EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
TRANSCOR WASTE SERVICES, INC.
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................................ 1
ARTICLE I - CLOSING..................................................... 2
ARTICLE II - TITLE INSURANCE............................................ 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLERS................. 4
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EASTERN.................. 13
ARTICLE V - ADDITIONAL AGREEMENTS OF SELLERS............................ 14
ARTICLE VI - ADDITIONAL AGREEMENTS OF EASTERN........................... 16
ARTICLE VII - CONDITIONS OF EASTERN..................................... 17
ARTICLE VIII - CONDITIONS OF SELLERS.................................... 18
ARTICLE IX - INDEMNIFICATION............................................ 19
ARTICLE X - OTHER PROVISIONS............................................ 22
i
SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.7(b) Opinion of Eastern Counsel
1.7(c) Noncompetition Agreement
1.8(e) Opinion of Xxxxxxx' and Transcor's Counsel
1.8(f) Release
ATTACHED AS PART OF DISCLOSURE BINDER
2.1 Real Property
2.2 Permitted Exceptions to Real Property Title
3.1 Subsidiaries
3.2 Capital Structure
3.3 Contracts, Permits, Mortgages and Material Documents
3.4(b) Rolling Stock
3.4(c) Containers
3.4(f) Personal Property Encumbrances
3.5 Customer Contracts
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Real Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental
violations
3.6(f) Definition of "Hazardous Materials" and Environmental Conditions
3.6(h) Wetlands
3.6(i) Mechanic's liens
3.6(k) Exceptions to proceedings which would affect use of the Real
Property
3.7 Adverse Changes
3.8(a)(iii) Liabilities not in Ordinary Course of Business
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
3.20 Adjustment in Purchase Price for Certain Contracts
5.7 Divested Assets
5.9 Allocation of Purchase Price among the Assets of the Company
9.7 List of Business Regions
ii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is made and entered into on
July 17, 1998, by and between Eastern Environmental Services, Inc., a Delaware
corporation ("Eastern") and Transcor Waste Services, Inc., a Delaware
Corporation ("Transcor" or "Seller"). Xxxxxxx Corp, a Delaware Corporation
("Xxxxxxx") has entered into this Agreement for the purposes of giving certain
limited representations and warranties and a limited indemnity, all as
specifically set forth in this Agreement.
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. Xxxxxxx owns a controlling
interest in the outstanding stock of Transcor, and Transcor is the owner of all
of the outstanding stock of Xxxxxxx Recycling Corp. ("Company"). The Company is
in the business of operating a solid waste transfer station and collecting,
recycling, transporting, and disposing of non-hazardous solid waste in various
cities in Florida. For purposes of this Agreement, Transcor is sometimes
hereinafter referred to as the Seller, and Eastern is sometimes hereinafter
referred to as the Purchaser. Xxxxxxx joins in the execution of this Agreement
solely for the limited purposes expressly set forth herein. In accordance with
the provisions of this Agreement, Sellers desire to sell all of the outstanding
shares of stock of the Company (the "Company Shares") to Eastern in exchange for
cash and common stock of Eastern, all on the terms contained herein.
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. The parties agree that the Disclosure
Binder will be completed and approved by the parties within twenty (20) days
after the execution of this Agreement. For purposes of identification, the
Disclosure Binder will be 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
-------------------------
SECTION 1.1 Incorporation of Recitals. The recitals set forth above are
-------------------------
incorporated herein by reference and are a part of this Agreement.
SECTION 1.2 Time and Place for Closing. Closing under this Agreement
--------------------------
shall take place within ten 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
1
Place, Mount Laurel, 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 Seller, and agreed to by
Seller.
SECTION 1.3 Agreement to Sell Stock of Company; Consideration.
-------------------------------------------------
(a) At the Closing, the Sellers agree to transfer and deliver to Purchaser
all of the Company Shares owned by Sellers, and Purchaser agrees to purchase and
pay for the Company Shares, the total consideration, subject to adjustment as
provided herein, of $51,100,000 as follows: (i) a number of shares of Eastern's
common stock ("EESI Stock") having a value of $10,000,000, each share being
valued at the average closing price of the common stock on the Nasdaq Stock
Market for the five trading days which end on the fifth trading day prior to the
Closing Date ("Per Share Value"), and (ii) cash by wire transfer of good funds
in the amount of $41,100,000 (the "Cash Portion"). The Purchase Price shall be
(i) increased or decreased, dollar for dollar, by the amount by which the
current assets of the Company at Closing, determined in accordance with
generally accepted accounting principles ("GAAP"), exceed or are exceeded by,
respectively, the current liabilities of the Company at Closing, including any
current portion of long term debt, as determined in accordance with GAAP and
(ii) decreased, dollar for dollar, by the amount of any long term liability of
the Company existing at the Closing Date, excluding only the current portion of
any long term liability. For purposes of this Agreement the adjustment to the
Purchase Price set forth in (i) and (ii) above is hereafter referred to as the
("Working Capital Adjustment"). The increase or decrease, if any, resulting from
the Working Capital Adjustment, shall be added to or deducted from the Cash
Portion. The Cash Portion as adjusted by the Working Capital Adjustment shall be
paid to Seller at Closing. The EESI Stock shall be delivered to Seller at
Closing; provided, however, that if Seller does not deliver to Purchaser at
Closing the audited financial statements set forth in Section 5.6, then the EESI
Stock shall be escrowed with an escrow agent suitable to Seller and Purchaser,
and delivered to Seller at such time as the audited financial statements set
forth in Section 5.6 are provided to Purchaser.
(b) Within one hundred twenty (120) days after the Closing Date, Purchaser
shall prepare and deliver to Seller the balance sheet for the Company as of the
close of business of on the Closing Date (the "Closing Date Balance Sheet").
Seller shall fully cooperate with Purchaser during Purchaser's preparation of
the Closing Date Balance Sheet. The Closing Date Balance Sheet shall set forth
the Net Working Capital (as defined below) of the Company, and shall have been
prepared in accordance with generally accepted accounting principles. Seller
shall have the right to review all of Purchaser's work papers and all relevant
records of Purchaser and its accountants relating to the Closing Date Balance
Sheet. For purposes of this Agreement, Net Working Capital shall mean the
current assets of the Company, less its current liabilities, including the
current portion of any long term
2
liabilities, in each case as determined in accordance with generally accepted
accounting principles.
