<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NO. 0-16102
EASTERN ENVIRONMENTAL SERVICES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
59-2840783
(I.R.S. Employer Identification No.)
ROUTE 309 NORTH, RR #4, BOX 4452, DRUMS, PA 18222
(Address of Principal Executive Offices)
Registrant's Telephone No., including area code: (717) 788-6075
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ____
----
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock:
As of May 6, 1996 4,199,004 Shares of Common Stock
1,591,201 Shares of Class A Common Stock
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
Form 10-Q
Quarter Ended March 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
<S> <C>
Consolidated Balance Sheets - March 31, 1996
and June 30, 1995 1-2
Consolidated Statements of Operations for the three
months ended March 31, 1996 and 1995 3
Consolidated Statements of Operations for the nine
months ended March 31, 1996 and 1995 4
Consolidated Statement of Stockholders' Equity
for the nine months ended March 31, 1996 5
Consolidated Statements of Cash Flows for the
nine months ended March 31, 1996 and 1995 6-7
Notes to Consolidated Financial Statements 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
PART II - OTHER INFORMATION
Item 5 - Other Information 15
Item 6 - Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Eastern Environmental Services, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
---------- --------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 596,633 $ 566,771
Accounts receivable, less allowance for
doubtful accounts of $430,505
and $454,695 1,181,347 1,381,469
Deferred income taxes 168,186 168,186
Tax refund receivable 73,467 152,871
Prepaid expenses and other current assets 776,612 769,987
-------- -------
Total current assets 2,796,245 3,039,284
Property and equipment:
Land 148,852 148,852
Landfill Sites 12,429,185 10,804,589
Buildings and leasehold improvements 1,474,933 1,446,640
Vehicles 1,714,277 1,658,513
Machinery and equipment 3,505,508 3,512,070
Furniture and fixtures 650,505 639,075
---------- ----------
Total property and equipment 19,923,260 18,209,739
Accumulated depreciation and amortization 7,784,932 6,829,458
---------- ----------
12,138,328 11,380,281
Assets of discontinued operations 514,631 517,659
Intangible assets, net of $3,167,773 and
$3,057,468 accumulated amortization 343,145 453,450
Other assets, including $398,576 and
$544,597 of restricted cash on deposit
for landfill closure and insurance bonding 459,891 618,274
---------- ----------
Total assets $16,252,240 $16,008,948
=========== ===========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
---------- --------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Short-term borrowings $ 275,000 $ 350,000
Accounts payable 1,674,702 1,686,861
Accrued expenses 587,355 743,584
Note payable to shareholder/officer - 42,457
Income taxes payable 55,782 59,506
Current portion of accrued landfill
closure and other environmental costs 870,000 870,000
Current portion of long-term debt 820,371 766,240
---------- ----------
Total current liabilities 4,283,210 4,518,648
Deferred income taxes 240,538 240,538
Long-term debt 1,789,398 1,782,715
Accrued landfill closure and other
environmental costs 1,175,763 1,082,246
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares - 20,000,000
Issued and outstanding shares -
4,123,104 and 3,168,104 41,231 31,681
Class A common stock (convertible to
common stock), $.01 par value:
Authorized shares - 10,000,000
Issued shares - 1,591,201 15,912 15,912
Additional paid-in capital 8,524,502 7,672,228
Retained earnings 257,945 741,239
------------ -----------
8,839,590 8,461,060
Less treasury stock at cost - 39,100
common shares 76,259 76,259
---------- ----------
Total stockholders' equity 8,763,331 8,384,801
------------ -----------
Total liabilities and stockholders' equity $16,252,240 $16,008,948
============ ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Revenues $1,531,180 $2,106,708
Cost of revenues 1,200,324 1,676,322
----------- -----------
Gross profit 330,856 430,386
Selling, general and administrative expenses 635,252 749,558
Operating loss (304,396) (319,172)
Interest expense (37,644) (61,549)
Other income 44,609 51,838
----------- -----------
Loss before income taxes (297,431) (328,883)
Income tax benefit - 56,000
----------- -----------
Net loss $ (297,431) $ (272,883)
=========== ===========
Loss per share $(.06) $ (.06)
=========== ===========
Weighted average number of shares
outstanding 5,672,128 4,390,205
=========== ===========
</TABLE>
See accompanying notes.
3
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
---------------------------------------
1996 1995
------ ------
<S> <C> <C>
Revenues $5,713,966 $6,624,498
Cost of revenues 4,342,810 5,390,165
----------- -----------
Gross profit 1,371,156 1,234,333
Selling, general and administrative expenses 1,875,295 2,205,608
----------- -----------
Operating loss (504,139) (971,275)
Interest expense (110,441) (167,911)
Other income 131,286 227,080
----------- -----------
Loss before income taxes (483,294) (912,106)
Income tax benefit - 246,000
----------- -----------
Net loss $ (483,294) $ (666,106)
=========== ===========
Loss per share $(.09) $(.15)
=========== ===========
Weighted average number of shares
outstanding 5,484,841 4,390,205
=========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statement of Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
CLASS A ADDITIONAL
COMMON COMMON PAID-IN RETAINED TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
------- ------- ---------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1995 $31,681 $15,912 $7,672,228 $ 741,239 $(76,259) $8,384,801
Exercise of
common stock
options 800 - 69,200 - - 70,000
Proceeds from sale
of 875,000 shares of
common stock, less
issuance expenses of
$83,176 8,750 - 783,074 - - 791,824
Net loss - - - (483,294) - (483,294)
----- ----- ------- --------- --------- ---------
Balance at
March 31, 1996 $41,231 $15,912 $8,524,502 $ 257,945 $(76,259) $8,763,331
======= ======= ========== ========== ========= ==========
</TABLE>
See accompanying notes.
