EXHIBIT 10.3
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AGREEMENT AND PLAN OF REORGANIZATION OF
CONEY ISLAND RUBBISH REMOVAL, INC.
XXXXXXX XXXXX
EASTERN WASTE OF NEW YORK, INC.
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
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Page
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RECITALS..................................................................... 1
ARTICLE I. Reorganization; Closing........................................... 1
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ARTICLE II. Representations and Warranties of the Sellers.................... 9
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ARTICLE III. Representations and Warranties of Purchasers.................... 20
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ARTICLE IV. Additional Agreements of Sellers................................. 21
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ARTICLE V. Additional Agreements of Purchasers............................... 24
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ARTICLE VI. Conditions of Purchasers......................................... 27
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ARTICLE VII. Conditions of Sellers........................................... 28
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ARTICLE VIII. Indemnification................................................ 29
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ARTICLE IX. Other Provisions................................................. 33
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SCHEDULES
1.4 COMPANY DEBT
1.6 EXCLUDED ASSETS
1.10(C) OPINION OF PURCHASERS' COUNSEL
1.10(E) ASSIGNMENT AND ASSUMPTION AGREEMENT
1.11(A) XXXX OF SALE
1.11(B) NON-COMPETE AGREEMENT
1.11(D) OPINION OF SELLERS' COUNSEL
1.12(B) ALLOCATION OF PURCHASE PRICE TO ASSETS
2.1 SUBSIDIARIES
2.2 CAPITAL STOCK
2.3 CONTRACTS, PERMITS, MORTGAGES AND MATERIAL DOCUMENTS
2.4(A)(I) ROLLING STOCK
2.4(A)(II) CONTAINERS
2.4(B) PERSONAL PROPERTY EXCEPTIONS
2.5 CUSTOMERS
2.7 ADVERSE CHANGES
2.8(B) ACCOUNTS RECEIVABLE
2.8(C) ACCOUNTS PAYABLE
2.9(F) COMPENSATION INCREASES
2.10 TAX STATUS OF COMPANY
2.11 INSURANCE POLICIES, PERFORMANCE BONDS AND LETTERS OF CREDIT
2.12(A) CONTRACTS WITH EMPLOYEES
2.12(B) EMPLOYEES
2.12(C) BENEFIT PLANS
2.13(A) VIOLATIONS OF FEDERAL, STATE OR LOCAL LAW
2.13(B) ENVIRONMENTAL VIOLATIONS
2.13(C) LANDFILLS AND DISPOSAL FACILITIES
2.13(F) LIST AND SYNOPSIS OF ALL LITIGATION
2.15 REQUIRED CONSENTS
2.18 RELATED PARTY TRANSACTIONS
6.3 CANCELLED OR MODIFIED MATERIAL DOCUMENTS
7.3 GUARANTEES
AGREEMENT AND PLAN OF REORGANIZATION
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This Agreement and Plan of Reorganization ("Agreement") is made as of April
7, 1997, by and among Xxxxxxx Xxxxx ("Shareholder"), Coney Island Rubbish
Removal, Inc. ("Coney Island"), Eastern Environmental Services, Inc. ("EESI"),
and Eastern Waste of New York, Inc. ("EESI NY"). For purposes of this
Agreement, EESI and EESI NY are collectively referred to as "Purchasers;" Coney
Island may also be referred to as "Company;" and the Company and the Shareholder
are collectively referred to as the "Sellers."
RECITALS
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Shareholder is the sole owner of the outstanding stock of Coney Island.
The Company is a New York corporation. The Company is in the business of
collecting, transporting, recycling and disposing of non-hazardous, commercial,
industrial, and municipal solid waste ("Business").
The parties hereto desire that substantially all of the assets of the
Company be acquired by EESI NY in exchange solely for the voting stock of EESI,
the parent and sole shareholder of EESI NY, on the terms contained herein. The
parties intend that the transactions contemplated hereby qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended.
ARTICLE
REORGANIZATION; CLOSING
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Section 1.1. Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2. Place for Closing. Subject to Section 1.9 hereof, closing
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under this Agreement shall take place at the offices of Xxxxxx, Xxxxxx & Xxxxxx,
XXX Xxxxx, Xxxxxxxxx, XX 00000, 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."
Section 1.3. Agreement to Exchange Stock for Assets; Consideration.
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(a) At the Closing, the Company, as set forth in Section 1.5 below, shall
transfer and deliver to EESI NY, as set forth in Section 1.5 below, the assets
owned by the Company other than the Excluded Assets, defined in Section 1.6, and
EESI agrees to issue and deliver, in exchange for the assets, as consideration
therefor, shares of EESI's common stock ("EESI Stock"), calculated as set forth
in Section 1.4 below, and the assumption by Purchasers of the Assumed
Liabilities, as defined in Section 1.7. The EESI Stock shall be issued and paid
to the Company on the Closing Date.
(b) In accordance with Section 1.4(a)(iii) of this Agreement, the dollar
value of the EESI Stock to be delivered at Closing is being increased by the
amount by which the accounts receivable of the Company conveyed to the
Purchasers at Closing, less the bad accounts receivable reserve of the Company
agreed upon by Sellers and Purchasers at Closing, exceeds the accrued expenses,
accrued interest, accrued unpaid vacation and accounts payable of the Company,
assumed by the Purchasers in accordance with this Agreement ("Accounts
Receivable Payment"). The EESI Stock issued in the amount of the Accounts
Receivable Payment shall be hereafter referred to as the "Additional Stock". One
half of the Additional Stock shall be delivered to Xxxxxx X. Xxxxxx &
Associates, P.C. ("Escrow Agent") in escrow to be held under the provisions of
this Section 1.3(b) ("Escrow Stock"). On or before one hundred ninety-five (195)
days from the Closing Date, Purchasers will supply Company and the Escrow Agent
with an accounting of the accounts receivable of the Company collected by the
Purchasers within 180 days after the Closing and the accounts payable of the
Company paid by Purchasers within 180 days after Closing ("Receivable and
Payable Statement"). Within ten days of Escrow Agent's receipt of the Receivable
and Payable Statement, Escrow Agent, based on the Receivables and Payable
Statement shall deliver to the Company out of the Escrow Stock, an amount of
EESI's common stock equal in value to the amount by which (i) the accounts
receivable of the Company collected by the Purchasers within 180 days after
Closing exceeded the accounts payable of the Company paid by the Purchaser
within 180 days after Closing, less (ii) 50% of the Accounts Receivable Payment.
The EESI common stock delivered to Company by Escrow Agent under this Section
1.3(b) shall be valued at a per-share value equal to the closing price of EESI's
common stock as reported on the NASDAQ National Market on the day which is five
(5) trading days prior to the Closing Date. The EESI Stock delivered by Escrow
Agent shall be issued and paid to the Company. The Escrow Agent shall deliver to
Purchaser for cancellation the Escrow Stock not required to be delivered to the
Company.
Section 1.4. Calculation of EESI Stock. The dollar amount of the EESI
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Stock to be delivered at Closing shall be calculated as set forth in this
Section 1.4(a) and paid in EESI Stock having the per-share value set forth in
Section 1.4(b).
(a) The EESI Stock to be delivered at Closing shall equal, in dollar value
(based on the per share values set forth in Section 1.4(b) below), One Million
Seven Hundred Ten Thousand Dollars ($1,710,000) increased and decreased as
follows ("Dollar Value of the Purchase Price"):
(i) decreased, by the principal owed, as of the Closing Date, by the
Company with respect to the debt, set forth on Schedule 1.4 ("Company
Debt") (after the date of this Agreement, the Company Debt may
increase, due to additional indebtedness incurred as allowed by
Section 4.4 of this Agreement, or decrease, due to scheduled payments
or pre-payments, as allowed by Section 4.4);
(ii) increased, by an amount equal to one-half of any discount of the
Company Debt which the holders of the Company Debt have agreed to
accept in writing after
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the Closing Date in exchange for an accelerated payment of such
Company Debt where EESI agrees to fund the accelerated payment (EESI
agrees to pay accelerated payments which are payable in EESI's common
stock valued at the market value of EESI's common stock at the time of
issuance, as listed on the NASDAQ National Market and provided the
accelerated payment will achieve a ten percent or more discount of the
Company Debt being prepaid); and
(iii) increased, by the amount by which the accounts receivable of
the Company conveyed to the Purchasers at Closing, less the bad
accounts receivable reserve of the Company agreed upon by Sellers and
Purchasers at Closing, exceeds the accrued expenses, accrued interest,
accrued unpaid vacation and accounts payable of the Company, assumed
by the Purchasers in accordance with this Agreement.
(iv) decreased by a dollar amount equal to the product of (A)
fifteen (15) and (B) the dollar amount by which the annualized
revenues of the Company on the Closing Date is less than $114,000,
provided however there shall be no purchase price adjustment pursuant
to this clause (iv) if the decrease in revenues is five percent (5%)
or less. When determining the dollar amount of the annualized revenue
of the Business on the Closing Date, the dollar amount by which
revenues are reasonably likely to decrease if there shall have been
enacted or promulgated or adopted, on or prior to the Closing Date,
any rule, statute, law or regulation or any modification or
interpretation of any of the foregoing, (including without limitation,
any of the foregoing which reduces the rates charged to customers for
any services) which is reasonably likely to decrease revenues of the
Company by 5% or more from the date of this Agreement, shall be taken
into consideration. The 5% or more change in revenues referred to in
this clause (iv) shall not be deemed to be a material adverse change
under Section 6.3 of this Agreement.
(b) The per-share values used to calculate the amount of the EESI Stock to
be paid to the Company shall be as follows:
(i) Nine Dollars ($9.00) per Share for an amount of the Dollar Value
of the Purchase Price equal to One Million Six Hundred Seventy
Thousand Dollars ($1,670,000), plus the amount that the principal of
the Company Debt at Closing is less than the principal of the Company
Debt, as of the date of this Agreement, as set forth on Schedule 1.4,
due to normally scheduled principal amortization paid by the Company
and identified as a monthly payment on Schedule 1.4; and
(ii) the closing price for EESI's common stock on the NASDAQ National
Market for the trading day which is five trading days prior to the
Closing Date, shall be used to calculate the remaining balance of
Dollar Value of the Purchase Price.
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For purposes of this Agreement, the shares of EESI common stock delivered based
on the $9.00 value as set forth in subsection (i) above is hereafter referred to
as the "Restricted Stock" and the shares of EESI common stock delivered based on
the closing price of EESI common stock five trading days prior to Closing, as
set forth in subsection (ii) above, is referred to as the "Unrestricted Stock."
The Restricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement on the earlier of eighteen (18) months after the
Closing Date or July 12, 1998. The Unrestricted Stock shall be entitled to the
registration rights set forth in Section 5.2 of this Agreement commencing on the
Closing Date.
Section 1.5. Description of Assets. Upon the terms and subject to the
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conditions set forth in this Agreement, on the Closing Date the Company shall
grant, convey, sell, transfer and assign to EESI NY the following assets,
properties and contractual rights of the Company, wherever located, all as set
forth in this Section 1.5.
(a) All of the containers and carts ("Containers") owned or leased by
Coney Island;
(b) All of the motor vehicles and all attachments, accessories and
materials handling equipment owned or leased by Coney Island;
(c) All of the compactors and recycling equipment owned or leased by Coney
Island;
(d) All radios located in the rolling stock, the radio base station, and
all manual and automated routing and billing systems and components thereof,
including, without limitation, all computer hardware, software and programs
("Radios") owned or leased by Coney Island;
(e) All of the inventory of parts, tires and accessories owned by Coney
Island;
(f) All right, title and interest of Coney Island in and to all trade
secrets, proprietary rights, symbols, trademarks, service marks, logos and trade
names used and owned by Coney Island;
(g) All contractual rights of Coney Island with its customers (whether
oral or in writing) relating to the conduct of the Business;
(h) All accounts receivable of Coney Island arising out of the Business;
(i) All leases and agreements to which Coney Island is a party;
(j) All permits, licenses, franchises, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals") held by Coney Island relating to, used in or
required for the operation of the Business which are transferable;
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(k) The exclusive right to use the name Coney Island;
(l) All right, title, and interest of Coney Island in and to the telephone
numbers used in the conduct of the Business;
(m) All of the shop tools owned by Coney Island relating to the Business;
(n) All of the furniture and office or other equipment owned by Coney
Island;
(o) All of the interest of Coney Island in all tangible and intangible
property, including, without limitation, pre-paid expenses;
(p) All of the goodwill of the Business owned by Coney Island;
(q) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (p) above.
All of the foregoing assets, properties and contractual rights described in (a)
through (q) above are hereinafter sometimes collectively called the "Assets." At
Closing, good and marketable title to the Assets will be conveyed to Purchasers
by the Company free and clear of all liens, encumbrances, security interests and
claims, except for liens securing the Assumed Liabilities, as defined in Section
1.7.
Section 1.6. Excluded Assets. The parties agree that the only tangible
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and intangible property owned by the Company and not being sold to the
Purchasers are the cash on hand of the Company, the corporate records of the
Company other than the records set forth in Section 1.5(q) above, and the other
assets listed on Schedule 1.6 ("Excluded Assets").
Section 1.7. Assumption of Obligations. From and after the Closing the
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Purchasers agree to assume and perform all of the Company's obligations under
(i) the Company Debt and all documents evidencing the Company Debt, as
identified on Schedule 1.4, to the extent, and only to the extent, such
obligations first mature and are required to be performed subsequent to the
close of business on the Closing Date; (ii) the customer contracts of the
Company, to the extent, and only to the extent, such obligations first mature
and are required to be performed subsequent to the close of business on the
Closing Date; (iii) the accounts payable of the Company; (iv) all documents,
identified in Schedule 2.3, except for any collective bargaining agreements with
Labor Unions, to the extent, and only to the extent, obligations under such
documents first mature and are required to be performed subsequent to the close
of business on the Closing Date (union contracts are not being assumed by the
Purchasers) and (v) contracts or agreements arising in the ordinary course of
the Company's Business, only to the extent such obligations first mature and are
required to be performed subsequent to the close of business on the Closing Date
and which in the aggregate require the payment of $25,000 or less a year
("Assumed Liabilities"). Purchasers agree to defend and indemnify Sellers and
hold Sellers harmless from all losses,
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claims, causes of action, damages, liabilities, expenses and costs of any kind
or amount whatsoever (including, without limitation, reasonable attorneys' fees)
with respect to the Assumed Liabilities.
Section 1.8. Non-Assumption of Liabilities. Except as explicitly set
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forth in Section 1.7 above, Purchasers shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for, or
incur any liability or obligation of any nature of the Company, whether legal or
equitable, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, including, without limiting
the generality of the foregoing, any liability or obligation arising out of or
relating to: (a) any occurrence or circumstance (whether known or unknown) which
occurs or exists on or prior to the Closing Date and constitutes, or which by
the lapse of time or giving notice (or both) would constitute, a breach or
default under any lease, contract, or other instrument or agreement or
obligation (whether written or oral); (b) injury to or death of any person or
damage to or destruction of any property, whether based on negligence, breach of
warranty, or any other theory; (c) violation of the requirements of any
governmental authority or of the rights of any third person, including, without
limitation, any requirements relating to the reporting and payment of federal,
state, local or other income, sales, use, franchise, excise or property tax
liabilities of Sellers; (d) the generation, collection, transportation, storage
or disposal by the Company of any materials, including, without limitation,
hazardous materials; (f) any severance pay obligation of the Company,
compensation owed employees of the Company for periods prior to the Closing
Date, or any obligations under any employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended)
or any other fringe benefit program maintained or sponsored by Company or to
which any of the Company contributes or any contributions, benefits or
liabilities therefor or any liability for the withdrawal or partial withdrawal
from or termination of any such plan or program by the Company; (g) the debts
and obligations of the Company, except for the Assumed Liabilities; (h) any
violation by the Company of any law, including, without limitation, any federal,
state or local antitrust, racketeering or trade practice law; and (i)
liabilities or obligations of the Sellers for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder.
Section 1.9. Term And Time For Closing. Following execution of this
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Agreement, the Purchasers and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms on the last business day of
the month that the conditions of Closing set forth in Article VI and Article VII
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, Purchasers may seek to enforce this Agreement with an
action of specific performance, in addition to, and not in limitation of, any
other rigths and remedies available to the Purchasers, under this Agreement, or
at law or in equity, including, without limitation, an action to recover their
actual damages resulting from the default of Sellers. If the failure to conclude
this transaction is due to the refusal and failure of Purchasers to perform
their obligations to close under this Agreement, the Sellers, or either of them,
may, in addition to and not in limitation of any other rights and
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remedies available to the Sellers, or either of them, under this Agreement, or
at law or in equity, bring legal action to recover their actual damages
resulting from the default of the Purchasers.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and Xxxxxxx Xxxxx, on behalf of
the Sellers;
(b) by EESI by that date which is fourteen days after the Approval Date
(or if such date is not a business day, then the next business day) if (i) EESI
is not satisfied in its sole discretion with the due diligence it has conducted
on the Company, including without limitation its due diligence with respect to
the matters described on the Schedules hereto, which Schedules the Purchasers
have not yet reviewed or (ii) without limiting the generality of the foregoing
clause (i), if EESI in its sole discretion determines that the matters disclosed
in the Schedules or any other matters of which it otherwise becomes aware of
during the course of its due diligence, are materially adverse to the
Purchasers, the Assets, or the Business. For purposes hereof, the "Approval
Date" shall mean that date on which the Purchasers have received written
approval from the Trade Waste Commission for the Purchasers to close the
transactions contemplated by this Agreement;
(c) by EESI or Xxxxxxx Xxxxx, on behalf of the Sellers, by providing the
other with written notice thereof, if the Closing shall not have occurred by
April 30, 1997, or such other date as may be agreed to by the parties hereto in
writing, if such notifying party is ready, willing and able to consummate the
transactions contemplated by this Agreement and all of the conditions to the
other party's obligation to close as set forth in Article VI or VII, as
applicable, shall have been satisfied and the other party fails to consummate
the transactions contemplated by this Agreement for any reason whatsoever;
(d) by Xxxxxxx Xxxxx, on behalf of the Sellers, or by EESI, on or prior to
April 30, 1997, or such other date as may be agreed to by the parties in
writing, in the event Purchasers or the Sellers, 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) days from the date of written notice of the existence of
such misrepresentation or breach;
(e) by Xxxxxxx Xxxxx, on behalf of the Sellers or EESI, if the Closing
shall not have occurred by April 30, 1997, or such other date as may be agreed
to by the parties hereto in writing, due to the non-fulfillment of a condition
precedent to such party's obligation to close as set forth at Article VI or VII
hereof, as applicable (through no fault or breach by the terminating party); or
(f) by the Purchasers and Sellers as provided in Section 9.14.
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All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that Section 1.9, Section 5.1, Article VIII, Section 9.1, Section
9.2 and Section 9.15 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. In the event of termination by Xxxxxxx Xxxxx,
on behalf of the Sellers, pursuant to the above Sections (c) or (d) hereof,
Xxxxxxx Xxxxx, on behalf of the Sellers, shall be entitled to recover Sellers
costs and expenses, including reasonable attorneys fees, in connection with the
preparation, negotiation and execution of this Agreement.
Section 1.10. Deliveries by Purchasers. At the Closing, Purchasers shall
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deliver, all duly and properly executed, authorized and issued (where
applicable):
(a) The EESI Stock, as provided in Sections 1.3 and 1.4 above, to be
delivered to the Company;
(b) A certified copy of resolutions of the directors and shareholder of
EESI NY and the directors of EESI 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;
(c) A favorable opinion from counsel for Purchasers, dated the day of the
Closing in the form attached as Schedule 1.10(c);
(d) The Certificate described at Section 7.1;
(e) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(f) Other documents and instruments required by this Agreement, if any.
Section 1.11. Deliveries by Sellers. At the Closing, each of the Sellers,
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as applicable, shall deliver to Purchasers, all duly executed, the following:
(a) The Company shall deliver to EESI NY a duly executed Xxxx of Sale for
the Assets to be conveyed and assigned, in the form attached as Schedule
1.11(a);
(b) The Shareholder shall execute the Covenant Not to Compete Agreement
attached to this Agreement as Schedule 1.11(b);
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(c) The Company shall have delivered to EESI a current certificate of good
standing for the Company from the New York Secretary of State;
(d) A favorable opinion from counsel for the Company, dated the date of
the Closing, in form attached as Schedule 1.11(d);
(e) Each of the Sellers shall execute and deliver the Certificate
described at Section 6.1;
(f) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(g) The books and records of the Company to be delivered as set forth in
Section 1.5(q);
(h) Physical possession of all Assets; and
(i) Other documents and instruments required by this Agreement, if any.
Section 1.12. Transfer Tax, Allocation of Purchase Price and Bulk Sales
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(a) Purchasers shall pay all sales, transfer taxes and fees imposed on the
conveyance of the Assets by all governments, state, local and federal.
