Exhibit 10.1
AGREEMENT AND PLAN OF REORGANIZATION OF
ALLEGRO ENTERPRISES, INC.
REGIONAL RECYCLING, INC.
XXX BIN CONTAINERS, INC.
MADISON ENTERPRISES, INC.
XXXXX AND XXXXXX XXXXXX PARTNERSHIP
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
TABLE OF CONTENTS
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AGREEMENT AND PLAN OF REORGANIZATION.................................................................... 1
RECITALS................................................................................................ 1
ARTICLE I REORGANIZATION; CLOSING...................................................................... 2
Section 1.1 Incorporation of Recitals............................................................. 2
Section 1.2 Place for Closing..................................................................... 2
Section 1.3 Agreement to Exchange Stock for Stock and Assets; Consideration....................... 2
Section 1.4 Calculation of EESI Stock............................................................. 4
Section 1.5 Description of Seller Stock and Assets................................................ 5
Section 1.6 Excluded Assets....................................................................... 6
Section 1.7 Assumption of Obligations............................................................. 6
Section 1.8 [Intentionally Omitted]............................................................... 7
Section 1.9 Term And Time For Closing............................................................. 7
Section 1.10 Deliveries by Purchaser............................................................... 8
Section 1.11 Deliveries by Sellers................................................................. 8
Section 1.12 Transfer Tax, Allocation of Purchase Price and Bulk Sales............................. 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS................................................ 9
Section 2.1 Organization and Standing............................................................. 10
Section 2.2 Company Stock......................................................................... 10
Section 2.3 Contracts, Permits and Material Documents............................................. 10
Section 2.4 Personal and Real Property............................................................ 11
Section 2.5 Customers............................................................................. 12
Section 2.6 Title................................................................................. 12
Section 2.7 Financial Statements.................................................................. 13
Section 2.8 Liabilities; Accounts Receivable and Working Capital.................................. 13
Section 2.9 Fiscal Condition...................................................................... 14
Section 2.10 Tax Returns........................................................................... 15
Section 2.11 Policies of Insurance................................................................. 15
Section 2.12 Employees, Pensions and, ERISA........................................................ 15
Section 2.13 Legality of Operation................................................................. 17
Section 2.14 Corrupt Practices..................................................................... 19
Section 2.15 Legal Compliance...................................................................... 19
Section 2.16 Transaction Intermediaries............................................................ 20
Section 2.17 Intellectual Property................................................................. 20
Section 2.18 Competition........................................................................... 20
Section 2.19 Shareholder Loans..................................................................... 20
Section 2.20 Conduct of Business................................................................... 20
Section 2.21 Disclosure............................................................................ 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER................................................. 21
Section 3.1 Structure............................................................................. 21
Section 3.2 Authorization to Proceed with this Agreement.......................................... 21
Section 3.3 Absence of Intermediaries............................................................. 21
Section 3.4 Public Reports........................................................................ 21
Section 3.5 EESI Stock............................................................................ 21
Section 3.6 Authorization......................................................................... 21
Section 3.7 Contravention; Consents and Approvals................................................. 21
ARTICLE IV ADDITIONAL AGREEMENTS OF SELLERS............................................................ 22
Section 4.1 Investment Representations and Covenants of Shareholders.............................. 22
Section 4.2 Plan of Reorganization................................................................ 23
Section 4.3 Access to Records..................................................................... 23
Section 4.4 Continuation of Business.............................................................. 23
Section 4.5 Continuation of Insurance............................................................. 24
Section 4.6 Standstill Agreement.................................................................. 24
Section 4.7 Audited Financial Statements.......................................................... 24
Section 4.8 Pooling of Interests.................................................................. 25
Section 4.9 Shareholder Debt...................................................................... 25
ARTICLE V ADDITIONAL AGREEMENTS OF PURCHASER.......................................................... 26
Section 5.1 Registration Rights................................................................... 26
Section 5.2 Books and Records..................................................................... 26
Section 5.3 Replacement of Indebtedness........................................................... 27
Section 5.4 Permitted Actions..................................................................... 27
ARTICLE VI CONDITIONS OF PURCHASER..................................................................... 27
Section 6.1 Compliance by Sellers................................................................. 28
Section 6.2 Litigation Affecting This Transaction................................................. 28
Section 6.3 Fiscal Condition of Business.......................................................... 28
Section 6.4 Opinion of Counsel.................................................................... 28
Section 6.5 Consents.............................................................................. 28
Section 6.6 Financial Statements.................................................................. 28
Section 6.7 Pooling of Interests Advice........................................................... 28
Section 6.8 Title to Real Property; Survey........................................................ 28
Section 6.9 HSR................................................................................... 29
Section 6.10 Company Debt.......................................................................... 29
Section 6.11 Due Diligence......................................................................... 29
ARTICLE VII CONDITIONS OF SELLERS....................................................................... 29
Section 7.1 Compliance by Purchaser............................................................... 29
Section 7.2 Litigation Affecting This Transaction................................................. 29
Section 7.3 Payment............................................................................... 29
Section 7.4 Consents.............................................................................. 29
Section 7.5 Opinion of Counsel.................................................................... 30
ARTICLE VIII INDEMNIFICATION............................................................................ 30
Section 8.1 Indemnification by Sellers............................................................ 30
Section 8.2 Indemnification by Purchaser.......................................................... 30
Section 8.3 Procedure for Indemnification with Respect to Third Party Claims...................... 31
Section 8.4 Procedure for Non-Third Party Claims.................................................. 32
Section 8.5 Survival of Claims.................................................................... 32
Section 8.6 Limitation............................................................................ 32
ARTICLE IX OTHER PROVISIONS........................................................................... 33
Section 9.1 Nondisclosure by Sellers.............................................................. 33
Section 9.2 Nondisclosure by Purchaser............................................................ 33
Section 9.3 Assignment; Binding Effect; Amendment................................................. 33
Section 9.4 Entire Agreement...................................................................... 34
Section 9.5 Counterparts.......................................................................... 34
Section 9.6 Notices............................................................................... 34
Section 9.7 Governing Law......................................................................... 35
Section 9.8 No Waiver............................................................................. 35
Section 9.9 Captions.............................................................................. 35
Section 9.10 Severability.......................................................................... 35
Section 9.11 Construction.......................................................................... 35
Section 9.12 Extension or Waiver of Performance.................................................... 35
Section 9.13 Liabilities of Third Parties.......................................................... 35
Section 9.14 Disclosure on Schedules............................................................... 36
Section 9.15 Arbitration........................................................................... 36
Section 9.16 Costs and Expenses.................................................................... 37
Section 9.17 Certain Pricing Determination......................................................... 37
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AGREEMENT AND PLAN OF REORGANIZATION
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This Agreement and Plan of Reorganization ("Agreement") is made as of May 18,
1998, by and among the individuals and entities set forth on the signature page
under the heading "Shareholders"("Shareholders"), Regional Recycling, Inc.
("Regional"), Allegro Enterprises, Inc. ("Allegro"), Xxx Bin Containers, Inc.
("Xxx Bin"), Madison Enterprises, Inc. ("Madison"), Xxxxxx and Xxxxx Xxxxxx
Partnership (the "Partnership"), and Eastern Environmental Services, Inc.
("EESI"). For purposes of this Agreement, EESI is referred to as "Purchaser";
Regional, Xxx Bin, and Allegro are collectively referred to as the "Companies"
and individually as a "Company;" and the Companies, Madison and the Partnership,
and the Shareholders are collectively referred to as the "Sellers."
RECITALS
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Each of the individual Shareholders is the owner of the outstanding capital
stock of each of the Companies, as set forth on Exhibit "A" attached; together
the Shareholders own all of the outstanding capital stock of the Companies; and
the Shareholders together own all of the interests in the Partnership.
Regional, Xxx Bin, Madison, and Allegro are New Jersey corporations. The
Companies are in the business of collecting, transporting, recycling and
disposing of commercial, medical, industrial, and municipal solid waste in the
State of New Jersey and operating and (together with Madisons) owning a transfer
station (the "Transfer Station") located at 000 Xxxxxxxxxxxx Xxxxxx, Xxxxxx, Xxx
Xxxxxx, which is licensed by the State of New Jersey to accept 600 tons of
municipal solid waste per day (collectively, the "New Jersey Business").
Madison owns all of the real property on which the Transfer Station is located
(the "Transfer Station Property") and certain of the personal property and
equipment comprising the Transfer Station. The Partnership owns an 80% interest
in a parcel of real property 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxx Xxxxxx, which
is used as the office of the Companies and the maintenance garage and parking
facility for vehicles and equipment owned by the Companies (the "Hoboken
Property"). The remaining interest in the Hoboken Property is held by Madison.
Except for these interests in real property and the assets set forth on Schedule
2.4(d), neither Madison nor the Partnership holds any assets, and neither
engages in any operations or business.
The parties hereto desire that substantially all of the assets of the
Companies and the interests of Madison and the Partnership in the real property
used in the New Jersey Business be acquired, directly or indirectly, by EESI in
exchange solely for the voting stock of EESI on the terms contained herein. The
parties intend that the acquisitions of Xxx Bin, Allegro, Madison and Regional
contemplated hereby qualify as reorganizations within the meaning of Sections
368(a)(1)(C) and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended,
and that, as a result of the transactions contemplated hereby, the Purchaser
shall acquire all assets and properties used in the New Jersey Business.