(c) The Closing Date Balance Sheet delivered by Purchaser to Seller shall
be deemed to be and shall be final, binding and conclusive on the parties
hereto, unless Seller disputes the Closing Date Balance Sheet in accordance with
this Section 1.3(c). Seller may dispute any amounts reflected on the Closing
Date Balance Sheet (any such disputed amounts, the "Disputed Matters");
provided, however, that Seller shall be entitled to dispute any such matter only
-------- -------
if (1) Seller shall notify Purchaser in writing of each Disputed Matter within
thirty (30) days of Seller's receipt of the Closing Date Balance Sheet and (2)
all such asserted disputes, if resolved in Seller'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 Seller and Purchaser (the "Independent
Accounting Firm"). The cost and fees of the Independent Accounting Firm shall be
shared equally by Seller and Purchaser. The Independent Accounting Firm so
chosen shall consider only the Disputed Matters and Purchaser and Seller 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
Purchaser and Seller no later than thirty (30) days after having received the
assignment with respect thereto. The decision of the Independent Account 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 Net Working Capital as of the Closing Date as conclusively
determined as provided in Section 1.3 (such conclusive determination is referred
to herein as "Certified Net Working Capital"), is less than $25,000, then Seller
shall pay, or cause to be paid, to Purchaser the amount of such deficiency. If
the Certified Net Working Capital is greater than $25,000, then Purchaser shall
pay, or cause to be paid, to Seller the amount of such excess. Any payment
pursuant to this Section 1.3(b) shall be made within five (5) business days
following the conclusive determination of Net Working Capital (such fifth
business day, the "Due Date"). Any payment not made by the Due Date therefor
shall bear interest from the Due Date at the rate of ten percent (10%) per
annum.
(e) Payments made pursuant to this Section 1.3 shall be made by wire
transfer of immediately available funds or by good check to an account
designated by the party receiving such payment.
SECTION 1.4 Closing. Following execution of this Agreement, the Purchaser
-------
and Sellers shall be obligated to conclude the transaction strictly in
accordance with its terms within ten business days after the conditions of
Closing set forth in Article VII and Article
3
VIII have been satisfied or waived. If the failure to conclude this transaction
is due to the refusal and failure of Sellers to perform their obligations to
close under this Agreement, Purchaser may seek to enforce this Agreement with an
action of specific performance, or, in the alternative, shall be entitled to
liquidated damages in the amount of $1,200,000 of the Cash Portion. If the
failure to conclude this transaction is due to the refusal and failure of
Purchaser to perform its obligations to close under this Agreement, the Sellers
may seek to enforce this Agreement with an action of specific performance, or,
in the alternative, shall be entitled to liquidated damages in the amount of
$1,200,000 of the Cash Portion.
SECTION 1.5 Termination. This Agreement and the transactions contemplated
-----------
hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Eastern and Sellers;
(b) by Purchaser within 35 days after the date of this Agreement, if
Purchaser is not satisfied, in its sole discretion, with the due diligence it
conducts on the Company subsequent to the date of this Agreement, including,
without limitation the matters disclosed in the Schedules delivered by the
Seller in the Disclosure Binder.
(c) by the Seller or by Purchaser, in the event Purchaser or the Seller,
as applicable, makes a material misrepresentation under this Agreement or
breaches a material covenant or agreement under this Agreement, and fails to
cure such misrepresentation or breach within ten (10) business days from the
date of written notice of the existence of such misrepresentation or breach; or
(d) by the Seller or Purchaser, if the Closing shall not have occurred by
September 15, 1998, or such other date as may be agreed to by the parties hereto
in writing, due to the non-fulfillment by the non-terminating party of a
condition precedent to the terminating 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). However, if the only condition to Closing which has not been
satisfied is the condition set forth in Section 7.7, the date of September 15,
1998, shall be extended to October 15, 1998, at the option of Purchaser or
Seller, to be exercised through written notice to Seller or Purchaser, as
applicable.
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
this Section 1.4, Section 1.5, Article IX, Section 10.1, Section 10.2 and
Section 10.15 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement. If this agreement is terminated, all due
diligence and other documentation delivered to Eastern by the Company and Seller
shall be returned to the Seller.
4
SECTION 1.6 Deliveries by Eastern. At the Closing, Eastern shall deliver
----------- ---------------------
or cause to be delivered, all duly and properly executed, authorized and issued
(where applicable):
(a) The Cash Portion, as adjusted by the Working Capital Adjustment, and
the EESI Stock;
(b) A favorable opinion from counsel for Eastern, dated the Closing Date,
in the form attached as Schedule 1.6(b);
(c) A Noncompetition Agreement between Purchaser and each of the Seller,
Xxxxxxx, and Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxxx, in the form and content
agreed to between the parties and attached as Schedule 1.6(c) to the Disclosure
Binder (the "Noncompetition Agreement");
(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) Such other documents as required to consummate the Closing.
SECTION 1.7 Deliveries by Seller. At the Closing, Seller shall deliver 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 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 Company as of the time of
Closing;
(c) The Noncompetition Agreement;
(d) A certified copy of all charter documents and by-laws of the Company
and a current certificate of good standing for the Company from each applicable
jurisdiction of incorporation and admission;
(e) A favorable opinion from counsel for Seller and Transcor, dated the
Closing Date, in form attached as Schedule 1.7(e);
(f) A release from Seller and each executive officer of the Company, in a
form and content attached as Schedule 1.7(f);
5
(g) The Certificate described at Section 7.1 executed by the President of
Seller;
(h) The books and records of the Company, including, without limitation,
all original financial and operating records, the corporate minute books and
seals, the corporate stock ledgers, and all title documents; and,
(i) Such other documents as required to consummate the Closing.
ARTICLE II
TITLE INSURANCE
SECTION 2.1 Real Property. A legal description of the meters and bounds
--------------
of all parcels of and rights to real property which will be owned by the Company
at Closing is attached as Schedule 2.1 ("Real Property"). For purposes of this
Agreement, "Real Property" shall also include (i) all of the Company's right,
title and interest in and to all easements, rights-of-way, privileges and
appurtenances thereto, (ii) all of the Company's right, title and interest, if
any, in and to the beds of all streets, roads, avenues or highways, open or
proposed, abutting the Real Property, (iii) all of the Company's right, title
and interest, if any, in and to any award in condemnation, or damages of any
kind, to which the Company may have become entitled or may hereafter be
entitled, by reason of any exercise of the power of eminent domain with respect
to the Real Property or any other right, title or interest to be sold hereunder
or any part thereof, and (iv) all of the Company's right, title and interest in
and to all surveys, architectural and engineering plans, specifications,
drawings, environmental and other reports, etc., if any, presently existing or
hereafter prepared, with respect to the Real Property.