(b) The parties agree that the consideration for the sale of the Assets
shall be allocated among the Assets as set forth on Schedule 1.12(b) attached
hereto. The Sellers and the Purchasers acknowledge that the allocation has been
arrived at based upon their negotiations and shall be used by them for all
purposes, including, but not limited to, federal, state, and local tax and
financial reporting purposes, and they shall not take any position inconsistent
to the allocation. On the Closing Date, the Purchasers and the Sellers shall
execute Internal Revenue Form 8594 which form shall be binding on the Purchasers
and the Sellers and shall be filed with the income tax returns of the Purchasers
and the Sellers.
(c) The Purchasers hereby waive compliance by the Company with the
provisions of the New York Bulk Sales Law and the Sellers, jointly and
severally, covenant and agree to pay and discharge, when due, or contest in good
faith by appropriate proceedings, all claims of creditors which could be
asserted against the Purchasers or the Assets by reason of such noncompliance.
Simultaneously with the execution of this Agreement (and in any event, not less
than ten days prior to Closing), the parties shall complete New York State
Department of Taxation and Finance Form AU-196.10 (Notification of Sale,
Transfer or Assignment in Bulk) and the Purchasers shall promptly file it in the
appropriate office.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
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Whenever the phrase "to Sellers' knowledge", "to Shareholder's knowledge"
or a similar phrase is used in this Agreement, the phrase means the actual
knowledge of the Shareholder and the knowledge such Shareholder would or should
have had, if such Shareholder exercised reasonable diligence in the conduct of
the Shareholder's duties to the Company. With knowledge that Purchasers are
relying upon the representations, warranties and covenants herein contained, the
Sellers jointly and severally represent and warrant to Purchasers and make the
following covenants for the Purchasers' benefit:
Section 2.1. Organization and Standing. The Company is a corporation duly
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organized, legally existing and in good standing under the laws of the state of
its incorporation, with full power and authority to own its properties and
conduct its business as now being conducted. The Company does not own any stock
or interest in any other corporation, partnership, or other business
organization, except as set forth on Schedule 2.1.
Section 2.2. Company Stock. The Company has the authorized and kind of
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capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets forth the
number of shares of the capital stock of the Company issued and outstanding.
Except as set forth in Schedule 2.2, the stock ("Company Shares") each
Shareholder owns in the Company is legally and validly authorized and issued,
fully paid and nonassessable. There are no outstanding rights of any kind to
acquire additional shares of any class of stock from the Company.
Section 2.3. Contracts, Permits and Material Documents. The items listed
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in Schedule 2.3 attached, are all of the following with respect to the Company
("Material Documents"): (i) leases for real and personal property excepting
office equipment, (ii) licenses, (iii) franchises, (iv) promissory notes,
guarantees, bonds, mortgages, liens, pledges, and security agreements under
which the Company is bound or under which the Company is the beneficiary, except
for the obligations evidencing Company Debt which are listed on Schedule 1.4,
(v) collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of the Company's
businesses, and (viii) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 2.5) which are binding on the Company or any of its property
and pursuant to which the Company derives any material benefit or has imposed
upon it any material detriment. For purposes of this Section 2.3 a material
benefit or material detriment shall be anything which provides a benefit or
imposes a detriment having a value of $25,000 or more. The Material Documents
listed on Schedule 2.3 are organized under separate headings for each of the
different type of documents listed. Except as set forth on Schedule 2.3 or
Schedule 1.4, neither the Company nor, to the knowledge of the Sellers, any
person or party to any of the Material Documents or the Company Debt, or bound
thereby is in material or knowing default
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under any of the Material Documents or the Company Debt, and, to the knowledge
of the Sellers, no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The Company is not a party to, and no
Company property is bound by, any agreement or instrument which is material to
the continued conduct of business operations of the Company, as now being
conducted, except as listed in Schedule 2.3 or Schedule 1.4.
Section 2.4. Personal Property. All items of personal property owned or
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leased by the Company (except as set forth in Section 1.6), or used in the
business operations of the Company, will be transferred to Purchasers at
closing, in the condition set forth in subparagraphs (a) and (b) below:
(a) Attached hereto, made a part hereof and marked Schedule 2.4(a) is a
listing of all those items described in subparagraphs "i" and "ii," organized by
subparagraph.
(i) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors used in the Company's business operations
together with information as to the make, description of body and chassis, model
number, serial number and year of each such vehicle, all of which are owned or
leased by the Company, as listed on Schedule 2.4(a)(i) and, to the knowledge of
the Sellers, all of the vehicles are, in all material respects, in good
condition, normal wear and tear excepted, except as noted on Schedule 2.4(a)(i);
(ii) All containers used in the Company's business operations are in
good condition, in all material respects, normal wear and tear excepted, except
as noted on Schedule 2.4(a)(ii), and all containers used in the Company's
business operations having a size of 10 yards or greater together with
information as to container size are listed on Schedule 2.4(a)(ii);
(b) All other items of personal property owned, leased or used by the
Company, including, without limitation, all radios, compactors, recycling
equipment, furniture, office equipment and other equipment used in the Company's
business operations, the inventory of parts, tires and accessories maintained by
the Company, and the shop tools used by the Company are in good condition, in
all material respects, normal wear and tear excepted, except as noted on
Schedule 2.4(b);
Section 2.5. Customers. Each customer the Company serves (listed by
---------
account number and not by name) together with information as to the services
rendered to each such customer, frequency of service and rates charged, is
listed on Schedule 2.5 attached hereto. All customers are obligated under the
Company's standard form of contract, except for variations agreed to by the
Company which are not material in nature. The name and address of each customer
shall be provided by the Company to Purchasers at Closing. To the knowledge of
Sellers, each customer is creditworthy and no customer represents more than 3%
of the total annual xxxxxxxx of the Company. Neither the Company nor, to the
knowledge of the Sellers, any person or party to any of the customer contracts
is in material or knowing default under any of the customer contracts,
11
and, to the knowledge of the Sellers, no act or event has occurred which with
notice or lapse of time, or both, would constitute such a default.
Section 2.6. Title. The Company has good and marketable title to, or a
-----
valid leasehold interest in all of its assets both real property and personal
property, each free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement ("Liens"), except the items set forth in subparagraphs "a" through
"c", and the items listed on Schedule 2.3 or Schedule 1.4 ("Permitted
Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or materialmen
and the like; and
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation;
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment;
Section 2.7. Financial Statements. Sellers have delivered to Purchaser
--------------------
true and correct copies of the following financial statements of the Company
complied by Xxxxxxx X. Xxxxx, C.P.A., P.C., (the "Financial Statements"): a
balance sheet as of December 31, 1995, and a statement of income for the period
ended December 31, 1995, prepared on a cash basis. The Financial Statements have
been prepared by the regular accountants of the Company, 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
comprising the Financial Statements 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 a cash basis
the results of the operations of the Company for the periods indicated thereon.
Except as set forth on Schedule 2.7, since the date of the Financial Statements,
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. Except as set forth on Schedule 2.7, 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 Financial Statements, except as set forth on Schedule 2.7,
there has not been any material adverse change in the income, expenses or assets
of the Company.
Section 2.8. Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) the Company Debt;
12
(ii) liabilities fully reflected in the Financial Statement, except
for liabilities not required to be disclosed therein in accordance with GAAP, as
applied on a basis consistent with past custom and practice;
(iii) liabilities disclosed in the Schedules attached to this
Agreement or not required to be disclosed therein by reason of amount or other
qualifications contained in the representations and warranties of this
Agreement; and
(iv) liabilities arising since the date of the Financial Statement
arising during the normal course of business consistent with past custom and
practice as allowed in accordance with Section 4.4 of this Agreement.
(b) Substantially all accounts receivable of the Company as of the date
hereof are set forth by account number on Schedule 2.8(b), and all of such
accounts and all accounts arising since such date are, or will be, valid
accounts receivable. The accounts receivable less the bad accounts reserve
conveyed to Purchaser at Closing will be fully collected by Purchaser within 180
days after Closing. Schedule 2.8(b) gives the aging of each of the accounts
receivable of the Company. All accounts receivable have been generated in the
ordinary course of the Company's business consistent with past practice. To
Sellers' knowledge, there are no defenses or set-offs to any of the accounts
receivable. On the Closing Date, the accounts receivable, less the bad accounts
reserve on Schedule 2.8(b), plus the pre-paid expenses of the Company (which are
assigned to the Purchasers or which benefit the Purchasers) shall equal or
exceed the accounts payable, plus the accrued expenses of the Company plus
accrued and unpaid interest on the Company Debt.
(c) The Company's accounts payable as of the date of this Agreement are
attached hereto, made a part hereof and marked Schedule 2.8(c). Schedule 2.8(c)
gives the aging of each of the accounts payable of the Company. Schedule 2.8(c)
accurately reflects in all material respects the books and records of the
Company as of the date of Schedule 2.8(c).
(d) Except as set forth in Schedule 1.4, the Company Debt is not in
default, the Company Debt all requires the current monthly payment of accrued
interest, and there is no accrued interest owed on any of the Company Debt in
excess of the amount of accrued interest not yet payable for the current month.
Section 2.9. Fiscal Condition of The Company. Since the date of the
-------------------------------
Financial Statements, there has not (except as otherwise specifically permitted
by this Agreement or as set forth in the Schedules to this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others;
13
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any stock dividend or other distribution of its
capital stock;
(c) Any sale or other disposition of any asset owned by the Company at the
close of business on the date of the Financial Statements, 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, except in the ordinary course of business consistent with past
practices;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $100,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee, except as required by law
or pursuant to a contract which is listed on Schedule 2.9(f) and except as
otherwise set forth in Schedule 2.9(f);
(g) Any loans or advances to the Company other than (i) renewals or
extensions of existing indebtedness, or (ii) loans and advances between the
Company and its affiliates, or (iii) loans extended under existing lines of
credit of the Company which loans will not exceed $50,000; or
(h) Any change in accounting method or practice, except for increases in
earning due to acquisition expenses being capitalized instead of expensed in
current periods.
Section 2.10. 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 "S" corporation
under the Internal Revenue Service Code. The reserves for all taxes reflected in
the Financial Statements plus the reserves on Schedule 2.10 for all taxes from
the date of this agreement through the Closing Date, 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. Except for a Truck Mileage
Tax (MT 903) owed by the Company to the New York State Department of Taxation
and Finance, in an amount not to exceed $1,000.00, for the first quarter of
1997, 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 Closing Date.
