Exhibit 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
EASTERN ENVIRONMENTAL SERVICES, INC.
AND
THE SHAREHOLDERS OF
XXXXXX JERSEY SANITATION CO.,
WEST MILFORD HAULAGE, INC.,
XXXXX XXXXXXX & COMPANY, AND
SPECIALIZED RECYCLING TECHNOLOGIES, INC.
TABLE OF CONTENTS
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Page
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RECITALS.................................................. 1
ARTICLE I - CLOSING....................................... 1
ARTICLE II - TITLE INSURANCE.............................. 6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLERS... 6
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EASTERN.... 17
ARTICLE V - ADDITIONAL AGREEMENTS OF SELLERS.............. 18
ARTICLE VI - ADDITIONAL AGREEMENTS OF EASTERN............. 21
ARTICLE VII - CONDITIONS OF EASTERN....................... 23
ARTICLE VIII - CONDITIONS OF SELLERS...................... 24
ARTICLE IX - INDEMNIFICATION.............................. 25
ARTICLE X - OTHER PROVISIONS.............................. 28
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SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.6(b) Opinion of Eastern Counsel
1.6(c) Employment Agreement
1.7(e) Opinion of Sellers Counsel
1.7(f) Release
ATTACHED AS PART OF DISCLOSURE BINDER
1.3(a) Company Debt; Historic Working Capital
1.3(e) Capital Structure; Share Allocation
2.2 Permitted Exceptions to Real Property Title
3.1 Subsidiaries
3.3 Contracts, Permits, Mortgages and Material Documents
3.4(b) Rolling Stock
3.4(c) Containers
3.4(d) Recycling Equipment
3.5 Customer Contracts
3.6 Real Property
3.7 Adverse Changes
3.8(a)(iii) Liabilities not in Ordinary Course of Business
3.8(c) Working Capital
3.9 Fiscal Condition of Companies
3.10 Tax Status of Companies
3.11 Insurance Policies, Performance Bonds and Letters of Credit
3.12(a) Contracts with Employees
3.12(b) Employees
3.12(c) Benefit Plans
3.13(a) Violations of federal, state or local laws or regulations
3.13(b) Environmental Violations
3.13(f) List and Synopsis of All Litigation
3.15 Required Consents
3.18 Related Party Transactions
8.6 Guarantees
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is made and entered into on
February 5, 1998, by and between Eastern Environmental Services, Inc., a
Delaware corporation ("Eastern"), on one part, and Xxx Xxxxxxx and Xxxxxxx X.
Xxxxxxx (collectively, the "Sellers"), on the other part.
RECITALS
Eastern is a waste services company engaged in the collection,
transportation and disposal of residential, commercial and industrial waste in
several eastern, southern, and Midwestern states. Xxxxxx Jersey Sanitation Co.,
West Milford Haulage, Inc., Xxxxx Xxxxxxx & Company and Specialized Recycling
Technologies, Inc. (collectively, the "Xxxxxxx Companies"), are waste services
companies engaged in the collection, recycling and disposal of residential,
commercial and industrial waste in the state of New Jersey. By the Closing
Date, as hereinafter defined, Sellers shall own all of the issued and
outstanding shares of the capital stock of the Xxxxxxx Companies ("Company
Shares"). For purposes of this Agreement, Eastern is sometimes hereinafter
referred to as "Purchaser."
In accordance with the provisions of this Agreement, Sellers desire to sell
all of the outstanding shares of stock of the Xxxxxxx Companies to Eastern in
exchange for common stock of Eastern, all 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, and be treated as a "pooling of interests" for
accounting purposes.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by the Sellers. The
Disclosure Binder is organized under subheadings which correspond to the various
Schedules described in this Agreement. For purposes of identification, the
Disclosure Binder has been identified by the parties by a written statement
executed by the parties and appearing as the first page of the Disclosure
Binder.
ARTICLE I
CONSIDERATION AND 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 within fifteen days of the conditions set forth in Article VII
and Article VIII being satisfied or waived, time being of the essence, at the
offices of Eastern, 1000 Xxxxxxxx Place, Mount Laurel,
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New Jersey, or such other place as the parties hereto may agree upon. 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.
SECTION 1.3 Agreement to Sell Stock of Companies; Consideration.
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(a) At the Closing, each of the Sellers agrees to transfer and deliver to
Purchaser all of the Company Shares owned by such Seller, as applicable, and
Purchaser agrees to purchase and pay for the Company Shares, the total
consideration, subject to adjustment as provided herein, of $39,200,000.00 (the
"Purchase Price") as follows: (i) a number of shares of Eastern's common stock
("EESI Stock") having a value of $31,200,000.00, each share being valued at the
closing price of the stock on the Nasdaq Stock Market on the date of this
Agreement ("Per Share Value"), and (ii) Purchaser accepting the Company Shares
with the Xxxxxxx Companies having long-term liabilities, including the current
portion thereof ("Company Debt"). As of the date hereof the Company Debt is as
set forth on Schedule 1.3(a) attached. If the Company Debt, at Closing, is less
than or more than $8,000,000.00, the EESI Stock to be delivered at Closing shall
be increased or decreased, dollar for dollar, by the amount by which the total
principal amount owed on the Company Debt at Closing is less than or exceeds
$8,000,000.00. The increase or decrease, as applicable, shall be calculated by
valuing the EESI Stock at the Per Share Value. If the Xxxxxxx Companies, at
Closing, have Working Capital, as hereinafter defined in Section 1.3(b), that
exceeds the amount historically maintained by the Xxxxxxx Companies at the end
of the first calendar quarter, as set forth on Schedule 1.3(a), the portion of
the Purchase Price payable in EESI Stock shall be increased or decreased, dollar
for dollar, at the Per Share Value, by the amount by which the Working Capital
at Closing exceeds, or is less than, the amount set forth on Schedule 1.3(a).
(b) Within 45 days after the Closing Date, Sellers shall prepare and
deliver to Eastern the consolidated balance sheet for the Xxxxxxx Companies as
of the close of business on the business day immediately preceding the Closing
Date (the "Closing Date Balance Sheet"). Eastern shall fully cooperate with
Sellers during Sellers' preparation of the Closing Date Balance Sheet. The
Closing Date Balance Sheet shall set forth the consolidated Working Capital of
the Xxxxxxx Companies and shall have been prepared in accordance with generally
accepted accounting principles, applied consistently. Eastern shall have the
right to review all of Sellers' work papers and all relevant records of the
Xxxxxxx Companies and their accountants relating to the Closing Date Balance
Sheet. For purposes of this Agreement, "Working Capital" shall mean the
consolidated current assets of the Xxxxxxx Companies, less their consolidated
current liabilities, including without limitation, all accrued expenses
including interest on the Company Debt through the Closing Date and excluding
only the current principal portion of the Company Debt, in each case as
determined in accordance with generally accepted accounting principles and
consistent with the manner that the Xxxxxxx Companies historically reflected
current assets and current liabilities on the Financial Statements, as defined
in Section 3.7.