SECTION 2.2 Owners Title Policy. At Closing, the Company shall own, with
-------------------
respect to the Real Property, 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 ("Owners Policy"). The Owners Policy shall have each of the
Title Company's standard printed exceptions deleted and shall include, to the
extent available, comprehensive, access, non-imputation and contiguity
endorsements. The Owners Policy shall insure title to the Real Property to be in
fee simple in Company, subject only to the exceptions permitted by Section 2.3
hereof. Seller shall order a preliminary title commitment in respect of the Real
Property and shall cause the same to be delivered to Purchaser and its counsel,
together with all documents noted as exceptions to title in the preliminary
title commitment. Seller shall deliver to Purchasers any unrecorded leases,
option agreements, contracts and any other items affecting title which are in
the possession of, or known to, Seller. Purchaser, within 7 business days after
the receipt of such title commitment, and all such other documents required by
this Section, shall either: (i) notify Seller in writing of Purchaser's approval
of the form and substance of the preliminary title commitment and such other
documents; or (ii) notify Seller in writing that Seller must remove or satisfy
any exception or exceptions
6
shown in the preliminary title commitment or contained in any such other
document which are not acceptable to Purchaser. If the exceptions objected to
are not removed or satisfied within 15 days after the date of receipt by Seller
of notice from Purchaser in accordance with (ii) above, then Purchaser may, at
Purchaser's sole option, to be exercised by written notice to Seller, either:
(a) accept such title as Seller is able to furnish without removal of the
exceptions to which Purchaser objected; or (b) allow Seller additional time in
which to cure or remove any objected to exceptions; or (c) terminate this
Agreement. Seller agrees to use its reasonable efforts to remove any exception
which is not accepted by the Purchaser in accordance with this Section 2.2. At
least three business days prior to the Closing Date, Seller shall cause Title
Company to deliver to Purchaser and its counsel a pro forma Owners Policy or
--- -----
marked title commitments listing as exceptions only those matters accepted by
the Purchasers and or not objected to by the Purchasers under this Section 2.2
("Permitted Exceptions"), containing all endorsements and otherwise in the form
required by this Section 2.2. Seller and Purchaser shall share the cost of the
Owners Policy.
SECTION 2.3 Permitted Exceptions. The Owners Policy shall insure
--------------------
Company's interest in the Real Property to be free and clear of all encumbrances
and exceptions whatsoever except for the Permitted Exceptions.
SECTION 2.4 Survey. The Seller shall furnish Purchaser with a survey
------
relating to all of the Real Property 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, Seller and Purchaser shall share the cost of such
survey.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Whenever the phrase "to Seller's knowledge," or a similar phrase is used in
this Agreement, the phrase means the actual knowledge of any general manager,
officer or director of the Seller or the Company and the knowledge such
officers, directors or general managers would or should have had, if such
officer, director or general manager had exercised reasonable diligence in the
ordinary conduct of the Company's affairs. With knowledge that Purchaser is
relying upon the representations, warranties and covenants herein contained, the
Seller represents and warrants to Purchaser and makes the following covenants
for the Purchaser's benefit:
SECTION 3.1 Organization and Standing. The Company is duly organized,
-------------------------
validly existing and in good standing under the laws of the state of its
incorporation, with full power and authority to own its properties and conduct
its business as now being conducted. Except as listed in Schedule 3.1, the
Company does not own any stock or interest in any other corporation,
partnership, joint venture or other business organization. Transcor owns all of
the outstanding securities issued by the Company.
7
SECTION 3.2 Securities. The Company has the authorized and outstanding
----------
securities set forth on Schedule 3.2. 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 Company, except as set forth on Schedule 3.2.
SECTION 3.3 Contracts, Permits and Material Documents. The items listed
-----------------------------------------
in Schedule 3.3 attached hereto are all of the following ("Material Documents")
with respect to the Company 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 Company are bound
or under which any of the Company are the beneficiary, (v) collective bargaining
agreements, (vi) patents, trademarks, trade names, copyrights, trade secrets,
proprietary rights, symbols, service marks, and logos, (vii) all permits,
licenses, consents and other approvals from governments, governmental agencies
(federal, state and local) and/or third parties relating to, used in or required
for the operation of any of the business of the Company, (viii) all surety
bonds, closure bonds or any other obligation which the Company 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
Company or any of their property and pursuant to which the Company 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 different types of documents listed. Except as set forth on Schedule 3.3,
neither the Company 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 Seller, no act or event has occurred which
with notice or lapse of time, or both, would constitute such a default. The
Company is not a party to, and none of Company's properties are bound by, any
agreement or instrument which is material to the continued conduct of business
operations of the Company, as now being conducted, except as listed in Schedule
3.3.
SECTION 3.4 Personal Property.
-----------------
(a) All furniture, office equipment, computer equipment, and radio
equipment, owned by the Company is in reasonably good condition, normal wear and
tear excepted, and is sufficient in type, quantity and quality to operate the
business currently conducted by the Company in a reasonably efficient manner.
(b) Listed on Schedule 3.4(b) is all of the rolling stock, including motor
vehicles, trucks, front and rear end loaders, and compactors and accessories and
attachments used in the business of the Company 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
the Company as listed on Schedule 3.4(b). The Rolling Stock is in reasonably
good condition, normal wear and tear excepted, except
8
as noted on Schedule 3.4(b). The Company owns and/ or leases a sufficient number
and type of Rolling Stock to service its customers in a reasonably efficient
manner.
(c) Schedule 3.4(c), attached hereto, lists the containers used in the
business of the Company which are ten yards or greater together with information
as to container size. All of the containers owned and used by the Company are in
reasonably good condition, normal wear and tear excepted, except as noted on
Schedule 3.4(c). The Company owns and/ or leases a sufficient number and type of
containers to service its customers in a reasonably efficient manner.