Simultaneously with the execution and delivery of this Agreement, the
Shareholders and the Purchaser have entered into a second Agreement and Plan of
Reorganization (the "New York Agreement") relating to the acquisition by the
Purchaser from Xxx Bin, Allegro, Allegro Carting and Recycling, inc., Allegro
Transportation, Inc., the Partnership, and Xxxxxx Xxxxxx and Sons, Inc.,
entities wholly controlled by the Shareholders, of substantially all of their
assets (other than assets to be conveyed to Purchaser hereunder) in exchange
solely for the voting stock of EESI on the terms contained therein. The parties
intend that the transactions contemplated by this Agreement and the New York
Agreement shall be closed simultaneously and that such acquisitions be treated
(together or separately) as a pooling of interests for accounting purposes.
However, the parties recognize that simultaneous closings may not be possible.
Therefore, the closing under this Agreement and the New York Agreement are not
contingent upon each other, and the parties have agreed that they will not treat
the transactions as poolings of interests if a closing under the New York
Agreement does not occur within one year of the date of this Agreement.
ARTICLE I
REORGANIZATION; CLOSING
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Section 1.1 Incorporation of Recitals. The recitals set forth above
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are 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 Xxxxxxxx, Xxxxxx &
Golieb, P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 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 Stock and Assets;
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Consideration.
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(a) At the Closing, (i) the Shareholders shall transfer and deliver to
the Purchaser or to one or more wholly-owned subsidiaries of Purchaser
designated by it all of the capital stock of Regional (the "Seller Stock"), (ii)
the Partnership and Madison shall transfer and deliver to the Purchaser, or to
one or more wholly-owned subsidiaries of the Purchaser designated by it, all of
their respective interests in and to the Hoboken Property, the Transfer Station
Property, and the assets comprising the Transfer Station, and (iii) Xxx Bin and
Allegro shall transfer and deliver to the Purchaser, or to one or more wholly-
owned subsidiaries of the Purchaser designated by it, the assets owned by them
and used in the New Jersey Business, and Purchaser shall issue and deliver, in
exchange for the Seller Stock and the assets, as consideration therefor, (i)
shares of EESI's common stock ("EESI Stock"), calculated as set forth in Section
1.4 below, and (ii) assume or pay the Company Debt (as defined in Section 2.8
and as may be refinanced under Section 5.3) and assume the liabilities of Xxx
Bin, Madison, the Partnership, and Allegro relating to the New Jersey Business
(the "New Jersey Liabilities") conducted by them as at the Closing
(collectively, the "Assumed Liabilities"). The EESI Stock shall be allocated and
paid to the Sellers as set forth on Exhibit "A" attached hereto and as set forth
in
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Section 1.3(c). Not less than ten (10) days prior to the Closing, the Sellers
shall deliver to Purchaser for Purchaser's review and comment a balance sheet of
Regional as of the last day of the month most recently ended and a statement of
the New Jersey Liabilities as of the same date. For purposes of this Agreement,
the balance sheet revised to incorporate Purchaser's reasonable comments shall
be referred to as the "Closing Balance Sheet" and the statement of New Jersey
liabilities revised to incorporate Purchaser's reasonable comments shall be
referred to as the "Closing Statement." The dollar value of the EESI Stock to be
delivered at Closing shall be the value that is equal to (x) $21,504,000 minus,
in all cases without duplication the following four items: (i) the liabilities
reflected on the Closing Balance Sheet, (ii) the amount of the Company Debt
refinanced or assumed by Purchaser pursuant to Section 5.3 (and not used to
reduce the purchase price under the New York Agreement), (iii) the liabilities
reflected on the Closing Statement, and (iv) the amount by which cash included
in the Assets and cash held by Regional immediately after the Closing in the
aggregate is less than $750,000. The Closing Balance Sheet and the Closing
Statement will not reflect or include any inter-company liability which will be
paid to Purchaser, Regional, or otherwise to or for Purchaser's benefit by
reason of Purchaser's purchase of a Receivable that is included in the Assets or
is owned by Regional.
(b) (i) Within one hundred fifty (150) days after the Closing Date,
Purchaser shall prepare and deliver to Sellers the balance sheet for Regional as
of the close of business on the Closing Date (the "Closing Date Balance Sheet")
and a final statement as of the close of business on the Closing Date of the New
Jersey Liabilities (the "Closing Date Statement"). The Closing Date Balance
Sheet shall set forth the assets and liabilities of Regional and the Closing
Date Statement shall set forth the Liabilities of Allegro, Xxx Bin, Madison, and
the Partnership deriving from the New Jersey Business conducted by them. The
Closing Date Balance Sheet and the Closing Date Statement will not reflect or
include (x) any inter-company liability which is set forth on Schedule 1.3(b) or
(y) any Receivable that is not collected by Purchaser within one hundred fifty
(150) days after the Closing Date. Seller shall have the right to review all of
Purchaser's work papers and all relevant records relating to the Closing Date
Balance Sheet and the Closing Date Statement.
(ii) The Closing Date Balance Sheet and Closing Date Statement
delivered to Sellers shall be deemed to be and shall be final, binding and
conclusive on the parties hereto, unless Sellers dispute the Closing Date
Balance Sheet and/or the Closing Date Statement in accordance with this Section
1.3(b)(ii). Sellers may dispute any amounts reflected on the Closing Date
Balance Sheet or the Closing Date Statement (any such disputed amounts, the
"Disputed Matters") by giving written notice to Purchaser of each Disputed
Matter within forty-five (45) days of receipt of the Closing Date Balance Sheet
or the Closing Date Statement. Any Disputed Matters shall be subject to good
faith negotiations between the parties for up to fifteen (15) days prior to
being referred to the Independent Accounting Firm (as defined below). Any
Disputed Matters not resolved by such good faith negotiations shall be decided
by an independent accounting firm acceptable to both Sellers and Purchaser (the
"Independent Accounting Firm"). The costs and expenses of the Independent
Accounting Firm shall be shared equally by Sellers and Purchaser. The
Independent Accounting Firm so chosen shall consider only the Disputed Matters
and Purchaser and Sellers shall use reasonable efforts to cause the Independent
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Accounting Firm to render a final decision on the Disputed Matters by delivering
a written report to Purchaser and Sellers no later than thirty (30) days after
having received the assignment with respect thereto. The decision of the
Independent Accounting Firm with respect to all Disputed Matters shall be based
solely on whether the Closing Date Balance Sheet or the Closing Date Statement
was prepared in accordance with the requirements of this Agreement, shall be
final and binding upon the parties hereto and shall not be subject to challenge
in any court.
(iii) On the basis of the Closing Date Balance Sheet and the
Closing Date Statement the dollar value of the EESI stock shall be (A) decreased
or increased, as applicable, by the amount that is equal to the excess or
deficit, as applicable, of the sum of the liabilities reflected on the Closing
Date Balance Sheet and the Closing Date Statement over the liabilities reflected
on the Closing Balance Sheet and the Closing Statement and (B) decreased by the
amount by which the Receivables (as defined in Section 2.8) reflected on the
Closing Date Balance Sheet are less than $2,215,000, and (C) increased by the
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amount by which Receivables reflected on the Closing Date Balance Sheet exceed
$2,597,000; (D) if cash reflected on the Closing Date Balance Sheet is less than
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cash reflected on the Closing Balance Sheet then, the dollar value of the EESI
Shares issuable shall be decreased by the amount of the difference between the
amount of cash reflected on the Closing Date Balance Sheet and the lower of
$750,000 and the cash on the Closing Balance Sheet (however, no decrease will be
made if the cash on the Closing Date Balance Sheet is $750,000 or more); and (E)
if cash reflected on the Closing Date Balance Sheet is greater than cash
reflected on the Closing Balance Sheet, the dollar value of the EESI Shares
issuable shall be increased by the amount that is equal to the positive
difference, if any, between cash reflected on the Closing Date Balance Sheet and
the cash reflected on the Closing Balance Sheet (however, no increase will be
made for any cash on the Closing Date Balance Sheet in excess of $750,000).
(c) Ninety (90) percent (%) of the EESI Stock shall be delivered to the
Shareholders at Closing as set forth on Exhibit A hereto and ten (10) percent
(%) of the EESI Stock shall be delivered to Xxxxxx X. Xxxxxx & Associates P.C.
in escrow ("Escrow Agent") under the provisions of this Section 1.3(c) ("Escrow
Stock") to be held against possible reduction in the purchase price pursuant to
Section 1.3(b) and to secure the Sellers' indemnity obligations under Article
VIII. Based on the final determination of the Closing Date Balance Sheet, the
Escrow Agent shall deliver to the Sellers, the Escrow Stock minus, if
applicable, the number of shares of Escrow Stock having a dollar value equal to
the amount of any decrease in the purchase price pursuant to Section 1.3(b). If
the adjustments required by Section 1.3(b) result in an increase in the number
of shares of EESI stock issuable, the Company shall promptly issue and deliver
to the Sellers the additional shares, which shall be valued as provided above.
The EESI Shares delivered pursuant to this Section 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 allocated and
paid to the Sellers, as set forth on Exhibit A. The Escrow Agent shall deliver
to Purchaser for cancellation any Escrow Stock not required to be so delivered.
To the extent the Escrow Stock is not sufficient to satisfy any reduction in the
purchase price pursuant to this
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Section, the Shareholders shall transfer to the Purchaser EESI shares with a
value (as determined herein) equal to such deficiency.
