EXHIBIT 10.3
STOCK AND PARTNERSHIP INTEREST PURCHASE AGREEMENT
BETWEEN
EASTERN ENVIRONMENTAL SERVICES, INC.
AND
THE SHAREHOLDERS AND PARTNERS OF
EMPIRE WRECKING CORP.
NORTHEAST HAULING COMPANY
HILLSIDE MAINTENANCE CORPORATION
XXXXXXX AND COMPANIES ENVIRONMENTAL RECOVERY, INC.
AND
0000 XXXXXXXX XXXXXX ASSOCIATES (A PARTNERSHIP)
AUGUST 6, 1998
TABLE OF CONTENTS
-----------------
Page
----
RECITALS.................................................................... 1
ARTICLE I - Consideration and Closing....................................... 1
ARTICLE II - Associates--Real Estate........................................ 5
ARTICLE III - Representations and Warranties of Sellers..................... 6
ARTICLE IV - Representations and Warranties of Eastern...................... 19
ARTICLE V - Additional Agreements of the Parties and Sellers................ 20
ARTICLE VI - Additional Agreements of the Parties and Eastern............... 23
ARTICLE VII - Conditions of Eastern......................................... 24
ARTICLE VIII - Conditions of Sellers........................................ 26
ARTICLE IX - Indemnification................................................ 27
ARTICLE X - Other Provisions................................................ 30
SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.6(b) Opinion of Eastern Counsel
1.7(b) Assignment of Partnership Interests
1.7(e) Opinion of Seller's Counsel
1.7(f) Release
1.7(h) Noncompetition Agreement
ATTACHED AS PART OF DISCLOSURE BINDER
1.3(a) Company Debt
1.3(b) Capital Structure; Share Allocation
2.1 Property Description
2.3 Real Property Permitted Exceptions
3.1 Subsidiaries
3.3 Contracts, Permits, Mortgages and Material Documents
3.4(b) Rolling Stock
3.4(c) Trailers
3.5 Customer Contracts
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(e) Litigation or administrative proceedings for environmental
violations
3.6(f) Disclosure of "Hazardous Materials" and Environmental Conditions
3.6(h) Wetlands
3.6(i) Mechanic's liens
3.9 Fiscal Condition of Companies
3.10 Certain Tax Matters
3.11 Insurance Policies, Performance Bonds and Letters of Credit
3.12(a) Contracts with Employees
3.12(b) Employees
3.12(c) Benefit Plans
3.13 Legality of Operation
3.13(b) Environmental Violations
3.13(c) Landfills and Disposal Facilities
3.13(f) List and Synopsis of All Litigation
3.15 Required Consents
3.18 Related Party Transactions
3.19(a) Other Waste Collection or Transfer Businesses or Assets Owned by
Sellers
3.19(b) Change in Ownership of Company Shares or Partnership Interests
STOCK AND PARTNERSHIP INTEREST PURCHASE AGREEMENT
THIS STOCK AND PARTNERSHIP INTEREST PURCHASE AGREEMENT ("Agreement"), is
dated and entered into effective as of August 6, 1998, by and between Eastern
Environmental Services, Inc., a Delaware corporation ("Eastern"), on one part,
and Xxxxxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxx and Xxxx Xxxxxxx
(collectively, the "Sellers"), on the other part.
RECITALS
Eastern is a waste services company engaged in the collection,
transportation and disposal of residential, commercial and industrial waste in
several eastern, southern, and midwestern states. Empire Wrecking Corp., ("EW");
Northeast Hauling Company ("NHC"); Hillside Maintenance Corporation ("HMC");
Xxxxxxx and Companies Environmental Recovery, Inc. ("PI"); and 0000 Xxxxxxxx
Xxxxxx Associates (a partnership), ("Associates"), (collectively, the
"Companies") are waste services companies engaged in the collection, recycling,
transfer and disposal of residential, commercial and industrial waste in New
Jersey. Sellers own collectively all of the issued and outstanding shares and
partnership interests of the Companies ("Company Shares" and "Partnership
Interests"). For purposes of this Agreement, Eastern is sometimes hereinafter
referred to as "Purchaser."
In accordance with the provisions of this Agreement, Sellers desire to sell
all of the outstanding shares of stock and partnership interests of the
Companies to Eastern in exchange for common stock of Eastern, all on the terms
contained herein. The parties intend that the transactions contemplated hereby
qualify as a reorganization, within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended, (as to EW, NHC, HMC, and PI, but not
as to Associates) and be treated as a "pooling of interests" for accounting
purposes.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by the Sellers, and
some will be delivered to Eastern within five (5) days after the date hereof
(and in the case of June 30, 1998, financial statements by August 14, 1998). The
Disclosure Binder is organized under subheadings which correspond to the various
Schedules described in this Agreement. For purposes of identification, the
Disclosure Binder has been identified by the parties by a written statement
executed by the parties and appearing as the first page of the Disclosure
Binder.
1
ARTICLE I
CONSIDERATION AND CLOSING
-------------------------
SECTION 1.1 Incorporation of Recitals. The recitals set forth above are
-------------------------
incorporated herein by reference and are a part of this Agreement.
SECTION 1.2 Time and Place for Closing. Closing under this Agreement
--------------------------
shall take place within two (2) business days after the conditions set forth in
Section 7.7 and Section 8.5 (regarding governmental approvals and consents) have
been satisfied or, if later, August 30, 1998, (provided that all Schedules and
all financial information required to be delivered by Sellers to Eastern have
been delivered by that date), time being of the essence, at the office of
Eastern Environmental Services, Inc., 0000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx
Xxxxxx, Xxx Xxxxxx 00000, or such other time and place as the parties hereto may
agree upon. The parties expect to close by August 31, 1998. The date that
Closing occurs is referred to hereinafter as the "Closing Date" and the act of
closing as "Closing." The exact Closing Date shall be established by a written
notice sent by Eastern to Sellers.
SECTION 1.3 Agreement to Sell Stock of Companies; Consideration.
---------------------------------------------------
(a) At the Closing, each of the Sellers agrees to transfer and deliver to
Eastern all of the Company Shares and Partnership Interests owned by such
Seller, as applicable, and Eastern shall deliver to Sellers shares of the common
stock of Eastern having a value of $22,000,000 (the "EESI Stock"), subject to
adjustment as provided herein in this Section 1.3, each share being valued at
the closing price of the common stock on the NASDAQ Stock Market on the date of
this Agreement ("Per Share Value"). The value of the aggregate number of EESI
Stock to be delivered to Sellers shall be reduced, dollar for dollar, by the
amount of the liabilities of the Companies as of the Closing Date ("Company
Debt"); except that if the Company Debt is increased after the date hereof to
buy new equipment to service new customers, and Eastern approves in writing the
acquisition of such new equipment, the increase in liabilities to finance that
new equipment will not be included in Company Debt for the purposes of computing
the amount of EESI Stock to be delivered to Sellers. The Company Debt as of the
date of this Agreement is listed by creditor on Schedule 1.3(a) attached.
(b) The EESI Stock shall be allocated among the Companies as the parties
may agree prior to the Closing, which allocation will be set forth on a Schedule
1.3(b), except that the amount allocated to Associates shall not be less than
$2,400,000. The Sellers shall receive the shares of EESI Stock as allocated
among the Companies in the same proportions that the Sellers own shares and
partnership interests in each of the Companies, as set forth on the Schedule
1.3(b).
SECTION 1.4 Closing. Following execution of this Agreement, Eastern and
-------
Sellers shall be
2
obligated to conclude the transaction. If the failure to conclude this
transaction is due to the refusal and failure of one party to perform its
obligations under this Agreement, the other party may seek to enforce this
Agreement with an action for specific performance, in addition to, and not in
limitation of, any other rights and remedies available to such party 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 non-performing
party.