(d) The inventory of parts, tires and accessories and the shop tools owned
by the Company is in reasonably good condition, normal wear and tear excepted,
and is sufficient in type, quantity and quality to operate the business
currently conducted by the Company in a reasonably efficient manner.
(e) All recycling equipment and other equipment not listed on one of the
above schedules owned by the Company is in reasonably good condition, normal
wear and tear excepted, and is sufficient in type, quantity and quality to
operate the business currently conducted by the Company in a reasonably
efficient manner.
(f) The Company has good and marketable title to, or a valid leasehold
interest in, all of its 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
3.4(f) ("Personal Property Encumbrances").
(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(ii) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation; and
(iii) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment.
SECTION 3.5 Customers. A list of customers the Company 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, is listed on Schedule 3.5 attached hereto. Neither the
Company nor, to Seller's knowledge, any 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. The purchase of the Company by Eastern
will not create a default under any customer contract.
9
SECTION 3.6 Real Property. The Company has never owned, leased or
-------------
otherwise occupied, had an interest in or operated any real property other than
the Real Property, except as listed on Schedule 3.6 attached hereto and
incorporated herein by reference. The Company has good, marketable and insurable
title to the Real Property, except for the Permitted Exceptions.
(a) To Seller's knowledge, in all material respects, except as set forth
in Schedule 3.6(a) attached hereto and incorporated herein, the Real Property
is, and at all times during operation of the Company's business ("Business")
thereon has been, licensed, permitted and authorized for the operation of such
Business under all applicable federal, state and local statutes, laws, rules,
regulations, orders, permits (including, without limitation, zoning restrictions
and land use requirements) and licenses and all administrative and judicial
judgments, rulings, decisions and orders affecting or otherwise applicable to
the protection of the environment, the Real Property and the conduct of such
Business thereon (collectively, the "Applicable Laws").
(b) To Seller's knowledge, except as set forth in Schedule 3.6(b) attached
hereto and incorporated herein by reference, the Real Property is legally usable
for its current uses, and the Real Property can be used by the Purchaser after
the Closing to operate such business as is currently operated, without violating
any Applicable Law or private restriction, and such uses are legal, conforming
uses.
(c) To Seller's knowledge, except as set forth in Schedule 3.6(c) attached
hereto and incorporated herein by reference, all activities and operations
conducted on the Real Property, whether by Seller or by third parties, are now
being conducted and have always been conducted in compliance with all Applicable
Laws.
(d) The Seller shall make available on Purchaser's reasonable request all
engineering, geologic and other similar reports, documentation and maps relating
to the Real Property in the possession or control of the Seller or its
consultants or employed professional firms.
(e) Except as set forth in Schedule 3.6(e) attached hereto and
incorporated herein by reference, the Real Property is not now and during the
Company's ownership has not been involved in any litigation or administrative
proceeding seeking to impose fines, penalties or other liabilities or seeking
injunctive relief for violation of any Applicable Laws relating to the
environment.
(f) To Seller's knowledge, there have been no spills, leaks, deposits or
other releases by the Company into the environment or onto or under the Real
Property of any Hazardous Materials as defined in Schedule 3.6(f) attached
hereto or other material environmental conditions other than as disclosed on
Schedule 3.6(f).
10
(g) No party, other than the Company, has a present or future right to
possession of all or any part of the Real Property, except for any right defined
in, under or by any of the Permitted Exceptions.
(h) To Seller's knowledge, and without independent investigation, no
portion of the Real Property contains any areas that could be characterized as
disturbed, undisturbed or man-made wetlands or as "waters of the United States"
pursuant to any Applicable Laws or the procedural manuals of the Environmental
Protection Agency, U.S. Army Corps of Engineers or the applicable state agency
whether such characterization reflects current conditions or historic conditions
which have been altered without the necessary permits or approvals, except as
listed on Schedule 3.6(h) attached hereto and incorporated herein by reference.
(i) There are no mechanic's liens affecting the Real Property and no work
has been performed on the Real Property within ninety days of the date hereof
for which a mechanic's lien could be filed, except as set forth in Schedule
3.6(i) attached hereto and incorporated herein by reference.
(j) To Seller's knowledge, there are no levied or pending special
assessments affecting all or any part of the Real Property owed to any
governmental entity and none is threatened.
(k) There are no proceedings or amendments pending and brought by or
threatened by any third party which would result in a change in the allowable
uses of the Real Property or which would modify the right of the Purchaser to
use the Real Property for its present uses after the Closing Date, except as set
forth in Schedule 3.6(k) attached hereto and incorporated herein by reference.
SECTION 3.7 Financial Statements. Seller will deliver to Purchaser, as
--------------------
part of the Disclosure Binder true and correct copies of the following financial
statements of the Company (the "Financial Statements"):
(a) Balance sheets of the Company as of December 31, 1996, and December
31, 1997, and a statement of income, cash flow and retained earnings for the
periods ended December 31, 1996, and December 31, 1997, all prepared on an
accrual basis; and
(b) A balance sheet as of June 30, 1998 ("Most Recent Balance Sheet"), and
a statement of income, cash flow and retained earnings for the period ended June
30, 1998 ("Most Recent Income Statement"), with respect to the Company, both
prepared on an accrual basis internally by the Company. The Most Recent Balance
Sheet and Most Recent Income Statement are hereafter referred to as the "Most
Recent Financial Statements."
11
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 Company. The balance sheets
present fairly, in all material respects, the financial condition of the Company
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 Company for the periods indicated thereon. Since the date of the Most Recent
Balance Sheet, the Company has not (i) made any material change in its
accounting policies or (ii) effected any prior period adjustment to, or other
restatement of, its financial statements for any period. The Financial
Statements are consistent with the books and records of the Company (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 Company.
SECTION 3.8 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any long-term liabilities, and no other
liabilities, fixed or contingent, other than:
(i) liabilities fully reflected in the Most Recent Balance Sheet,
except for liabilities not required to be disclosed therein in accordance with
GAAP; and
(ii) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice.
(b) All accounts receivable of the Company are, and all accounts
receivable arising since the date of this Agreement, will be valid and
enforceable accounts receivable, and will be fully collectable in the ordinary
course of business, less an allowance for bad debt set forth on Most Recent
Balance Statement. All accounts receivable have been generated in the ordinary
course of business of the Company consistent with past practice. To Seller's
knowledge, there are no defenses or set-offs to any of the accounts receivable.