Section 1.4 Calculation of EESI Stock. The number of shares of EESI
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Stock to be delivered at Closing shall be calculated by dividing the dollar
value of the EESI Stock by the per share 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. For purposes of this Agreement, one-half of the EESI
Stock is hereafter referred to as the "Restricted Stock" and the remaining half
is referred to as the "Unrestricted Stock." The Unrestricted Stock shall be
entitled to registration rights set forth in Section 5.1 of this Agreement. Any
Escrow Stock delivered or cancelled and any additional EESI Stock issued
pursuant to Section 1.3(b) shall be equally divided between Restricted and
Unrestricted Stock.
Section 1.5 Description of Seller Stock and Assets. Upon the terms
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and subject to the conditions set forth in this Agreement, on the Closing Date
the Shareholders, Madison, the Partnership and the Companies shall grant,
convey, sell, transfer and assign to Purchaser, (a) the Seller Stock, (b) all
assets and properties owned or leased by Allegro, Xxx Bin, Madison, and the
Partnership and used in the New Jersey Business. In consequence, Purchaser shall
acquire, directly or indirectly, all of the assets and properties associated
with or used in the New Jersey Business, including the following:
(a) All of the capital stock of Regional.
(b) All containers and carts ("Containers");
(c) All bailers, extruders, scales and other equipment and personal
property associated with the Transfer Station as set forth on Schedule 1.5(c);
(d) All motor vehicles and all attachments, accessories and materials
handling equipment, as set forth on Schedule 1.5(d) attached.
(e) All compactors and recycling equipment.
(f) 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").
(g) All inventory of parts, tires and accessories.
(h) All right, title and interest in and to all trade secrets,
proprietary rights, symbols, trademarks, service marks, logos and trade names
used and owned.
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(i) All contractual rights (whether oral or in writing), including,
without limitation, all rights under the Companies' agreement with Stero Cycle,
Inc. (relating to the sale of the Companies' medical waste business.)
(j) All accounts receivable.
(k) All leases and agreements.
(l) All permits, licenses, franchises, consents and other approvals
from governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals"), used in or required for the operation of the
Business which are transferable.
(m) The exclusive right to use all names associated with the New Jersey
Business.
(n) All right, title, and interest in and to the telephone numbers used
in the conduct of the Business.
(o) All shop tools relating to the New Jersey Business.
(p) All furniture and office or other equipment.
(q) All interest in all tangible and intangible property, including,
without limitation, pre-paid expenses.
(r) All goodwill of the New Jersey Business.
(s) All real property (other than real property comprising Excluded
Assets) owned or leased by any Company and all interests in and to the Hoboken
Property and the Transfer Station Property (collectively, the "Real Property").
(t) All cash, cash equivalents, securities, prepaid expenses, deposits,
accounts receivable and financial instruments of the Companies.
(u) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (t) above.
All of the foregoing assets, properties and contractual rights described in (b)
through (u) above are hereinafter sometimes collectively called the "Assets."
At Closing, good and marketable title to the Assets and the Seller Stock will be
conveyed to Purchaser by the Companies free and clear of all liens,
encumbrances, security interests and claims, except in the case of the Assets
for liens securing the Assumed Liabilities.
Section 1.6 Excluded Assets. The parties agree that the only tangible
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and intangible property owned by the Companies, Madison and the Partnership and
not being acquired by the
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Purchaser is (a) the corporate records of the Companies other than the records
set forth in Section 1.5(u) above, (b) certain assets that are personal to the
Shareholders and not used in the business of the Companies, and (c) the assets
of Xxx Bin and Allegro, required to be conveyed to Purchaser under the New York
Agreement that are not used in the New Jersey Business ("Excluded Assets"). The
Excluded Assets (other than those referred in clause "c") are listed on Schedule
1.6.
Section 1.7 Assumption of Obligations. From and after the Closing,
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the Purchaser agrees to assume and perform all of the obligations reflected on
the Closing Date Balance Sheet and the Closing Date Statement and (i) under the
customer contracts of Xxx Bin and Allegro set forth on Schedule 2.3; and (ii)
under all documents identified in Schedule 2.3 to which Xxx Bin or Allegro is a
party; and (iii) under contracts or agreements of Xxx Bin or Allegro arising in
the ordinary course and which in the aggregate require the payment of $35,000 or
less a year, and (iv) subject to Section 5.3, the Company Debt.
Section 1.8 [Intentionally Omitted].
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Section 1.9 Term And Time For Closing. Following execution of this
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Agreement, the Purchaser 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, Purchaser may seek to enforce this Agreement with an
action of specific performance, in addition to, and not in limitation of, any
other rights and remedies available to the Purchaser, under this Agreement, or
at law or in equity, including, without limitation, an action to recover their
actual damages resulting from the default of the Sellers. If the failure to
conclude this transaction is due to the refusal and failure of Purchaser to
perform its obligations to close under this Agreement, the Sellers, or any of
them, may, in addition to and not in limitation of any other rights and remedies
available to the Sellers, or any of them, under this Agreement, or at law or in
equity, bring legal action to recover their actual damages resulting from the
default of the Purchaser.
This Agreement and the transactions contemplated hereby may be
terminated at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and the Sellers;
(b) by EESI by July 15, 1998, if EESI is not satisfied with the due
diligence it has conducted on the Sellers;
(c) by EESI or the Sellers, by providing the other with written notice
thereof, if the Closing shall not have occurred by December 31, 1998, 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
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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 the Sellers, or by EESI, on or prior to December 31, 1998 or
such other date as may be agreed to by the parties in writing, in the event
Purchaser 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; or
(e) by the Purchaser and Sellers as provided in Section 9.14.
(f) by the Sellers on September 2, 1998 if the transactions
contemplated herein have not closed by September 1, 1998 and the Purchaser has
not notified the Sellers that the per share price of the EESI Stock will be
fixed at the closing price of such stock on September 2, 1998.
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, Article VIII, Section 9.1, Section 9.2, Section
9.4, Section 9.7, Section 9.15 and Section 9.16 shall survive and continue in
full force and effect, notwithstanding termination. The termination of this
Agreement shall not limit, waive or prejudice the remedies available to the
parties, at law or in equity, for a breach of this Agreement.
Section 1.10 Deliveries by Purchaser. At the Closing, Purchaser
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shall 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 Companies;
(b) A certified copy of resolutions of the directors and, if required,
shareholders of Purchaser authorizing the execution and delivery of this
Agreement and each other agreement to be executed in connection herewith,
including, but not limited to the Employment Agreements (collectively, the
"Collateral Documents") and the consummation of the transactions contemplated
herein and therein;
(c) An opinion from counsel for Purchaser, dated the day of the Closing
in the form attached as Schedule 1.10(c);
(d) The Certificate described in Section 7.1;
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(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
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Sellers, as applicable, shall deliver to Purchaser, all duly executed, the
following:
(a) All of the shares of capital stock of Regional duly endorsed to
Purchaser, with signatures guaranteed if requested by Purchaser;
(b) Executed Bills of Sale for the Assets to be conveyed and assigned
to Purchaser by Xxx Bin, in the form attached as Schedule 1.11(b);
(c) Each of the Shareholders, Xxx Bin, Madison, Allegro, and the
Partnership shall execute the Covenant Not to Compete Agreement attached to this
Agreement as Schedule 1.11(c);
(d) The Companies shall have delivered to EESI a current certificate of
good standing for each of the Companies from the New Jersey or New York
Secretary of State, as applicable;
(e) An opinion from counsel for the Companies, dated the date of the
Closing, in form attached as Schedule 1.11(c);
(f) Each of the Sellers shall execute and deliver the Certificate
described at Section 6.1;
(g) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(h) The books and records of each of the Companies to be delivered as
set forth in Section 1.5(u);
(i) Physical possession of all Assets;
(j) A special warranty deed in the form attached as Schedule 10.11(i)
in proper recordable form for each parcel of Real Property (including, without
limitation, the Hoboken Property and the Transfer Station Property);
(k) Releases pursuant to which the Shareholders and each entity
controlled by or under common control with them releases Regional and the
Purchaser from any obligation to any of them other than under this Agreement and
the Collateral Documents; and
(l) Other documents and instruments required by this Agreement, if any.
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Section 1.12 Transfer Tax, Allocation of Purchase Price and Bulk Sales
---------------------------------------------------------
(a) Purchaser shall pay all sales, transfer taxes and fees imposed on
the conveyance of the Assets by all governments, state, local and federal.
(b) The Purchaser and Regional hereby waives compliance by the
Companies with the provisions of the New Jersey State 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 Purchaser, the Seller Stock or the
Assets by reason of such noncompliance, other than Assumed Liabilities.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Whenever the phrase "to Sellers' knowledge", "to Shareholders'
knowledge" or a similar phrase is used in this Agreement, the phrase means the
actual knowledge of any of the Shareholders and (with respect to Shareholders
who are officers or employees of the Companies) the knowledge such Shareholders
would or should have had, if such Shareholders who are employees or officers of
the Companies exercised reasonable diligence in the conduct of such
Shareholders' duties to the Companies. With knowledge that Purchaser is relying
upon the representations, warranties and covenants herein contained, all of the
Sellers jointly and severally represent and warrant to Purchaser and make the
following covenants for the Purchasers' benefit:
Section 2.1 Organization and Standing. Except as set forth on
-------------------------
Schedule 2.1, each of the Companies and Madison is a corporation duly organized,
legally existing and in good standing under the laws of the state of its
incorporation, with full power and authority to own its properties and conduct
its business as now being conducted. Each of the Companies, Madison and the
Partnership is duly qualified to do business as a foreign corporation or
partnership and is in good standing under the laws of each jurisdiction in which
the ownership or leasing of assets or properties or the nature of its activities
requires such qualification. The Companies, Madison and the Partnership do not
own or have any right or obligation to acquire any stock or interest in any
other corporation, partnership, or other business organization, except as set
forth on Schedule 2.1. Except as set forth on Schedule 2.1, the Partnership is a
New York general partnership, duly organized, legally existing and in good
standing under the laws of the state of New York, with full power and authority
to own its properties and conduct its business as now being conducted.