Section 2.11. 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
14
are listed on Schedule 2.11 attached hereto. Schedule 2.11 includes the names
and addresses of the insurers and sureties, policy and bond numbers, types of
coverage or bond, time periods or projects covered and the names and addresses
of all known agents or agencies with respect to each listed insurance policy,
performance bond and letter of credit. The Company's current insurance policies,
performance bonds and letters of credits are in force and effect and the
premiums thereon are not delinquent. The Company has 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. Except as set forth on Schedule 2.11, the
Company has no claims against any of its insurance carriers under any of
policies insuring it pending or anticipated and there has been no occurrence of
any kind which would give rise to any such claim.
Section 2.12. Employees, Pensions and, ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee, except as listed on Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), no employee of the Company is
represented by any union. The name, address and social security number and
current rate of compensation of the Company's employees and capacity to which
each person is employed is listed on Schedule 2.12(b) attached. There is no
pending or, to the knowledge of the Sellers, threatened dispute between the
Company and any of its employees which might materially and adversely affect the
continuance of the Company's business operations. The Company is not deficient
or in arrears in contributing to any trust funds the Company are required to
contribute to in accordance with any contracts with unions, including, without
limitation, scholarship funds, legal aid funds, pension funds and health,
welfare or benefit funds ("Trust Funds"). There is no matter, action, audit,
suit or claim pending or, to the best knowledge of Sellers, threatened relating
to contributions of the Company to any Trust Fund, before any court, tribunal or
government agency.
(c) Attached hereto, made a part hereof and marked Schedule 2.12(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which are currently maintained
and/or were established or sponsored by the Company (whether or not they are now
terminated) or to which the Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Company.
(d) The Company has delivered to the Purchasers (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii) true
and complete copies of the most
15
recent financial statements with respect to the Plans, (iii) true and complete
copies of all annual reports for any Plan prepared within the past 5 years, and
(iv) all material filings submitted to and any correspondence received from any
government agency relating to any Plan within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law 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 2.13. Legality of Operation.
---------------------
16
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in material
compliance with all Federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use laws; payroll,
employment, labor, or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not limited to the
Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act ("Law"). Except as disclosed
in Schedule 2.13(a), the Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to the Company's property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
2.13(a), with respect to any Law there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting the Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which would result in an material change in
the financial condition or business of the Company or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), since January 1, 1990, no Company has received
notification of any past or present failure by the Company to comply with any
Law applicable to it or its assets. As used in this Section 2.13(a), "material"
shall mean any single event or number of events causing a loss to the Company of
$15,000 for an individual event or $50,000 for all events in the aggregate.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, the Company
is in material compliance with all Federal, state and local laws, rules and
regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.13(b), with
respect to any Environmental Law the Company is in material compliance with all
permits, licenses, and orders related thereto or issued thereunder with respect
to Environmental Laws, as are or may be applicable to the Company' property and
operations, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located. Except
as set forth on Schedule 2.13(b) there are no Environmental Law related claims,
actions, suits or proceedings pending, or, to the knowledge of the Sellers,
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which would result
in an adverse change in the financial condition or business of the Company of
$15,000 or more or which would invalidate this Agreement or any action taken in
connection with this Agreement. To the knowledge of the Sellers, except as set
forth on Schedule 2.13(b), since January 1, 1986 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 to or at
(i) any location other than a site lawfully
17
permitted to receive such waste for such purpose or, (ii) any location currently
designated for remedial action pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar federal or
state statute; nor has the Company performed, arranged for or allowed by any
method or procedure such transportation or disposal in contravention of state or
federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and the Company has not
disposed, nor has the Company knowingly allowed third parties to dispose of
waste upon property owned or leased by the Company other than as permitted by,
and in conformity with, applicable Environmental Law. Except as disclosed in
Schedule 2.13(b), since January 1, 1986, the Company has not received
notification of any past or present failure by the Company to comply with any
Environmental Law applicable to it or its operations or its assets. Without
limiting the generality of the foregoing since January 1, 1986, the Company has
not received any notification (including requests for information directed to
the Company or, to the knowledge of the Sellers, an owner thereof) from any
governmental agency asserting that the business is or may be a "potentially
responsible person" for a remedial action at a waste storage, treatment or
disposal facility, pursuant to the provisions of CERCLA, or any similar federal
or state statute assigning responsibility for the costs of investigating or
remediating releases of contaminants into the environment. Since January 1,
1986, the Company has not received hazardous waste as defined in the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et seq., or in any
-- ---
similar federal or state statute. As used in this Section 2.13(b), "material"
shall mean any single event or number of events causing a loss to the Company
of $15,000.
(c) Except as set forth on Schedule 2.13 (c), since January 1, 1986 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 Sellers, 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 Sellers' knowledge, no
employee, contractor or agent of the Company has, in the course and scope of
employment with the Company, been harmed by exposure to hazardous materials, as
defined under the Laws. No liens with respect to environmental liability have
been imposed against the Company under CERCLA, any comparable New York State
statute or other applicable Environmental Law, and to Sellers' knowledge no
facts or circumstances exist which would give rise to the same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past three years and all outstanding
unremedied notice of violations issued to the Company by any federal, state or
local regulatory agency.
(e) To the knowledge of Sellers, none of the Sellers are under
investigation by the District Attorney of any of the boroughs of New York City,
New York, for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, or unfair competition Laws.
18
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Company, or its assets or
liabilities, and a description of all such proceedings is set forth on Schedule
2.13(f) attached.
Section 2.14. Corrupt Practices. The Company has not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company 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 in any manner
which would result in the Company being in material violation of any Law, nor
has the Company otherwise taken any action which would cause it to be in
material violation of the Foreign Corrupt Practices Act of 1977, as amended. As
used in this Section 2.14, "material" shall mean any single event or number of
events causing a loss to the Company of $15,000 individually or in the
aggregate.
Section 2.15. Legal Compliance. The Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and, except as set forth in Schedule 2.15, no approvals or
consents of any other persons or entities are necessary in connection with the
transactions contemplated by this Agreement. Except as disclosed in Schedule
2.15 to this Agreement, the execution and performance of this Agreement will not
result in a material breach of or constitute a material default or result in the
loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which the Company
or any Seller is a party or by which such Company, Seller or any of their
property is bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Company or on any property of the Company.
Section 2.16. Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Seller is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
Section 2.17. Intellectual Property. To the knowledge of the Sellers, the
---------------------
Company has not infringed and is not now infringing, on any trade name,
trademark, service xxxx or copyright belonging to any person, firm or
corporation ("Intellectual Property") and to the knowledge of the Sellers no one
has or is infringing any Intellectual Property right of the Company.
Section 2.18. Competition. Except as set forth on Schedule 2.18, 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 is doing business which interest adversely or materially affects the
business of the Company.
19
Section 2.19. Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II or in any Exhibit or Schedule or other
document delivered by the Sellers or the Company pursuant hereto, do not contain
any untrue statement of a material fact, or omit any statement of a material
fact necessary to make the statements contained not misleading. If prior to
Closing the Sellers become aware of any inaccuracy, or misrepresentation or
omission in any of the Schedules, they shall immediately advise Purchasers in
writing of the inaccuracy, misrepresentation or omission.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
The Purchasers each, jointly and severally, represent and warrant to the
Sellers that:
Section 3.1. Structure. The Purchasers are corporations duly organized
---------
and legally existing in good standing under the laws of Delaware and EESI NY is
qualified to do business in New Jersey and the Purchasers are qualified in all
other jurisdiction in which they are required to be qualified.
Section 3.2. Authorization to Proceed with this Agreement. Purchasers
--------------------------------------------
have by proper corporate proceedings duly authorized the execution, delivery and
performance of this Agreement and each other agreement contemplated to be
entered into and no other corporate action is required by law or the Certificate
of Incorporation or by-laws of Purchasers.
Section 3.3. Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchasers' authority will be entitled to make any claim
against the Sellers for any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
Section 3.4. Public Reports. EESI has made all filings with Securities
--------------
and Exchange Commission that it is required to make under the Securities Act of
1933 (the "Act") and the Securities Exchange Act of 1934 (the "Exchange Act"),
as amended (collectively, the "Public Reports"). EESI has delivered to Sellers
all such Public Reports filed by EESI through March 31, 1997. The Public Reports
accurately and completely describe, in all material respects, EESI's financial
status, business operations and prospects as of the date of such filings, and do
not contain any untrue statement of a material fact or omit any material fact(s)
necessary to make the information contained in the filings not misleading.
Section 3.5. Authorized Stock. The total authorized capital stock of EESI
----------------
consists of 50,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of Class A Common Stock, par value $.01 per share, none of
which is outstanding. As of February 21, 1997, the outstanding shares of capital
stock of EESI consisted solely of 13,244,807 shares of Common Stock, par value
$.01. EESI NY has 1,000 shares of no-par-value common stock authorized and 100
shares issued, all of which are owned by EESI. All of such issued and
20
outstanding shares of Purchasers have been duly authorized and validly issued,
are fully-paid and non-assessable and were issued in compliance with all federal
and state securities laws. Until Closing, EESI agrees it shall not redeem in
excess of five hundred thousand (500,000) of its shares of common stock.
Section 3.6. EESI Stock. All of the shares of EESI stock to be issued to
----------
the Company as contemplated by this Agreement and the Collateral Documents will,
upon delivery, be duly authorized and validly issued, fully paid and non-
assessable and issued in compliance with federal and state securities laws, free
and clear of all liens, charges, restrictions, mortgages, security interests or
claims of any kind.
Section 3.7. Authorization. The Purchasers have the power and authority
-------------
to enter into this Agreement and each of the Collateral Documents and to carry
out the transactions contemplated hereby and thereby and this Agreement and each
of the Collateral Documents to which the Purchasers are parties, as applicable,
constitutes the legal, valid and binding obligation of the Purchasers,
enforceable in accordance with its terms. The Purchasers have the power and
authority to own and lease their respective properties and to carry on their
respective businesses as now conducted.
Section 3.8. Contravention; Consents and Approvals. No filing, action,
-------------------------------------
consent or approval of any person, entity or governmental body is required by
the Purchasers for the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for the New York
Trade Waste Commission. The execution and delivery of this Agreement by the
Purchasers and the consummation of the transactions contemplated hereby by the
Purchasers will not result in a breach of the terms or conditions of, or
constitute a default under, or violate, (a) any provision of any law, regulation
or ordinance, (b) any agreement, lease, mortgage or other instrument or
undertaking, oral or written, to which any of the Purchasers are a party or by
which any of their properties or assets is or may be bound or affected, or (c)
any judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body.
Section 3.9. Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchasers in this Agreement do not contain any untrue
statement of a material fact, or omit any statement of a material fact necessary
to make the statements contained therein not misleading.