SECTION 1.5 Termination. This Agreement and the transactions contemplated
-----------
hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written Agreement of Eastern and all Sellers;
(b) by Eastern by August 30, 1998, if Eastern is not satisfied, in its
sole discretion, with the due diligence it has conducted on the Companies;
(c) by Eastern or Sellers, in the event the other makes a material
misrepresentation under this Agreement or breaches a material covenant or
agreement under this Agreement; or
(d) by Eastern or Sellers, if the Closing shall not have occurred by
August 31, 1998, or such other date as may be agreed to by the parties hereto in
writing, due to the non-fulfillment of a condition precedent to such party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating party). However, if the only
conditions to Closing which have not been satisfied are the conditions set forth
in Sections 7.7 and 8.5 (relating to government approvals and consents), the
date of August 31, 1998, shall be extended by up to six (6) months, at the
option of Eastern or Sellers, to be exercised through written notice to Sellers
or Eastern, as applicable.
In the event this Agreement is terminated pursuant to clauses (a), (b), or
(d) of this Section 1.5, 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 Sections 1.5, Article IX, Section 10.1, Section
10.2 and Section 10.16 shall survive and continue in full force and effect,
notwithstanding termination. If this Agreement is terminated, all due diligence
and other documentation delivered to Eastern by the Companies and Sellers shall
be returned to the Sellers.
SECTION 1.6 Deliveries by Eastern. At the Closing, Eastern shall deliver
---------------------
or cause to be delivered, all duly and properly executed, authorized and issued
(where applicable):
(a) Certificates representing the EESI Stock, as provided in Section 1.3
above;
(b) A favorable opinion from counsel for Eastern, dated the Closing Date,
in the form attached as Schedule 1.6(b); and
3
(c) A copy of resolutions of the directors of Eastern certified by its
secretary authorizing the execution and delivery of this Agreement and each
other agreement to be executed in connection herewith (collectively, the
"Collateral Documents") and the consummation and performance of the transactions
contemplated herein and therein.
SECTION 1.7 Deliveries by Sellers. At the Closing, Sellers shall deliver
----------------------
to Eastern or cause to be delivered, all duly and properly executed, authorized
and issued (where applicable) the following:
(a) Certificates in valid form evidencing all of the Company Shares owned
by each Seller, each duly endorsed in blank or accompanied by a duly executed
stock power attached or otherwise executed in the presence of authorized
representatives of Eastern;
(b) An assignment of Partnership Interests, executed by all the partners
of Associates, assigning 99.9 percent of the interests in Associates to Eastern,
and assigning .1 percent to Eastern's designee, in the form attached hereto as
Schedule 1.7 (b) together with certificates of U.S. resident status.
(c) Except as may be otherwise required by Eastern, the written
resignations of all officers, directors and partners of the Companies as of the
time of Closing;
(d) A current certificate of good standing for each of the Companies
(other than Associates) from each applicable jurisdiction of incorporation and
admission, together with a copy of all charter documents of each of the
Companies certified by the secretary of state of each applicable state of
incorporation, and, in the case of Associates, a copy of its partnership
agreement;
(e) An opinion from counsel for Sellers, dated the Closing Date, in form
attached as Schedule 1.7(e);
(f) A release from each Seller, in a form attached as Schedule 1.7(f);
(g) The Certificate described at Section 7.1 executed by the President (or
general partner) of each of the Companies;
(h) A Noncompetition agreement executed by the Sellers in form and
substance attached as Schedule 1.7(h); and
(i) The books and records of the Companies, including, without limitation,
all original financial and operating records, the corporate minute books and
seals, the corporate stock ledgers, and all title documents.
4
(j) A certificate signed by each Seller or his accountant setting forth
the tax basis of each of his Company Shares.
ARTICLE II
ASSOCIATES--REAL ESTATE
-----------------------
SECTION 2.1 Real Property. Associates owns one parcel of real property
--------------
having a street address of 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx 00000
(hereinafter referred to as the "Real Property"). The Real Property is used by
the Companies. Associates owns no other assets. A legal description of the metes
and bounds of the Real Property is attached as Schedule 2.1(a). For purposes of
this Agreement, "Real Property" shall also include: (i) all of Companies' right,
title and interest in and to all easements, rights-of-way, privileges and
appurtenances thereto, (ii) all of Companies' right, title and interest in and
to the beds of all streets, roads, avenues or highways, open or proposed,
abutting the Real Property, (iii) all of Companies' right, title and interest,
if any, in and to any award in condemnation, or damages of any kind, to which
Companies may have become entitled or may hereafter be entitled, by reason of
any exercise of the power of eminent domain with respect to the Real Property or
any other right, title or interest to be sold hereunder or any part thereof, and
(iv) all of Companies' right, title and interest in and to all surveys,
architectural and engineering plans, specifications, drawings, reports, etc., if
any, presently existing or hereafter prepared, with respect to the Real
Property.
SECTION 2.2 Owner's Title Policy. At Closing, Associates shall possess,
--------------------
with respect to the Real Property, an extended coverage owner's policy of title
insurance from a title company acceptable to Eastern (the "Title Company"),
dated as of the Closing Date, in the amount equal to the fair market value of
such real property. The title policy shall include comprehensive, access,
contiguity, non-imputation and zoning endorsements, and shall insure title to
the Real Property to be in fee simple in Companies, subject only to the
Permitted Exceptions set forth in Section 2.3 hereof (the "Owners Policy").
SECTION 2.3 Permitted Exceptions. The Owners Policy shall insure
--------------------
Associates' interest in the Real Property to be free and clear of all
encumbrances and exceptions whatsoever except those listed on Schedule 2.3.
attached hereto ("Real Property Permitted Exceptions").
SECTION 2.4 Survey. Sellers shall furnish Eastern with separate surveys
------
relating to the Real Property that are sufficiently current that the Title
Company shall not include a survey exception in the Owner's Policy. If Sellers
do not have such a survey available, Eastern, at its election, may have a survey
of the Real Property made at its expense. Sellers will cooperate and aid
Eastern's surveyor in preparing any survey commissioned by Eastern.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
5
With knowledge that Eastern is relying upon the representations, warranties
and covenants herein contained, Sellers each represent and warrant to Eastern
and make the following covenants for Eastern's benefit. When the phrase "to
Sellers' knowledge" or any equivalent phrase is used in this Agreement, the
phrase shall mean the actual knowledge of any Seller or the information and/or
knowledge any Seller who is or was a director or officer or employee of any
Company would actually possess had such Seller acted with reasonable diligence
in the conduct of his or her duties as an officer or director or employee.
SECTION 3.1 Organization and Standing. The Companies (other than
-------------------------
Associates, which is a legally-constituted partnership under the laws of the
State of New Jersey) are corporations duly organized, validly existing and in
good standing under the laws of the state of their incorporation, with full
power and authority to own their properties and conduct their businesses as now
being conducted. Except as listed in Schedule 3.1, the Companies do not own any
stock or interest in any other corporation, partnership, or other business
organization. Sellers own all of the issued and outstanding securities and
Partnership Interests of the Companies, as set forth on Schedule 1.3(b).
SECTION 3.2 Securities. The Companies have the authorized and outstanding
----------
securities (or, in the case of Associates, Partnership Interests) set forth on
Schedule 1.3(b). All outstanding shares of stock are legally and validly
authorized and issued, fully-paid and nonassessable. There are no outstanding
rights of any kind to acquire additional shares of any class of stock or
partnership interests of the Companies, except as set forth on Schedule 1.3(b).
The Sellers own the Company shares and Partnership Interests free and clear of
all liens and encumbrances and will convey to Eastern good title to the same
free and clear of all liens and encumbrances.