Section 2.2 Company Stock. Each of the Companies has the authorized
-------------
and kind of capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets
forth the number of shares of the capital stock of each of the Companies issued
and outstanding. All of the outstanding shares of capital stock of each Company
and of Madison and all of the interests in the
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Partnership are owned beneficially and of record by the Shareholders. The shares
of capital stock ("Company Shares") each Shareholder owns in each Company and in
Madison and the interests owned by him in the Partnership are legally and
validly authorized and issued, fully paid and nonassessable. Except as set forth
on Schedule 2.2, there are no outstanding rights of any kind to acquire the
Company Shares, additional shares of any class of stock from any Company, any
interests in the Partnership, or any shares of capital stock of Madison.
Section 2.3 Contracts, Permits and Material Documents. The items
-----------------------------------------
listed in Schedule 2.3 attached are all of the following with respect to each of
the Companies ("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 any of the Companies is bound or under which any of the Companies is
the beneficiary, (v) collective bargaining agreements, (vi) patents, trademarks,
trade names, copyrights, trade secrets, proprietary rights, symbols, service
marks, and logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of each 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 any Company or any of its property
and pursuant to which any Company derives any material benefit or has imposed
upon it any material detriment. For purposes of this Section 2.3 a material
benefit or material detriment shall be anything which provides a benefit or
imposes a detriment having a value of $35,000 or more. The Material Documents
listed on Schedule 2.3 are organized under separate headings for each of the
Companies and under subheadings for each of the different type of documents
listed. Except as set forth on Schedule 2.3, no Company nor any person or party
to any of the Material Documents or bound thereby is in material default under
any of the Material Documents, and no act or event has occurred which with
notice or lapse of time, or both, would constitute such a default. No Company is
a party to, and no Company's property is bound by any agreement or instrument
which is material to the continued conduct of business operations of the
Companies, taken as a whole, as now being conducted, except as listed in
Schedule 2.3. Neither Madison nor the Partnership is a party to any material
document, except as set forth on Schedule 2.3. Material Documents of Xxx Bin and
Allegro relating to their business conducted in New York are identified as such
on Schedule 2.3.
Section 2.4 Personal and Real Property. All items of personal and
---------------------------
real property (other than real property comprising Excluded Assets) owned or
leased by the Companies, Madison, and the Partnership or used in the business
operations of the Companies and the New Jersey Business, will be transferred to
Purchaser at Closing, in the condition set forth in subparagraphs (a), (b) and
(c) below:
(a) Attached hereto, made a part hereof and marked Schedule 2.4(a) is a
listing of all those items used in the New Jersey Business and described in
subparagraphs "i" and "ii," organized by Company and by subparagraph.
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(i) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors used in each 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 each Company, as listed on Schedule 1.5(b) and all of the vehicles
are, in all material respects, in reasonably good and working condition, normal
wear and tear excepted, and adequate for the Companies' conduct of day-to-day
operations, except as noted on Schedule 2.4(a)(i);
(ii) All Containers, bailers, scales, and extruders used in each
Company's business operations are in reasonably good condition, normal wear and
tear excepted, except as noted on Schedule 2.4(a)(ii);all containers used in
each 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
Companies, including, without limitation, all radios, compactors, recycling
equipment, furniture, office equipment and other equipment used in each
Company's business operations, the inventory of parts, tires and accessories
maintained by each Company, and the shop tools used by each Company are in
reasonably good, and, as applicable, working condition, in all material
respects, normal wear and tear excepted, except as noted on Schedule 2.4(b); and
(c) Schedule 2.4(c) describes each interest in Real Property owned or
leased by each Company, Madison, and the Partnership including the location and
a brief description thereof, the lessor of any such leased property and a copy
of each lease and other agreement under which any such property is held. Such
real estate and the premises located thereon occupied by each Company are
sufficient for its business and operational requirements and are expected to
continue to be sufficient for its future needs for at least the next year,
subject to the compliance requirements set forth on Schedule 2.4(c). Except as
described in Schedule 2.4(c), each Company, Madison, and the Partnership has
good and insurable title in fee simple to all of its Real Property as owned by
it and owns all right, title and interest in all leasehold estates and other
rights purported to be granted to it by the leases and other agreements listed
in Schedule 2.4(c), in each case free and clear of any restriction, mortgage,
deed of trust, pledge, lien, security interest or other charge, claim, lien or
encumbrance except for: (a) liens for current taxes, assessments and
governmental charges and levies which may be paid without penalty, interest or
other additional charge; (b) such minor utility and municipal easements and
restrictions, if any, as do not detract from the value or marketability of the
property subject thereto and do not interfere with the use of such property; and
(c) the liens, mortgages and encumbrances set forth on Schedule 2.4(c). Except
as described in Schedule 2.4(c), all of the buildings and structures to the
extent of the premises owned or leased by each Company, Madison and the
Partnership are structurally sound with no known defects, and are in good
operating condition and repair and each has adequate rights of ingress and
egress for the operation in the ordinary course of business. No such building or
structure, or any appurtenance thereto or equipment therein, or the operation or
maintenance thereof, violates any restrictive covenant or any Law (including
without limitation any such Laws relating to health, safety,
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subdivision and zoning) or encroaches on any property owned by others. All
governmental permits, approvals and licenses required in connection with the
operation and, if applicable, ownership of such Real Property and all
improvements thereon and the conduct of each Company's, Madison's and the
Partnership business thereon have been duly obtained, are in full force and
effect and no proceedings are pending, to the knowledge of Sellers, threatened
which could lead to a revocation or other impairment of any thereof. No
condemnation proceeding is pending or, to the knowledge of Sellers, threatened
with respect to any Real Property identified in Schedule 2.4(c) nor is any
change in any of the foregoing Laws pending, or to the knowledge of Sellers,
threatened which would interfere with the use of any such building, structure,
or other appurtenance thereon.
(d) Except as set forth on Schedule 2.4(d), neither Madison nor the
Partnership owns any real or personal property, tangible or intangible. Neither
Madison nor the Partnership conducts, or in the past three years has conducted,
any business or operations other than the passive ownership of the real and
personal property or interests therein identified on Schedule 2.4(d).
Section 2.5 Customers. Each customer each Company serves (listed by
---------
account number and not by name) together with information as to the services
rendered to each such customer, is listed on Schedule 2.5 attached hereto. All
customers are obligated under the Companies' standard form of contract, except
for variations agreed to by the Companies which are not material in nature.
Immediately following the execution of this Agreement, the Sellers shall provide
Purchaser with information as to frequency and type of services rendered and
rates charged to each customer. The name and address of each customer shall be
provided by the Companies to Purchaser at Closing. Except as set forth on
Schedule 2.5, no customer represents more than 3% of the total annual xxxxxxxx
of all of the Companies taken as a whole. No Company nor any person or party to
any of the customer contracts is in material or knowing default under any of the
customer contracts, and no act or event has occurred which with notice or lapse
of time, or both, would constitute such a default. None of Xxxxxxx, Xxx Bin,
Allegro, or the Partnership has any customers.
Section 2.6 Title. Each Company, Madison, and the Partnership has
-----
good and insurable 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 "d", and the items listed on Schedule 2.3 ("Permitted
Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation; and
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(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
Companies (the "Financial Statements"): a combining and combined balance sheets
as of December 31, 1996 and 1997 and a statement of income, cash flow and
retained earnings for the period ended December 31, 1996 and December 31, 1997,
both prepared on an accrual basis. The Financial Statements have been prepared
by the regular accountants of the Companies, in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis in
accordance with past custom and practice of the Companies. The balance sheets
comprising the Financial Statements present fairly, in all material respects,
the financial condition of the Companies as of the dates indicated thereon and
the statements of income present fairly, in all material respects, on an accrual
basis the results of the operations of the Companies for the periods indicated
thereon. Since the date of the Financial Statements, the Companies have not (i)
made any material change in their accounting policies or (ii) effected any prior
period adjustment to, or other restatement of, its financial statements for any
period. The Financial Statements are consistent with the books and records of
Companies (which books and records are correct and complete in all material
respects). Since the date of the Financial Statements, except as set forth on
Schedule 2.7, there has not been any material adverse change in the income,
expenses or assets of the Companies, taken as a whole.
Section 2.8 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Companies do not have any liabilities, fixed or contingent,
other than:
(i) the obligations under a $2 million line of credit with IESI
Corp. pursuant to the Agreements attached on Schedule 2.8(a) (the "Company
Debt");
(ii) liabilities under the capitalized and operating leases
identified on Schedule 2.8;
(iii) liabilities fully reflected in the Financial Statements,
except for liabilities not required to be disclosed therein in accordance with
GAAP, as applied on a basis consistent with past custom and practice;
(iv) 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
(v) accounts payable arising since the date of the Financial
Statement for 1997 arising during the normal course of business consistent with
past custom and practice as allowed in accordance with Section 4.4 of this
Agreement.