Section 3.10. Xxxx-Xxxxx-Xxxxxx Filing. Purchasers, jointly and severally,
------------------------
represent and warrant that they shall make a Xxxx-Xxxxx-Xxxxxx anti-trust
notification filing, if such a filing is required by applicable law, at
Purchasers' expense.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
21
Section 4.1. Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------
Stock delivered to Company at Closing is not registered under the Securities Act
of 1933 ("Act"), the Company understands and agrees that the following
restrictions and limitations are applicable to the Company's purchase and resale
or other transfer of the EESI Stock, pursuant to the Act.
(a) Company agrees that the EESI Stock shall not be sold or otherwise
transferred, unless the EESI Stock is registered under the Act and state
securities laws or is exempt therefrom.
(b) Until the EESI Stock is registered under the Act, a legend in
substantially the following form will be placed on the certificates evidencing
the EESI Stock to be issued to the Company:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Eastern Environmental Services, Inc. shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Eastern
Environmental Services, Inc. that registration is not required under any
such acts."
(c) Stop transfer instructions will be imposed with respect to the EESI
Stock issued to Company pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 4.2. Plan of Reorganization. This Agreement contemplates the
----------------------
exchange of substantially all of the assets of the Company solely in exchange
for the voting stock of EESI in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to take
no action inconsistent with the treatment of such exchange as a reorganization
under Code (S)368(a)(1)(C) and to comply with all IRS filing and other
requirements for such exchange.
Section 4.3. Access to Records. The Shareholder will cause the Company to
-----------------
give and the Company shall give Purchasers and their representatives, from the
date hereof until six years after 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 pertaining to the Business, and
to make available to Purchasers and their representatives all additional
financial statements of and all information with respect to the business and
affairs of the Company that Purchasers may reasonably request.
Section 4.4. Continuation of Business. The Company will operate until the
------------------------
time of Closing, in the ordinary course of business, consistent with past
practice, so as to preserve its business organization intact, to assure, to the
extent possible, the availability to Purchasers of the
22
present key employees of the Company, and to preserve for Purchasers the
relationships of the Company with suppliers, customers, and others, except if it
is determined in the judgment of the Company to be in the best interest of the
Company.
(a) Purchasers acknowledge that increases in Company Debt due to the
financing of single assets having a purchase price of no more than $150,000 are
in the ordinary course of Company's business. Prior to Closing, the Company may
decrease the Company Debt due to pre-payments outside of regularly scheduled
payments in an amount not exceeding $200,000 in the aggregate. Any reduction of
the Company Debt in excess of $200,000 shall not occur without the written
approval of EESI. EESI will not withhold its consent to a reduction of Company
Debt in excess of $200,000, if such reduction will not reduce the net income of
the Company.
(b) Purchasers acknowledge that management bonuses may be paid or accrued
prior to Closing; provided that any accrued and not paid management bonuses
shall be treated as an accounts payable for purposes of determining whether the
warranty and representation set forth in the last sentence of Section 2.8(b) was
true.
Section 4.5. Continuation of Insurances. The Shareholder will cause the
--------------------------
Company to and the Company shall keep in existence all policies of insurance
insuring the Company against liability and property damage, fire and other
casualty through the time of Closing, consistent with the policies currently in
effect.
Section 4.6. Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the
Shareholder and the Company will not directly or indirectly solicit offers for
the Company or the Assets or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company's assets; nor
will the Shareholder permit the Company to do any of the foregoing.
Section 4.7 Audited Financial Statements.
----------------------------
(a) Sellers agree to cause the Company to prepare and the
Company shall prepare an audited balance sheet for the Company as of December
31, 1996 and a statement of income, cash flow and retained earnings for the
Company for the twelve month period ended December 31, 1996 ("Historical
Financial Statements") as rapidly as possible, but no later than 30 days after
the Closing Date (the "Post Closing Date"). Sellers shall also cause the
Company to prepare an unaudited balance sheet of the Company as of the end of
the calendar quarter completed immediately prior to the Closing Date and an
unaudited statement of income, cash flow and retained earnings for the period
ending with the completion of the calendar quarter ended prior to the
Closing Date ("Interim Financial Statements"). The Interim Financial Statements
are to be delivered by the Company on or before the Post Closing Date. Company
may select the
23
accounting firm used to prepare such statements as required above, but said firm
must be reasonably acceptable to EESI. Purchasers shall pay the fee of the
accounting firm hired to prepare the statements required by this Section 4.7,
whether or not Closing occurs. If the Purchasers fail to pay the invoice of the
accounting firm hired to prepare the statements referred to in this Section 4.7,
then the Sellers may, on behalf of the Purchasers, pay such fees in which case
the Purchasers shall, promptly upon receiving from Sellers evidence of such
payment by Sellers to the accounting firm, reimburse the Sellers for such amount
together with interest computed at an annual interest rate equal to the higher
of 25% per annum or the maximum rate permitted by applicable law on any amounts
so advanced by Sellers from the date of such advancement to the date of
reimbursement by Purchasers.
(b) The Sellers acknowledge that the delivery of the Historical
Financial Statements to EESI on or prior to the Post Closing Date is of
paramount importance to EESI and its shareholders and that time is of the
essence because EESI will need the Historical Financial Statements in order to
file a Form 8-K as required by the Securities and Exchange Commission in a
timely manner. If the Sellers fail to deliver the Historical Financial
Statements to EESI on or prior to the Post Closing Date then EESI is hereby
irrevocably instructed to cancel all the outstanding shares of EESI Stock which
the Sellers received at Closing or any other shares of EESI Stock issued or to
be issued after the Closing in connection therewith, without any liability to
the Sellers, provided, however, that EESI or the Purchasers and the Sellers
-------- -------
promptly execute an Assignment and Assumption Agreement whereby the Purchasers
shall reassign all of the assets to be assigned to the Purchasers hereunder to
the Sellers and the Sellers shall reassume the liabilities to be assumed by the
Purchasers hereunder. After such cancellation by EESI and the execution of the
Assignment and Assumption Agreement referred to in the preceding sentence, this
Agreement shall be deemed terminated and neither party hereto shall have any
obligation to any other party.
ARTICLE V.
ADDITIONAL AGREEMENTS OF PURCHASERS
-----------------------------------
Section 5.1. Payment of Expenses. EESI will pay all expenses incurred by
-------------------
Purchasers in connection with the negotiation, execution and performance of this
Agreement. EESI will also pay the accounting fees for the audits to be
delivered by the Company as set forth in Section 4.7 and any accounting fees
incurred in connection with the preparation of audited financial statements for
the twelve month period ended December 31, 1994 and 1995, respectively. The
Company, before the Closing Date, will pay all reasonable legal and accounting
expenses incurred by the Shareholder and the Company (except for the accounting
fees set forth in Section 4.7 and the accounting fees EESI has agreed to pay in
the prior sentence) in connection with the negotiation, execution and
performance of this Agreement and the Collateral Documents.
Section 5.2. Registration Rights.
-------------------
24
(a) This Section 5.2 shall apply to the EESI Stock, delivered under this
Agreement, as follows: (i) the Restricted Stock, as defined in Section 1.4,
shall be entitled to the registration rights set forth in this Section 5.2 on
the earlier of eighteen (18) months after the Closing Date or July 12, 1998; and
(ii) the Unrestricted Stock, as defined in Section 1.4, shall be entitled to the
registration rights set forth in this Section 5.2 commencing on the Closing
Date. For purposes of this Agreement the term "Unregistered Stock" shall mean
the EESI common stock consisting of the Restricted Stock and the Unrestricted
Stock as of the time that such stock is entitled to the registration rights set
forth in this Section 5.2. As soon as practical following the date that any
Unregistered Stock first becomes Unregistered Stock, as defined in this Section
5.2, but in any event within one hundred twenty (120) days after the date that
the Unregistered Stock first became Unregistered Stock, EESI shall file a
registration statement to register the Unregistered Stock under the Act for sale
to the public pursuant to a "shelf registration" on Form S-3 or other
appropriate form, if Form S-3 is not available under Rule 415 of the Act to
qualify such securities under the Act or if required any state "blue sky" laws.
Purchasers agree to include the Unregistered Stock in any registration statement
on Form S-3 that registers the 2,500,000 shares of common stock issued by EESI
in a private placement on July 12, 1996. EESI will give written notice to the
Sellers of the "shelf registration" at least 15 days before the registration
statement is filed. After receiving the notice of the "shelf" registration,
each Seller will advise EESI in writing of the intended method of disposition of
the Unregistered Stock to be registered, as required for EESI to prepare the
registration statement. Sellers recognize that the occurrence of certain
corporate developments, including significant acquisitions, may result in the
failure of the registration statement in which the Unregistered Stock is
registered to contain all information required in accordance with applicable law
until an amendment or supplement is filed and made available to the holders of
all such Unregistered Stock. Sellers recognize that in such event, sales under
the registration statement will be suspended until EESI files the amendments or
supplements required by the next sentence. EESI agrees, as promptly as
reasonably practicable, to prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period required pursuant to the terms of this Agreement and comply with the
provisions of the Act with respect to the disposition of all Unregistered Stock
covered by such registration statement during such period in accordance with the
intended methods of disposition by the holders thereof set forth in such
registration statement. EESI shall keep such registration statement current and
effective, until such time as all of the Unregistered Stock may be sold by the
Sellers at any time without restriction or pursuant to the provisions of Rule
144 without volume restrictions or until such earlier date as all of the shares
registered pursuant to such registration statement shall have been sold or
otherwise transferred to a third party.
(b) With respect to the registration of the Unregistered Stock, EESI will,
as expeditiously as possible: (i) furnish to the Sellers such number of
prospectuses, including copies of preliminary prospectuses, prepared in
conformity with the requirements of the Act, and such other documents, as the
Sellers may reasonably request in order to facilitate the public sale or other
disposition of the securities to be sold by the Sellers; and (ii) before filing
the registration
25
statement, prospectus or amendments or supplements thereto, furnish to counsel
for Sellers copies of all such documents proposed to be filed.
(c) Upon any registration under the Act of any of the Unregistered Stock,
EESI shall indemnify Sellers in accordance with the provisions of Article VIII
from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing) or necessary in order to make the statements therein not misleading or
(iii) any violation or alleged violation by EESI to which such Sellers may
become subject under the Act, or other Federal or state laws or regulations, at
common law or otherwise. Notwithstanding the above, EESI shall not be liable to
Sellers if and to the extent that any Security Liability arises out of or is
based upon any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to EESI by Sellers
which is stated in writing to be specifically intended for such use; and
provided further, that EESI shall not be required to indemnify Sellers against
any Security Liability which arises out of the failure of Sellers to deliver a
final prospectus made available to Sellers by EESI.