SECTION 3.3 Contracts, Permits and Material Documents. The items listed
-----------------------------------------
in Schedule 3.3 attached hereto are all of the following ("Material Documents")
with respect to the Companies which provide a benefit or imposes a detriment of
a value of $25,000 or more: (i) leases for real and personal property, (ii)
licenses, (iii) franchises, (iv) promissory notes, guarantees, bonds, mortgages,
liens, pledges, and security agreements under which any of the Companies are
bound or under which any of the Companies are the beneficiary, (v) collective
bargaining agreements, (vi) patents, trademarks, trade names, copyrights, trade
secrets, proprietary rights, symbols, service marks, and logos, (vii) all
permits, licenses, consents and other approvals from governments, governmental
agencies (federal, state and local) and/or third parties relating to, used in or
required for the operation of any of the business of the Companies, (viii) all
surety bonds, closure bonds or any other obligation which the Companies have
liability for with respect to their operations and (ix) other contracts,
agreements and instruments not listed on another Schedule attached to this
Agreement (such as the customer contracts listed on Schedule 3.5) which are
binding on any of the Companies or any of their property and pursuant to which
any of the Companies derive a benefit or incur a detriment having a value of
$25,000 or more. The Material Documents listed on Schedule 3.3 are organized
under separate headings for each of the Companies and under subheadings for each
of the
6
different type of documents listed. Except as set forth on Schedule 3.3, neither
the Companies 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. None of the Companies is a party to, and none of
Companies' properties are bound by, any agreement or instrument which is
material to the continued conduct of business operations of the Companies, as
now being conducted, except as listed in Schedule 3.3.
SECTION 3.4 Personal Property. All items of personal property used in the
------------------
business of the Companies (the "Business") are listed on the schedules set forth
below, are owned by the Companies by good and marketable title, free of all
liens, claims and encumbrances other than the Company Debt, and are now and at
closing will be in good condition, normal wear and tear excepted.
(a) All furniture, office equipment, computer equipment, and radio
equipment used in the Business, all of which are owned by the Companies, except
as noted on Schedule 3.4(a);
(b) All rolling stock, including motor vehicles, trucks, front and rear
end loaders, and compactors and accessories and attachments to the rolling stock
used in the Business together with information as to the make, description of
body and chassis, model number, vehicle identification or serial number, and
year of each such vehicle, all of which are owned by the Companies, except as
noted on Schedule 3.4(b);
(c) All containers used in the Business together with information as to
container size and year of manufacture, all of which are owned by the Companies,
except as noted on Schedule 3.4(c);
(d) All balers, scales, compactors, extruders and other equipment used at
the transfer station operated by the Companies and/or used in the Business and
having a fair market value of $15,000 or greater, all of which are owned by the
Companies, except as noted on Schedule 3.4(d);
(e) All of the inventory of parts, tires and accessories used in the
Business; and
(f) All of the shop tools used in the Business.
Sellers represent and warrant that, in the aggregate, the personal property of
the Companies is sufficient for the Companies to carry on the Business as
presently conducted, and that the personal property is all in operable
condition, except as noted to the contrary on Schedules 3.4(a) through 3.4(d)
attached.
SECTION 3.5 Customers. A list of customers served by any of the Companies
---------
together with information as to the services rendered to each such customer,
frequency of service and rates charged and the contractual rights of each
customer, whether oral or in writing, is listed on Schedule
7
3.5 attached hereto. None of the Companies and no other person or party to any
of the customer contracts is in material default under any of the customer
contracts, and no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The purchase of the Companies by
Eastern will not create a default under any customer contract.
SECTION 3.6 Real Property. None of the Companies has ever owned, leased
-------------
or otherwise occupied, had an interest in or operated any real property other
than the Real Property, except as listed on Schedule 3.6 attached hereto and
incorporated herein by reference. Companies have good, marketable and insurable
title to the Real Property except for the Real Property Permitted Exceptions.
(a) In all material respects, except as set forth in Schedule 3.6(a)
attached hereto and incorporated herein, the use of the Real Property is, and at
all times during operation of the Business thereon has been, licensed, permitted
and authorized under all applicable federal, state and local statutes, laws,
rules, regulations, orders, permits (including, without limitation, zoning
restrictions and land use requirements) and licenses and all administrative and
judicial judgments, rulings, decisions and orders affecting or otherwise
applicable to the protection of the environment, the Real Property and the
conduct of the Business thereon (collectively, the "Applicable Laws").
(b) The Real Property is legally usable for its current uses, and the Real
Property can be used by Eastern and the Companies after the Closing to operate
the Business as is currently operated, without violating any Applicable Law or
private restriction, and such uses are legal, conforming uses.
(c) All activities and operations conducted on the Real Property, whether
by the Companies or by third parties, are now being conducted and have always
been conducted in compliance with all Applicable Laws.
(d) The Companies shall make available on Eastern's reasonable request all
engineering, geologic, environmental and other similar reports, documentation
and maps relating to the Real Property in the possession or control of the
Sellers or their consultants or employed professional firms.
(e) Except as set forth in Schedule 3.6(e) attached hereto and
incorporated herein by reference, neither the Companies nor the Real Property
now is or ever has been involved in any litigation or administrative proceeding
seeking to impose fines, penalties or other liabilities or seeking injunctive
relief for violation of any Applicable Laws relating to the environment.
(f) There have been no spills, leaks, deposits or other releases into the
environment or onto or under the Real Property of any Hazardous Materials as
defined in any Applicable Law or other material environmental conditions other
than as disclosed on Schedule 3.6(f).
8
(g) No party, other than the Companies, has a present or future right to
possession of all or any part of the Real Property, except for any right defined
in, under or by any of the Permitted Exceptions.
(h) No portion of the Real Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any Applicable Laws or the procedural manuals of
the Environmental Protection Agency, U.S. Army Corps of Engineers or the New
Jersey Department of Environmental Protection whether such characterization
reflects current conditions or historic conditions which have been altered
without the necessary permits or approvals, except as listed on Schedule 3.6(h)
attached hereto and incorporated herein by reference.
(i) There are no mechanic's liens affecting the Real Property and no work
has been performed on the Real Property within twelve (12) months of the date
hereof for which a mechanic's lien could be filed, except as set forth in
Schedule 3.6(i) attached hereto and incorporated herein by reference.
(j) There are no levied or pending special assessments affecting all or
any part of the Real Property owed to any governmental entity and none is
threatened.
(k) There are no proceedings or amendments pending and brought by or
threatened by, any third party which would result in a change in the allowable
uses of the Real Property or which would modify the right of the Companies or
Eastern to use the Real Property for its present uses after the Closing Date.
SECTION 3.7 Financial Statements. Sellers have delivered to Eastern true
--------------------
and correct copies of the following financial statements of the Companies (the
"Financial Statements"):
(a) Balance sheets of the Companies as of December 31, 1995, December 31,
1996, and December 31, 1997, and a statement of income, cash flow and retained
earnings for the twelve-month periods ended December 31, 1995, December 31,
1996, and December 31, 1997, all prepared on an accrual basis and compiled by
the accountants of the Companies; and
(b) A balance sheet as of June 30, 1998 ("Most Recent Balance Sheet"), and
a statement of income, cash flow and retained earnings for the six-month period
ended June 30, 1998 ("Most Recent Income Statement"), with respect to each of
the Companies, both prepared in accordance with GAAP by the Companies. The Most
Recent Balance Sheet and Most Recent Income Statement are hereafter referred to
as the "Most Recent Financial Statements."
The Financial Statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
in accordance with past custom and
9
practice of the Companies. The balance sheets 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 each of the Companies for
the periods indicated thereon. Since the date of the Most Recent Balance Sheet,
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, their
financial statements for any period. The Financial Statements are consistent
with the books and records of the Companies (which books and records are correct
and complete in all material respects). Since the date of the Most Recent
Financial Statements, there has not been any material adverse change in the
income, expenses or assets of the Companies.
SECTION 3.8 Liabilities; Accounts Receivable; Revenues; and Working
-------------------------------------------------------
Capital.