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(b) All accounts receivable of the Companies (the "Receivables") as of
the date hereof are set forth by account number on Schedule 2.8(b). All of such
accounts and all accounts arising since such date are, or will be, valid
accounts receivable. Schedule 2.8(b) gives the aging of each of the accounts
receivable and is organized by Company. All accounts receivable have been
generated in the ordinary course of each Company's business consistent with past
practice. There are no defenses or set offs to any of the accounts receivable.
Neither Madison nor the Partnership has any accounts receivable.
(c) Each Company's accounts payable as of the date of this Agreement is
attached hereto, made a part hereof and marked Schedule 2.8(c). Schedule 2.8(c)
gives the aging of each of the accounts payables and is organized by Company.
Schedule 2.8(c) accurately reflects in all material respects the books and
records of the Companies as of the date of Schedule 2.8(c).
(d) The Company Debt is not in default, and there is no accrued
interest owed on any of the Company Debt in excess of the amount of accrued
interest.
Section 2.9 Fiscal Condition. 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 any Company or in the relationships of any Company
with suppliers, customers or others;
(b) Any disposition by any Company, Madison or the Partnership of any
of its capital stock or interests or any grant of any option or right to acquire
any of its capital stock or interests, or any acquisition or retirement by any
Company, Madison or the Partnership of any of its capital stock or interests or
any declaration or payment of any stock or interests dividend or other
distribution of its capital stock or interests;
(c) Any sale or other disposition of any asset owned by any Company,
Madison or the Partnership 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 any Company, Madison or the
Partnership for the acquisition of any single asset, except in the ordinary
course of business consistent with past practices or the entry into any contract
or agreement which is not cancelable upon short notice without penalty or
premium or which could require the Companies to expend more than $25,000 in any
one year;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of any of the Companies, Madison
or the Partnership except damage, destruction or loss which does not exceed
$150,000 in the aggregate;
-15-
(f) Any bonuses or increases in the compensation payable or to become
payable by any Company to any officer or key employee, except as otherwise set
forth in Schedule 2.9(f);
(g) Any loans or advances to any Company, except as set forth on
Schedule 2.9(g); or
(h) Any change in accounting method or practice.
Section 2.10 Tax Returns. Each Company, Madison and the Partnership
-----------
has filed all Federal and other tax returns for all periods on or before the
date hereof and has paid all taxes due (and all applicable penalties and
interest) for the periods covered by the said returns, except as set forth on
Schedule 2.10. Except as set forth on Schedule 2.10, the Companies and Madison
are Subchapter "C" corporations 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. The Companies and Madison have filed, and will file (if due) in a
timely manner, all requisite federal, state, local and other tax returns due for
all fiscal periods ended on or before the Closing Date.
Section 2.11 Policies of Insurance. All insurance policies,
---------------------
performance bonds, and letters of credit insuring the Companies, Madison, or the
Partnership or which the Companies, Madison or the Partnership have had issued
and which have not expired are listed on Schedule 2.11 attached hereto. Schedule
2.11 includes the names and addresses of the insurers and sureties, policy and
bond numbers, types of coverage or bond, time periods or projects covered and
the names and addresses of all known agents or agencies with respect to each
listed insurance policy, performance bond and letter of credit. Each current
insurance policies, performance bonds and letters of credits are in force and
effect and the premiums thereon are not delinquent. No Company, Madison or the
Partnership has received notification from any insurance carrier denying or
disputing any claim made by it 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, no Company, Madison or the Partnership has a claim against any of
its insurance carriers under any of policies insuring it pending or anticipated
and there has been no occurrence of any kind which would give rise to any such
claim.
Section 2.12 Employees, Pensions and, ERISA.
------------------------------
(a) The Companies do not have any contract of employment with an
officer or other employee, except as listed on Schedule 2.12(a), and neither
Madison nor the Partnership has or has had (at any time in the past three) years
any employees .
(b) Except as set forth on Schedule 2.12(b), no employee of any Company
is represented by any union. The name, address and social security number and
current rate of compensation of each of the Company's employees and capacity to
which each person is employed is listed
-16-
on Schedule 2.12(b) attached. There is no pending or, to the knowledge of the
Sellers, threatened dispute between any Company and any of its employees which
might materially and adversely affect the continuance of any Company's business
operations. The Companies are not deficient or in arrears in contributing to any
trust funds the Companies 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 knowledge of
Sellers, threatened relating to contributions of the Companies 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 any Company (whether or not they are now
terminated) or to which any Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Companies. Neither Madison nor the Partnership ever instituted or maintained
any employee benefit plan.
(d) The Companies have delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii) true
and complete copies of the most recent financial statements with respect to the
Plans, (iii) true and complete copies of all annual reports for any Plan
prepared within the past 5 years, and (iv) all material filings submitted to and
any correspondence received from any government agency relating to any Plan
within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a)
and exempt from tax under Section 501(a) of the Code has been determined by the
IRS to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which may
adversely affect such qualification or exemption, or result in the imposition of
excise taxes or tax on unrelated business income under the Code or ERISA. No
Plan is funded through a trust intended to be exempt from tax under Section
501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with
-17-
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. In regard to each Company,
---------------------
Madison and the Partnership:
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and
except as to Environmental Laws, as hereafter defined, each Company, the
Partnership, and Madison is in compliance with all Federal, state and local
laws, rules and regulations including, without limitation, the following laws:
land use laws; payroll, employment, labor, or safety laws; or federal, state or
local "anti-trust" or "unfair competition" or "racketeering" laws such as but
not limited to the Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade
Commission Act, or Racketeer Influenced and Corrupt Organization Act ("Law").
Except as disclosed in Schedule 2.13(a), each Company, the Partnership, and
Madison is in compliance with all permits, franchises, licenses, and orders that
have been issued with respect to the Laws and are or may be applicable to their
respective 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 Shareholders and the threatened against or affecting any Company, the
Partnership, and Madison 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 a change in
the financial condition or business of the Companies or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), since January 1, 1993 no Company,
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Madison or the Partnership has received notification of any past or present
failure by the Company, Madison, or the Partnership to comply with any Law
applicable to it or its assets.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, each
Company, Madison and the Partnership is in compliance with all Federal, state
and local laws, rules and regulations relating to environmental issues of any
kind and/or the receipt, transport or disposal of any hazardous or non-hazardous
waste materials from any source ("Environmental Law"). Except as disclosed in
Schedule 2.13(b), with respect to any Environmental Law each Company, Madison,
and the Partnership is in 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 their property and operations, including, without
limitation, any order, decree or directive of any court or federal, state,
municipal, or other governmental department, commission, board, bureau, agency
or instrumentality wherever located. 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 Shareholders and the Sellers, threatened
against or affecting any Company, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, wherever located, which would result in an
adverse change in the financial condition or business of the Companies, Madison,
and the Partnership of $150,000 or more or which would invalidate this Agreement
or any action taken in connection with this Agreement. To the knowledge of the
Shareholders and the Sellers, except as set forth on Schedule 2.13(b), since
January 1, 1988 no Company, Madison or the Partnership has transported, stored,
treated or disposed, nor has any Company allowed any third persons, on its
behalf, to transport, store, treat or dispose waste to or at (i) any location
other than a site lawfully permitted to receive such waste for such purpose or,
(ii) any location currently designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar federal or state statute; nor has any of the Companies, Madison
or the Partnership performed, arranged for or allowed by any method or procedure
such transportation or disposal in contravention of state or federal laws and
regulations or in any other manner which may result in liability for
contamination of the environment; and no Company, Madison or the Partnership has
disposed, nor has any of a Company, Madison or the Partnership allowed third
parties to dispose of waste upon property owned or leased by any of the
Companies other than as permitted by, and in conformity with, applicable
Environmental Law. Except as disclosed in Schedule 2.13(b), since January 1,
1988, no Company, Madison or the Partnership has 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, no Company, Madison or the
Partnership has received any notification (including requests for information
directed to the Company 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, 1988, no Company, Madison or
the Partnership has received hazardous waste as defined in the Resource
Conservation and Recovery Act, 42 USCA Section 6901 et seq., or in any similar
-- ---
federal or
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state statute, which has not been handled in full compliance with all applicable
federal and state laws.
(c) Except as set forth on Schedule 2.13 (c), since January 1, 1988
none of the Companies, Madison, and the Partnership has ever owned, operated,
had an interest in, engaged in and/or leased a waste transfer, recycling,
treatment, storage, landfill or other disposal facility. The Companies, Madison,
and the Partnership have obtained and maintained, when required to do so under
applicable Environmental Laws, trip tickets, signed by the applicable waste
generators demonstrating the nature of all waste deposited and or transported by
any of them. No employee, contractor or agent of the Companies, Madison or the
Partnership has, in the course and scope of employment with any of them, been
harmed by exposure to hazardous materials, as defined under the Laws. No liens
with respect to environmental liability have been imposed against any of the
Companies, Madison, or the Partnership under CERCLA, any comparable state
statute or other applicable Environmental Law, and no facts or circumstances
exist which would give rise to the same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of Laws
and Environmental Laws which existed within the past three years and all
outstanding unremedied notice of violations issued to any of the Companies,
Madison or the Partnership by any federal, state or local regulatory agency.
(e) Except as set forth on Schedule 2.13(e), none of the Sellers are
under investigation for the violation of any Laws, including, without
limitation, the violation of any anti-trust, racketeering, or unfair competition
Laws.
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Companies, Madison or the
Partnership or their assets or liabilities, and a description of all such
proceedings is set forth on Schedule 2.13(f) attached.