(c) The Closing Date Balance Sheet delivered by Sellers to Eastern shall
be deemed to be and shall be final, binding and conclusive on the parties
hereto, unless Eastern disputes the Closing
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Date Balance Sheet in accordance with this Section 1.3(c). Eastern may dispute
any amounts reflected on the Closing Date Balance Sheet (any such disputed
amounts, the "Disputed Matters")
provided, however, that Eastern shall be entitled to dispute any such matter
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only if (1) Eastern shall notify Sellers in writing of each Disputed Matter
within ninety (90) days of Eastern's receipt of the Closing Date Balance Sheet
and (2) all such asserted disputes, if resolved in Eastern's favor, would result
in an adjustment to the Closing Payment in excess of $25,000 (in which event the
full amount of the adjustment, as finally determined, shall be made as provided
below). Any Disputed Matters shall be subject to good faith negotiations
between the parties for up to fifteen (15) days prior to being referred to the
Independent Accounting Firm (as defined below). Any Disputed Matters not
resolved by such good faith negotiations shall be decided by an independent
accounting firm acceptable to both Sellers and Eastern (the "Independent
Accounting Firm"). The costs and expenses of the Independent Accounting Firm
shall be shared equally by Sellers and Eastern. The Independent Accounting Firm
so chosen shall consider only the Disputed Matters and Eastern and Sellers shall
use reasonable efforts to cause the Independent Accounting Firm to render a
final decision on the Disputed Matters by delivering a written report to Eastern
and Sellers no later than thirty (30) days after having received the assignment
with respect thereto. The decision of the Independent Accounting Firm with
respect to all Disputed Matters shall be based solely on whether the Closing
Date Balance Sheet was prepared in accordance with the requirements of this
Agreement, shall be final and binding upon the parties hereto and shall not be
subject to challenge in any court.
(d) If the Working Capital as of the Closing Date as conclusively
determined as provided in Section 1.3(c) (such conclusive determination is
referred to herein as "Certified Working Capital"), is less than as set forth on
Schedule 1.3(a), then Sellers shall return to Eastern for cancellation an amount
of EESI Stock, valued at the Per Share Value, in the amount of such deficiency.
If the Certified Working Capital is greater than as set forth on Schedule
1.3(a), then Eastern shall deliver to Sellers additional EESI Stock valued at
the Per Share Value in the amount of the excess. Any payment pursuant to this
Section 1.3(d) shall be made within five (5) business days following the
conclusive determination of Working Capital.
(e) The EESI Stock shall be allocated between the Xxxxxxx Companies as set
forth on Schedule 1.3(e). The Sellers shall receive the shares of EESI Stock as
allocated among the Xxxxxxx Companies and in the same proportions that the
Sellers own shares in each of the Xxxxxxx Companies, as set forth on Schedule
1.3(e).
SECTION 1.4 Closing. Following execution of this Agreement, Purchaser and
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Sellers shall be obligated to conclude the transaction strictly in accordance
with its terms within fifteen (15) days after the conditions of Closing set
forth in Article VII and Article VIII have been satisfied or waived, time being
of the essence. If the failure to conclude this transaction is due to the
refusal and failure of a party to perform its obligations under this Agreement
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after the conditions of Closing set forth in Article VII and Article VIII have
been satisfied or waived, the other party 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. If the failure to conclude this transaction is due to the refusal
and failure of a party to perform its obligations under this Agreement after the
conditions of Closing set forth in Article VII and Article VIII have been
satisfied or waived, the non-breaching party may bring an action of specific
performance or terminate this Agreement and bring legal action to recover the
damages set forth in Section 1.5 below.
SECTION 1.5 Termination. This Agreement and the transactions contemplated
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hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Eastern and Sellers;
(b) by Eastern within forty-five (45) days of the date of this Agreement,
if Eastern is not satisfied, in its sole discretion, with the due diligence it
has conducted on the Xxxxxxx Companies;
(c) by Eastern or Sellers, in the event the other makes a material
misrepresentation under this Agreement or breaches a material covenant or
agreement under this Agreement;
(d) by Eastern or Sellers, if the Closing shall not have occurred by June
30, 1998, 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);
(e) by Eastern or Sellers, if Sellers do not deliver the Disclosure Binder
within 14 days of the date of this Agreement;
(f) by Eastern, within 15 days of receipt of the Disclosure Binder, if
Eastern is not satisfied, in its sole discretion, with the statements,
representations, warranties and covenants set forth in the Disclosure Binder; or
(g) by Sellers, if Sellers shall be unable to consummate the purchase of
certain outstanding shares of the Xxxxxxx Companies from the estates of certain
deceased shareholders of said companies, as described in Section 3.2, after
using their reasonable efforts to consummate the purchases in accordance with
the terms of the terms of the applicable shareholder agreements described in
Section 3.2 .
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 10.1 and Section 10.2 shall survive and continue in full force and
effect, notwithstanding termination. The termination of this Agreement by
virtue of a material breach of a covenant or a material misrepresentation shall
not limit, waive or prejudice the remedies available to the parties, at law,
provided, however, that the failure or refusal to deliver the Disclosure Binder
or consummate the purchase described in Section 1.5(g) above shall not
constitute a breach. If this Agreement is terminated, all due diligence and
other documentation delivered to Eastern by the Xxxxxxx Companies and Sellers
shall be returned to the Sellers. If this Agreement is terminated under Section
1.5(c) above due to a material misrepresentation which was not intentional, the
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damages which may be recovered by the party terminating the Agreement shall be
limited to One Hundred Fifty Thousand Dollars ($150,000). If this Agreement is
terminated under Section 1.5(c) above due to a intentional material
misrepresentation or a breach of a material covenant, the damages of the
terminating party shall be the actual damages of the terminating party,
including, without limitation, the loss of the benefit of the transaction and
all costs and expenses incurred by the terminating party in negotiating and
preparing to close the transactions under this Agreement and in recovering its
damages, including, without limitation, filing fees, attorney fees and
accounting fees.
SECTION 1.6 Deliveries by Eastern. At the Closing, Eastern shall
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deliver or cause to be delivered, all duly and properly executed, authorized and
issued (where applicable):
(a) Certificates representing the EESI Stock, as provided in Section 1.3
above, to be delivered upon delivery of the Company Shares;
(b) A favorable opinion from counsel for Eastern, dated the Closing Date,
in the form attached as Schedule 1.6(b);
(c) Employment Agreements with each of the Sellers, in the form and content
attached hereto as Schedule 1.6(c) (the "Employment Agreements");
(d) A copy of resolutions of the directors of Eastern authorizing the
execution and delivery of this Agreement and each other agreement to be executed
in connection herewith (collectively, the "Collateral Documents") and the
consummation of the transactions contemplated herein and therein; and
(e) The Certificate described at Section 8.1 executed by a duly authorized
officer of Purchaser.
SECTION 1.7 Deliveries by Sellers. At the Closing, Sellers shall deliver
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to Eastern or cause to be delivered, all duly and properly executed, authorized
and issued (where applicable) the following:
(a) Duly executed certificates in valid form evidencing all of the Company
Shares owned by each Seller, duly endorsed in blank or accompanied by duly
executed stock powers attached or otherwise executed in the presence of
authorized representatives of Purchaser;
(b) Except as may be otherwise required by Eastern, the written
resignations of all officers and directors of the Xxxxxxx Companies as of the
time of Closing;
(c) The Employment Agreements;
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(d) A current certificate of good standing for each of the Xxxxxxx
Companies from each applicable jurisdiction of incorporation and admission;
(e) A favorable opinion from counsel for Sellers, dated the Closing Date,
in form attached as Schedule 1.7(e);
(f) A release from each Seller, in a form and content satisfactory to
Purchaser, which provides that the Sellers are releasing the Xxxxxxx Companies
from any and all claims, causes of action, debts and obligations whatsoever
existing on the Closing Date, except such obligations of indemnity available to
Sellers pursuant to applicable laws and/or the Certificate of Incorporation or
By-laws of the Xxxxxxx Companies;
(g) The Certificate described at Section 7.1 executed by the President of
each of the Xxxxxxx Companies; and
(h) The books and records of the Xxxxxxx Companies, including, without
limitation, all original financial and operating records, the corporate minute
books and seals, the corporate stock ledgers, and all title documents.