(d) All expenses incurred in effecting the registrations provided for in
this Section 5.2 shall be paid by EESI, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for EESI, fees and disbursement of counsel for Sellers (up to $2,500 per
year), underwriting expenses (other than commissions or discounts which shall be
shared by the parties registering shares of EESI's common stock in proportion to
the number of shares registered in each particular offering), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or "blue sky" laws of any jurisdictions.
(e) Sellers agree that, with respect to the first underwritten public
offering for the sale of EESI Stock pursuant to an effective registration
statement which occurs after the Closing Date, they will enter into a "lock-up"
agreement which would prohibit them from selling any Restricted Stock or
Unrestricted Stock for a period of 90 days commencing on the date such
registration statement becomes effective, if such a "lock-up" agreement is
requested by the underwriter of such public offering.
Section 5.3. Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchasers shall allow the Sellers and their agents access
to all business records and files of the Company pertaining to the operation of
the Company prior to the Closing Date which were
26
delivered to the Purchasers in accordance with Section 1.5(q) of this Agreement
("Records") where the Shareholder or Company require access to the Records for
the purpose of preparing their tax returns, responding to any audit or
informational request regarding their tax returns or if required by them for use
in a judicial proceeding in which they are a party. Access to the records shall
be during normal working hours at the location where such Records are stored.
The Sellers shall have the right, at their own expense, to make copies of any
Records provided, however, that any such access or copying shall be had or done
in such a manner so as not to interfere unreasonably with the normal conduct of
the Purchasers' business. For a period of six years after the Closing Date, the
Purchasers shall not dispose of or destroy any material Records without first
providing written notice to the Shareholder at least 30 days prior to the
proposed date of such disposition or destruction.
ARTICLE VI.
CONDITIONS OF PURCHASERS
------------------------
The obligations of Purchasers to effect the transaction contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing.
Section 6.1. Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers prior to or at the Closing Date.
All representations and warranties of Sellers contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement and the Purchasers shall have received a
Certificate duly executed by each of the Sellers as to the foregoing.
Section 6.2. 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 Purchasers to own, operate or control the Assets
which, in the judgment of the Boards of Directors of Purchasers, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 6.3. 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 to any of the Assets, whether or not covered by insurance, since
the date of the Financial Statements; there shall not have been any cancellation
or modification of any Material Documents except for such cancellation or
modification set forth in Schedule 6.3 to this Agreement or for such
cancellation or modification of any Material Documents which, singly or in the
aggregate, is not reasonably likely to have a material adverse effect on the
operations, financial condition or business of the Company its Business or
Assets (it being understood that all cancellations and modifications of Material
27
Documents which affect revenue shall be computed in the purchase price
adjustment provided for in Section 1.4(a)(iv)); there shall be a sufficient
number of rolling stock, vehicles and other equipment in good working condition
to provide service to the customers of the Company on the Closing Date and to
otherwise conduct the business of the Company in its customary and usual manner.
Section 6.4. Opinion of Counsel. The Sellers shall have delivered to
------------------
the Purchasers the opinion of counsel, dated the Closing Date, in the form
annexed hereto as Schedule 1.11(d).
Section 6.5. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Purchasers shall have
been furnished with appropriate evidence, reasonably satisfactory to Purchasers
and their counsel, of the granting of such approvals, authorizations and
consents, including, without limitation, EESI NY being granted a trade waste
license by the New York City Trade Waste Commission.
ARTICLE
CONDITIONS OF SELLERS
---------------------
The obligations of the Sellers to transfer the Assets in accordance with
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 7.1. Compliance by Purchasers. The Purchasers shall have
------------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by them at or prior to or at the
Closing Date. All representations and warranties of Purchasers contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement and the Sellers shall have
received a Certificate duly executed by an officer of the Purchasers as to the
foregoing.
Section 7.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control any of the
Assets and which, in the judgment of the Sellers, made in good faith and based
upon advice of their counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.3. Guarantees. The Sellers shall be released from any
----------
liability they have under guarantees they have made with respect to the
Company's debts or obligations, as set forth on Schedule 7.3 ("Guarantees"). If,
after a good faith attempt, Purchasers cannot obtain the release of the
Shareholder from the Guarantees, this condition shall be waived and Purchasers
will
28
indemnify Sellers under the provisions of Section 8.2 from any and all
liability, expense and claims made against Sellers with respect to the
Guarantees.
Section 7.4. Payment. The Purchasers shall have delivered to the
-------
Company, as applicable, the EESI Stock in accordance with Sections 1.3 and 1.4.
Section 7.5. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Sellers shall have
been furnished with appropriate evidence, reasonably satisfactory to them and
their counsel, of the granting of such approvals, authorizations and consents.
Section 7.6. Opinion of Counsel. The Purchasers shall have delivered
------------------
to the Company the opinion of counsel to the Purchasers, dated the Closing Date,
in the form annexed hereto as Schedule 1.10(c).
Section 7.7. Material Adverse Change. There shall not have been, and
-----------------------
on the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be expected to result in, any material adverse
change in the condition (financial or otherwise), assets, real property,
personal property, results of operations, business or prospects of EESI and its
subsidiaries taken as a whole and, in any event, and without limiting the
generality of the foregoing, the closing price of EESI's stock on the Closing
Date shall not be less than $5.00 per share.
ARTICLE
INDEMNIFICATION
---------------
Section 8.1. Indemnification by Sellers. The Sellers each agree that
--------------------------
they will each, jointly and severally, indemnify, defend, protect and hold
harmless the Purchasers and their officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, successors
and assigns from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, from (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Sellers
made in this Agreement or in the Collateral Documents and to be performed by
Sellers before or after the Closing Date; (c) the imposition upon, claim
against, or payment by the Purchasers of any liability or obligation of the
Company other than the Assumed Liabilities (d) any claim by a third party that,
if true, would mean that a condition for indemnification set forth in
29
subsections (a), (b) or (c) of this Section 8.1 of this Agreement has occurred.
The indemnification in this Section 8.1 is subject to the limitations set forth
in Section 8.5 and 8.6.
Section 8.2. Indemnification by Purchasers. The Purchasers each agree
-----------------------------
that they will each, jointly and severally, indemnify, defend, protect and hold
harmless each Seller, and each of their respective officers, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, heirs, legal
representatives, successors and assigns, as applicable, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) whether
equitable or legal, matured or contingent, known or unknown to the Purchasers,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, whether
arising out of occurrences prior to, at, or after the date of this Agreement,
incurred by them, or either of them, as a result of or incident to: (a) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties of Purchasers set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment of
any agreement, covenant or condition on the part of Purchasers made in this
Agreement or in the Collateral Documents and to be performed by Purchasers
before or after the Closing Date; (c) any Security Liability; (d) any of the
Guarantees; (e) the imposition upon, claim against, or payment by the Sellers of
any of the Assumed Liabilities; and (f) any claim by a third party that, if
true, would mean that a condition for indemnification set forth in subsections
(a), (b), (c), (d) or (e) of this Section 8.2 has occurred. The indemnification
in this Section 8.2 is subject to the limitations set forth in Sections 8.5 and
8.6.
Section 8.3. 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 VIII, 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 (it being agreed that Xxxxxx, Xxxxxx & Xxxxxx is
satisfactory) so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within fifteen 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 VIII, 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
30
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 8.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If the conditions set forth in Section 8.3(b) above are or become
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
VIII.
Section 8.4. Procedure for Non-Third Party Claims. If Purchasers or
------------------------------------
Sellers wish to make a claim for indemnity under Section 8.1 or Section 8.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 8.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 8.1 or
Section 8.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 8.1 or Section
8.2, 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
31
objections ("Indemnification Objection"). If no Indemnification Objection is
sent within forty-five (45) 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 sixty (60) 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 8.5. Survival of Claims.
------------------
(a) All of the respective representations and warranties of the Sellers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Sellers pertaining to anti-
trust Laws, unfair competition Laws and racketeering Laws set forth in Section
2.13 shall survive for thirty months after the Closing Date, (ii) the
representations and warranties of Sellers made in the first two sentences of
Section 2.13(b) as to matters of which they had no knowledge shall survive for
eighteen months after the Closing Date, and all other representations and
warranties pertaining to Environmental Laws set forth in Section 2.13,
including, without, limitation the representations and warranties of the Sellers
made in the first two sentences of Section 2.13(b) as to matters of which
Sellers had knowledge shall survive for thirty months after the Closing Date,
(iii) all representations and warranties of Sellers pertaining to federal, state
and local taxes, including, without limitation, the representations and
warranties set forth in Section 2.10 shall survive until the expiration of the
applicable statute of limitations on any claim which can be brought against the
Sellers by tax authorities or governmental agencies or governmental units and
(iv) all representations and warranties other than set forth in (i), (ii) and
(iii) above shall survive until eighteen months from the Closing Date.
(b) All of the respective representations and warranties of Purchasers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Purchasers set forth in
Section 3.4 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought with respect to the sale of a
security and (ii) all representations and warranties other than set forth in (i)
above shall survive until eighteen months from the Closing Date.
(c) Notwithstanding the provisions of Section 8.5(a) and 8.5(b) above,
which provides that representations, warranties and obligations expire after
certain stated periods of time, if within the stated period of time, an
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.
32
Section 8.6. Limitation of Liability. Notwithstanding anything else to
-----------------------
the contrary contained herein, neither the Purchasers nor any other party
entitled to indemnification pursuant to Section 8.1 hereof, shall be entitled to
assert any claim for indemnification contained in Section 8.1 unless and until
such time as claims of indemnification thereunder, exceed ("Basket") (i) Fifteen
Thousand Dollars ($15,000), in the aggregate, for claims made regarding the
falsity of the representations and warranties of Sellers made in the first two
sentences of Section 2.13(b), where Sellers had no knowledge of the falsity of
the representation or warranty, (ii) Fifteen Thousand Dollars ($15,000) in the
aggregate for claims made regarding the falsity of the representations and
warranties of Sellers made in Section 2.14, where Sellers had no knowledge of
the falsity of the representation or warranty, (iii) Fifteen Thousand Dollars
($15,000), in the aggregate, for claims made against Purchasers due to
Environmental Law violations of the Company asserted against Purchasers where
Sellers had no knowledge of the Environmental Law violation and where the
violation occurred prior to the Closing Date, (iv) One Hundred Dollars ($100.00)
in the aggregate, for claims made regarding the falsity of any representation or
warranty of Sellers made under Section 2.8(b), and (v) Ten Thousand Dollars
($10,000) in the aggregate, for all other claims, including, without limitation,
claims made under the first two sentences of Section 2.13(b) and Section 2.14
where Sellers had knowledge of the falsity of the representation or warranty and
for Environmental Law violations of the Company asserted against Purchasers
where Sellers had knowledge of the violation. Purchasers shall only be entitled
to assert claims for indemnification that exceed the applicable Basket; it being
understood and agreed that the applicable Basket amount shall be excluded from
the indemnification contained in Section 8.1 and shall be borne 100% by the
Purchasers and the parties entitled to be indemnified thereunder so that the
Sellers, as applicable, shall have no liability with respect thereto. In
addition, notwithstanding anything else contained herein to the contrary, the
obligations of the Sellers pursuant to the indemnification contained in Section
8.1 shall be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Company, as valued under Section 1.3 at closing,
as adjusted under Section 1.4.