-------
(a) The Companies do not have any liabilities, fixed or contingent, other
than:
(i) liabilities fully reflected in the Most Recent Balance
Sheet; and
(ii) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice; and
(b) All existing accounts receivable of the Companies are, and all
accounts receivable arising since the date of this Agreement will be valid and
enforceable accounts receivable, and will be fully collectible in the ordinary
course of business within 120 days after the Closing. All accounts receivable
have been generated in the ordinary course of business of the Companies
consistent with past practice. There are no defenses or set-offs to any of the
accounts receivable. At Closing, the accounts receivable of the Companies on a
consolidated basis shall exceed the accounts payable of the Companies.
(c) At Closing, the Companies on a consolidated basis shall have working
capital consisting of current assets in excess of current liabilities (each
determined in accordance with GAAP) in an amount no less than the amount they
have had on an historic basis as reflected on the Financial Statements, but in
no event less than $300,000. It is acknowledged that current assets shall
include cash, cash equivalents, pre-paid expenses and accounts receivable, and
current liabilities shall include accounts payable, accrued expenses, and
accrued vacation pay.
SECTION 3.9 Fiscal Condition of the Companies. Since the date of the Most
---------------------------------
Recent Balance Sheet, except as set forth in Schedule 3.9, there has not (except
as otherwise specifically permitted by this Agreement or as set forth in the
Schedules to this Agreement) been:
(a) Any material adverse change in the financial condition, business
organization or personnel of any of the Companies or in the relationships of any
of the Companies with suppliers,
10
customers or other third parties;
(b) Any disposition by any of the Companies of any of its capital stock or
any grant of any option or right to acquire any of its capital stock or
partnership interest, or any acquisition or retirement by any of the Companies
of any of its capital stock or partnership interest or any declaration or
payment of any dividend or other distribution of its capital stock;
(c) Any sale or other disposition of any asset owned by any of the
Companies at the close of business on the date of the Most Recent Balance Sheet,
or acquired by it since that date, other than a sale of inventory or spare parts
in the ordinary course of business consistent with past practice;
(d) Any expenditure or commitment by any of the Companies for the
acquisition of any single asset or any single business, except in the ordinary
course of business consistent with past practices and having an acquisition
price of $25,000 or less;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Companies taken as a whole,
except damage, destruction or loss which does not exceed $25,000 in the
aggregate;
(f) Any material bonuses or increases in the compensation payable or to
become payable by any of the Companies to any officer or key employee, except in
the ordinary course of business or as required by law or pursuant to a contract
which is listed on a Schedule to this Agreement;
(g) Any loans or advances to or by any of the Companies other than
renewals or extensions of existing indebtedness and other than in the ordinary
course of business consistent with past practice; or
(h) Any change in accounting method or practice.
SECTION 3.10 Tax Returns. Except as set forth in Schedule 3.10, the
-----------
Companies have filed all federal, state and local tax returns required to be
filed on or before the due date of such returns (as may have been extended by
any valid extension of time) for all periods ending before the date hereof, and
have paid all taxes due for the periods covered by said returns. Except as set
forth in Schedule 3.10, the Companies have no liability for taxes incurred prior
to the close of business on the Closing Date, except for taxes for the current
fiscal year in an amount not exceeding the reserve therefore on the Most Recent
Balance Sheet.
NEH and HMC are Subchapter "C" Corporations under the Internal
Revenue Code and EW and PCI are Subchapter "S" corporations under the Internal
Revenue Code, with an equivalent "S" election under New Jersey Income Tax Law.
Sellers will not revoke EW's and PCI's
11
election to be treated as a Subchapter "S" corporation, and Sellers will not
take or allow any action, other than the transfer of stock pursuant hereto, that
would result in the termination of EW's and PCI's status as a valid electing
Subchapter "S" corporation.
The Companies do not file income tax returns in any state other than
the State of New Jersey, and are not liable for tax in any other state.
Sellers warrant that they will pay, with their own funds, (and will
indemnify, defend and hold-harmless the Companies and Eastern) for any and all
federal, state and local taxes due and payable by the Companies with respect to
all periods ending prior to the Closing Date, and periods ending with the close
of business on the Closing Date (including the day of the Closing), (and, to the
extent applicable, a pro-rata share, based on daily pro-ration of all state and
local taxes for periods beginning before and ending after the Closing); but only
to the extent such taxes exceed the reserve for taxes established on the Most
Recent Balance Sheet including, without limiting the generality of the
foregoing, all federal, state and local income, sales, use, payroll, franchise,
excise and property taxes.
The reserves for taxes reflected in the Most Recent Balance Sheet, if
any, are adequate to cover all taxes, interest and penalties in connection
therewith that may be assessed with respect to the property and business
operation for periods ending with the close of business on the day of the
Closing and for all prior periods.
The Companies have filed, or will file in a timely manner, all
requisite federal, state, local and other tax returns due for fiscal periods
ending on or before the date hereof, and as promptly as possible after the
Closing, shall file in a timely manner all such returns due for all periods
ending on the close of business on the Closing Date or ending after the date
hereof, but before the Closing Date.
Tax returns for the Companies for periods ending on and for periods
ending before the Closing Date shall be timely prepared by Seller's accountants
and filed by Sellers on or before the due date thereof. Seller shall permit
Eastern to review and comment on such tax returns prior to filing. Sellers
shall include any income, gain, loss, deduction or any other tax items with
respect to the Subchapter "S" corporations for the period ending prior to the
date of the Closing on their tax returns. Neither Eastern nor the Companies
will have any obligation to reimburse the Sellers for their tax liability with
respect to such period or any other period.
Except as set forth in Schedule 3.10, the Companies have duly withheld
and collected all taxes for which the Companies are required to withhold or
collect by law, have paid over to the proper authorities all such amounts
required to be paid and have in reserve all amounts so withheld or collected
that have not yet been paid. No taxing authority has assessed any deficiency
for any prior tax period of the Companies, and the Sellers are not aware of any
facts that would constitute
12
the basis of the assertion of such a deficiency.
SECTION 3.11 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Companies or which the Companies have
had issued and which have not expired are listed on Schedule 3.11 attached
hereto. Schedule 3.11 includes the names and addresses of the insurers and
sureties, policy and bond numbers, types of coverage or bond, time periods or
projects covered and the names and addresses of all known banks, beneficiaries,
agents or agencies with respect to each listed insurance policy, performance
bond and letter of credit. All current insurance policies, performance bonds
and letters of credits of the Companies are in force and effect and the premiums
thereon are not delinquent. Except as set forth in Schedule 3.11, the Companies
have not received any notification from any insurance carrier denying or
disputing any claim made by any of the Companies or denying or disputing any
coverage for any such claim or denying or disputing the amount of any claim.
The Companies have no claim against any of their insurance carriers under any of
policies insuring them pending or anticipated and there has been no occurrence
of any kind which would give rise to any such claim.
SECTION 3.12 Employees, Pensions, and ERISA.
------------------------------
(a) None of the Companies has any contract of employment with any officer
or other employee, except as listed on Schedule 3.12(a).
(b) Except as set forth on Schedule 3.12(b), no employee of the Companies
is represented by any union. A list of the name, address and social security
number and current rate of compensation of each of the Companies' employees and
capacity in which each person is employed is set forth on Schedule 3.12(b).
There is no pending or threatened dispute between any of the Companies and any
of its employees which might materially and adversely affect the continuance of
the business operations of such Company.
(c) Attached hereto made a part hereof and marked Schedule 3.12(c) lists
all employee benefit plans, funds or programs (within the meaning of the Code or
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) which
are currently maintained and/or were established or sponsored by any of the
Companies (whether or not they are now terminated) or to which any of the
Companies currently contributes, or has an obligation to contribute in the
future, including, without limitation, employment agreements and any other
agreements containing "golden parachute" provisions ("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.