Section 2.14 Corrupt Practices. The Shareholders, and to the best of
-----------------
the Shareholders' knowledge, the Companies, Madison, and the Partnership have
not made, offered or agreed to offer anything of value to any employees of any
customers of the Companies, Madison and the Partnership for the purpose of
attracting business to the Companies, Madison and the Partnership 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 any of the Companies, Madison, or the Partnership being in
material violation of any Law, nor have any of the Companies otherwise taken any
action which would cause them to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended.
Section 2.15 Legal Compliance. 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. The Sellers are
not parties to any other agreement or understanding which would prohibit or
limit their
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ability to consummate the transactions contemplated hereby. Except as disclosed
in Schedule 2.15 to this Agreement, the execution and performance of this
Agreement will not result in a breach of or constitute a default or result in
the loss of any right or benefit under:
(a) Any charter, partnership documents, by-law, agreement or other
document to which any Company or any Seller is a party or by which such Company,
Seller or any of their property is bound; or
(b) Any decree, order or rule of any court or governmental authority
which is binding on any Company or on any Seller or on any property of any
Company or any Seller .
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. No Company has infringed and is
---------------------
not now infringing, on any trade name, trademark, service xxxx or copyright
belonging to any person, firm or corporation ("Intellectual Property") and to
the knowledge of the Sellers no one has or is infringing any Intellectual
Property right of any Company.
Section 2.18 Competition. Except as set forth on Schedule 2.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of any Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of such Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company is doing business which interest adversely or affects the business of
any Company.
Section 2.19 Shareholder Loans. The amount owed by the Shareholders
-----------------
(including under Shareholder Receivables, if any, acquired by Purchaser as part
of the Assets) to any Company, the Partnership and Madison do not exceed
$600,000 when netted against the amounts owed to them by the Companies, the
Partnership and Madison, all such amounts and bear interest at the rate of 6%
per annum.
Section 2.20 Conduct of Business. In the past, aspects of the New
-------------------
Jersey Business were conducted through Interboro Disposal, Inc. Prior to the
date hereof, Interboro was merged with and into Regional with the result that
Regional acquired all of its business assets, and properties. No entity or
person nor a party to this Agreement (including, without limitation, Smart,
Inc., owns any asset or property used or useful in the New Jersey Business.
Section 2.21 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 Companies pursuant hereto, do not
contain any untrue statement of a material fact, or omit any statement of a
material fact necessary to make the statements contained not misleading. If
prior to Closing the Sellers become aware of any inaccuracy, or
misrepresentation or omission in any of the Schedules, they shall immediately
advise Purchaser in writing of the inaccuracy, misrepresentation or omission.
Purchaser understands and acknowledges that in the event Sellers disclose such
subsequent inaccuracy, misrepresentation or omission in any
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of the Schedules, they shall immediately advise Purchaser in writing of the
inaccuracy, misrepresentation or omission. Purchaser understands and
acknowledges that in the event Sellers disclose such subsequent inaccuracy,
misrepresentation or omission in any of the representations set forth in this
Article II or in any of the Schedules, that Purchaser's sole remedy shall be to
terminate this Agreement whereupon all obligations of Sellers' and Purchaser
cease and in no event shall Purchaser have the right to xxx for damages.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
The Purchaser represents and warrants to the Sellers that:
Section 3.1 Structure. The Purchaser is a corporation duly formed and
---------
legally existing in good standing under the laws of Delaware.
Section 3.2 Authorization to Proceed with this Agreement. Purchaser
--------------------------------------------
has 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 Purchaser.
Section 3.3 Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Purchaser's authority will be entitled to make any
claim against the Sellers for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
Section 3.4 Public Reports. Purchaser has delivered to Sellers an
--------------
accurate copy for the year ended June 30, 1997 of the historical filings made by
it on Form 10-K and all amendments thereto, its Quarterly Report on Form 10-Q
for the period ended December 31, 1997 and all reports on Form 8-K filed with
the Securities and Exchange Commission by it since December 31, 1997. Since
December 31, 1997, there has not been any material adverse change in the income,
expenses, assets, results of operation or financial condition of EESI.
Section 3.5 EESI Stock. All of the shares of EESI Stock to be issued
----------
to the Companies as contemplated by this Agreement and the Collateral Documents
will, upon delivery, be duly authorized and validly issued, fully paid and non-
assessable by EESI, free and clear of all liens, charges, restrictions,
mortgages, security interests or claims of any kind.
Section 3.6 Authorization. Purchaser has the power and authority to
-------------
enter into this Agreement and each of the Collateral Documents and to carry out
the transactions contemplated hereby and thereby and this Agreement and each of
the Collateral Documents to which the Purchaser is a party, constitutes the
legal, valid and binding obligation of the Purchaser, enforceable in accordance
with its terms.
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Section 3.7 Contravention; Consents and Approvals. Except as set
-------------------------------------
forth on Schedule 3.7, no filing, action, consent or approval of any person,
entity or governmental body is required by the Purchaser for the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. The execution and delivery of this Agreement by the Purchaser and the
consummation of the transactions contemplated hereby by the Purchaser will not
result in a breach of the terms or conditions of, or constitute a default under,
or violate, (a) any provision of any law, regulation or ordinance, (b) any
agreement, lease, mortgage or other instrument or undertaking, oral or written,
to which the Purchaser is a party or by which any of its properties or assets is
or may be bound or affected, or (c) any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental body.
ARTICLE IV
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
Section 4.1 Investment Representations and Covenants of Shareholders.
--------------------------------------------------------
(a) Each Shareholder understands (subject to the express
obligation of EESI to register the Unrestricted Stock to be issued to the
Shareholders as provided in Section 5.1 hereof) that the issuance of the EESI
Stock will not be registered under the Securities Act of 1933, as amended (the
"Act"), on the grounds that the issuance of the EESI Stock is exempt from
registration pursuant to Section 4(2) of the Act and/or Regulation D promulgated
under the Act ("Regulation D"), and that the reliance of EESI on such exemptions
is predicated in part on such Shareholder's representations, warranties,
covenants and acknowledgements set forth in this Section.
(b) Each Shareholder hereby represents and warrants to EESI that
he is an Accredited Investor, as that term is defined in Regulation D, and that
the EESI Stock will be acquired by him for his own account, not as a nominee or
agent, for investment and without a view to resale or other distribution within
the meaning of the Act, and the rules and regulations thereunder, and such
Shareholder will not distribute or transfer any of the EESI Stock in violation
of the Act. Each Shareholder is a resident of New York for purposes of state
securities laws.
(c) Each Shareholder: (i) acknowledges that the EESI Stock is
not registered under the Act and may not be sold by such Shareholder unless the
EESI Stock is first registered under the Act (in accordance with Section 5.1
hereof or otherwise) or an exemption from registration is available with respect
to such sale transaction, (ii) is aware that any sales of the EESI Stock made
under Rule 144 of the Securities and Exchange Commission under the Act may be
made only in limited amounts and in accordance with the terms and conditions of
that Rule and that in such cases where the Rule is not applicable, registration
or compliance with some other registration exemption will be required, (iii) is
aware that Rule 144 is not presently, and for a period of at least one year
following the Closing Date hereof may not be, available for use by such
Shareholder for resale of the EESI Stock, and (iv) is aware that EESI is not
-23-
obligated to register any sale, transfer or other disposition of the EESI Stock
except in accordance with the provisions of Section 5.1 hereof.
(d) Each Shareholder represents and warrants to EESI that such
Shareholder has such knowledge and experience in financial and business matters
that he is fully capable of evaluating the risks and merits of such
Shareholder's investment in the EESI Stock.
(e) Each Shareholder acknowledges receipt of the Public Reports
referred to in Section 3.4 hereof, and such other documents, agreements and
information as each Shareholder has required and confirms and acknowledges that:
(i) EESI has afforded such Shareholder the opportunity to ask questions of and
receive answers from EESI's officers and various directors concerning the terms
and conditions of this Agreement and such Shareholder's investment in the EESI
Stock and to obtain such additional information as such Shareholder has
requested, and (ii) such Shareholder has availed himself of such opportunity to
the extent he deems necessary and has received the information requested.
(f) In order to ensure compliance with the provisions of
subsection (b) hereof, each Shareholder covenants and agrees that, after the
Closing, he will not sell, transfer or otherwise dispose of any of the EESI
Stock or any interest therein (unless such sale, transfer or disposition has
been registered under the Act in accordance with the provisions of Section 5.1
hereof or otherwise) or otherwise without there first having been compliance
with either of the following conditions:
i) EESI shall have received a written opinion of counsel in
form and substance reasonably satisfactory to EESI, or a copy of
a "no-action" or interpretive letter of the SEC, specifying the
nature and circumstances of the proposed transfer and indicating
that the proposed transfer will not be in violation of any of
the provisions of the Act and the rules and regulations
promulgated thereunder; or
ii) EESI shall have received an opinion from its own counsel
to the effect that the proposed transfer will not be in
violation of any of the provisions of the Act and the rules and
regulations promulgated thereunder.
(g) Each Shareholder also acknowledges and agrees that the
certificates representing the EESI Stock issuable to him will contain a
restrictive legend noting the restrictions on transfer described in this Section
4.1 and under federal and applicable state securities laws, and that appropriate
"stop-transfer" instructions will be given to EESI's stock transfer agent.
Section 4.2 Plan of Reorganization. This Agreement contemplates that
----------------------
the acquisitions of the Seller Stock and the Assets are to qualify as
reorganizations within the meaning of Sections 368(a)(1)(C) and 368(a)(1)(B) 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
-24-
parties hereto agree to take no action inconsistent with the treatment of such
exchange as a reorganization under Code (S)(S)368(a)(1)(C) and 368(a)(1)(B) and
to comply with all IRS filing and other requirements for such exchanges.