ARTICLE II
TITLE INSURANCE
SECTION 2.1 Owners Title Policy. At Closing, the Xxxxxxx Companies
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shall own, with respect to all real property owned by the Xxxxxxx Companies, an
extended coverage owners policy of title insurance from a title company
acceptable to Purchaser (the "Title Company"), dated as of the Closing Date, in
the amount equal to the fair market value of such real property. The title
policies shall include comprehensive, zoning, nonimputation, access and
contiguity endorsements, and shall insure title to the real property to be in
fee simple in each company subject only to the Permitted Exceptions permitted by
Section 2.2 hereof (the "Owners Policy"). Purchaser shall pay the cost of the
Owners Policy.
SECTION 2.2 Permitted Exceptions. The Owners Policy shall insure each
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company's interest in its real property to be free and clear of all encumbrances
and exceptions whatsoever except those listed on Schedule 2.2 attached hereto.
SECTION 2.3 Survey. The Sellers shall furnish Purchaser with a survey
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relating to all of the real property owned by the Xxxxxxx Companies that is
sufficiently current that the Title Company shall not have included a survey
exception in the Owner's Policy. If a new survey is required, Purchaser shall
pay the cost of such survey.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
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With knowledge that Eastern is relying upon the representations and
warranties herein contained, Sellers each represent and warrant to Eastern for
Eastern's benefit. When the phrase "to Sellers' knowledge" or any equivalent
phrase is used in this Agreement, the phrase shall mean the actual knowledge of
any Seller or the information and/or knowledge any Seller who is or was a
director or officer of any Xxxxxxx Company would actually possess had such
Seller acted with due diligence in the conduct of his or her duties as an
officer or director. Each Seller shall conduct an investigation of the Xxxxxxx
Companies for purposes of making the representations and warranties set forth
below. Within 14 days of the date hereof, Sellers shall complete such
investigation and deliver the Disclosure Binder contemplated hereunder. No
representation or warranty shall be effective nor shall the same constitute or
be deemed to be a representation or warranty unless and until Sellers shall
deliver the Disclosure Binder. Any statement contained in the representations
and warranties set forth below shall be deemed amended or modified by reason of
any statement or disclosure in the Disclosure Binder.
SECTION 3.1 Organization and Standing. The Xxxxxxx Companies are
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corporations duly organized, validly existing and in good standing under the
laws of the state of their incorporation, with full power and authority to own
their properties and conduct their business as now being conducted. Except as
listed in Schedule 3.1, the Xxxxxxx Companies do not own any stock or interest
in any other corporation, partnership, or other business organization. Sellers
own all of the outstanding securities issued by the Xxxxxxx Companies, as set
forth on Schedule 1.3(e).
SECTION 3.2 Securities.
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(a) The Xxxxxxx Companies have the authorized and outstanding securities
set forth on Schedule 1.3(e). All outstanding shares of stock 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 of the Xxxxxxx Companies, except as set forth on Schedule 1.3(e). For the
twenty-four month period ending on the date of this Agreement, there has been no
change of ownership of the Company Shares except as listed on Schedule 1.3(e).
Except as listed on Schedule 1.3(e), there will be no change in the Ownership of
the Company Shares from the date of this Agreement to the Closing Date. Sellers
are obligated to purchase shares of the common stock of Xxxxxx Jersey Sanitation
Co. ("Xxxxxx Jersey") pursuant to binding agreements entered into on May 5,
1993, and undated, 1994.
(b) At Closing each of the Sellers shall deliver the outstanding
securities of the Xxxxxxx Companies, free and clear of all liens, claims,
security interests, and encumbrances.
SECTION 3.3 Contracts, Permits and Material Documents. The items listed
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in Schedule 3.3 attached hereto are all of the following ("Material Documents")
with respect to the Xxxxxxx Companies which provide a benefit or imposes a
detriment of a value of $25,000 or more: (i) leases for real and personal
property, (ii) licenses, (iii) franchises, (iv) promissory notes, guarantees,
bonds, mortgages, liens, pledges, and security agreements under which any of the
Xxxxxxx Companies are bound or under which any of the Xxxxxxx Companies are the
beneficiary, (v) collective bargaining
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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 any of the business of the Xxxxxxx Companies, (viii) all
surety bonds, closure bonds or any other obligation which the Xxxxxxx Companies
have liability for with respect to their operations and (ix) other contracts,
agreements and instruments not listed on another Schedule attached to this
Agreement (such as the customer contracts listed on Schedule 3.5) which are
binding on any of the Xxxxxxx Companies or any of their property and pursuant to
which the Xxxxxxx Companies derive a benefit or incur a detriment having a value
of $25,000 or more. The Material Documents listed on Schedule 3.3 are organized
under separate headings for each of the Xxxxxxx Companies and under subheadings
for each of the different type of documents listed. None of the Material
Documents have been amended or modified or have had any terms waived, except as
listed on Schedule 3.3 and except for non-material waivers or modifications of
which Sellers do not have knowledge. Except as set forth on Schedule 3.3,
neither the Xxxxxxx Companies nor any person or party to any of the Material
Documents or bound thereby is in material or knowing default under any of the
Material Documents, and, to the knowledge of Sellers, no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default. The Xxxxxxx Companies are not a party to, and none of Xxxxxxx
Companies' properties are bound by, any agreement or instrument which is
material to the continued conduct of business operations of the Xxxxxxx
Companies, as now being conducted, except as listed in Schedule 3.3.
SECTION 3.4 Personal Property.
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(a) All furniture, office equipment, computer equipment, and radio
equipment, owned by the Xxxxxxx Companies is in reasonably good condition,
normal wear and tear excepted, and is sufficient in type, quantity and quality
to operate the business as currently conducted by the Xxxxxxx Companies.
(b) Listed on Schedule 3.4(b) is all of the rolling stock, including motor
vehicles, trucks, front and rear end loaders, and accessories and attachments
used in the business of the Xxxxxxx Companies together with information as to
the make, description of body and chassis, model number, serial number and year
of each such vehicle ("Rolling Stock"). The Rolling Stock is owned or leased by
each of the Xxxxxxx Companies, as listed on Schedule 3.4(b). The Rolling Stock
is in reasonably good condition, normal wear and tear excepted, except as noted
on Schedule 3.4(b). The Xxxxxxx Companies own and/ or lease a sufficient number
and type of Rolling Stock to service their customers.
(c) Schedule 3.4(c), attached hereto, lists by each of the Xxxxxxx
Companies the containers used in the business of each of the Xxxxxxx Companies
which are ten yards or greater together with information as to container size.
All of the containers owned and used by the Xxxxxxx Companies are in reasonably
good condition, normal wear and tear excepted, except as noted on Schedule
3.4(c). The Xxxxxxx Companies own and/or lease a sufficient number and type of
containers to service their customers.
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(d) Schedule 3.4(d), attached hereto, lists by each of the Xxxxxxx
Companies all recycling and waste handling equipment used in the business of
each of the Xxxxxxx Companies not listed on Schedules 3.4(b) or 3.4(c) having a
value of $25,000 or more, including without limitation, compactors, balers and
forklifts.
