
defined) together with that knowledge which the respective party would have
acquired through the proper exercise of its/his/her duty, if any, to investigate
the particular matter in question. EESI shall bear the burden of establishing
the failure to properly exercise any such duty.
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"Seller's actual knowledge" shall mean the actual conscious awareness,
without regard to any duty to investigate, of the respective person making the
representation or warranty.
"Company's knowledge" shall mean Company's actual knowledge together with
that knowledge which any officer of Company would have acquired had they
exercised reasonable diligence in the conduct of the Company's business affairs.
With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, the Company and all of the Sellers
jointly and severally represent and warrant to Purchaser and make the following
covenants for Purchaser's benefit (except that Xxxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxx make all of the following representations and warranties only to their
actual knowledge):
Section 2.1 Organization and Standing. The Company is a corporation duly
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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 Company does not own any stock
or interest in any other corporation, partnership, or other business
organization, except as set forth on Schedule 2.1.
Section 2.2 Company Stock. The Company has the authorized and kind of
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capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets forth the
number of shares of the capital stock of the Company issued and outstanding.
The Company Shares each Seller owns in the 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. The Company Shares owned by the Sellers constitute one hundred percent
(100%) of the issued and outstanding securities of the 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 the
Company ("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 the Company is bound or
under which the Company is 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 the 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 the Company or any of its property and pursuant to which the 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 each of the different type of documents listed. Except
as set forth on Schedule 2.3, neither the 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,
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and, to the actual knowledge of the Sellers, no act or event has occurred which
with notice or lapse of time, or both, would constitute such a default. The
Company is not a party to, and none of the Company's property is bound by, any
agreement or instrument which is material to the continued conduct of business
operations of the Company, as now being conducted, except as listed in Schedule
2.3.
Section 2.4 Personal Property.
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Sellers make no representation or warranty concerning the tangible personal
property of Company other than as set forth below in paragraphs (a) through (f)
of this Section 2.4.
(a) All furniture, office equipment, computers, software programs, mobile
and base radios, transfer station equipment, recycling equipment, and other
equipment used in the Company's business operations, all of which are owned or
leased by the Company, are listed on Schedule 2.4(a) and are, in all material
respects, in good condition, normal wear and tear excepted, except as noted on
Schedule 2.4(a);
(b) All currently operating rolling stock, including motor vehicles,
trucks, front and rear end loaders, and compactors and accessories and
attachments to the rolling stock used in the Company's business 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
the Company, are listed on Schedule 2.4(b) and are, in all material respects, in
good condition for their respective ages, normal wear and tear excepted, except
as noted on Schedule 2.4(b);
(c) All containers used in the Company's business operations together with
information as to container size and year of manufacture, all of which are owned
or leased by the Company, are listed on Schedule 2.4(c) and are in good
condition for their respective ages, normal wear and tear excepted, except as
noted on Schedule 2.4(c);
(d) The Company owns or has on consignment a sufficient inventory of
parts, tires and accessories, by type and quantity, to perform maintenance on
its Rolling Stock and to keep its Rolling Stock in operation in the ordinary
course of business consistent with industry practices;
(e) All equipment owned by the Company used in its business operations,
such as scales, compactors, balers, recycling equipment or any other equipment
having a value of $10,000 or more and not listed on Schedules 2.4(a), 2.4(b), or
2.4(c), and all such equipment, in all material respects, is in good condition
for their respective ages, normal wear and tear excepted, except as noted on
Schedule 2.4(e); and
(f) The Company owns sufficient shop tools to perform proper maintenance
on the Rolling Stock in the ordinary course of business consistent with
industry practices.
Section 2.5 Customers. The name and address of each customer the Company
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serves, together with information as to the services rendered to each such
customer are listed on Schedule
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2.5 attached hereto. Neither the Company nor, to the knowledge of the Sellers,
any person or party to 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. The 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 2.6 ("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.
Section 2.7 Financial Schedules.
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(a) A complete and correct listing of all of the Company's receivables as
of February 28, 1997, is attached hereto as Schedule 2.7(a) (the "Receivables
Schedule").
(b) A complete and correct listing of all of the Company's payables as of
February 28, 1997, is attached hereto as Schedule 2.7(b) (the "Payables
Schedule").