(d) The Sellers have delivered to Eastern (i) true and complete copies of
all Plan documents and other instruments relating thereto, (ii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iii) true and complete copies of all annual reports for any Plan
13
prepared within the past 5 years, and (iv) all material filings submitted to and
any correspondence received from any government agency relating to any Plan
within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, threatened relating to any Plan, fiduciary of any
Plan or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
SECTION 3.13 Legality of Operation. In regard to the Companies:
---------------------
(a) Except as to Environmental Laws, as hereinafter defined in Section
3.13(b) below, and as set forth in Schedule 3.13(a), each of the Companies is in
compliance with all federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use or zoning laws;
payroll, employment, labor, interstate commerce, transportation or safety laws;
or
14
federal, state or local "anti-trust" or "unfair competition" or "racketeering"
laws such as but not limited to the Xxxxxxx Act, the Xxxxxxx Act, the Xxxxxxxx
Xxxxxx Act, the Federal Trade Commission Act, or the Racketeer Influenced and
Corrupt Organization Act (collectively, "Law"). Each of the Companies 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 any of its
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.
There are no claims, actions, suits, investigations or proceedings pending, or
to Sellers' knowledge threatened against or affecting any of the Companies, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
wherever located, which would result in any adverse change in the financial
condition or business of any of the Companies or which would invalidate this
Agreement or any action taken in connection with this Agreement. The Companies
have received no notification of any past or present failure by any of the
Companies to comply with any Law applicable to it or its assets.
(b) Each of the Companies 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"). Each of the Companies is
in compliance with all permits, licenses, and orders related thereto or issued
thereunder, as are or may be applicable to the property and operations of the
Companies, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located. There are
no Environmental Law related claims, actions, suits or proceedings pending or
threatened against or affecting any of the Companies, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, wherever located, which
would result in an adverse change in the financial condition or business of any
Company or which would invalidate this Agreement or any action taken in
connection with this Agreement. None of the Companies has transported, stored,
treated or disposed of, nor has any Company allowed any third persons, on its
behalf, to transport, store, treat or dispose of waste to or at (i) any location
other than a site lawfully permitted to receive such waste for such purpose or,
(ii) any location currently designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar federal or state statute; nor has any Company performed, arranged
for or allowed by any method or procedure such transportation or disposal in
contravention of state or federal laws and regulations or in any other manner
which may result in any liability for contamination of the environment; and the
Companies have not disposed of, nor have the Companies knowingly allowed third
parties to dispose of waste upon property owned or leased by the Companies other
than as permitted by, and in conformity with, applicable Environmental Law.
Except as disclosed in Schedule 3.13(b), the Companies have not received any
notification of any past or present failure by the Companies to comply with any
Environmental Law applicable to their operations or their assets. Without
limiting the generality
15
of the foregoing, except as set forth in Schedule 3.13(b), the Companies have
not received any notification (including requests for information directed to
the Companies or an owner thereof) from any governmental agency asserting that
any of the Companies is or may be a "potentially responsible person" for a
remedial action at a waste storage, treatment or disposal facility, pursuant to
the provisions of CERCLA, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment. The Companies have not received any hazardous
waste as defined in the Resource Conservation and Recovery Act, 42 USCA Section
6901 et seq., or in any similar federal or state statute in quantities which
-- ---
would require remediation or abatement.
(c) Schedule 3.13(c) lists all landfills to which Companies have delivered
waste in the past ten years. Except as set forth on Schedule 3.13 (c), no
Company has ever owned, operated, had an interest in, engaged in and/or leased a
waste transfer, recycling, treatment, storage, landfill or other disposal
facility. Each of the Companies has obtained and maintained, when required to
do so under applicable Environmental Laws, trip tickets, signed by the
applicable waste generators demonstrating the nature of all waste deposited and
or transported by any of the Companies. To the Sellers' knowledge, no employee,
contractor or agent of any Company has, in the course and scope of employment
with the Companies, 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 under CERCLA, any comparable New Jersey
State statute or other applicable Environmental Law, and to Sellers' knowledge
no facts or circumstances exist which would give rise to the same.
(d) Schedules 3.13(a) and 3.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past three years and all outstanding
unremedied notices of violations issued to the Companies by any federal, state
or local regulatory agency.
(e) No employee, officer, director, or shareholder of any of the Companies
is under investigation by the Attorney General of any state, by the District
Attorney of any county of any state, or by any United States Attorney or any
other governmental investigative agency for the violation of any Laws,
including, without limitation, the violation of any anti-trust, racketeering, or
unfair competition Laws.
(f) All pending or threatened litigation and administrative, investigative
or judicial proceedings involving any of the Companies, or any of their assets
or liabilities, are set forth on Schedule 3.13(f) attached, together with a
description of each such proceeding.
SECTION 3.14 Corrupt Practices. None of the Companies has made, offered
-----------------
or agreed to offer anything of value to any employees of any customers of any of
the Companies (except in conformity with Law) for the purpose of attracting
business to any of the Companies or any foreign or domestic governmental
official, political party or candidate for government office or any of their
respective
16
employees or representatives, nor has any Company otherwise taken any action
which would cause it to be in violation of the Foreign Corrupt Practices Act of
1977, as amended.
SECTION 3.15 Legal Compliance. Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their obligations under this
Agreement, and, except as set forth in Schedule 3.15, no approvals or consents
of any other persons, business or governmental units are necessary to be
obtained by Sellers or any Company in connection with the transactions, filings
with or notices to, contemplated by this Agreement. The execution and
performance of this Agreement will not result in a material breach of or
constitute a material default or result in the loss of any material right or
benefit under:
(a) Any charter, by-law, agreement, partnership agreement or other
document to which any of the Companies is a party or by which any of the
Companies or any of their respective properties are bound, including, without
limitation, any agreement by or between any shareholder of any Company; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on any of the Companies or on any of their respective properties; or
(c) Any permit, certificate or license issued by any governmental
authority under which any of the Companies operate or pursuant to which any of
the property of the Companies is bound; or
(d) Any agreement to which any of the Companies is bound, including,
without limitation, bank loan documents, agreements with customers or suppliers
and leases for equipment.
SECTION 3.16 Transaction Intermediaries. Sellers have no agreement or
--------------------------
understanding with any agent, broker, financial advisor or other person acting
pursuant to the express authority of any of the Companies with respect to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
SECTION 3.17 Intellectual Property. The Companies have not infringed, and
---------------------
are not now infringing, on any trade name, trademark, service xxxx or copyright
belonging to any person, firm or corporation ("Intellectual Property") and no
one has or is infringing any Intellectual Property right of any of the
Companies. The Companies own or have legally licensed all computer software
used in connection with the Business and have not infringed, and are not now
infringing, on the rights of any third parties by their use of computer
software.
SECTION 3.18 Competition. Except as set forth on Schedule 3.18, no Seller
-----------
or salaried officer of any Company, nor any spouse or child of any of them, has
any direct or indirect interest in any competitor of the Companies within the
geographical area in which the Companies currently conduct business, or an
interest in any supplier or customer of the Companies or in any person from whom
17
or to whom the Companies lease any real or personal property, or in any other
person with whom the Companies are doing business. Excluded from the scope of
this Section 3.18 is any ownership of stock in a publicly traded entity.
SECTION 3.19 Pooling Requirements. Except as set forth in Schedule
--------------------
3.19(a), the Sellers do not own any waste collection or transfer businesses or
assets other than the Companies and the Real Property. For the twenty-four (24)
month period ending on the date of this Agreement, there has been no change of
ownership of the Company Shares or Partnership Interests except as listed on
Schedule 3.19(b). Except as listed on Schedule 3.19(b), there will be no change
in the Ownership of the Company Shares or partnership interests from the date of
this Agreement to the Closing Date. During the most recent twenty-four calendar
months prior to the date of this Agreement, the Companies have not paid any
dividends or distributions to their shareholders other than dividends and
distributions consistent in amount and kind to the dividends and distributions
paid by the Companies during the three-year period immediately preceding the
twenty-four-month period.
SECTION 3.20 Adult Individuals as Sellers. All the Sellers are adult
----------------------------
individuals and have the legal capacity to enter into and perform this
Agreement.