(e) The inventory of parts, tires and accessories, and all of the shop
tools owned by the Xxxxxxx Companies are in reasonably good condition, normal
wear and tear excepted, and are sufficient in type, quantity and quality to
operate the business as currently conducted by the Xxxxxxx Companies.
(f) All other equipment not listed on one of the above schedules owned by
the Xxxxxxx Companies is in reasonably good condition, normal wear and tear
excepted, and is sufficient in type, quantity and quality to operate the
business as currently conducted by the Xxxxxxx Companies.
SECTION 3.5 Customers. A list of customers each of the Xxxxxxx Companies
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serves together with information as to the services rendered to each such
customer, frequency of service and rates charged and the contractual rights of
each customer, whether oral or in writing, has been provided to Purchaser.
Except as set forth on Schedule 3.5, none of the Xxxxxxx Companies and, to
Sellers' knowledge, no other person or party to any of the customer contracts is
in material or knowing default under any of the customer contracts, and no act
or event has occurred which with notice or lapse of time, or both, would
constitute such a default. Except as set forth on Schedule 3.5, the purchase
of the Xxxxxxx Companies by Eastern will not create a default under any customer
contract.
SECTION 3.6 Title.
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(a) Listed on Schedule 3.3(i) attached are the addresses and ownership
interest which each Xxxxxxx Company has in any real property, including, without
limitation, fee ownership, lease, license or other form of interest.
(b) The Xxxxxxx Companies have good and marketable title to, or a valid
leasehold interest in, all of their 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 types of liens set forth in subparagraphs (i)
through (iii), and the items listed on Schedule 3.6 ("Permitted Encumbrances").
(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to landlords, carriers, warehousemen,
laborers or materialmen and the like;
(ii) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation; and
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(iii) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment.
SECTION 3.7 Financial Statements. Sellers have delivered to Eastern true
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and correct copies of the following financial statements of the Xxxxxxx
Companies (the "Financial Statements"): balance sheets of the Xxxxxxx Companies
as of December 31, 1995, December 31, 1996, and December 31, 1997, and
statements of income, cash flow and retained earnings for the periods ended
December 31, 1995, December 31, 1996, and December 31, 1997, all prepared on an
accrual basis. The Financial Statements of Xxxxxx Jersey Sanitation Co., and
West Milford Haulage, Inc. are audited by Xxxxx and DeFillipis, LLP, the
Financial Statements of Xxxxx Xxxxxxx & Company are reviewed by Xxxxx and
DeFillipis, LLP and the Financial Statements of Specialized Recycling
Technologies, Inc are compiled. The balance sheets as of December 31, 1997, are
hereinafter referred to as the "Most Recent Balance Sheets," and the statements
of income, cash flow and retained earnings for the period ended December 31,
1997, are hereinafter referred to as the "Most Recent Income Statements." The
Most Recent Balance Sheets and Most Recent Income Statements are hereafter
referred to as the "Most Recent Financial Statements."
The Financial Statements 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 Xxxxxxx Companies. The balance
sheets present fairly, in all material respects, the financial condition of the
Xxxxxxx Companies as of the dates indicated thereon and the statements of income
present fairly, in all material respects, on an accrual basis the results of the
operations of the Xxxxxxx Companies for the periods indicated thereon. Since
the date of the Most Recent Balance Sheets, the Xxxxxxx Companies have not (i)
made any material change in their accounting policies or (ii) effected any prior
period adjustment to, or other restatement of, their financial statements for
any period. The Financial Statements are consistent with the books and records
of the Xxxxxxx Companies (which books and records are correct and complete in
all material respects). Since the date of the Most Recent Financial Statements,
except as set forth on Schedule 3.7, there has not been any material adverse
change in the income, expenses or assets of the Xxxxxxx Companies.
SECTION 3.8 Liabilities; Accounts Receivable and Working Capital.
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(a) The Xxxxxxx Companies do not have any liabilities, fixed or contingent,
which should be disclosed in accordance with GAAP, other than:
(i) liabilities fully reflected in the Most Recent Balance Sheets,
except for liabilities not required to be disclosed therein in accordance with
GAAP;
(ii) accounts payable arising since the date of the Most Recent
Balance Sheets arising during the normal course of business consistent with past
custom and practice; and
(iii) liabilities listed on Schedule 3.8(a)(iii) attached.
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(b) All accounts receivable of the Xxxxxxx Companies are, and all
accounts receivable arising since the date of this Agreement, will be valid and
enforceable accounts receivable, less an amount equal to the customary write-
offs of accounts receivable, on an historical basis. All accounts receivable
have been generated in the ordinary course of business of the Xxxxxxx Companies
consistent with past practice. To Sellers' knowledge, there are no defenses or
set-offs to any of the accounts receivable.
(c) At Closing, the Xxxxxxx Companies shall have Working Capital consisting
of current assets in excess of current liabilities (each determined in
accordance with generally accepted accounting principles) in an amount no less
than they have had on an historic basis as reflected on the Financial
Statements. For purposes of this Agreement, the parties agree that the amount
of historic Working Capital which the Xxxxxxx Companies shall have at Closing,
on a consolidated basis, is as set forth on Schedule 1.3(a). It is agreed and
acknowledged that, for purposes of calculating Working Capital, current assets
shall include cash, cash equivalents, pre-paid expenses and accounts receivable,
and current liabilities shall include accounts payable and accrued expenses, but
not the current portion of any Company Debt.
SECTION 3.9 Fiscal Condition of the Xxxxxxx Companies. Since the date of
-----------------------------------------
the Most Recent Balance Sheets, except as set forth in Schedule 3.9, there has
not (except as otherwise specifically permitted by this Agreement or as set
forth in the Schedules to this Agreement) been:
(a) Any material adverse change in the financial condition, business
organization or personnel of the Xxxxxxx Companies or in the relationships of
the Xxxxxxx Companies with suppliers, customers or others;
(b) Any disposition by any of the Xxxxxxx Companies of any of its capital
stock or any grant of any option or right to acquire any of its capital stock,
or any acquisition or retirement by any of the Xxxxxxx Companies of any of its
capital stock or any declaration or payment of any dividend or other
distribution of its capital stock;
(c) Any sale or other disposition of any asset owned by any of the Xxxxxxx
Companies at the close of business on the date of the Most Recent Balance
Sheets, or acquired by it since that date, other than in the ordinary course of
business consistent with past practice;
(d) Any expenditure or commitment by the Xxxxxxx Companies for the
acquisition of any single asset or any single business or for the purchase of
any services, except in the ordinary course of business consistent with past
practices and having a cost of $50,000 or less;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Xxxxxxx Companies taken as
a whole, except damage, destruction or loss which does not exceed $50,000 in the
aggregate;
11
(f) Any material bonuses or increases in the compensation payable or to
become payable by the Xxxxxxx Companies to any officer or key employee, except
in the ordinary course of business or as required by law or pursuant to a
contract which is listed on a Schedule to this Agreement;
(g) Any loans or advances to or by any of the Xxxxxxx Companies other than
renewals or extensions of existing indebtedness and other than in the ordinary
course of business consistent with past practice; or
(h) Any change in accounting method or practice.