(c) A complete and correct listing of all of the Company's cash,
marketable investments, and prepaid expenses as of February 28, 1997, is
attached hereto as Schedule 2.7(c) (the "Current Assets Schedule").
(d) A complete and correct listing of all the Company's accrued expenses,
deferred revenue, accrued payroll and payroll taxes, accrued vacation, accrued
start-up costs and other accrued liabilities as of February 28, 1997, is
attached as Schedule 2.7(d) ("Accrued Liabilities Schedule").
The Receivables Schedule, the Payables Schedule, the Accrued Liabilities
Schedule and the Current Assets Schedule are sometimes referred to as the
Financial Schedules. The Financial Schedules have been prepared in accordance
with generally accepted accounting principles ("GAAP") applied on a consistent
basis in accordance with past custom and practice of the Company. The Financial
Schedules are consistent in all material respects with the books and records of
Company (which books and records are correct and complete in all material
respects). Since the date of the Financial Schedules, there has not been any
material adverse change in the income, expenses or assets of the Company.
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Section 2.8 Liabilities; Accounts Receivable and Payable; Working Capital.
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(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) the Company Debt and the Credit Line Amount;
(ii) liabilities listed on the Payables Schedule and the Accrued
Liabilities Schedule; and
(iii) liabilities arising since the date of the Payables Schedule
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.
(b) The Company's accounts receivable, as of the date of the Financial
Schedules, are listed on the Receivables Schedule. All accounts receivable of
the Company are, and all accounts receivable arising since the date of the
Receivables Schedule will be, valid and enforceable accounts receivable, and
will be fully collected in the ordinary course of business, less an amount of
$90,000 for a bad accounts reserve ("Bad Accounts Reserve"). The Receivables
Schedule gives the aging of each accounts receivable and accurately reflects, in
all material respects, the books and records of the Company. All accounts
receivable have been generated in the ordinary course of the Company's business
consistent with past practice. To Sellers' knowledge, there are no defenses or
set-offs to any of the accounts receivable.
(c) The Company's accounts payable, as of the date of the Payables
Schedule, are listed on the Payables Schedule. The Payables Schedule gives the
aging of each of the accounts payable and accurately reflects, in all material
respects, the books and records of the Company as of the date of the Payables
Schedule.
(d) For the five-month period ending February 28, 1997, the Company has
had gross revenues in the amount of $7,265,000.
(e) On the Closing Date, after the payment of the Company Debt and the
Line of Credit Amount the Company's Closing Date Working Capital as hereinafter
defined shall exceed $150,000. For purposes of this Agreement, the Company's
Closing Date Working Capital shall equal (i) the total of the cash, accounts
receivable, less the Bad Accounts Reserve, inventory, and prepaid expenses of
the Company, as of the Closing Date, less (ii) the total of (a) accounts
payable, (b) accrued expenses (except for the vacation accrual and start-up
accrual on the Accrued Liabilities Schedule), (c) deferred revenue, and (d) the
Credit Line Amount, all as of the Closing Date.
Section 2.9 Fiscal Condition of The Company. Since the date of the
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Financial Schedules, there has not (except as otherwise specifically permitted
by this Agreement or as set forth in the Schedules to this Agreement) been:
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(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others;
(b) Any disposition by the 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 the 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 the Company at the
close of business on the date of the Financial Schedules, or acquired by it
since that date, other than in the ordinary course of business consistent with
past practice or valued at $25,000 or less in the aggregate;
(d) Any expenditure or commitment by the 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 $50,000 or less;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $50,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any employee;
(g) Any loans or advances to the Company other than renewals or extensions
of existing indebtedness;
(h) Any change in accounting method or practice.