SECTION 3.21 Disclosure. The representations and warranties of Sellers
----------
contained in this Agreement, or in any Schedule or other document delivered by
Sellers pursuant hereto, do not contain any untrue statement of a material fact,
or omit any statement of a material fact necessary to make the statements
contained not misleading. If, prior to Closing, Sellers become aware of any
inaccuracy or misrepresentation or omission in any of the Schedules, they shall
immediately advise Eastern in writing of the inaccuracy, misrepresentation or
omission.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EASTERN
------------------------------------------
With knowledge that Sellers are relying upon the representations,
warranties and covenants contained herein, Eastern represents and warrants to
Sellers and makes the following covenants for Sellers' benefit.
SECTION 4.1 Organization and Existence. Eastern is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted. Eastern has all requisite corporate power and
authority to consummate the transactions contemplated by this Agreement.
SECTION 4.2 Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement and the Collateral Documents by Eastern has
been duly authorized and approved by the Board of Directors of Eastern. No
further corporate action is necessary on the part of Eastern
18
to consummate this Agreement and the Collateral Documents in accordance with
their terms. Eastern has full authority to enter into and perform its
obligations under this Agreement and the Collateral Documents, and neither the
execution, delivery nor performance by Eastern of this Agreement or the
Collateral Documents will (i) result in a violation or breach of any term or
provision nor constitute a default under the certificate of incorporation or
bylaws of Eastern or under any contract or agreement to which Eastern is a party
or by which it is bound, or violate any order, writ, injunction or decree of any
court, administrative agency or governmental body, or (ii) result in a violation
or breach of any term or provision, or constitute a default or accelerate the
performance required, under any indenture, mortgage, deed of trust or other
contract or agreement to which Eastern is a party or by which it or its
properties is bound.
SECTION 4.3 Commission Filings. Eastern has delivered to Sellers current
------------------
(for the quarter ending June 30, 1998) and all other filings made by Eastern on
Forms 8-K, 10-K, 10-Q and Proxy Statements timely filed with the Securities and
Exchange Commission ("SEC") for the fiscal year ending June 30, 1998 (the
"Public Reports"). The Public Reports accurately furnish all information
concerning Eastern required by such forms.
SECTION 4.4 Issued Common Stock. The EESI Stock to be issued pursuant to
-------------------
this Agreement has been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable and is registered under the Securities Act
of 1933 (the "Act").
SECTION 4.5 Transaction Intermediaries. Eastern has no agreement or
--------------------------
understanding with any agent, broker, financial advisor or other person acting
pursuant to the express authority of Eastern with respect to any commission or
finder's fee in connection with the transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PARTIES AND SELLERS
------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 5.1 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all the outstanding stock of the Companies solely in exchange for
voting stock of Eastern in a transaction intended to qualify (as to EW, NHC, PCI
and HMC, but not as to Associates) as a reorganization within the meaning of
Section 368(a)(1)(B) of the Code, and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to
take no action inconsistent with the treatment of such exchange as a
reorganization under Code Section 368(a)(1)(B) and to comply with all IRS filing
and other requirements for such exchange. Eastern and Sellers agree that a
material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement shall constitute a "plan of reorganization"
within the meaning of
19
the Code. If for any reason a provision in this Agreement would prevent the
transaction from qualifying as a reorganization within the meaning of the Code,
the parties agree to negotiate in good faith to modify the Agreement so the
transaction can qualify as a reorganization, as long as the economics of the
transaction as to each of the parties is not materially changed.
SECTION 5.2 Pooling Restrictions. Eastern and Sellers have agreed that a
--------------------
material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement be treated as a "pooling of interests" for
accounting purposes. If for any reason a provision in this Agreement would
prevent the transaction being accounted for as a "pooling of interests," the
parties agree to negotiate in good faith to modify the Agreement so the
transaction can be accounted for as a "pooling of interests" while maintaining
materially the same financial terms as to each of the parties. Notwithstanding
any other provision of this Agreement, prior to the publication and
dissemination by Eastern of consolidated financial results which include results
of combined operations of the Companies and Eastern for at least 30 days on a
consolidated basis following the Closing Date, Sellers shall not sell or
otherwise transfer or dispose of, or in any way reduce 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). Eastern agrees that such consolidated financial results
shall be published and disseminated no later than 135 days after the Closing
Date. The Securities Exchange Commission ("SEC") has issued Accounting Series
Release Nos. 130 and 135, as amended (collectively, the "ASRs"), setting forth
certain restrictions applicable to the availability of "pooling-of-interests"
accounting treatment in transactions of the type contemplated by this Agreement.
Sellers therefore covenant and agree with Eastern to hold the EESI Stock and to
comply with the ASRs until the requirements of the ASRs have been met. In
addition, the certificates evidencing the EESI Stock to be received by Sellers
will bear a legend substantially in the form set forth below:
"The shares represented by this certificate may not be sold,
transferred or assigned, and Eastern Environmental Services,
Inc., shall not be required to give effect to any attempted sale,
transfer or assignment prior to the publication and dissemination
of financial statements by Eastern Environmental Services, Inc.,
which include the results of at least 30 days of combined
operations of Eastern Environmental Services, Inc., and the
companies acquired by Eastern Environmental Services, Inc., for
which these shares are issued. Upon the written request of the
holder hereof directed to Eastern Environmental Services, Inc.,
the issuer agrees to remove this restrictive legend (and any stop
order places with the transfer agents) when the requirements of
Accounting Series Releases Nos. 130 and 135, as amended, of the
Securities Exchange Commission have been met."
SECTION 5.3 Access to Properties, Documents and Records. To the extent
-------------------------------------------
possible, Sellers will give to Eastern and its representatives, from the date
hereof until the Closing Date, full access during normal business hours, upon
reasonable notice, to all of the properties, books, contracts,
20
documents and records of each of the Companies, and will make available to
Eastern and its representatives all additional financial statements of and all
information with respect to the business and affairs of each of the Companies
that Eastern may reasonably request.
SECTION 5.4 Continuation of Business. Sellers will operate the Business
------------------------
of the Companies until the Closing Date in the ordinary course of business,
consistent with past practice, so as to preserve its business organizations
intact, to assure, to the extent possible, the availability to Eastern of the
present key employees of the Companies and to preserve for Eastern the
relationships of the Companies with suppliers, customers, and others.
SECTION 5.5 Continuation of Insurance. Sellers will keep in existence all
-------------------------
policies of insurance insuring the Companies against liability and property
damage, fire and other casualty through the Closing Date, consistent with the
policies currently in effect.
SECTION 5.6 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, Sellers will
not, directly or indirectly, solicit offers for the shares or the assets of the
Companies or for a merger or consolidation involving any of the Companies, or
respond to inquiries from, share information with, negotiate with or in any way
facilitate inquiries or offers from, third parties who express or who have
heretofore expressed an interest in acquiring any or all of the Companies by
merger, consolidation or other combination or acquiring any of the Companies'
assets.
SECTION 5.7 Consents. Sellers and Eastern shall cooperate with each other
--------
and use their best efforts to obtain all approvals, authorizations and consents
required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, the approval of every regulatory
agency of federal, state, or local government that may be required in the
opinion of either Eastern or Sellers. Eastern shall pay for all filing fees
required in connection with the filing of any application for consent including
the notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 ("HSR Notification"); provided, however, if Eastern is required to
pay more than one filing fee because Eastern is acquiring more than one entity,
Sellers shall pay one-half of such additional filing fees.