Section 8.7. Insurance Proceeds. In determining the amount of loss for
------------------
which Purchasers, or any party entitled to be indemnified pursuant to Section
8.1 of this Agreement is entitled, the loss shall be reduced by any proceeds
(under insurance policies maintained by Purchasers ) which are paid to any of
the Purchasers with respect to the loss for which indemnification is sought. If
Sellers pay Purchasers a payment which satisfies Sellers obligations under this
Article VIII, in full, with regard to a loss for which Purchasers were entitled
to indemnification in accordance with Section 8.1 and after such payment by
Sellers, any of the Purchasers receives insurance proceeds (under insurance
policies maintained by any of the Purchasers) in payment of the same loss,
Purchasers will reimburse the Sellers for the amount the Sellers have paid up
to, but not exceeding, the insurance proceeds received. Notwithstanding the
prior two sentences, a loss or losses incurred by Purchasers shall not be
reduced and Sellers shall not be reimbursed by or with the amount of insurance
proceeds paid to Purchasers equaling, in the aggregate, the applicable Basket
for which Purchasers were not indemnified. The initial amounts of insurance
proceeds received by Purchasers up to the amount of the applicable Basket with
respect to any loss or losses for which indemnification under Section 8.1
applies, shall
33
compensate Purchasers for not being able to initiate an indemnification claim
until an aggregate loss equal to the applicable Basket is suffered by the
Purchasers as set forth in Section 8.6. Purchasers shall use their reasonable
efforts to assert the claim giving rise to any loss for which they are entitled
to be indemnified under Section 8.1, with the issuer of the applicable insurance
policy.
ARTICLE IX.
OTHER PROVISIONS
----------------
Section 9.1. Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Company such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company. Sellers agree that for a period of five (5) years from
the Closing Date and as to any Records received by them under Section 5.3 of
this Agreement, five (5) years from their receipt of the Records, they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of the Sellers, unless (i) such information becomes
known to the public generally through no fault of Sellers, (ii) the Sellers are
compelled to disclose such information by a governmental entity or pursuant to a
court proceeding, or (iii) the Closing does not take place. In the event of a
breach or threatened breach by Sellers of the provisions of this Section,
Purchasers shall be entitled to an injunction restraining Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchasers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2. Nondisclosure by Purchasers. Purchasers recognize and
---------------------------
acknowledge that they have in the past, currently have, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchasers, jointly and
severally, agree that none of them will utilize such information in the business
or operation of Purchasers, or any of their 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 Purchasers or any of their
affiliates (ii) Purchasers are 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 Purchasers of the
provisions of this Section, the Sellers shall be entitled to an injunction
restraining Purchasers from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
Section 9.3. 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
34
merger of Purchasers) and shall be binding upon and shall inure to the benefit
of the parties hereto, the successors of Purchasers, and the Sellers. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
Section 9.4. 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 9.5. 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 9.6. 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 Purchasers, addressed to them at:
President
0000 Xxxxxxxx Xxxxx
Xx. Xxxxxx, XX 00000
with a copy to:
Xxxxxx X. Xxxxxx & Assoc., P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxx, XX 00000
(b) If to Sellers, addressed to
Xxxxxxx Xxxxx
Xxx Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
with a copy to:
35
Xxxxxx, Xxxxxx & Xxxxxx
XXX Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxx, Esq.
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 9.6.
Section 9.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 9.8. 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 9.9. 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 9.10. 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 9.11. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
36
Section 9.12. Extension or Waiver of Performance. Either Xxxxxxx Xxxxx on
-----------------------------------
behalf of the Sellers, or Purchasers 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 Xxxxxxx
Xxxxx on behalf of the Sellers and the Purchasers.
Section 9.13. Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 9.14. Disclosure on Schedules. The parties acknowledge that
-----------------------
notwithstanding the provisions of the Agreement stating all Schedules and
Exhibits to this Agreement are attached to the Agreement, none of the Schedules
have been attached and certain of the Exhibits have not been attached. Sellers
will deliver to Purchasers all Schedules to be attached to this Agreement as
soon as reasonably possible but no later than seven (7) days from the date of
this Agreement. Purchasers will have fourteen (14) days from the Approval Date
(as defined in Section 1.9(b)), to review the Schedules and terminate the
Agreement by sending written notice to Company, if Purchasers are not satisfied
with any material matter revealed by any Schedule. The parties hereto shall use
their best efforts to agree upon and attach to this Agreement all Exhibits not
attached to this Agreement on the date of this Agreement's execution. If the
parties can not agree upon any Exhibits not attached to this Agreement, within
seven (7) days after the date of this Agreement, any of the parties may
terminate this Agreement by sending written notice of termination to the other
parties. Once the Schedules are produced and the Exhibits agreed upon the
parties hereto shall execute a signature page which states that attached to the
signature page are the Schedules and Exhibits to this Agreement. For purposes of
this Agreement, a disclosure by any party hereto of any fact on any Schedule
shall be deemed a disclosure on every Schedule of any party hereto to the extent
such disclosure properly could have been made thereon but was not made. The
parties to this Agreement shall have the obligation to supplement or amend the
Schedules being delivered concurrently with the execution of this Agreement and
annexed hereto with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or described in the Schedules. The obligations of the parties to
amend or supplement the Schedules shall terminate on the Closing Date.
Notwithstanding any such amendment or supplementation, the condition to Closing
set forth in Section 6.1 shall not be satisfied, if the amendment or
supplementation of any Schedule by Sellers results in any of Sellers'
representations and warranties changing in a manner which the Purchaser in good
faith believes is materially adverse to the Purchasers, the Assets or the
Business.
Section 9.15. Arbitration.
-----------
37
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the commercial
rules (the "Rules") of the American Arbitration Association then obtaining, in
New York, New York and judgment upon the award rendered in such arbitration
shall be final and binding upon the parties and may be confirmed in any court
having jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
arbitrate shall not bar any party from seeking temporary or provisional remedies
in any Court having jurisdiction if such party can establish irreparable harm.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement, which such demand shall set forth in the same degree of
particularity as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration. Additionally, the demand
for arbitration shall be stated with reasonable particularity with respect to
such demand with documents attached as appropriate. In no event shall the demand
for arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchasers and the Sellers in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). The
Purchasers and the Sellers, respectively, waive the right and agree they shall
not seek to disqualify any such counsel in any such Proceedings for any reason,
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
38
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
COMPANY
CONEY ISLAND RUBBISH REMOVAL, INC.
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: Xxxxxxx Xxxxx
Title: President
SHAREHOLDER
/s/ Xxxxxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
XXXXXX X. XXXXXX & ASSOCIATES, P.C.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Xxxxxx X. Xxxxxx
39
EXHIBIT 10.3
------------
Amendment No. 1 dated as of May 12, 1997, to Agreement and Plan of
Reorganization made as of April 7, 1997 by and among Coney Island Rubbish
Removal Inc., Xxxxxxx Xxxxx, Eastern Environmental Services, Inc., and Eastern
Waste of New York Inc. (the "Agreement"). All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
RECITALS
--------
The parties have entered into the Agreement which provides that the Closing
thereunder shall occur on or prior to April 30, 1997. The parties hereto wish
to extend the termination date and to make certain other modifications to the
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, received to the
full satisfaction of each of them, the parties hereto agree to amend the
Agreement as follows:
ARTICLE I. AMENDMENTS.
1.1 Section 1.3(b) of the Agreement is hereby deleted in its entirety.
1.2 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(a) of the Agreement is hereby amended by deleting the
phrase "One Million Seven Hundred and Ten Thousand Dollars ($1,710,000)
therefrom and substituting the phrase One Million Two Hundred Thirty-Two
Thousand Five Hundred Dollars ($1,232,500)" therefor.
(b) Section 1.4(a)(iii) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted thereof.
(c) Section 1.4(a)(iv) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted therefor.
(d) Section 1.4(b)(i) is hereby amended by deleting the phrase "One
Million Six Hundred Seventy Thousand ($1,670,000) Dollars" therefrom and
substituting the new phrase "One Million One Hundred Eighty-Two Thousand Two
Hundred Thirty-Six 83/100 ($1,182,236.83) Dollars" therefor.
1.3 Section 1.5 of the Agreement is hereby amended as follows:
(a) Section 1.5(h) of the Agreement is hereby amended and
restated in its entirety to read as follows: "all accounts receivable
(including, without limitation, all receivables billed for which
services were not rendered as of May 1, 1997) of Coney Island arising
out of the Business on and after May 1, 1997".
(b) Section 1.5(o) of the Agreement is hereby amended and
restated in its entirety to read as follows: "(o) All of the interest
of Coney Island in all tangible and intangible property, including
without limitation, prepaid expenses and all cash generated by the
Company on or after May 1, 1997;".
1.4 Section 1.6 is hereby amended and restated in its entirety to
read as follows:
Section 1.6 Excluded Assets. "The parties agree that the only
---------------
tangible and intangible property owned by the Company and not being
sold to Purchasers are accounts receivable created prior to May 1,
1997, the cash on hand of the Company generated prior to May 1, 1997,
the corporate records of the Company other than the records set forth
in Section 1.5(q) above, and the other assets listed on Schedule 1.6
("Excluded Assets")."
1.5 Section 1.7 of the Agreement is hereby amended as follows:
(a) Clause (iii) of Section 1.7 is hereby amended and restated
in its entirety to read as follows: "the accounts payable of the
Company on and after May 1, 1997 which were incurred in the ordinary
course of business as historically operated;"
(b) The following new clause (vii) is hereby added to Section
1.7: "and (vii) accrued expenses, accrued interest and accrued unpaid
vacation accrued on or after May 1, 1997 which were incurred in the
ordinary course of business as historically operated"
1.6 Section 1.8 of the Agreement is hereby amended by adding the
following new clause (j) thereto: "and (j) expenses, accounts payable, interest
and unpaid salary and/or vacation accrued after May 1, 1997 and before the
effective date of the management agreement to be entered into between the
Company and EESI NY."