Section 2.10 Tax Returns. The Company has filed all Federal and other tax
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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 Company is Subchapter "S" corporation
under the Internal Revenue Code. Sellers warrant that they will pay with their
own funds any and all federal, state and local taxes due and payable by the
Company with respect to all periods prior to the Closing, to the extent such
taxes exceed the reserves for taxes established on Schedule 2.7(d), including,
without limiting the generality of the foregoing, all federal, state and local
income, sales, use, franchise, excise and property taxes. The Company has
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 Company or which the Company has 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
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covered and the names and addresses of all known issuing banks, beneficiaries,
agents or agencies with respect to each listed insurance policy, performance
bond and letter of credit. The Company's current insurance policies,
performance bonds and letters of credits are in force and effect and the
premiums thereon are not delinquent. The Company has received no 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. The Company has no claims 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 Company does 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 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 the
Company and any of its employees which might adversely affect the continuance of
the Company's business operations.
(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 the Company (whether or not they are now
terminated) or to which the 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 Company.
(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.
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(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 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, in all material respects, 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 the Company:
---------------------
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the 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), the 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 Company's 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 the 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 Company or
which would invalidate this
11
Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), the Company has received no 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 Company of $15,000 for an
individual event or $25,000 for all events in the aggregate.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, the 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, disposal, emission or release 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, the Company is in
material compliance with all permits, licenses, and orders related thereto or
issued thereunder, as are or may be applicable to the Company's 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 the 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 Company of
$15,000 or more or which would invalidate this Agreement or any action taken in
connection with this Agreement. Except as set forth on Schedule 2.13(b), the
Company has not transported, stored, treated or disposed, nor has the Company
allowed any third persons, on its behalf, to transport, store, treat or dispose
of 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 the Company 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 the Company has not disposed, nor has the
Company knowingly allowed third parties to dispose of waste upon property owned
or leased by the Company other than as permitted by, and in conformity with,
applicable Environmental Law. Except as disclosed in Schedule 2.13(b), the
Company has received no notification of any past or present failure by the
Company to comply with any Environmental Law applicable to it or its operations
or its assets. Without limiting the generality of the foregoing, the Company
has received no notification (including requests for information directed to the
Company or a shareholder 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. The Company has not 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 Company of $15,000 or more.
12
(c) Except as set forth on Schedule 2.13 (c), the Company has never owned,
operated, had an interest in, engaged in and/or leased a waste transfer,
recycling, treatment, storage, landfill or other disposal facility. The Company
has 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
Company. To Sellers' knowledge, no employee, contractor or agent of the Company
has, in the course and scope of employment with the Company, 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
Company under CERCLA, any comparable Pennsylvania 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 the Company 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 Commonwealth of Pennsylvania, the
District Attorney of any County of the Commonwealth of Pennsylvania, or any
United States Attorney or other law enforcement agency for the violation of any
Laws, including, without limitation, the violation of any anti-trust,
racketeering, or unfair competition Laws.
(f) Each pending or, to Sellers' knowledge, threatened lawsuit, litigation
and administrative or judicial proceeding involving the Company or its assets or
liabilities, together with a description of each such proceeding, is set forth
on Schedule 2.13(f) attached.
Section 2.14 Corrupt Practices. The Company has not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company (except in conformity with Law) for the purpose of attracting business
to the Company or any foreign or domestic governmental official, political party
or candidate for government office or any of their respective employees or
representatives, nor has the Company 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. The Company and the Sellers have the
----------------
right, power, legal capacity and authority to enter into, and perform their
respective obligations under this Agreement and each of the Collateral
Documents, 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. This Agreement and each of the Collateral
Documents to which the Company and the Sellers are parties, as applicable,
constitute the legal, valid and binding obligations of the Company and the
Sellers, as applicable, enforceable in accordance with its terms. 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:
13
(a) Any charter, by-law, agreement or other document to which the Company
or any Seller is a party or by which the Company, Seller or any of their
property is bound;
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Company or on any property of the Company;
(c) Any permit, certificate or license issued by any governmental
authority under which the Company operates or pursuant to which any of the
property of the Company is bound; or
(d) Any agreement to which the Company is bound, including, without
limitation, bank loan documents, agreements with customers or suppliers and
leases for equipment.
Section 2.16 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of the Company or any Seller is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
Section 2.17 Intellectual Property. To the knowledge of the Sellers, the
---------------------
Company has not 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 the Company.
Section 2.18 Competition. Except as set forth on Schedule 2.18 and except
-----------
for passive ownership of securities of nationally-traded companies, to Sellers'
actual knowledge no Seller or salaried officer, nor any spouse or child of any
of them, has any direct or indirect interest in any competitor of the 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 the Company.