SECTION 5.8 Audited Financial Statements. Before and after Closing,
----------------------------
Sellers agree to cooperate with Eastern to have the Companies prepare audited
balance sheets for the Companies as of December 31, 1995, December 31, 1996, and
December 31, 1997, and statements of income, cash flow and retained earnings for
the Companies for the twelve-month periods ended December 31, 1995, December 31,
1996, and December 31, 1997 ("Historical Financial Statements"), as rapidly as
possible. Sellers' cooperation shall include, without limitation, the execution
of standard representation letters requested by Eastern's auditors. Sellers
shall prepare a compiled stub balance sheet and statements of income, cash flow
and retained earnings for the period commencing January 1, 1998, and ending on
the last day of the last calendar quarter ending prior to Closing ("Interim
21
Financial Statements"). The Historical Financial Statements and the Interim
Financial Statements shall be prepared by Ernst & Young at Eastern's cost.
Sellers shall cause the Companies' usual accountants to cooperate with Ernst &
Young. Eastern shall pay for the cost of the Companies' usual accountants in
the preparation of the Historical Financial Statements and the Interim Financial
Statements, provided Sellers cooperate at all times in their preparation.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES AND EASTERN
------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 6.1 Payment of Expenses. Eastern will pay all expenses incurred
-------------------
by Eastern in connection with the negotiation, execution and performance of this
Agreement and the Collateral Documents. Sellers will pay all legal and
accounting expenses incurred by Sellers and the Companies in connection with the
negotiation, execution and pre-Closing performance of this Agreement and the
Collateral Documents, and all realty transfer taxes, if any, arising out of the
transfer of Partnership Interests to Eastern pursuant hereto, except as set
forth in Sections 5.7 and 5.8 above.
SECTION 6.2 Registration Rights.
-------------------
(a) The EESI Stock delivered at Closing will be registered under the Act
for sale to the public in brokers transactions, pursuant to a "shelf
registration" on Form S-4 or an other appropriate form, if Form S-4 is not
available under Rule 415 of the Act. At Eastern's request, the Sellers or the
Companies shall provide Eastern with any information required for the completion
of the registration statement or any supplements thereto. Eastern shall keep
such registration statement current and effective, until such time as the shares
may be sold by the 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. Eastern shall also prepare and file with
the Securities and Exchange Commission such amendments and supplements to such
registration statement (and the prospectus used in connection therewith) as may
be necessary to update and keep such registration statement current and
effective for such period and to comply with the provisions of the Act with
respect to the sale of all securities covered by such registration statement.
Notwithstanding the above, Eastern's obligation to keep the shelf registration
continuously effective shall be suspended during any period that there exists
material, non-public information relating to Eastern.
(b) With respect to the EESI Stock, Eastern will furnish to the Sellers
such number of prospectuses, if required, under the Act, including copies of
preliminary prospectuses, prepared in conformity with the requirements of the
Act, and such other documents as the Sellers may reasonably request in order to
facilitate the public sale or other disposition of the securities to be sold
22
by the Sellers.
(c) Eastern shall indemnify Sellers in accordance with the provisions of
Article IX from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing, or necessary in order to make the statements therein not misleading), or
(iii) any violation or alleged violation by Eastern to which such Seller may
become subject under the Act, or other Federal or state laws or regulations, at
common law or otherwise. Notwithstanding the above, Eastern shall not be liable
to Sellers if and to the extent that any Security Liability arises out of or is
based upon any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with information furnished to Eastern by Sellers which is
intended for such use; and provided further, that Eastern shall not be required
to indemnify Sellers against any Security Liability which arises out of the
failure of Sellers to deliver a prospectus.
(d) All expenses incurred in effecting the registrations provided for in
this Section 6.2 shall be paid by Eastern, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Eastern, underwriting expenses (other than commissions or discounts
which shall be shared by the parties registering shares of Eastern's common
stock in proportion to the number of shares registered in each particular
offering), expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or "blue sky" laws of
any jurisdictions.
ARTICLE VII
CONDITIONS OF EASTERN
---------------------
The obligations of Eastern to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
each of the following items which are conditions to the Closing:
SECTION 7.1 Compliance by Sellers. Sellers and the Companies shall have
---------------------
performed and
23
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers and the Companies at or prior to the
Closing Date. All representations and warranties of Sellers contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date, with the same force and effect as though made at and as of the
Closing Date, except for changes expressly permitted by this Agreement, and
Eastern shall have received a Certificate duly executed by the President or
General Partner of each Company representing and warranting the foregoing.
SECTION 7.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might materially adversely affect the right of Eastern to own, operate in its
entirety or control the Companies or the business the Companies operate, which,
as a result of the transaction contemplated by this Agreement, might materially
adversely affect such right as to Eastern or any affiliate thereof subsequent to
the Closing Date and which, in the judgment of the Board of Directors of
Eastern, made in good faith and based upon advice of its counsel, makes it
inadvisable to proceed with the transactions contemplated by this Agreement.
SECTION 7.3 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Companies, and the Companies shall have not suffered any
material loss or damage or any of their properties or assets, whether or not
covered by insurance, since the date of the Most Recent Balance Sheet.
SECTION 7.4 Opinion of Counsel. Sellers shall have delivered to Eastern
------------------
the opinion of counsel, dated the Closing Date, in the form annexed hereto as
Schedule 1.7(e).
SECTION 7.5 Noncompetition Agreement. The Sellers shall have executed and
------------------------
delivered to Eastern the Noncompetition Agreement.
SECTION 7.6 Release. Sellers shall have executed and delivered to Eastern
-------
the Releases described at Section 1.7(f).
SECTION 7.7 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent and approval of the New Jersey Department of Environmental Protection,
including but not limited to all approvals required under the Industrial Sites
Recovery Act ("ISRA"), to the change in control of the Companies, and the
approval of the New Jersey Attorney General, (ii) the consent of the Federal
Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
(or expiration of any applicable waiting period); (iii) the approval of every
regulatory agency of federal, state, or local government that may be required in
the opinion of either Eastern or Sellers. Eastern shall have been furnished
with appropriate evidence, reasonably satisfactory to Eastern and its counsel,
of the granting of such approvals, authorizations and consents.
24
SECTION 7.8 Pooling Determination. Eastern shall have received
---------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
ARTICLE VIII
CONDITIONS OF SELLERS
---------------------
The obligations of Sellers to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
each of the following conditions:
SECTION 8.1 Compliance by Eastern. Eastern shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing Date. All
representations and warranties of Eastern contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date, with
the same force and effect as though made at and as of the Closing Date, except
for changes expressly permitted by this Agreement.
SECTION 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of Eastern to own, operate in its entirety or control the
Companies or the business the Companies operate which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
Eastern or any affiliate thereof subsequent to the Closing Date and which, in
the reasonable judgment of Sellers, made in good faith and based upon advice of
their counsel, makes it inadvisable to proceed with the transactions
contemplated by this Agreement.
SECTION 8.3 Material Adverse Change. There shall not have been, and on
-----------------------
the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be expected to result in, any material adverse
change in the condition (financial or otherwise), assets, real property,
personal property, results of operations, business or prospects of Eastern and
its subsidiaries taken as a whole.
SECTION 8.4 Opinion of Counsel. Eastern shall have delivered to Sellers
------------------
the opinion of counsel to Eastern, dated the Closing Date, in the form annexed
hereto as Schedule 1.6(b).
SECTION 8.5 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent and approval of the New Jersey Department of Environmental Protection,
including but not limited to all approvals required under the Industrial Sites
Recovery Act ("ISRA"), to the change in control of the Companies, and the
approval of the New Jersey Attorney General, (ii) the consent of the Federal
Trade Commission under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
(or expiration of any applicable waiting period); and (iii) the approval of
every regulatory agency of federal, state, or local government that may be
required in the opinion of either Eastern or Sellers. Sellers shall have been
furnished with appropriate evidence, reasonably satisfactory to Sellers and
their counsel, of the granting of such approvals, authorizations and consents.