(c) At Closing, the Company 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. It is
acknowledged that current assets shall include cash, cash equivalents, pre-paid
expenses and accounts receivable (less a bad debt allowance), and current
liabilities shall include accounts payable, accrued expenses, accrued vacation
pay, and the current portion of any long-term liabilities not satisfied at
Closing.
SECTION 3.9 Fiscal Condition of the Company. Since the date of the Most
-------------------------------
Recent Balance Sheet, 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:
12
(a) Any material adverse change in the financial condition, business
organization or personnel of the Company or in the relationships of the Company
with suppliers, customers or others;
(b) Any disposition by any of the Company of any of its capital stock or
any grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by any of the Company of any of its capital stock or
any declaration or payment of any dividend or other distribution of its capital
stock;
(c) Any sale or other disposition of any asset owned by any of the Company
at the close of business on the date of the Most Recent Balance Sheet, or
acquired by it since that date, other than in the ordinary course of business
consistent with past practice;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset or any single business, except in the ordinary course of
business consistent with past practices and having an acquisition price of
$25,000 or less;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company taken as a whole,
except damage, destruction or loss which does not exceed $25,000 in the
aggregate;
(f) Any material bonuses or increases in the compensation payable or to
become payable by the Company 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 Company 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 Company has 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 has paid all taxes due for the
periods covered by the said returns. The Company is a Subchapter "C" corporation
under the Internal Revenue Code of 1986, as amended (the "Code"). The reserves
for all taxes reflected in the Most Recent Balance Sheet, if any, are adequate
to cover all taxes, interest and penalties in connection therewith that may be
assessed with respect to the property and business operations for the period(s)
ending on the Closing Date and for all prior periods. The Company has filed, and
will file (if due), in a timely manner all requisite federal, state, local and
other tax returns due for all fiscal periods ended on or before the date hereof,
and as of the Closing shall have or will in a timely manner file all such
returns due for all periods ended on or before the Closing Date.
13
SECTION 3.11 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company or which the Company has 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 Company are in force and effect and the premiums thereon are
not delinquent. Except as set forth in Schedule 3.11, the Company has not
received any notification from any insurance carrier denying or disputing any
claim made by the Company or denying or disputing any coverage for any such
claim or denying or disputing the amount of any claim. The Company has no claim
against any of its insurance carriers under any of policies insuring it pending
or anticipated and there has been no occurrence of any kind which would give
rise to any such claim.
SECTION 3.12 Employees, Pensions, and ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee, except as listed on Schedule 3.12(a).
(b) Except as set forth on Schedule 3.12(b), no employee of the Company is
represented by any union. A list of the name, address and social security number
and current rate of compensation of each of the Company's employees and capacity
in which each person is employed is set forth on Schedule 3.12(b). There is no
pending or threatened dispute between the Company and any of its employees which
might materially and adversely affect the continuance of the business operations
of the Company.
(c) Attached hereto made a part hereof and marked Schedule 3.12(c) lists
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 the Company
(whether or not they are now terminated) or to which the Company currently
contributes, or has an obligation to contribute in the future, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions ("Plans"), whether or not the Plans are or are
intended to be (i) covered or qualified under the Code, ERISA or any other
applicable law, (ii) written or oral, (iii) funded or unfunded, or (iv)
generally available to all employees of the Company.
(d) The Seller's 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.
14
(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.
(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.
---------------------
(a) To Seller's knowledge, except as disclosed in Schedule 3.13(a) to this
Agreement, and except as to Environmental Laws, as hereinafter defined, the
Company is in compliance with all Federal, state and local laws, rules and
regulations including, without limitation, the following laws: land use laws;
payroll, employment, labor, or safety laws; or federal, state or local "anti-
trust" or "unfair competition" or "racketeering" laws such as but not limited to
the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act,
15
or Racketeer Influenced and Corrupt Organization Act ("Law"). Except as
disclosed in Schedule 3.13(a), to Seller's knowledge the Company is in
compliance with all permits, franchises, licenses, and orders that have been
issued with respect to the Laws and are or may be applicable to the Company,
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 or
proceedings pending, or, to Seller's knowledge threatened against or affecting
the Company or the Real Property, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, wherever located, which would result in an
material change in how Company may conduct its operations or which would
invalidate this Agreement or any action taken in connection with this Agreement.
Except as disclosed in Schedule 3.13(a), the Company and the Seller have
received no notification of any past or present failure by the Company to comply
with any Law applicable to the Company or the Real Property or affecting the
Company's use of the Real Property.
(b) To Seller's knowledge, and except as disclosed in Schedule 3.13(b) to
this Agreement, the Company is 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
materials from any source ("Environmental Law"). Except as disclosed in Schedule
3.13(b), with respect to any Environmental Law, the Company is in compliance
with all permits, licenses, and orders related thereto or issued thereunder with
respect to Environmental Laws, 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 Seller's knowledge
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which would result
in an adverse change in the financial condition of the Company of $5,000 or more
or which would invalidate this Agreement or any action taken in connection with
this Agreement. To Seller's knowledge, except as set forth on Schedule 3.13(b),
the Company has not transported, stored, treated or disposed, nor has the
Company allowed any third persons, on its behalf, to transport, store, treat or
dispose waste generated or processed by the Company to or at (i) any location
other than a site lawfully permitted to receive such waste for such purpose or,
(ii) any location currently designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar federal or state statute; nor has the Company performed, arranged
for or allowed by any method or procedure such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which may result in liability for contamination of the environment; and the
Company has not disposed, nor has Company knowingly allowed third parties to
dispose of waste upon the Real
16
Property other than as permitted by, and in conformity with, applicable
Environmental Law. Except as disclosed in Schedule 3.13(b), the Company and the
Seller has not received notification of any past or present failure by the
Company to comply with any Environmental Law applicable to the Company. Without
limiting the generality of the foregoing, the Company and the Seller have not
received any notification (including requests for information directed to the
Seller or Company) from any governmental agency asserting that, in connection
with the operation of the business of the Company or the ownership of the Real
Property, the Company is or may be a "potentially responsible person" for a
remedial action at a waste storage, treatment or disposal facility, pursuant to
the provisions of CERCLA, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment. The Company and the Seller have not received
at the Real Property 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 de-minimis amounts which do not require remediation.