SECTION 3.10 Tax Returns. The Xxxxxxx Companies have filed all Federal
-----------
and other tax returns for all periods on or before the due date of such return
(as may have been extended by any valid extension of time) and have paid all
taxes due for the periods covered by the said returns. Each of the Xxxxxxx
Companies is a Subchapter "S" corporation under the Internal Revenue Code of
1986, as amended (the "Code"), except for Xxxxx Xxxxxxx & Company, Inc. which is
a Subchapter "C" corporation. Except as set forth on Schedule 3.10, the
reserves for all taxes reflected in the Most Recent Balance Sheets, if any, are
adequate to cover all taxes, interest and penalties in connection therewith that
may be assessed with respect to the property and business operations for the
period(s) ending on the Closing Date and for all prior periods. The Xxxxxxx
Companies have filed, and will file (if due), in a timely manner all requisite
federal, state, local and other tax returns due for all fiscal periods ended on
or before the date hereof, and as of the Closing shall have or will in a timely
manner file all such returns due for all periods ended on or before the Closing
Date.
SECTION 3.11 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Xxxxxxx Companies or which the Xxxxxxx
Companies have had issued and which have not expired are listed on Schedule 3.11
attached hereto. Schedule 3.11 includes the names and addresses of the insurers
and sureties, policy and bond numbers, types of coverage or bond, time periods
or projects covered and the names and addresses of all known banks,
beneficiaries, agents or agencies with respect to each listed insurance policy,
performance bond and letter of credit. All current insurance policies,
performance bonds and letters of credits of the Xxxxxxx Companies are in force
and effect and the premiums thereon are not delinquent. Except as set forth in
Schedule 3.11, the Xxxxxxx Companies have not received any written notification
from any insurance carrier denying or disputing any claim made by any of the
Xxxxxxx Companies or denying or disputing any coverage for any such claim or
denying or disputing the amount of any claim. Except as set forth on Schedule
3.11, the Xxxxxxx Companies have no claim against any of their insurance
carriers under any of policies insuring them pending or anticipated and there
has been no occurrence of any kind which would give rise to any such claim.
SECTION 3.12 Employees, Pensions, and ERISA.
------------------------------
(a) The Xxxxxxx Companies do not have any contract of employment with an
officer or other employee, except as listed on Schedule 3.12(a).
12
(b) Except as set forth on Schedule 3.12(b), no employee of the Xxxxxxx
Companies is represented by any union. A list of the name, address and social
security number and current rate of compensation of each of the Xxxxxxx
Companies' employees and capacity in which each person is employed is set forth
on Schedule 3.12(b). There is no pending or, to Sellers' knowledge, threatened
dispute between any of the Xxxxxxx Companies and any of its employees which
might materially and adversely affect the continuance of the business operations
of the Xxxxxxx Companies.
(c) Attached hereto and made a part hereof marked as Schedule 3.12(c) is a
list of all employee benefit plans, funds or programs (within the meaning of the
Code or the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) which are currently maintained and/or were established or sponsored
by any of the Xxxxxxx Companies (whether or not they are now terminated) or to
which any of the Xxxxxxx Companies currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions,
other than union-sponsored multi-employer plans ("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 Xxxxxxx Companies.
(d) The Sellers have delivered to Eastern (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. Except as set forth in the Disclosure Schedule, nothing has occurred
since the date of any such determination which may adversely affect such
qualification or exemption, or result in the imposition of excise taxes or tax
on unrelated business income under the Code or ERISA. No Plan is funded through
a trust intended to be exempt from tax under Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law 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.
13
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, threatened relating to any Plan, fiduciary of any
Plan or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
SECTION 3.13 Legality of Operation. In regard to the Xxxxxxx Companies:
---------------------
(a) Except as disclosed in Schedule 3.13(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined in Section 3.13(b) below, the
Xxxxxxx Companies are in compliance in all material respects with all Federal,
state and local laws, rules and regulations including, without limitation, the
following laws: land use or zoning 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 3.13(a), the
Xxxxxxx Companies are in compliance in all material respects with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to any of their 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 3.13(a), with
respect to any Law there are no claims, actions, suits, investigations or
proceedings pending, or to Sellers' knowledge, threatened against or affecting
any of the Xxxxxxx Companies, 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 any adverse
change in the financial condition or business of the Xxxxxxx Companies or which
would invalidate this Agreement or any action taken in connection with this
Agreement. Except as disclosed in Schedule 3.13(a), the Xxxxxxx Companies have
received no written notification of any past or present failure by any of the
Xxxxxxx Companies to comply with any Law applicable to it or its assets, which
has not been remedied.
(b) Except as disclosed in Schedule 3.13(b) to this Agreement, the Xxxxxxx
Companies are in compliance with all Federal, state and local laws, rules and
regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste
14
materials from any source ("Environmental Law"). Except as disclosed in Schedule
3.13(b), with respect to any Environmental Law, the Xxxxxxx Companies are in
compliance with all permits, licenses, and orders related thereto or issued
thereunder, as are or may be applicable to the property and operations of the
Xxxxxxx Companies, 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 3.13(b), there are no Environmental Law related claims,
actions, suits or proceedings pending or, to Sellers' knowledge, threatened
against or affecting the Xxxxxxx Companies, 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 Xxxxxxx
Companies or which would invalidate this Agreement or any action taken in
connection with this Agreement. Except as set forth on Schedule 3.13(b), for the
most recent five years the Xxxxxxx Companies have not, and for all periods prior
to the most recent five years to Sellers' knowledge the Xxxxxxx Companies have
not, transported, stored, treated or disposed of, nor to Sellers' knowledge have
the Xxxxxxx Companies allowed any third persons, on their 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. For the most recent five years, the Xxxxxxx Companies
have not, and for all periods prior to the most recent five years to Sellers'
knowledge the Xxxxxxx Companies have not, 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
any liability for contamination of the environment. For the most recent five
years, the Xxxxxxx Companies have not, and for all periods prior to the most
recent five years to Sellers' knowledge the Xxxxxxx Companies have not, disposed
of, nor have the Xxxxxxx Companies knowingly allowed third parties to dispose
of, waste upon property owned or leased by the Xxxxxxx Companies other than as
permitted by, and in conformity with, applicable Environmental Law. Except as
disclosed in Schedule 3.13(b), the Xxxxxxx Companies have not received any
notification of any past or present failure by the Xxxxxxx Companies to comply
with any Environmental Law applicable to their operations or their assets which
has not been remedied. Without limiting the generality of the foregoing, except
as set forth in Schedule 3.13(b), the Xxxxxxx Companies have not received any
written notification (including requests for information directed to the Xxxxxxx
Companies or an owner thereof) from any governmental agency asserting that any
of the Xxxxxxx Companies 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 Xxxxxxx Companies have not received any
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, except
-- ---
for limited amounts which were contained in loads of non-hazardous waste in
quantities which would not require remediation.
(c) Except as listed on Schedule 3.13(c), the Xxxxxxx Companies have never
owned, operated, had an interest in, engaged in and/or leased a waste transfer,
recycling, treatment, storage, landfill or other disposal facility. For the
most recent five years, the Xxxxxxx Companies have, and
15
prior to the most recent five years to the knowledge of Sellers the Xxxxxxx
Companies have, obtained and maintained, when required to do so under applicable
Environmental Laws, trip tickets, signed by the applicable waste generators
demonstrating the nature of all waste deposited and or transported by the
Xxxxxxx Companies. Except as set forth on Schedule 3.13(c), to Sellers'
knowledge, no employee, contractor or agent of the Xxxxxxx Companies has, in the
course and scope of employment with the Xxxxxxx Companies, been harmed by
exposure to hazardous materials, as defined under the Environmental Laws. No
liens with respect to environmental liability have been imposed against the
Xxxxxxx Companies under CERCLA, any comparable state statute or any other
applicable Environmental Law, and Sellers have no knowledge that any facts or
circumstances exist which would give rise to the same.