Section 4.3 Access to Records. The Shareholders will cause the
-----------------
Companies, Madison and the Partnership to give and the Companies, Madison and
the Partnership shall give Purchaser and its 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 Companies, Madison and the Partnership
pertaining to the Business, and to make available to Purchaser and its
representatives all additional financial statements of and all information with
respect to the business and affairs of the Companies, Madison and the
Partnership that Purchaser may reasonably request.
Section 4.4 Continuation of Business. The Companies will operate
------------------------
until the time of Closing, in the ordinary course of business, consistent with
past practice, so as to preserve their business organization intact, to assure,
to the extent possible, the availability to Purchaser of the present key
employees of the Companies, and to preserve for Purchaser the relationships of
the Companies with suppliers, customers, and others.
Section 4.5 Continuation of Insurance. The Shareholders will cause the
-------------------------
Companies, Madison and the Partnership to and the Companies shall keep in
existence all policies of insurance insuring the Companies, Madison and the
Partnership 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
Shareholders and the Companies will not directly or indirectly solicit offers
for the Company Shares, the Assets, any interests in or to the Partnership or
capital stock of Madison or any of their respective assets and properties or for
a merger or consolidation involving any of them, or respond to inquiries from,
share information with, negotiate with or in any way facilitate inquiries or
offers from, third parties who express or who have heretofore expressed an
interest in acquiring the Companies, Madison or the Partnership by merger,
consolidation or other combination or acquiring any of their respective assets;
nor will the Shareholders permit the Companies, Madison, or the Partnership to
do any of the foregoing.
Section 4.7 Audited Financial Statements.
----------------------------
(a) Sellers shall cause their current and former independent
accountants to cooperate fully with the Purchasers accountants, and to furnish
all necessary reports and consents in connection with the Purchasers audits of
the Companies historical financial statements referred to in Section 4.7(b)
below. Sellers shall also cause the Companies to prepare an unaudited balance
sheet of the Companies 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
-25-
for the period ending with the completion of the calendar quarter ended prior to
the Closing Date ("Interim Financial Statements"). The Companies will use their
best efforts to deliver the Interim Financial Statements within fifteen (15)
days after the end of the applicable quarter. Companies may select the
accounting firm used to prepare such statements as required above, but said firm
must be reasonably acceptable to EESI.
(b) The Sellers shall cooperate (including by delivering all required
representation letters) with all reasonable requests of Purchaser and its
auditors necessary to audit all previously unaudited periods of the Companies,
Madison and the Partnership for the purposes of enabling Purchaser to make
periodic reports pursuant to the Securities Exchange Act of 1934 (the
"Securities Exchange Act") or to make public offerings of its securities under
the Securities Act of 1933, as amended (the "Securities Act"), and Sellers shall
permit such financial statements to be included in any of Purchasers filings
with the Securities and Exchange Commission under the Securities Exchange Act or
the Securities Act, in any prospectus used in connection with any such offering,
in any filings required by any state or other governmental agency, and in any
private placement memorandum that may be used by Purchaser in connection with an
offering of securities. All fees and expenses of the Purchasers' auditors
incurred to comply with the foregoing shall be borne by Purchaser; the fees and
expenses of Sellers' auditors in furnishing any needed representation or
management letters or in providing general guidance and information to
Purchasers auditors shall be borne by the Sellers.
Section 4.8 Pooling of Interests.
--------------------
(a) Purchaser and Sellers have agreed that a material factor in their
execution of this Agreement is that the transactions contemplated by this
Agreement be treated as a "pooling of interests" for accounting purposes. If for
any a provision in this Agreement would prevent the transaction being accounted
for as a "pooling interests," the parties agree to negotiate in good faith to
modify the Agreement so the transaction can be accounted for as a "pooling of
interests." Notwithstanding any other provision of this Agreement, prior to the
publication and dissemination by Purchaser of consolidated financial results
which include results of combined operations of the Companies and Purchaser for
at least 30 days on a consolidated basis following the Closing Date, which shall
in no event occur later than 120 days after the Closing, Sellers shall not sell
or otherwise transfer or dispose of, or in any way reduce their risk relative
to, any shares of the EESI Stock received by Sellers (including by way of
example and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions.) The Securities Exchange Commission ("SEC") has
issued Accounting Series Release Nos. 130 and 135, as amended (collectively, the
"ASRs"), setting forth certain restrictions applicable to the availability of
"pooling of interests" accounting treatment in transactions of the type
contemplated by this Agreement. Sellers therefore covenant and agree with EESI
to hold the EESI Stock and to comply with the ASRs until the requirements of the
ASRs have been met as set forth in this Section 4.8. In addition, the
certificates evidencing the EESI Stock to be received by Sellers will bear a
legend substantially in the form set forth below:
-26-
"The shares represented by this certificate may not be sold, transferred
or assigned, and Eastern Environmental Services, Inc., shall not be
required to give effect to any attempted sale, transfer or assignment
prior to the application and dissemination of financial statements by
Eastern Environmental Services, Inc., which include the results of at
least 30 days of combined operations of Eastern Environmental Services,
Inc., for which these shares are issued. Upon the written request of the
holder hereof directed to Eastern Environmental Services, Inc., the
issuer agrees to remove this restrictive legend (and any stop order
placed with the transfer agents) when the requirements of Accounting
Series Releases Nos. 130 and 135, as amended, of the Securities Exchange
Commission have been met."
(b) Notwithstanding the foregoing, the parties agree that if a closing
does not occur under the New York Agreement within one year of the date of this
Agreement, the transactions contemplated hereby will not be treated as a pooling
of interests.
Section 4.9 Shareholder Debt. The Shareholders shall pay all
----------------
amounts owed by them to the Companies, the Partnership and Madison within one
year after the Closing. At the Closing, the Shareholders shall produce and
deliver to Purchaser the original notes evidencing the amounts they owe or shall
execute promissory notes evidencing the indebtedness they owe.
ARTICLE V
ADDITIONAL AGREEMENTS OF PURCHASER
----------------------------------
Section 5.1 Registration Rights.
-------------------
(a) As soon as practical following the Closing, but in any event within
one hundred twenty (120) days after the Closing, EESI shall file a registration
statement to register the Unrestricted 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. 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 Unrestricted 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 Unrestricted 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 Unrestricted 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
-27-
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 Unrestricted 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 Unrestricted Stock may be sold by the Sellers at
any time without restriction or pursuant to the provisions of Rule 144 or until
such earlier date as all of the shares registered pursuant to such registration
statement shall have been sold or otherwise transferred to a third party.
(b) With respect to the registration of the Unrestricted Stock, EESI
will, as expeditiously as possible 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.
(c) All expenses incurred by EESI in effecting the registrations
provided for in this Section 5.1 shall be paid by EESI, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for EESI, expenses of any audits incident to or
required by any such registration and expenses of complying with the securities
or "blue sky" laws of any jurisdictions.
Section 5.2 Books and Records. From the Closing Date to six years
-----------------
after the Closing Date, the Purchaser shall allow the Sellers and their agents
access to all business records and files of the Companies pertaining to the
operation of the Companies prior to the Closing Date which were delivered to the
Purchaser in accordance with Section 1.5(u) of this Agreement ("Records") where
the Shareholders or Companies 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
Purchaser's business. For a period of six years after the Closing Date, the
Purchaser shall not dispose of or destroy any material Records without first
providing written notice to the Shareholders at least 30 days prior to the
proposed date of such disposition or destruction.
Section 5.3 Replacement of Indebtedness. The Company Debt is
---------------------------
reflected in a Loan Agreement among the Companies and IESI Corp. providing for
loans to the Companies aggregating $2 million principal amount, maturing on June
30, 1998, and bearing interest at the rate of 10% per annum, all as reflected on
Schedule 2.8. The Company Debt is secured by a first priority security interest
in substantially all of the assets and all of the shares of capital stock of the
Companies and Madison, all of the interests in and substantially all of the
assets of the Partnership, and all of the capital stock and assets of the
several affiliated companies that
-28-
are parties to the New York Agreement. If a Closing under this Agreement shall
not have occurred on or before June 20, 1998, Purchaser shall refinance the
Company Debt and replace it with a loan from Purchaser to the Companies,
Madison, the Partnership and their affiliates, on substantially the same terms
as the terms contained in the Loan Agreement and related documents, but with a
maturity of December 31, 1998; provided, in either case, that the Sellers and
the Purchaser shall have received from the holders of the Company Debt all such
releases and discharges as they may reasonably request, and, further provided,
that the Companies, the Shareholders and their affiliates shall have granted to
and perfected in favor of the Purchaser a first priority security interest in
and lien on and to all collateral presently securing the Company debt and such
other collateral as Purchaser may reasonably request. If a Closing occurs prior
to June 20, 1998, Purchaser may at its option assume or repay the Company Debt.
Section 5.4 Permitted Actions. Notwithstanding any other provision of
-----------------
this Agreement, the Purchaser shall permit the Companies to transfer to the
Shareholders or their designees any Excluded Asset (other than an asset required
to be conveyed to Purchaser under the New York Agreement) at or prior to the
Closing.