(c) To Seller's knowledge, Schedule 3.13(c) is a complete list of all
landfill and other disposal sites to which the Company has brought waste within
the past ten years. Except as set forth on Schedule 3.13 (c), the Company has
never owned, operated, had an interest in, engaged in and/or leased a waste
transfer, recycling, treatment, storage, landfill or other disposal facility.
To the knowledge of Seller, the Company has obtained and maintained, when
required to do so under applicable Environmental Laws, trip tickets, signed by
the applicable waste generators demonstrating the nature of all waste deposited
and or transported by the Company. To the Seller's knowledge, no employee,
contractor or agent of the Company has, in the course and scope of employment
with the Company, been harmed by exposure to hazardous materials, as defined
under the Laws. No liens with respect to environmental liability have been
imposed against the Company or the Real Property under CERCLA, any comparable
Florida state statute or other applicable Environmental Law, and to Seller's
knowledge no 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 five years and all outstanding
unremedied notice of violations issued to the Company by any federal, state or
local regulatory agency.
(e) To Seller's knowledge, no employee, officer, director, or shareholder
of the Company 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 threatened litigation and administrative or judicial
proceedings involving the Company, or its assets or liabilities, are set forth
on Schedule 3.13(f) attached, together with a description of each such
proceeding.
17
SECTION 3.14 Corrupt Practices. The Company has not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company (except in conformity with Law) for the purpose of attracting business
to the Company or any foreign or domestic governmental official, political party
or candidate for government office or any of their respective employees or
representatives, nor has the Company otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
SECTION 3.15 Legal Compliance.
----------------
(a) Seller has the right, power, legal capacity and authority to enter
into, and perform their 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 Seller or the Company 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:
(i) Any charter, by-law, agreement or other document to which the
Company or Seller are a party or by which the Company or the Seller or any of
their properties are bound, including, without limitation, any agreement by or
between any shareholder of Company; or
(ii) Any decree, order or rule of any court or governmental authority
which is binding on any Seller or the Company or on any property of the Company;
or
(iii) Any permit, certificate or license issued by any governmental
authority under which the Company operates or pursuant to which any of the
property of the Company is bound; or
(iv) Any agreement to which the Company is bound, including, without
limitation, bank loan documents, agreements with customers or suppliers and
leases for equipment.
(b) Xxxxxxx has the right, power, legal capacity and authority to enter
into, and perform their 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 Xxxxxxx in connection with
the transactions, filings with or notices to, contemplated by this Agreement.
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
18
the Company or the Seller is entitled to any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
SECTION 3.17 Intellectual Property. To Seller's knowledge, the Company
---------------------
has not infringed, and is not now infringing, on any trade name, trademark,
service xxxx or copyright belonging to any person, firm or corporation
("Intellectual Property") and no one has or is infringing any Intellectual
Property right of the Company. The Company owns or has legally licensed all
computer software used in connection with its business and has not infringed,
and is not now infringing, on the rights of any third parties by its 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 Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of the Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company does business.
SECTION 3.19 Disclosure. The representations and warranties of Seller
----------
contained in this Agreement, or in any Schedule or other document delivered by
Seller 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, Seller 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.
SECTION 3.20 Certain Contracts. The Company is a party to a Palm Beach
------------------
Area 8 Contract, dated May 13, 1998 between the Company and Solid Waste
Authority of Palm Beach and a City of Cape Coral Contract, dated May 11, 1998
between the Company and City of Cape Coral (the "Disposal Contracts"). The
Disposal Contracts are valid and enforceable. The Disposal Contracts are
scheduled to commence on October 1, 1998. In the event that either of the
Disposal Contracts fail to commence due to their being canceled subsequent to
Closing, through no fault of Purchaser (the parties acknowledge it is not the
fault of Purchaser, if either Disposal Contract is canceled by the other party
to it as a result of the Company Shares being bought by Purchaser), then the
stock portion of the Purchase Price shall be adjusted by the value assigned to
such contract(s), as set forth on Schedule 3.20. In the event that either
Disposal Contract shall be terminated prior to Closing, then Seller, in its sole
discretion, reserves the right, upon notice to Purchaser, to terminate this
Agreement, upon which event neither party shall have any further obligation to
each other.
19
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EASTERN
-----------------------------------------
With knowledge that Seller is relying upon the representations, warranties
and covenants contained herein, Eastern represents and warrants to Seller and
makes the following covenants for Seller's 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 Seller current
------------------
(for the quarter ending March 31, 1998) 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 December 31,
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. As of the date of this Agreement,
except as otherwise disclosed in the Public Reports, Eastern knows of no
condition, activity or event which would result in a material adverse change in
its business or its fiscal condition, taken as a whole.
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.
20
SECTION 4.5 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of Purchasers is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES AND SELLER
-----------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 5.1 Access to Records. Seller 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 Company, 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 Company that the
other party may reasonably request.
SECTION 5.2 Continuation of Business. Seller will operate the business of
------------------------
the Company 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 Company and to preserve for Eastern the
relationships of the Company with suppliers, customers, and others.
SECTION 5.3 Continuation of Insurance. Seller will keep in existence all
-------------------------
policies of insurance insuring the Company against liability and property
damage, fire and other casualty through the Closing Date, consistent with the
policies currently in effect.
SECTION 5.4 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, Seller will
not, directly or indirectly, solicit offers for the shares or the assets of the
Company or for a merger or consolidation involving the Company, or respond to
inquiries from, share information with, negotiate with or in any way facilitate
inquiries or offers from, third parties who express or who have heretofore
expressed an interest in acquiring the Company by merger, consolidation or other
combination or acquiring the Company's assets.
SECTION 5.5 Consents. Seller 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) the approval of the Federal Trade
Commission pursuant to the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Acts of 1986, 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 Seller.
SECTION 5.6 Audited Financial Statements. Seller agrees to have prepared
----------------------------
audited balance sheets for the Company as of December 31, 1995, December 31,
1996, and
21
December 31, 1997, and statements of income, cash flow and retained earnings for
the Companies for the twelve-month periods ended December 31, 1996, December 31,
1996, and December 31, 1997 ("Historical Financial Statements"), as rapidly as
possible. Seller shall prepare a compiled stub balance sheets and statements of
income, cash flow and retained earnings for the period commencing January 1,
1998, and ending on the last day of the last calendar quarter ending prior to
Closing ("Interim Financial Statements"). The Interim Financial Statements are
to be delivered as soon as possible, and shall be reviewed by Xxxxxx & Young,
LP. The Historical Financial Statements shall be prepared by Xxxxxx & Xxxxx, XX
and the Interim Financial Statements shall be reviewed by Xxxxxx & Young, LP, at
Seller's cost and expense.