(d) Schedules 3.13(a) and 3.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past two years and all outstanding
unremedied notices of violations issued to the Xxxxxxx Companies by any federal,
state or local regulatory agency.
(e) To Sellers' knowledge, no employee, officer, director, or shareholder
of the Xxxxxxx Companies is under investigation by the Attorney General of any
state, by the District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative agency for the violation
of any Laws, including, without limitation, the violation of any anti-trust,
racketeering, or unfair competition Laws.
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Xxxxxxx Companies, or their
assets or liabilities, are set forth on Schedule 3.13(f) attached, together with
a description of each such proceeding.
SECTION 3.14 Corrupt Practices. The Xxxxxxx Companies have not made,
-----------------
offered or agreed to offer anything of value to any employees of any customers
of the Xxxxxxx Companies (except in conformity with Law) for the purpose of
attracting business to any of the Xxxxxxx Companies or any foreign or domestic
governmental official, political party or candidate for government office or any
of their respective employees or representatives, nor have the Xxxxxxx Companies
otherwise taken any action which would cause them to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended.
SECTION 3.15 Legal Compliance. Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform its obligations under this
Agreement, and, except as set forth in Schedule 3.15, no approvals or consents
of any other persons, business or governmental units are necessary to be
obtained by Sellers or the Xxxxxxx Companies in connection with the
transactions, filings with or notices to, contemplated by this Agreement.
Except as disclosed in Schedule 3.15 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:
16
(a) Any charter or by-law to which the Xxxxxxx Companies are a party or by
which the Xxxxxxx Companies or any of their properties are bound, including,
without limitation, any agreement by or between any shareholder of any Xxxxxxx
Company; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on any of the Xxxxxxx Companies or on any property of the Xxxxxxx
Companies; or
(c) Any permit, certificate or license issued by any governmental
authority under which any of the Xxxxxxx Companies operate or pursuant to which
any of the property of the Xxxxxxx Companies is bound; or
(d) Any agreement to which the Xxxxxxx Companies are bound, including,
without limitation, bank loan documents, agreements with customers or suppliers
and leases for equipment.
SECTION 3.16 Transaction Intermediaries. Except as disclosed in Schedule
--------------------------
3.16, no agent, broker, financial advisor or other person acting pursuant to the
express authority of any of the Xxxxxxx Companies is entitled to any commission
or finder's fee in connection with the transactions contemplated by this
Agreement.
SECTION 3.17 Intellectual Property. To Sellers' knowledge, the Xxxxxxx
---------------------
Companies have not infringed, and are not now infringing, on any trade name,
trademark, service xxxx or copyright belonging to any person, firm or
corporation ("Intellectual Property") and no one has or is infringing any
Intellectual Property right of the Xxxxxxx Companies. The Xxxxxxx Companies own
or have legally licensed all computer software used in connection with their
business and have not infringed, and are not now infringing, on the rights of
any third parties by their use of computer software.
SECTION 3.18 Competition. Except as set forth on Schedule 3.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of the Xxxxxxx Companies within the
geographical area in which the Xxxxxxx Companies currently conduct business, or
an interest in any supplier or customer of the Xxxxxxx Companies or in any
person from whom or to whom the Xxxxxxx Companies lease any real or personal
property, or in any other person with whom the Xxxxxxx Companies are doing
business.
SECTION 3.19 Disclosure. The representations and warranties of Sellers
----------
contained in this Agreement, or in any Schedule or other document delivered by
Sellers 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, Sellers become aware of any
inaccuracy or misrepresentation or omission in any of the Schedules, they shall
immediately advise Eastern in writing of the inaccuracy, misrepresentation or
omission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EASTERN
-----------------------------------------
17
With knowledge that Sellers are relying upon the representations,
warranties and covenants contained herein, Eastern represents and warrants to
Sellers and makes the following covenants for Sellers' benefit.
SECTION 4.1 Organization and Existence. Eastern is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted. Eastern has all requisite corporate power and
authority to consummate the transactions contemplated by this Agreement.
SECTION 4.2 Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement by Eastern has been duly authorized and
approved by the Board of Directors of Eastern. No further corporate action is
necessary on the part of Eastern to consummate this Agreement in accordance with
its terms. Eastern has full authority to enter into and perform its obligations
under this Agreement, and neither the execution, delivery nor performance by
Eastern of this Agreement will (i) result in a violation or breach of any term
or provision nor constitute a default under the certificate of incorporation or
bylaws of Eastern or under any contract or agreement to which Eastern is a party
or by which it is bound, or violate any order, writ, injunction or decree of any
court, administrative agency or governmental body, or (ii) result in a violation
or breach of any term or provision, or constitute a default or accelerate the
performance required, under any indenture, mortgage, deed of trust or other
contract or agreement to which Eastern is a party or by which it or its
properties is bound.
SECTION 4.3 Commission Filings. Eastern has delivered to Sellers current
------------------
(for the quarter ending September 30, 1997) and all historical filings made by
Eastern on Forms 8-K, 10-K, 10-Q and Proxy Statements timely filed with the
Securities and Exchange Commission ("SEC") for fiscal year ending June 30, 1997
(the "Public Reports"). The Public Reports accurately and completely describe,
in all material respects, Eastern's financial status, business operations and
prospects as of the date of such filings and as of the date hereof, and do not
omit any material fact(s) necessary to make the information contained in the
filings not misleading.
SECTION 4.4 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.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES AND SELLERS
------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 5.1 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all the outstanding stock of the Xxxxxxx Companies solely in
exchange for voting stock of Eastern in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(B) of the 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
18
under Code Section 368(a)(1)(B) and to comply with all IRS filing and other
requirements for such exchange. Eastern 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 5.2 Pooling Restrictions. Eastern and Sellers have agreed that a
--------------------
material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement be treated as a "pooling of interests" for
accounting purposes. If for any reason a provision in this Agreement would
prevent the transaction being accounted for as a "pooling of interests," the
parties agree to negotiate in good faith to modify the Agreement so the
transaction can be accounted for as a "pooling of interests." Notwithstanding
any other provision of this Agreement, prior to the publication and
dissemination by Eastern of consolidated financial results which include results
of combined operations of the Xxxxxxx Companies and Eastern for at least 30 days
on a consolidated basis following the Closing Date, which shall in no event
occur later than 120 days after the Closing, Sellers shall not sell or otherwise
transfer or dispose of, or in any way reduce their 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). 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 Eastern to hold the EESI
Stock and to comply with the ASRs until the requirements of the ASRs have been
met as set forth in this Section 5.2. In addition, the certificates evidencing
the EESI Stock to be received by Sellers will bear a legend substantially in the
form set forth below:
"The shares represented by this certificate may not be sold, transferred or
assigned, and Eastern Environmental Services, Inc., shall not be required
to give effect to any attempted sale, transfer or assignment prior to the
publication and dissemination of financial statements by Eastern
Environmental Services, Inc., which include the results of at least 30 days
of combined operations of Eastern Environmental Services, Inc., and the
companies acquired by Eastern Environmental Services, Inc., for which these
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 Representations as to Registration. Subject to Section 6.2,
----------------------------------
the EESI Stock is being delivered to the Sellers pursuant to a registration
statement filed on Form S-4 under the
19
Securities Act of 1933, as amended (the "Act"). To induce Eastern to issue the
EESI Stock, each Seller represents and warrants as follows:
(a) Each Seller represents and warrants that he is a resident of New
Jersey and that he is an "accredited" investor within the meaning of Rule 501 of
Regulation D under the Act.