1.7 Section 1.9 of the Agreement is hereby amended as follows:
"(a) Subsection 1.9(b) is hereby deleted therefrom
2
and the phrase "Intentionally Omitted" is substituted therefor.
(b) Subsections 1.9(c), (d) and (e) of the Agreement are hereby
amended by deleting the phrase, "April 30, 1997" therefrom and
substituting the phrase therefor: "July 31, 1997 which date may be
extended indefinitely by the Purchasers, if the Sellers shall be paid
by Purchaser on or before July 31, 1997 the amount of EESI Stock to be
delivered to the Sellers under this Agreement calculated as if the
Closing under this Agreement had occurred (the "Payment"). If the
Payment is made, then on the Closing Date the Sellers shall not
receive any further payment of EESI Stock and the only payment
obligations of Purchasers under this Agreement with respect to the
purchase price shall be to pay the Company Debt on the Closing Date to
the holders of such Company Debt as provided in this Agreement. "
(c) The following new subsection (g) is added thereto: "(g) by
Xxxxxxx Xxxxx, on behalf of the Sellers or EESI, if the transactions
contemplated by the Leone Agreement (as defined in Section 6.6) do not
close for any reason whatsoever."
1.8 Section 2.8 is hereby amended by deleting subsections (b) and (c)
therefrom and substituting in each case the phrase "Intentionally Omitted".
1.9 Article II is hereby amended by adding the following new Section
2.20 thereto:
"2.20 Notices and Customer Register. Sellers have sent the
-----------------------------
"Notice of Reduction and Carting Rates" to all its customers as
required by the Trade Waste Commission. Sellers have prepared a
computerized customer register which conforms to the Trade Waste
Commission requirements."
1.10 Article IV is hereby as amended as follows:
(a) Section 4.1 is hereby amended by adding the following new
subsections (d) and (e) thereto:
"(d) Sellers agree that prior to July 12, 1998, they shall not
sell, trade, or otherwise dispose of Restricted Stock in an open
market or brokered sales transaction, whether or not they would
otherwise be able to legally enter into such a transaction, provided
however, that Sellers may enter into a private placement transaction
with respect to the Restricted Stock at any time."
3
"(e) Sellers agree that, with respect to an underwritten public
offering for the sale of EESI Stock pursuant to an effective
registration statement which occurs after the earlier of the Closing
Date, or delivery of EESI Stock pursuant to Section 1.9(c), (d), or
(e), they will enter into a "lock-up" agreement which would prohibit
them from selling any Restricted Stock for a period of 90 days
commencing on the date such registration statement becomes effective,
if such a "lock-up" agreement is requested by the underwriter of such
public offering."
(b) Article IV is hereby further amended by adding the following
new subsections 4.8 and 4.9 thereto:
"4.8 Trade Waste Regulations. Sellers shall deliver to the
-----------------------
Trade Waste Commission by May 8, 1997, if the Closing has not
occurred prior to such date, a letter certifying that it has sent
to customers the notice referred to in Section 2.20."
"4.9 Cash. Sellers shall not distribute any cash of the
----
Company resulting from receivables generated on or after May 1,
1997 by the Company on or after May 1, 1997 for any purpose
whatsoever without the prior written consent of the Purchaser."
1.11 Article V is hereby as follows:
(a) (i) The following new sentence is hereby added to Section
5.2(a): "Notwithstanding anything in this Agreement to the contrary,
EESI shall not be obligated to file a registration statement with
respect to the Restricted Stock if at such time it would be obligated
to file a registration statement hereunder if the Sellers are able to
sell the Restricted Stock without volume limitations under Rule 144."
(ii) Section 5.2(e) of the Agreement is hereby deleted in
its entirety.
(b) Article V is amended by adding the following new Sections
5.4, 5.5 and 5.6 thereto:
(a) "5.4 Union Contracts. After the Closing Date Purchaser
---------------
shall enter into a union contract which is substantially similar to
the union contracts listed on Schedule 2.3."
(b) "5.5 Accounts Receivable. Purchaser shall for a period of
-------------------
ninety (90) days after the Closing Date (the
4
"Collection Period") collect on behalf of Sellers any accounts
receivable generated by the Business prior to May 1, 1997, it being
understood that the Purchaser shall have no liability with any such
account receivable which is not collected. Any payments in respect of
such accounts receivables which the Purchaser collects during the
Collection Period and which are not identified or reconciled to a
specific account receivable generated by the Business after May 1,
1997 shall be remitted to Xxxxxxx Xxxxx, as agent for the Sellers, on
a weekly basis for the first month and thereafter on a bi-monthly
basis together with a payment application statement generated in the
ordinary course of business. After the expiration of the Collection
Period, Sellers shall collect the accounts receivable generated by the
Business prior to May 1, 1997 and Purchaser shall have no further
obligation to collect such account receivables."
"(c) 5.6 Closing Adjustments.
-------------------
(a) If the management agreement between the Company and EESI NY
(the "Management Agreement") is entered into on or prior to May 15,
1997, the Sellers and Purchasers will account to each other with
respect to the expenses of the Business generated in the ordinary
course on a historical basis which accrued and the revenues of the
Business which were generated on and after May 1, 1997 through the
Closing Date. To the extent Sellers paid any expenses related to the
Business on or after May 1, 1997 from funds which were not generated
by the Business through the rendering of services on or after May 1,
1997 (such expenses being "Sellers' Expense"), Purchasers shall pay in
cash to Sellers at Closing a dollar amount equal to the Sellers'
Expense. If the Closing occurs after May 15, 1997, the accounting
referred to in this Section 5.6(a) shall not be applicable.
(b) If the Management Agreement is executed after May 15,
1997, then all references in this Agreement to the allocation of
accounts receivable, accounts payable, accrued interest, unpaid
vacation and accrued expenses to the Sellers for the period prior to
May 1, 1997 and to the Purchasers from and after May 1, 1997 shall be
deemed to be of no force and effect and the Sellers and Purchasers
hereby agree that the new date for allocating all accounts receivable,
accounts payable accrued interest, unpaid vacation and accrued
expenses to the Sellers and Purchasers shall be the date on which the
Company and EESI NY enter into the management agreement to be dated
the date of the closing under the Leone Agreement (the "Management
Date"), it being understood that if the Closing under the Leone
Agreement occurs
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after May 15, 1997, the Sellers shall be responsible for all accounts
payable, accrued interest, accrued unpaid vacation and salary, and
accrued unpaid expenses prior to the Management Date and shall be
entitled to receive collections from all accounts receivable generated
by the Business prior to the Management Date, in addition to all cash
on hand in the Company on the Management Date. If the Closing under
the Leone Agreement occurs after May 15, 1997, the Purchasers and
Sellers shall re-execute the Assignment and Assumption Agreement,
Bills of Sale, and such other documents as are necessary to give
effect to the allocation described in the preceding two sentences."
"(c) If the closing under the Leone Agreement occurs on or prior
to May 15, 1997, then the amount of EESI Stock to be delivered to the
Sellers pursuant to Section 1.4(b)(i) shall be calculated based upon
the Company Debt set forth in Schedule 1.4 as of May 1, 1997 and the
amount of EESI Stock to be delivered to the Sellers pursuant to
Section 1.4(b)(ii) shall be calculated based upon a per share value of
$13.50. If the Management Agreement is executed after May 15, 1997,
then the amount of EESI Stock to be delivered to the Sellers pursuant
to Section 1.4(b)(i) shall be calculated based upon the Company Debt
set forth in Schedule 1.4 as of the Closing Date and the amount of
EESI Stock to be delivered to the Sellers pursuant to Section
1.4(b)(ii) shall be calculated based upon a per share value based upon
the closing price for EESI's Common Stock on the NASDAQ National
Market for the trading day which is five trading days prior to the
Closing Date. If the Purchasers exercise their option to extend this
Agreement indefinitely by delivering EESI Stock to Sellers, then all
references to the "Closing Date" in this subsection (c) and in Section
1.4(b) shall mean the date of the delivery of the EESI stock to the
Sellers by the Purchasers, whether or not a Closing under this
Agreement has occurred."
1.12 Article VI of the Agreement is hereby amended by adding the
following new Section 6.6 thereto:
"Section 6.6. Other Transactions. Closing shall have taken place
------------------
under the Reorganization Agreement ("Leone Agreement") dated October 23, 1996 by
and between Purchasers, Eastern Container Corporation, Eastern Waste of L.I.,
Inc., Curbside Leasing, Inc., WSI Holdings, Inc., Waste Services, Inc., N.Y.
Waste, Inc., L.I. Waste Services, Inc., and KC Waste Services, Inc., and certain
named individuals, as amended."
1.13 The third sentence of Section 9.14 of the Agreement
6
is hereby amended and restated in its entirety to read as follows:
(a) "Purchasers will have fourteen (14) days from that date on
which the Purchasers have received written approval from the Trade
Waste Commission for the Purchasers to close the transactions
contemplated by this Agreement (the "Approval Date") to review any new
or revised Schedule delivered to Purchasers on or prior to the
Approval Date and terminate the Agreement by sending written notice to
the Company if Purchasers are not satisfied with any material matter
revealed by any such new or revised Schedule."
1.14 The following new Schedules 1.4, 1.6, 1.12(b), 2.7, 2.13(c) and
2.13(f) attached hereto are hereby substituted for Schedules 1.4, 1.6, 1.12(b),
2.7, 2.13(c) and 2.13(f) to the Agreement.
1.15 Notwithstanding anything in the Agreement to the contrary, all
references in the Agreement to the phrase "Escrow Stock", "Escrow Agent",
"Accounts Receivable Payment" and "Receivable Payment Statement" are hereby
deleted.
ARTICLE II. MISCELLANEOUS.
2.1 All references in the Agreement to "this Agreement" or like terms
shall mean and be a reference to the Agreement as amended by this Amendment and
all references to "the Agreement" or a like term in any agreement executed in
connection with the Agreement shall mean and be a reference to the Agreement as
amended by this Amendment.
2.2 Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect.
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2.3 This Amendment hereby incorporates, includes and is subject to
Article IX of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
COMPANY
CONEY ISLAND RUBBISH REMOVAL, INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
Title: President
SHAREHOLDER
/s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
XXXXXX X. XXXXXX & ASSOCIATES, P.C.
By: /s/ Xxxxxx Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
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