SECTION 5.7 Asset Divestiture. Seller and Purchaser agree that between
-----------------
the date of this Agreement and the Closing Date, the Company shall distribute to
its shareholder those assets listed on Schedule 5.7 ("Divested Assets").
SECTION 5.8 Payment of Expenses. Eastern will pay all expenses incurred
-------------------
by Eastern in connection with the negotiation, execution and performance of this
Agreement and the Collateral Documents. Seller will pay all legal and accounting
expenses incurred by Seller and the Company in connection with the negotiation,
execution and performance of this Agreement and the Collateral Documents.
SECTION 5.9 Tax Treatment.
--------------
(a) The parties intend for the purchase of the Company Shares to be a
"qualified stock purchase" for purposes of Section 338(d)(3) of the Code,
Seller, Purchaser and Xxxxxxx shall join in making an election under Section
338(h)(10) of the Code with respect to the purchase of the Company Shares (the
"338 Election"). Seller shall deliver to Purchaser at the Closing (i) Internal
Revenue Service Form 8023 and any applicable similar forms required by state or
local law fully completed with respect to the purchase of the Company Shares and
executed by a duly authorized officer of the Seller, and (ii) all additional
data and materials required to be attached to such Form 8023 and any applicable
similar forms required by state or local law pursuant to Temp. Treas. Reg or
otherwise. Xxxxxxx and Seller shall attach the Form 8023 to the consolidated
Federal Income Tax Return for the affiliated group of corporations of which
Xxxxxxx is the common parent for its taxable period which includes the Closing
Date and otherwise shall cooperate fully with Purchaser in making the 338
Election. The Form 8023 and all materials required to be attached to such Form
8023 shall be as set forth in Schedule 5.9, described in Section 5.9(b) below.
(b) The Purchase Price for the Company Shares shall be allocated among the
assets of the Company in accordance with Schedule 5.9. Schedule 5.9 shall be
prepared by Seller and shall be given to Purchaser for review prior to being
finalized for the Disclosure Binder. Schedule 5.9 shall set forth (i) the
modified aggregate deemed sales price
22
("MADSP") at which the Company is deemed to have sold its assets for tax
purposes as a result of the Section 338(h)(10) election, (ii) the adjusted
grossed up basis ("AGUB") at which the Company is deemed to have purchased its
assets for tax purposes as a result of such election, and (iii) the allocations
of MADSP and AGIB among the assets of the Company. Schedule 5.9 shall be
determined in accordance with Section 338 of the Code and the applicable
regulations thereunder. Purchaser, Seller and Xxxxxxx will, to the maximum
extent permitted under applicable law file, or cause to be filed, all tax
returns filed by them in a manner consistent with Schedule 5.9 and not to take
any action inconsistent with Schedule 5.9.
(c) The parties hereto acknowledge that for Federal income tax purposes
(and for state tax purposes for those states that use a taxpayer's Federal
income tax liability or Federal taxable income as a base for computing such
taxpayer's state tax liability, or whose income tax provisions are otherwise
similar to the Federal income tax in this respect) the purchase of the Company
Shares and the 338(h)(10) election will be treated in all respects as a sale of
assets by the Company to a newly-formed subsidiary of Purchaser followed by a
complete liquidation of the Company into the Seller, and the parties agree to
report the transaction in a manner consistent with this treatment. The parties
also agree that neither Purchaser nor the Company shall be liable for any taxes,
including income, transfer, franchise, sales or use taxes, resulting from the
purchase of the Company Shares and the 338(h)(10) election.
SECTION 5.10 Replacement of Surety Guarantees. The Company has certain
--------------------------------
surety bonds in place as listed in Schedule 3.11. Certain of the surety bonds
have been guaranteed by Xxxxxxx, Transcor and Xxxxxxx X. Xxxxxxxx
("Guarantors"). Promptly after Closing, Purchaser will replace all surety bonds
which have been guaranteed by the Guarantors or obtain the release of the
Guarantors from their guarantees. The Guarantors will cooperate with Purchaser
in obtaining the release of the guarantees.
ARTICLE VI
REGISTRATION OF EESI STOCK
--------------------------
SECTION 6.1 Registration Rights.
-------------------
(a) The EESI Stock delivered at Closing will be registered under the
Securities Act of 1933 ("Act") for sale to the public in brokered transactions,
pursuant to a "shelf registration" on Form S-4 or other appropriate form, if
Form S-4 is not available under Rule 415 of the Act. At Eastern's request, the
Seller shall provide Eastern with any information required for the completion of
the registration statement or any supplements thereto. Eastern shall keep such
registration statement current and effective, until such time as the shares may
be sold by the Seller at any time without restriction or pursuant to the
provisions of Rule 144 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
23
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. Notwithstanding the above, Eastern's obligation to
keep the shelf registration continuously effective shall be suspended during any
period that there exists material, non-public information relating to Eastern.
(b) With respect to the EESI Stock, Eastern will furnish to the Seller
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 Seller may reasonably request in order to
facilitate the public sale or other disposition of the securities to be sold by
the Seller.
(c) Eastern shall indemnify Seller 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 Seller 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 Seller 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 Seller which is
intended for such use; and provided further, that Eastern shall not be required
to indemnify Seller against any Security Liability which arises out of the
failure of Seller to deliver a prospectus.
(d) All expenses incurred in effecting the registrations provided for in
this Section 6.2 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.
24
SECTION 6.2 Lock-Up Agreement. Seller agrees not to sell the EESI Stock
-----------------
prior to September 20, 1998, without the Purchaser's consent and the EESI Stock
will be legend to state that it may not be sold prior to September 20, 1998.
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 Seller. Seller and the Company shall have
--------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by Seller and the Company at or
prior to the Closing Date. All representations and warranties of Seller
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 Seller representing and warranting the foregoing.
SECTION 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Eastern to own, operate in its entirety or control the
Company or the business the Company operates, which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
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 Company, and the Company shall have not suffered any material
loss or damage or any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.