ARTICLE VI
CONDITIONS OF PURCHASER
-----------------------
The obligations of Purchaser to effect the transactions 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 Purchaser 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 transactions contemplated by this Agreement or which
might affect the right of Purchaser to own, operate or control the Assets which,
in the judgment of the Boards of Directors of Purchaser, made in good faith and
based upon advice of their counsel, makes it inadvisable to proceed with the
transactions 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 Companies, taken as a whole, and the Companies taken as a whole
shall have not suffered any material loss or
-29-
damage to any of the Assets, whether or not covered by insurance, since the date
of the Financial Statements.
Section 6.4 Opinion of Counsel. The Sellers shall have delivered to
------------------
the Purchaser the opinion of counsel, dated the Closing Date, in the form
annexed hereto as Schedule 1.11(e).
Section 6.5 Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Purchaser shall have
been furnished with appropriate evidence, reasonably satisfactory to Purchaser
and their counsel, of the granting of such approvals, authorizations and
consents, including, without limitation the consents and approvals described on
Schedule 2.15 hereof.
Section 6.6 Financial Statements. The Purchaser shall have either
---------------------
received pursuant to Section 4.7, all financial statements required by the
applicable rules and regulations of the Securities Exchange Commission or been
advised by Ernst & Young LLP that the Companies records are auditable.
Section 6.7 Pooling of Interests Advice. The Purchaser shall have
---------------------------
received from Ernst & Young L.L.P., or such other accounting firm selected by
EESI, advice reasonably satisfactory to it to the effect that transactions
contemplated hereunder will be accounted for under the pooling of interests
method of accounting.
Section 6.8 Title to Real Property; Survey. Each parcel of Real
------------------------------
Property owned by the Companies, Madison, and the Partnership (other than Real
Property comprising Excluded Assets) shall be insurable at regular standard
rates by a reputable title company acceptable to Purchaser, and shall be free of
any conditions, covenants, restrictions or encumbrances that impose any
financial burden on the Purchaser or the premises or restrict the use of the
premises. The Purchaser shall have received a commitment for title insurance for
each such parcel and a current as built survey for each parcel reasonably
acceptable in form and substance to it.
Section 6.9 HSR. The waiting period under the Xxxx-Xxxxx-Xxxxxx
---
Antitrust Improvements Act of 1976, as amended, shall have terminated.
Section 6.10 Company Debt. All liens securing the Company Debt (other
------------
than liens in favor of Purchaser) shall have been released and the releases
contemplated by the proviso to Section 5.3 shall have been obtained or, if
assumed by Purchaser, perfected in favor of Purchaser.
Section 6.11 Due Diligence. Sellers shall have delivered to Purchaser
-------------
the Schedules, and Purchaser shall have finished its review thereof, in
accordance with and pursuant to Section 9.14.
ARTICLE VII
CONDITIONS OF SELLERS
---------------------
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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 Purchaser. Purchaser shall have performed
-----------------------
and complied with all material obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to or at the
Closing Date. All representations and warranties of Purchaser 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 Purchaser 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 Purchaser 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 Payment. The Purchaser shall have delivered to each of the
-------
Companies, as applicable, the EESI Stock in accordance with Sections 1.3 and
1.4.
Section 7.4 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 7.5 Opinion of Counsel. The Purchaser shall have delivered to
------------------
the Companies the opinion of counsel to the Purchaser, dated the Closing Date,
in the form annexed hereto as Schedule 1.10(c).
ARTICLE VIII
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 Purchaser and its 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
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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) any liability, claim, cost,
expense or obligation whether legal or equitable, matured or contingent, known
or unknown, foreseen or unforeseen, extraordinary or ordinary, patent or latent
of any nature ("Liabilities") of (x) Xxx Bin, Allegro, Madison or the
Partnership not reflected on the Closing Date Statement, except for obligations
under contracts, agreements and documents assumed by the Purchaser at the
Closing which first mature and accrue after the close of business on the Closing
Date, (y) any liability of Regional not reflected on the Closing Date Balance
Sheet which accrues or matures or arises from events occurring prior to the
close of business on the Closing Date, and (z) any Liability of the
Shareholders, whether arising out of occurrences prior to, at, or after the date
of this Agreement and (d) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections (a), (b) or (c) of
this Section 8.1 of this Agreement has occurred.
Section 8.2 Indemnification by Purchaser. Purchaser agrees that it will
----------------------------
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 Purchaser, 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 any of them, as a
result of or incident to: (a) any breach of, misrepresentation in, untruth in or
inaccuracy in the representations and warranties of Purchaser set forth in this
Agreement or in the Schedules attached to this Agreement or in the Collateral
Documents; (b) nonfulfillment of any agreement, covenant or condition on the
part of Purchaser made in this Agreement or in the Collateral Documents and to
be performed by Purchaser before or after the Closing Date; (c) any of the
Guarantees; (d) the imposition upon, claim against, or payment by the Sellers of
any of the Assumed Liabilities; and (e) any claim by a third party that, if
true, would mean that a condition for indemnification set forth in subsections
(a), (b), (c) or (d) of this Section 8.2 has occurred.
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
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any Indemnifying Party shall relieve the Indemnifying Party from any obligation
hereunder unless (and then solely to the extent) the Indemnifying Party is
thereby prejudiced. Such notice shall state the amount of the claim and the
relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 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
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.
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Section 8.4 Procedure for Non-Third Party Claims. If Purchaser 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 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. All of the respective representations
------------------
and warranties of the Sellers and the Purchaser shall survive consummation of
the transactions contemplated by this Agreement for a period of eighteen months,
the representations and warranties of the Sellers set forth in Sections 2.8 and
2.13 and, shall survive until the expiration of all applicable statutes of
limitation and the representations and warranties of Sellers in Sections 2.2,
2.4(c) (to the extent that Section 2.4(c) relates to title), and 2.15 shall
survive indefinitely.
Section 8.6 Limitation. No person shall be entitled under the
----------
indemnification provisions of this Agreement to indemnification for damages
resulting from breaches of representations and warranties until the damages
suffered by the Purchaser's indemnitees or Seller's indemnitees, as applicable,
exceeds $150,000; provided, however, that this limitation shall not be
applicable to breaches of Sellers' representations and warranties relating to
title, taxes, environmental matters, which are not listed on Schedule 2.13 to
this Agreement or the New York Agreement or which result in liabilities in
excess of those indicated on Schedule 2.13 to this Agreement or the New York
Agreement, and accounts receivable.
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ARTICLE IX
OTHER PROVISIONS
----------------
Section 9.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that it has in the past, currently has, and in the future will have certain
confidential information of the Companies such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Companies. Sellers agree that for a period of 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, Purchaser shall be entitled to an injunction restraining Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchaser from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2 Nondisclosure by Purchaser. Purchaser recognizes and
--------------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of the Companies. Purchaser agrees
that it will not utilize such information in the business or operation of
Purchaser, 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 Purchaser or any of their affiliates (ii)
Purchaser is compelled to disclose such information by a governmental entity or
pursuant to a court proceeding or (iii) Closing takes place. In the event of a
breach or threatened breach by Purchaser of the provisions of this Section, the
Sellers shall be entitled to an injunction restraining Purchaser 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 (a) after
Closing by operation of law by the merger of Purchaser, or (b) by Purchaser
prior to closing to one or more wholly-owned subsidiaries of Purchaser) and
shall be binding upon and shall inure to the benefit of the parties hereto, the
successors of Purchaser 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.
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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 or 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 Purchaser, 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
each Seller as set forth on
Exhibit "A" attached.
with a copy to:
Xxxxxxxx, Xxxxxx & Golieb, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
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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 Jersey,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
Section 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 or 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.
Section 9.12 Extension or Waiver of Performance. Either the Sellers or
-----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
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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 Purchaser all Schedules to be attached to this Agreement as soon
as reasonably possible but no later than thirty (30) days from the date of this
Agreement. Purchaser will have fourteen (14) days from the date of delivery of
the Schedules to review the Schedules and terminate the Agreement by sending
written notice to Companies, if Purchaser is 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 by July 15, 1998, 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
Purchaser, the Assets or the Business.
Section 9.15 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the commercial rules (the "Rules") of the American Arbitration Association then
obtaining, in Princeton, New Jersey 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
-38-
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 Purchaser and the Sellers in connection with
the negotiation of and consummation of the transactions under this Agreement
shall be entitled to represent their respective party in any and all proceedings
under this Section or in any other proceeding (collectively, "Proceedings"). The
Purchaser 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.
Section 9.16 Costs and Expenses. Expect as otherwise provided herein,
------------------
the parties hereto shall each pay their own fees and expenses and those of their
respective agents and advisors incurred in connection with the transactions
contemplated by this Agreement (including, without limitation, all legal and
accounting fees), except that the Purchaser shall be responsible for all Xxxx-
Xxxxx-Xxxxxx filing fees.
Section 9.17 Certain Pricing Determination. In establishing the
-----------------------------
consideration payable under this Agreement, (a) the rights of the Companies
under the Stericycle Agreement, relating
-39-
to the sale of the Companies' medical waste business were valued at $33,000 and
(b) the Hoboken property was valued at $1.75 million.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASER
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Executive Vice-President
COMPANIES
XXXXX AND XXXXXX XXXXXX PARTNERSHIP
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: General Partner
REGIONAL RECYCLING, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
XXX BIN CONTAINERS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
MADISON ENTERPRISES, INC.
-40-
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Name: Xxxxxx Xxxxxx
Title: President
ALLEGRO ENTERPRISES, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Name: Xxxxxx Xxxxxx
Title: President
SHAREHOLDERS
/s/ Xxxxx Xxxxxx
--------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
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
-41-