(b) Each Seller acknowledges that he has received a copy of the Public
Reports.
(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,
except in compliance with all applicable federal and state securities law, 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 Eastern
and its business and affairs as they have requested so as to more fully
understand the nature of the investment and to verify the accuracy of the
information supplied.
(e) THE SELLERS ACKNOWLEDGE, REPRESENT AND WARRANT THAT THE ACQUISITION OF
THE EESI STOCK INVOLVES A HIGH DEGREE OF RISK, and 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, (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, and that they are actively involved in the conduct of
the Sellers' businesses, fully familiar with the Sellers' current financial
condition, and capable of evaluating the fairness of the consideration being
received in this transaction.
(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 the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings set forth herein.
20
SECTION 5.4 Access to Records. Sellers will give to Eastern and its
-----------------
representatives, from the date hereof until the Closing Date, full access during
normal business hours, upon reasonable notice, to all of the properties, books,
contracts, documents and records of the Xxxxxxx Companies, and will make
available to Eastern and its representatives all additional financial statements
of and all information with respect to the business and affairs of the Xxxxxxx
Companies that the other party may reasonably request.
SECTION 5.5 Continuation of Business. Sellers will operate the businesses
------------------------
of the Xxxxxxx Companies until the Closing Date in the ordinary course of
business, consistent with past practice, so as to preserve its business
organizations intact, to assure, to the extent possible, the availability to
Eastern of the present key employees of the Xxxxxxx Companies and to preserve
for Eastern the relationships of the Xxxxxxx Companies with suppliers,
customers, and others.
SECTION 5.6 Continuation of Insurance. Sellers will keep in existence all
-------------------------
policies of insurance insuring the Xxxxxxx Companies against liability and
property damage, fire and other casualty through the Closing Date, consistent
with the policies currently in effect.
SECTION 5.7 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, Sellers will
not, directly or indirectly, solicit offers for the shares or the assets of the
Xxxxxxx Companies or for a merger or consolidation involving any of the Xxxxxxx
Companies, or respond to inquiries from, share information with, negotiate with
or in any way facilitate inquiries or offers from, third parties who express or
who have heretofore expressed an interest in acquiring any or all of the Xxxxxxx
Companies by merger, consolidation or other combination or acquiring any of the
Xxxxxxx Companies' assets.
SECTION 5.8 Consents. Sellers and Eastern shall cooperate with each other
--------
and use their best 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) any required approval of the
shareholders of Eastern of 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 Eastern or Sellers.
Eastern shall pay for all fees required in connection with the filing of any
application for consent including the notification requirements of the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
SECTION 5.9 Audited Financial Statements. Sellers shall cooperate and
----------------------------
shall use all reasonable efforts to cause their auditors to cooperate with all
reasonable requests of Eastern and its auditors necessary to audit or reaudit
all prior periods for activities of the Xxxxxxx Companies to the extent
necessary to enable Eastern and/or any affiliate of Eastern to make periodic
reports pursuant to the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), to make a public offering of its securities under
the Act, or to make a private placement of its securities, and Sellers hereby
consent to the use of historical financial information, to be included (if
required by the rules and regulations of the Securities and Exchange Commission
(the "Commission") or any applicable state securities law) in any of Eastern's
or any affiliate of Eastern's filing with the
21
Commission under either the Securities Exchange Act or the Act and in any
prospectus or memorandum used in connection with any offering of their
securities. Eastern shall indemnify and hold harmless Sellers against any and
all fees and expenses incurred or to be incurred at any time in the future to
comply with the foregoing. The Historical Financial Statements shall be prepared
by Ernst & Young at Eastern's cost. Sellers shall cause the Xxxxxxx Companies'
usual accountants to cooperate with Ernst & Young.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES AND EASTERN
------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 6.1 Payment of Expenses. Eastern will pay all expenses incurred
-------------------
by Eastern in connection with the negotiation, execution and performance of this
Agreement. Sellers will pay all legal and accounting expenses incurred by
Sellers and the Xxxxxxx Companies in connection with the negotiation, execution
and performance of this Agreement and the Collateral Documents.
SECTION 6.2 Registration Rights.
----------- -------------------
(a) The EESI Stock delivered at Closing will be registered under the Act
for sale to the public in brokers transactions, pursuant to a "shelf
registration" on Form S-4 or an other appropriate form, if Form S-4 is not
available under Rule 415 of the Act. At Eastern's request, the Sellers or the
Xxxxxxx Companies shall provide Eastern with any information required for the
completion of the registration statement. Notwithstanding the above, Eastern'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 Eastern. Eastern shall keep such
registration statement current and effective, until such time as the shares may
be sold by the Sellers at any time pursuant to the provisions of Rule 144 or
otherwise without any restrictions, including restrictions relating to volume,
manner of sale, and notice, 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. Eastern shall also prepare and file with
the Securities and Exchange Commission such amendments and supplements to such
registration statement (and the prospectus used in connection therewith) as may
be necessary to update and keep such registration statement current and
effective for such period and to comply with the provisions of the Act with
respect to the sale of all securities covered by such registration statement.
(b) With respect to the EESI Stock, Eastern will furnish to the Sellers
such number of prospectuses, if required, under the Act, 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.
22
(c) Eastern 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 Eastern 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, Eastern 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 information furnished to Eastern by Sellers which is
intended for such use; and provided further, that Eastern shall not be required
to indemnify Sellers against any Security Liability which arises out of the
failure of Sellers to deliver a prospectus.
(d) All expenses incurred in effecting the registrations provided for in
this Section 5.2 shall be paid by Eastern, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Eastern, underwriting expenses (other than commissions or discounts
which shall be shared by the parties registering shares of Eastern's common
stock in proportion to the number of shares registered in each particular
offering), expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or "blue sky" laws of
any jurisdictions.
ARTICLE VII
CONDITIONS OF EASTERN
---------------------
The obligations of Eastern 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. Sellers and the Xxxxxxx Companies
---------------------
shall have performed and complied with all material obligations and conditions
required by this Agreement to be performed or complied with by Sellers and the
Xxxxxxx Companies at or prior to the Closing Date. All representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects 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 Eastern shall have received a
Certificate duly executed by the President of each Xxxxxxx Company representing
and warranting the foregoing.
23
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 Eastern to own, operate in its entirety or control the
Xxxxxxx Companies or the business the Xxxxxxx Companies operate, which, as a
result of the transaction contemplated by this Agreement, might affect such
right as to Eastern or any affiliate thereof subsequent to the Closing Date and
which, in the judgment of the Board of Directors of Eastern, 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 Xxxxxxx Companies, and the Xxxxxxx Companies shall have not
suffered any material loss or damage of any of its properties or assets, whether
or not covered by insurance, since the date of the Most Recent Balance Sheet.
SECTION 7.4 Opinion of Counsel. Sellers shall have delivered to the
------------------
Eastern the opinion of counsel, dated the Closing Date, in the form annexed
hereto as Schedule 1.7(e).
SECTION 7.5 Employment Agreements. The Sellers shall have executed and
---------------------
delivered to Eastern the Employment Agreements.
SECTION 7.6 Release. Sellers shall have executed and delivered to Eastern
-------
the Release described at Section 1.7(f).