Section 2.19 Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II, or in any Exhibit or Schedule or other
document delivered by the Sellers or the Company 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 EESI
--------------------------------------
EESI represents and warrants to the Sellers that:
Section 3.1 Structure. EESI is a corporation duly organized and legally
---------
existing in good standing under the laws of Delaware.
14
Section 3.2 Authorization to Proceed with this Agreement. EESI has 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 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 Company 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 made all filings with Securities and
--------------
Exchange Commission (the "SEC") that it is required to make under the Securities
Act of 1933 (the "Act") and the Securities Exchange Act of 1934 (the "Exchange
Act"), as amended (collectively, the "Public Reports"). EESI has delivered to
Sellers all such Public Reports filed by Eastern since July 1, 1996. The Public
Reports accurately and completely describe, in all material respects, EESI's
financial status, business operations and prospects as of the date of such
filings, and do not contain any untrue statement of a material fact or omit any
material fact(s) necessary to make the information contained in the filings not
misleading. Since the date of the most recent Public Report, there has not been
any material adverse change in the financial condition, business organization or
personnel of EESI or in any relationships of EESI with suppliers, customers and
others.
Section 3.5 Capitalization. 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, none of
which is outstanding. As of February 21, 1997, the outstanding shares of
capital stock of EESI consisted solely of 13,244,807 shares of Common Stock, par
value $.01. All outstanding shares of stock are legally and validly authorized
and issued, fully-paid and nonassessable.
Section 3.6 Issued Common Stock. The EESI Stock to be issued pursuant to
-------------------
this Agreement has been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable, and no stockholder of Eastern or any other
person has preemptive or similar rights with respect to such stock. The EESI
Stock to be delivered at Closing will vest in Sellers good and marketable title
thereto and will be delivered free and clear of all liens, encumbrances and
other claims.
Section 3.7 Authorization. EESI has 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 EESI is a party constitutes the legal, valid and
binding obligation of EESI, enforceable in accordance with its terms. EESI has
the power and authority to own and lease its properties and to carry on its
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
EESI for the execution and delivery of this
15
Agreement or the consummation of the transactions contemplated hereby. The
execution and delivery of this Agreement by EESI and the consummation of the
transactions contemplated hereby by the 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 EESI is a
party or by which any of its 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.
Section 3.9 Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchaser 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. The Company has provided EESI with its title
------------
policy insuring ownership of all real property (the "Real Estate") owned by the
Company ("Title Policies"). EESI has ordered a title search ("Title Search")
with respect to the Real Estate. EESI may terminate this Agreement if the Title
Search shows title to the Real Estate to be subject to exceptions not set forth
in the Title Policies. EESI may exercise its right of termination by sending
written notice to Seller within fifteen (15) days from the date EESI receives
the Title Search and all documents noted as exceptions to title on the Title
Search.
Section 4.2 Survey. Within ten (10) days after the date of this
------
Agreement, Company shall deliver to EESI an as-built survey of the Real Estate.
EESI may terminate this Agreement if any survey reflects that any improvements
constructed on the Real Estate encroach upon any adjacent real estate or that
any of the Real Estate does 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. EESI shall pay for the cost of obtaining the policies
-----
of title insurance 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 Act, 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.
16
(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.
(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. EESI and Sellers agree 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 Company 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
Company 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 Company 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 Section 368(a)(1)(B) and to comply with all IRS filing
and other requirements for such exchange. EESI and Sellers agree 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 his residence in Pennsylvania;
(b) Each Seller acknowledges that he has received a copy of EESI's Public
Reports, as defined in Section 3.4 of this Agreement.
(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 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.
18
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE EESI STOCK
INVOLVES A HIGH DEGREE OF RISK, and represent and warrant 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, acknowledgments and
understandings set forth herein in order to determine the applicability of such
exemption and the suitability of Sellers to acquire the EESI Stock.
(i) The Sellers each acknowledge that they are officers or directors of
the Company. The Sellers further represent and warrant that they are familiar
with the business and financial affairs of the Company, and have had access to
all financial statements prepared by the Company.