SECTION 7.4 Opinion of Counsel. Seller shall have delivered to the
------------------
Eastern the opinion of counsel, dated the Closing Date, in the form annexed
hereto as Schedule 1.8(e).
SECTION 7.5 Noncompetition Agreement. The Seller shall have executed and
------------------------
delivered to Eastern the Noncompetition Agreement.
SECTION 7.6 Release. Seller shall have executed and delivered to Eastern
-------
the Release described at Section 1.8(f).
25
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 Federal Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust
Act; and (ii) the approval of every regulatory agency of federal, state, or
local government that may be required in the reasonable opinion of either
Eastern or Seller. 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 Title Policy. Company shall own the Owner's Policy.
------------
ARTICLE VIII
CONDITIONS OF SELLER
--------------------
The obligations of Seller 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
Company or the business the Company operates 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 Seller, 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 Noncompetition Agreement. Eastern shall have executed and
------------------------
delivered the Noncompetition Agreement.
26
SECTION 8.5 Opinion of Counsel. Eastern shall have delivered to Seller
------------------
the opinion of counsel to Eastern, dated the Closing Date, in the form annexed
hereto as Schedule 1.7(c).
SECTION 8.6 Payment. The Purchasers shall have delivered to the Seller
-------
the Cash Portion in accordance with Section 1.3, and the EESI Stock shall have
been delivered to Seller or escrow agent, in accordance with Section 1.3.
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.1 Indemnification by Seller and Xxxxxxx. Seller and Xxxxxxx,
-------------------------------------
jointly and severally, and subject to the terms of this Article IX, hereby agree
to 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 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
(to the extent payment exceeds the amount reserved for in the Most Recent
Financial Statement) of federal, state, local or other income, sales, use,
franchise, excise or property tax liabilities of the Company arising or accrued
prior to the Closing Date; (d) any violation by Company prior to the Closing
Date 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 Seller and their officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, 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
27
Eastern 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 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), (b), or (c) of this Section 9.2
has occurred.
SECTION 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written
28
consent of the Indemnified Party (which will not be unreasonably withheld). In
the case of (c)(ii) or (c)(iii) above, any such consent to judgment or
settlement shall include, as an unconditional term thereof, the release of the
Indemnifying Party from all liability in connection therewith.
(d) If 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.
SECTION 9.4 Procedure for Non-Third Party Claims. If Eastern or 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
29
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
Company 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 eighteen months from the Closing Date. Notwithstanding the prior
sentence which provides that the representations and warranties expire after
certain stated periods of time, if within the stated period of time, a good
faith notice of a actual or threatened 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 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
SECTION 9.7 Limitation of Liability. Notwithstanding anything in this
-----------------------
Agreement to the contrary, the liability and obligations of Xxxxxxx under this
Agreement for the indemnification set forth in Section 9.1, shall be limited to,
and in no event shall exceed, the total aggregate amount of any proceeds from
the sale of the Company to Eastern which are actually distributed by Transcor to
Xxxxxxx, except that the foregoing limitation of liability does not apply to
Xxxxxxx' failure to perform the covenants set forth in Section 5.9 of the
Agreement or the untruthfulness of the representation and warranty set forth in
Section 3.15(b) of the Agreement.
The parties further agree that the total liability of Seller and Xxxxxxx
under this Article IX shall be limited to and in no event shall exceed an
aggregate amount of seventy-five percent of the Purchase Price (the
"Indemnification Limit"). The Company has four business regions as set forth in
Schedule 9.7. As to Indemnification Claims relating to a business region, the
Indemnification Limit shall be divided among the business regions, as set forth
in Schedule 9.7.
SECTION 9.8 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 ($100,000) or more, singly or in the
aggregate, and no Indemnifying Party shall have any liability to an Indemnified
Party until the damages to the Indemnified Party exceed a cumulative aggregate
total of One Hundred ($100,000). Once cumulative aggregate
30
damages exceed One Hundred Thousand ($100,000), the Indemnifying Party shall be
liable for all damages to the Indemnified Party, including the first One Hundred
Thousand ($100,000) of damages. Notwithstanding the previous two sentences, this
Section 9.8 does not apply to claims for indemnity made for money owed under
Section 1.3 of this Agreement.
ARTICLE X
OTHER PROVISIONS
----------------
SECTION 10.1 Nondisclosure by Seller. Seller 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. Seller 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 Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Eastern agrees that 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 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, Seller 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 Seller 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
31
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.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, Xxxxxxxxxxxx 00000
(b) If to Seller, addressed to them at:
0000 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Mr. Xxxxxx Xxxxxxxx
32
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxxx & Xxxxxx, P.A.
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 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 Florida, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida.
SECTION 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
SECTION 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement.
SECTION 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
SECTION 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
SECTION 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue
33
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 Seller or
-----------------------------------
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 Seller 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 or otherwise to facilitate the consummation of this Agreement, 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.
SECTION 10.16 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Tampa, Florida, in accordance
with the commercial rules (the "Rules") of the American Arbitration Association
then obtaining, and judgment upon the award rendered in such arbitration shall
be final and binding upon the parties and may be confirmed in any court having
jurisdiction thereof. Notwithstanding the foregoing, this Agreement to arbitrate
shall not bar any party from seeking temporary or provisional remedies in any
Court having jurisdiction. Notice of the demand for arbitration shall be filed
in writing with the other party to this Agreement, which such demand shall set
forth in the same degree of particularity as required for complaints under the
Federal Rules of Civil Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with reasonable
particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the date
when institution of legal or equitable proceedings based on such claim, dispute
or other matter in question would be barred by the applicable statutes of
limitations.
34
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would aid
and assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The arbitrators
shall have the authority to modify, amend or change the discovery plans of the
parties upon application by either party, if good cause appears for doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to Seller and Purchaser in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). Seller
and Purchaser, respectively, waive the right and agree they shall not seek to
disqualify any such counsel in any such Proceedings for any reason, including
but not limited to the fact that such counsel or any member thereof may be a
witness in any such Proceedings or possess or have learned of information of a
confidential or financial nature of the party whose interests are adverse to the
party represented by such counsel in any such Proceedings.
[Remainder of Page Intentionally Blank.]
35
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
XXXXXXX CORP.
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxx
Title: Secretary
TRANSCOR WASTE SERVICES, INC.
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
36