SECTION 7.7 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of the New Jersey Department of Environmental Protection to the change
in control of the Xxxxxxx Companies, (ii) the consent of the Federal Trade
Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976; (iii)
the consent of BankBoston, N.A., and (iv) the approval of every regulatory
agency of federal, state, or local government that may be required in the
opinion of either Eastern or Sellers. Eastern shall have been furnished with
appropriate evidence, reasonably satisfactory to Eastern and its counsel, of the
granting of such approvals, authorizations and consents.
SECTION 7.8 Pooling Determination. Purchaser shall have received
---------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
SECTION 7.9 Underwriter's Consent. Sellers acknowledge that Eastern must
---------------------
obtain the consent of Xxxxxxx Xxxxx Barney, Inc. ("Salomon") to deliver EESI
Stock from Eastern's shelf registration statement on file with the Securities
and Exchange Commission. To procure Salomon's consent, Sellers will agree with
Salomon, if requested by Salomon, not to sell more than one-third of the EESI
Stock within one year from the Closing Date.
ARTICLE VIII
CONDITIONS OF SELLERS
---------------------
24
The obligations of Sellers 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 conditions:
SECTION 8.1 Compliance by Eastern. Eastern shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing Date. All
representations and warranties of Eastern contained in this Agreement shall be
true and correct in all material respects 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.
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 Eastern to own, operate in its entirety or control the
Xxxxxxx Companies or the business the Xxxxxxx Companies operate which, as a
result of the transaction contemplated by this Agreement, might affect such
right as to Eastern or any affiliate thereof subsequent to the Closing Date and
which, in the judgment of 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 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 Eastern and
its subsidiaries taken as a whole.
SECTION 8.4 Employment Agreements. Eastern shall have executed and
---------------------
delivered the Employment Agreements.
SECTION 8.5 Opinion of Counsel. Eastern shall have delivered to Sellers
------------------
the opinion of counsel to Eastern, dated the Closing Date, in the form annexed
hereto as Schedule 1.6(c).
SECTION 8.6 Guarantees. The Sellers shall be released from any liability
----------
they have under guarantees they have made with respect to the Companies' debts
or obligations, as set forth on Schedule 8.6 ("Guarantees"). If, after a good
faith attempt, Eastern cannot obtain the release of the Shareholders from the
Guarantees, Eastern shall pay off any such indebtedness guaranteed by Seller,
and shall replace any surety bonds. If Eastern cannot obtain the release of any
surety bonds guaranteed by Sellers, Eastern will indemnify Sellers under the
provisions of Section 9.2 from any and all liability, expense and claims made
against Sellers with respect to the Guarantees.
SECTION 8.7 Estate Stock. Sellers shall have purchased the shares of
------------
Xxxxxx Jersey from the estates of the deceased shareholders of Xxxxxx Jersey.
25
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.1 Indemnification by Sellers. Each Seller, jointly and
--------------------------
severally (except for breaches of the warranty in Section 3.2(b) which shall be
several and not joint), agrees that he will indemnify, defend, protect and hold
harmless Eastern and its officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, 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 such Seller, 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 the Seller, 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 a Seller
made in this Agreement and to be performed by Seller before or after the Closing
Date; (c) violation of the requirements of any governmental authority relating
to the reporting and payment of federal, state, local or other income, sales,
use, franchise, excise or property tax liabilities of the Xxxxxxx Companies
arising or accrued prior to the Closing Date; (d) any violation of any federal,
state or local "anti-trust" or "racketeering" or "unfair competition law",
including, without limitation, the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx
Act, Federal Trade Commission Act, or Racketeer Influenced and Corrupt
Organization Act; and (e) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections (a), (b), (c) or
(d) of this Section 9.1 of this Agreement has occurred.
SECTION 9.2 Indemnification by Eastern. Eastern agrees that it will
--------------------------
indemnify, defend, protect and hold harmless Sellers and their agents,
employees, heirs, legal representatives, successors and assigns, as applicable,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by it, as a result of or incident to: (a) any breach
of, misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Eastern set forth in this Agreement or in the Schedule attached to
this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Eastern
made in this Agreement and to be performed by Eastern before or after the
Closing Date; (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 9.2 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
26
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 thirty 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 (iii) 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.
If the Indemnified Party unreasonably withholds its consent to a settlement, the
Indemnifying Party's liability is limited to the amount offered by the
Indemnifying Party to settle, and the Indemnified Party shall take over defense
of the claim.
(d) If any condition 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.
27
SECTION 9.4 Procedure for Non-Third Party Claims. If Eastern 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"). 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 federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 3.10 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought against the Xxxxxxx Companies by
tax authorities or governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above shall survive
until two years from the Closing Date provided, however, that if Eastern sells
its assets or merges into another corporation where Eastern is not the surviving
entity the survival period shall be reduced to one year 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 Indemnification Threshold. No Indemnification Demand shall be
-------------------------
made under this Article IX until such time that the party making an
Indemnification Demand believes, in good faith, that it has a claim or claims
for indemnity totaling One Hundred Thousand Dollars ($100,000) or more, singly
or in the aggregate, and no Indemnifying Party shall have any liability to an
28
Indemnified Party until the damages to the Indemnified Party exceed a cumulative
aggregate total of $100,000. Once cumulative aggregate damages exceed $100,000,
the Indemnifying Party shall be liable for all damages to the Indemnified Party,
including the first $100,000 of damages.
SECTION 9.7 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 75%
of the value of the EESI Stock delivered to each Seller at Closing, valued at
the Per Share Value.
SECTION 9.8 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.
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 Eastern such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Eastern. Sellers agree that for a period of ten (10) years from the
Closing Date they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Eastern, unless (i) such
information becomes known to the public generally through no fault of any
Seller, (ii) a Seller is 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 any Seller of
the provisions of this Section, Eastern shall be entitled to an injunction
restraining such Seller from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Eastern from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
SECTION 10.2 Nondisclosure by Eastern. Eastern 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 Xxxxxxx
Companies, such as lists of customers, operational policies, and pricing and
cost policies that are valuable, special and unique assets of the Xxxxxxx
Companies. Eastern agrees that for a period of ten (10) years from the Closing
Date it will not utilize such information in the business or operation of
Eastern 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
29
Eastern or any of its affiliates, (ii) Eastern 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 Eastern of
the provisions of this Section, Sellers shall be entitled to an injunction
restraining Eastern 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 Eastern) and shall be binding upon and shall
inure to the benefit of the parties hereto, and the successors of Eastern. 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.
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 Eastern, addressed to it at:
President
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx X. Xxxxxx & Associates, P.C.
30
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
(b) If to Sellers, addressed to them at:
000 Xxxxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxx X. Xxxxxx, Esq.
Budd, Larner, Gross, Rosenbaum, Xxxxxxxxx & Sade, P.C.
000 Xxxx X. Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
SECTION 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New Jersey,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
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
31
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 Sellers or
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Eastern 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 Sellers and Eastern.
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 officers, shareholders, directors, affiliates,
subsidiaries, parents, agents, employees, legal representatives, successors 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.
SECTION 10.15 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this Agreement shall issue any press release or otherwise make
any statement with respect to the transactions contemplated by this Agreement
without the prior consent of the other party, which shall not be unreasonably
withheld.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /S/ XXXXXX X. XXXXXX
---------------------------------------------
XXXXXX X. XXXXXX
EXECUTIVE VICE PRESIDENT
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SELLERS:
/S/ XXX XXXXXXX /S/ XXXXXXX X. XXXXXXX
------------------------------------ ----------------------------
XXX XXXXXXX XXXXXXX X. XXXXXXX
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