Section 5.5 Access to Records. The Sellers will cause the Company 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 Company, 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 Company that
Purchaser may reasonably request.
Section 5.6 Continuation of Business. The Sellers will operate the
------------------------
Company until the Closing Date in the ordinary course of business, consistent
with past practice, so as to preserve its assets and business organization
intact, to assure, to the extent possible, the availability to Purchaser of the
present key employees of the Company, and to preserve for Purchaser the
relationships of the Company with suppliers, customers, and others.
Section 5.7 Continuation of Insurance. The Sellers will cause the Company
-------------------------
to keep in existence all policies of insurance insuring the Company against
liability and property damage, fire and other casualty through the Closing Date,
consistent with the policies currently in effect. Sellers shall terminate such
insurance as of the Closing Date, and EESI shall cause the Company to acquire
new insurance. The Company has paid $31,000 for stock in the Company's insurer,
which stock is owned by the Sellers. The amount paid by the Company for the
stock was booked as a receivable from the Sellers. At Closing, the Sellers will
pay the receivable owed, in the amount of $31,000, and will receive clear title
to the stock and all incidents of such ownership.
19
Section 5.8 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the Company
and the Sellers will not directly or indirectly solicit offers for the Company
Shares or the assets of the Company or for a merger or consolidation involving
the Company, 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 Company by
merger, consolidation or other combination or acquiring any of Company's assets;
nor will the Sellers permit the Company to do any of the foregoing.
Section 5.9 Financial Statements. Sellers agree to cooperate with EESI to
--------------------
cause the Company to prepare audited balance sheets for the Company and Waste
Management of Pennsylvania, Inc. ("WMP"), the entity which previously owned the
business currently operated by the Company, as of December 31, 1996, and
statements of income, changes in cash flow and retained earnings for the Company
for the twelve-month period ended December 31, 1996, and a reviewed balance
sheet of the Company and WMP as of June 30, 1996, and a reviewed statement of
income, changes in cash flow and retained earnings for the twelve-month period
ended June 30, 1996, and the six-month period ended December 31, 1996
("Historical Financial Statements"), as rapidly as possible, but no later than
thirty-five (35) calendar days after the Closing Date. Sellers shall also
cooperate with EESI to cause the Company to prepare reviewed balance sheets and
statements of income, changes in cash flow and retained earnings for the stub
period from July 1, 1996, through the last complete calendar quarter ended prior
to Closing ("Interim Financial Statements"). The Company shall use its best
efforts to have the Interim Financial Statements completed by no later than
thirty-five (35) calendar days after the Closing Date. EESI, Company and each
Seller specifically agree and acknowledge that the timely delivery of the
Historical Financial Statements and the Interim Financial Statements
(collectively, the "Required Statements") is of paramount importance to EESI and
Sellers because EESI will need the Required Statements in order to file a Form
8-K with the SEC within the time frames required by applicable law.
Section 5.10 Consents. Sellers and EESI shall cooperate with each other
--------
and use all reasonable efforts to obtain all approvals, authorizations and
consents required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, (i) the consent of the Bank of Boston
to the transactions contemplated by this Agreement, and (ii) the approval of
every regulatory agency of federal, state, or local government that may be
required in the opinion of either EESI or Sellers.
ARTICLE VI
Additional Agreements
---------------------
Section 6.1 Payment of Expenses. EESI will pay all expenses incurred by
-------------------
EESI in connection with the negotiation, execution and performance of this
Agreement. Sellers will pay all legal and accounting expenses incurred by the
Sellers in connection with the negotiation, execution and performance of this
Agreement. If a fee is charged by Waste Management, Inc., for any cooperation
necessary to produce the Historical Financial Statements and the Interim
Financial
20
Statements, EESI shall pay such fee up to a maximum of $500,000. Sellers shall
reimburse EESI for the actual accountants' fees to prepare the audited financial
statements pursuant to Section 5.9; however, the reimbursement shall not exceed
$40,000.
Section 6.2 Registration Rights.
-------------------
(a) If the EESI Stock delivered at Closing is not registered under the Act
("Unregistered Stock"), as soon as possible 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 any applicable "blue sky" laws. EESI
shall use its best efforts to obtain such registrations and approvals. 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.