25
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.1 Indemnification by Sellers. The Sellers agree that they will
--------------------------
indemnify, defend, protect and hold harmless Eastern and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, legal representatives, successors and assigns from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) whether equitable or legal, matured or contingent, known or
unknown to such Seller, foreseen or unforeseen, ordinary or extraordinary,
patent or latent, whether arising out of occurrences prior to, at, or after the
date of this Agreement, from: (a) any breach of, misrepresentation in, untruth
in or inaccuracy in the representations and warranties by the Seller, set forth
in this Agreement or in the Schedules attached to this Agreement or in the
Collateral Documents; (b) nonfulfillment or nonperformance of any agreement,
covenant or condition on the part of a Seller made in this Agreement and to be
performed by Sellers before or after the Closing Date; (c) violation of the
requirements of any governmental authority relating to the reporting and payment
of federal, state, local or other income, sales, use, franchise, excise or
property tax liabilities of the Companies arising or accrued prior to the
Closing Date; (d) any violation of any federal, state or local "anti-trust" or
"racketeering" or "unfair competition law", including, without limitation, the
Xxxxxxx Act, Xxxxxxx Act, Xxxxxxxx Xxxxxx Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act; and (e) any claim by a third
party that, if true, would mean that a condition for indemnification set forth
in subsections (a), (b), (c) or (d) of this Section 9.1 of this Agreement has
occurred.
SECTION 9.2 Indemnification by Eastern. Eastern agrees that it will
--------------------------
indemnify, defend, protect and hold harmless Sellers and their agents,
employees, heirs, legal representatives, successors and assigns, as applicable,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by it, as a result of or incident to: (a) any breach
of, misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Eastern set forth in this Agreement or in the Schedule attached to
this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Eastern
made in this Agreement and to be performed by Eastern before or after the
Closing Date; (c) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a), (b), or (c) of this
Section 9.2 has occurred.
SECTION 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification
26
against any other party to this Agreement (the "Indemnifying Party") under this
Article IX, then the Indemnified Party shall promptly notify each Indemnifying
Party thereof in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party is thereby prejudiced. Such notice shall state
the amount of the claim and the relevant details thereof to the extent known.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and
27
periodically for the cost of defending against the Third Party Claim (including
attorneys' fees and expenses), and (iii) the Indemnifying Party will remain
responsible for any adverse consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article IX.
SECTION 9.4 Procedure for Non-Third Party Claims. If Eastern or any
------------------------------------
Seller wishes to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party claim which makes
the provisions of Section 9.3 applicable, the party desiring indemnification
("Indemnified Party") shall deliver to the party from which indemnification is
sought ("Indemnifying Party") a written demand for indemnification
("Indemnification Demand"). The Indemnification Demand shall state: (a) the
amount of losses, damages or expenses to which the Indemnified Party has
incurred or has suffered or is expected to incur or suffer to which the
Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
thirty (30) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
SECTION 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 3.10 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought against the Companies by tax
authorities or governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above shall survive
until eighteen (18) months from the Closing Date. Notwithstanding the prior
sentence which provides that the representations and warranties expire after
certain stated periods of time, if within the stated period of time, a notice of
a claim for indemnification or Indemnification Demand is given, or a suit or
action based upon representation or warranty is commenced, the Indemnified Party
shall not be precluded from pursuing such claim or action, or from recovering
from the Indemnifying Party (whether through the courts or otherwise) on the
claim or action, by reason of the expiration of the representation or warranty.
28
SECTION 9.6 Indemnification Threshold. No Indemnification Demand shall be
-------------------------
made under this Article IX until such time that the party making an
Indemnification Demand believes, in good faith, that it has a claim or claims
for indemnity totalling Sixty-eight Thousand, Seven Hundred and Fifty Dollars
($68,750) or more, singly or in the aggregate, and no Indemnifying Party shall
have any liability to an Indemnified Party until the damages to the Indemnified
Party exceed a cumulative aggregate total of $68,750. Once cumulative aggregate
damages exceed $68,750, the Indemnifying Party shall be liable for all damages
to the Indemnified Party, including the first $68,750 of damages.
SECTION 9.7 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnified Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
ARTICLE X
OTHER PROVISIONS
----------------
SECTION 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of Eastern such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Eastern. Sellers agree that for a period of ten (10) years from the
Closing Date they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Eastern, unless (i) such
information becomes known to the public generally through no fault of any
Seller, (ii) a Seller is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) the Closing does
not take place. In the event of a breach or threatened breach by any Seller of
the provisions of this Section, Eastern shall be entitled to an injunction
restraining such Seller from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Eastern from
pursuing any other available remedy for such breach or threatened breach,
including, without limitation, the recovery of damages.
SECTION 10.2 Nondisclosure by Eastern. Eastern recognizes and
------------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of the Companies. Eastern agrees
that it will not utilize such information in the business or operation of
Eastern or any of its affiliates or, except
29
as required by law, disclose such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
unless (i) such information becomes known to the public generally through no
fault of Eastern or any of its affiliates, (ii) Eastern is compelled to disclose
such information by a governmental entity or pursuant to a court proceeding, or
(iii) Closing takes place. In the event of a breach or threatened breach by
Eastern of the provisions of this Section, Sellers shall be entitled to an
injunction restraining Eastern from utilizing or disclosing, in whole or in
part, such confidential information. Nothing contained herein shall be construed
as prohibiting Sellers from pursuing any other available remedy for such breach
or threatened breach, including, without limitation, the recovery of damages.
SECTION 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of Eastern) and shall be binding upon and shall
inure to the benefit of the parties hereto, and the successors of Eastern. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
SECTION 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
SECTION 10.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signatures.
SECTION 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid,
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
30
(a) If to Eastern, addressed to it at:
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
Attention: President
with a copy to:
Montgomery, McCracken, Xxxxxx & Xxxxxx, LLP
Attention: Xxxx X. Xxxxxxx, Esquire
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
(b) If to Sellers, addressed to them at:
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esquire
Xxxxxxxx Xxxxxxxx Xxxxx & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
SECTION 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New Jersey,
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New Jersey or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
Jersey.
SECTION 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of
31
default occurring before or after that waiver.
SECTION 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement.
SECTION 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
SECTION 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
SECTION 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
SECTION 10.13 Extension or Waiver of Performance. Either Sellers or
-----------------------------------
Eastern may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by Sellers and Eastern.
SECTION 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective officers, shareholders, directors, affiliates,
subsidiaries, parents, agents, employees, legal representatives, successors and
assigns, nor is anything in this Agreement intended to relieve or discharge the
obligation or liability of any third persons to any party to this Agreement, nor
shall any provisions give any third person any rights of subrogation or action
over or against any party to this Agreement.
SECTION 10.15 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this Agreement shall issue any press release or otherwise make
any statement with respect to the transactions contemplated by this Agreement
without the prior written consent of the other party, which shall not be
unreasonably withheld after review of the proposed press release.
32
SECTION 10.16 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Trenton, New Jersey, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies in any Court having jurisdiction. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement,
which such demand shall set forth in the same degree of particularity as
required for complaints under the Federal Rules of Civil Procedure the claims to
be submitted to arbitration. Additionally, the demand for arbitration shall be
stated with reasonable particularity with respect to such demand with documents
attached as appropriate. In no event shall the demand for arbitration be made
after the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred by the applicable
statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would aid
and assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to Seller and Eastern in connection with the negotiation
of and consummation of the transactions under this Agreement shall be entitled
to represent their respective party in any and all proceedings under this
Section or in any other proceeding (collectively, "Proceedings"). Seller and
Eastern, respectively, waive the right and agree they shall not seek to
33
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.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /s/ XXXXXX X. XXXXXX
---------------------
TITLE: EXECUTIVE VICE PRESIDENT
SELLERS:
/s/ XXXXXXXX XXXXXXX /s/ XXXXXXX XXXXXXX
----------------------- ---------------------
XXXXXXXX XXXXXXX XXXXXXX XXXXXXX
/s/ XXXXXXXX XXXXXXX /s/ XXXX XXXXXXX
----------------------- -------------------
XXXXXXXX XXXXXXX XXXX XXXXXXX
34