In order to facilitate the resale by Sellers of EESI Stock during any period in
which the registration statements shall not be effective, EESI shall use its
reasonable efforts to take all action and file with the SEC and state
authorities such information as the SEC or such state authorities may require as
a condition to the availability of Rule 144 or 145 under the Act or the state
equivalent exemption (or any successor exemptive rule hereafter in effect).
During the two years following the effective date of the registration of
Sellers' EESI Stock, EESI shall use its best efforts to maintain its listing on
a nationally recognized securities exchange.
(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.
21
(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;
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 the prospectus.
(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, (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.
Section 6.3 S Corporation Matters.
---------------------
(a) Sellers, the Company and EESI acknowledge that the Company has not
made a distribution to Sellers for purposes of Company earnings for the fiscal
year ending December 31, 1996.
(b) Sellers, the Company and EESI acknowledge that upon the transfer of
the Company Shares by Sellers to EESI, the S Corporation election of the Company
will automatically terminate because EESI is an ineligible shareholder for the
valid continuation of S Corporation status. Sellers, the Company and EESI also
acknowledge that because more than fifty percent (50%) of the stock of the
Company will change ownership in the current tax year, under Code section
1362(e)(6)(D), normal tax accounting methods, and not a pro rata allocation,
will apply to the short S tax year and the short C tax year resulting from the
termination of the S Corporation elections. Upon execution of this Agreement
and continuing after the transfer, Sellers, the Company and EESI agree, without
further consideration, to execute and deliver promptly to the requesting party
such further assignment, endorsement, and other documents and instruments, and
to take all such further actions as a Seller, the Company or EESI may from time
to time reasonably request with respect to the
22
preparation and submittal of tax returns, tax notices and other documents,
including without limitation, the execution and delivery of a consent to
termination date of the S Corporation election of the Company.
ARTICLE VII
Conditions of EESI
------------------
The obligations of EESI 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 and Company 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 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
the Company or the business the Company operates 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 Company, and the 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 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, excluding any consent or approval of
the Pennsylvania Department of Environmental Protection to a change of control
of the Company, which approval cannot be obtained until after Closing, 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 7.5 Financial Statements. The Company shall have obtained the
--------------------
agreement of Waste Management, Inc., to cooperate to any extent necessary for
Company to prepare the Historical Financial Statements and the Interim Financial
Statements as set forth in Section 5.9.
23
Section 7.6 Accounting Issues. EESI shall have determined, in its
-----------------
reasonable discretion, that the transactions contemplated by this Agreement
shall qualify as a "pooling of interests" transaction as contemplated by Section
5.2.
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. 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 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 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
the Company or the business the Company 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 Payment. The Purchaser shall have delivered to each of the
-------
Sellers, as applicable, the EESI Stock in accordance with Section 1.5.
Section 8.4 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including any consent or approval of
the Pennsylvania Department of Environmental Protection to a change of control
of the Company, 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 8.5 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.
24
Section 8.6 EESI Stock Price. The market price (the lower of bid or
----------------
asking price) of the EESI Stock on the Closing Date shall be no less than $10
per share.
Section 8.7 Company Debt. All Company Debt shall have been repaid in full
------------
by EESI, including the release of all personal guarantees or sureties for the
Company Debt.
Section 8.8 Financial Statements. The Company shall have obtained the
--------------------
agreement of Waste Management, Inc., to cooperate to any extent necessary for
Company to prepare the Historical Financial Statements and the Interim Financial
Statements as set forth in Section 5.9.
Section 8.9 Accounting Issues. Sellers, in their reasonable discretion,
-----------------
concur that the transactions contemplated by this Agreement shall qualify as a
Section 368(a)(1)(B) reorganization under the Code as contemplated by Section
5.3 and shall qualify as a "pooling of interests" transaction as contemplated by
Section 5.2.
ARTICLE IX
Indemnification
---------------
Section 9.1 Indemnification by Sellers. The Sellers each agree that they
--------------------------
will each, severally and not jointly, indemnify, defend, protect and hold
harmless EESI and its officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, legal
representatives, 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 by Sellers before or after the
Closing Date; or (c) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a) or (b) of this
Section 9.1 of this Agreement has occurred.
Section 9.2 Indemnification by EESI. EESI agrees that it will indemnify,
-----------------------
defend, protect and hold harmless each Seller, the Company, 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) 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
25
warranties of 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 EESI made in this Agreement or
in the Collateral Documents; (c) any Security Liability; or (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.
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 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.
26
(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 any
------------------------------------
Seller wishes 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 party from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). No Indemnification Demand shall be
made under this Section 9.4 until such time that the party making an
Indemnification Demand believes, in good faith, that it has a claim or claims
for indemnity totaling Fifty Thousand Dollars ($50,000) or more, singly or in
the aggregate, and no Indemnifying Party shall have any liability to an
Indemnified Party until the damages to the Indemnified Party exceed a cumulative
aggregate total of $50,000; however, the $50,000 threshold shall not apply to an
Indemnification Demand arising due to a breach or the falsity of the
representations in Section 2.8(e). Once cumulative aggregate damages exceed
$50,000, the Indemnifying Party shall be liable for all damages to the
Indemnified Party, including the first $50,000 of damages. 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 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 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, (ii) all
representations
27
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 Company by tax authorities or
governmental agencies or governmental units, and (iii) all representations and
warranties other than set forth in (i) and (ii) 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
-----------------------
contained herein to the contrary, the obligations of each of the Sellers
pursuant to the indemnification contained in Section 9.1 shall be limited to the
lesser of: (i) an aggregate dollar amount equal to the dollar amount received by
Sellers for any of the EESI Stock sold by them in bona fide sales, plus the
---- ----
market value of the EESI Stock (registered pursuant to Section 6.2) and not
sold by Sellers in bona fide sales as of the date each Seller becomes obligated
---- ----
to pay the Indemnification Demand; or (ii) the aggregate of the value of the
EESI Stock delivered to each Seller at Closing, valued at the Per Share Value.
Section 9.7 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
Section 9.8 Exclusive Remedy. The remedy provided by this Article IX,
----------------
subject to the limitations set forth herein, shall be the parties' sole and
exclusive remedy for the recovery of any damages resulting from, relating to or
arising out of this Agreement, and no party shall be entitled to an award of
punitive or exemplary damages against any other party.
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 Company such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company. Sellers agree that for a period of five (5) years from
the Closing Date they will not disclose such confidential information to any
person, firm, corporation, association
28
or other entity for any purpose or reason whatsoever, except to authorized
representatives of the Company, 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 EESI. EESI recognizes and acknowledges that
---------------------
it has in the past, currently has, and prior to the Closing Date, will have
access to certain confidential information of the Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company. EESI agrees that it will
not utilize such information in the business or operation of EESI or any of its
affiliates or 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 EESI, (ii) 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 EESI of the provisions
of this Section, the Sellers shall be entitled to an injunction restraining 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 Purchaser) and shall be binding upon and shall
inure to the benefit of the parties hereto, the successors of Purchaser and
Sellers. This Agreement, upon execution and delivery, constitutes 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.
29
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 Xxxxx
0000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx
Xxxx, Xxxxxxxxxxxx 00000
with a copy to:
D. Xxxx Xxxxx, Xx.
Kegel, Chesters & Xxxxxx, LLP
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 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 Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Pennsylvania or any
30
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the Commonwealth of Pennsylvania.
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 Xxxxx on
----------------------------------
behalf of the Sellers or Purchaser may extend the time for or waive the
performance of any of the obligations of 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 Xxxxx
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.
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Section 10.15 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in Philadelphia, Pennsylvania, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, 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 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 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"). 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 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EASTERN ENVIRONMENTAL SERVICES, INC.
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------------
By: Xxxxxx X. Xxxxxx
Its: Vice President
APEX WASTE SERVICES, INC.
/s/ Xxxxxx X. Xxxxx
--------------------------------------------------
By: Xxxxxx X. Xxxxx
Its: President
/s/ Xxxx X. Xxxxxx
--------------------------------------------------
Witness: Xxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxxx
--------------------------------- --------------------------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxxx /s/ Xxxxx X. Xxxxxx
--------------------------------- --------------------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxx X. Xxxxxx
33