5
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
-------- --------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (483,294) $ (666,106)
Adjustments to reconcile loss to net
cash provided by operating activities:
Depreciation and amortization 1,121,238 1,525,389
Provision for losses on receivables 46,000 20,000
Landfill closure costs 68,517 225,619
Deferred income taxes - (214,000)
Gain on sale of property and equipment (10,694) (686)
Changes in operating assets and liabilities:
Accounts receivable 154,122 320,507
Tax refund receivable 79,404 12,660
Prepaid expenses 428,564 420,326
Other assets 12,362 (229,971)
Accounts payable (12,159) (441,013)
Accrued expenses (131,229) (178,100)
Income taxes payable (3,724) (15,815)
---------- --------
Net cash provided by operating activities 1,269,107 778,810
Cash provided by
discontinued operations - 16,440
</TABLE>
See accompanying notes.
6
<PAGE>
Eastern Environmental Services, Inc.
Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------------------
1996 1995
------ ------
<S> <C> <C>
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 25,876 27,740
Development of landfill sites (1,624,597) (875,131)
Purchase of property and equipment (135,037) (315,042)
Landfill closure and insurance bonding deposits 146,021 (14,337)
Payments received on notes receivable - 189,592
---------- ----------
Net cash used in investing activities (1,587,737) (987,178)
FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term debt 1,350,000 525,000
Payments on revolving line of credit
and long-term debt (1,820,875) (784,206)
Net (payments) borrowings on note payable
to shareholder/officer (42,457) 42,457
Net proceeds from issuance of common stock 861,824 -
---------- ----------
Net cash provided by (used in) financing
activities 348,492 (216,749)
Net increase (decrease) in cash
and cash equivalents 29,862 (408,677)
Cash and cash equivalents at beginning
of period 566,771 785,749
---------- ----------
Cash and cash equivalents at end
of period $ 596,633 $ 377,072
============ ==========
</TABLE>
See accompanying notes.
7
<PAGE>
Eastern Environmental Services, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The accompanying unaudited consolidated financial statements include the
accounts of Eastern Environmental Services, Inc. (the "Company") and its
subsidiaries, all of which are wholly-owned. All significant intercompany
accounts and transactions have been eliminated in consolidation. These financial
statements reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of results of operations for the interim periods
presented. The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the operating results for the full year. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These interim financial statements should be read in
conjunction with the audited financial statements and notes contained in the
Company's Annual Report on Form 10-K for the year ended June 30, 1995.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements. Actual results could
differ from those estimates. Such estimates include the Company's accounting for
closure and post-closure obligations; amortization of landfill development
costs; and estimates of reserves such as the allowance for doubtful accounts
receivable.
3. NEW ACCOUNTING STANDARDS
In December 1994, the Accounting Standards Executive Committee of the AICPA
(AcSEC) issued Statement of Position ("SOP") 94-6, "Disclosure of Significant
Risks and Uncertainties", which requires disclosures related to the Company's
nature of operations, significant estimates included in the preparation of
financial statements, and current vulnerability due to certain market
concentrations resulting in certain risks and uncertainties in the near term.
The Company will provide disclosures as required by SOP 94-6 in the June 30,
1996 notes to the financial statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percentage that
each item in the Consolidated Statements of Operations bears to total revenues.
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
------------------------
1996 1995
------- --------
<S> <C> <C>
Revenues....................... 100.0 100.0
Cost of revenues............... 76.0 81.4
------ ------
Gross profit................... 24.0 18.6
Selling, general and
administrative expenses....... 32.8 33.3
------ ------
Operating loss................. (8.8) (14.7)
Interest expense............... (1.9) (2.5)
Other income................... 2.3 3.4
------ -------
Loss before income taxes....... (8.4) (13.8)
Income tax benefit............. - 3.7
------ ------
Net loss....................... (8.4) (10.1)
Depreciation and amortization
included in above costs...... 19.6 23.0
</TABLE>
9
<PAGE>
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 1996 COMPARED TO THE
NINE MONTHS ENDED MARCH 31, 1995
Revenue decreased 13.7% or $910,000 from $6,624,000 for the nine months ended
March 31, 1995 to $5,714,000 for the nine months ended March 31, 1996. The most
significant factor effecting the decrease in revenues was the closure at June
30, 1995 of the Company's unprofitable collection operation in Beaufort County,
South Carolina which resulted in a decrease in revenues of $517,000 as compared
to the prior year nine month period. Revenue decreases of $96,000 or 2.9% and
$65,000 or 4.5% were experienced for the nine months ending March 31, 1996 at
the Company's long-haul transportation operations and the Company's West
Virginia landfill, respectively. The revenues at the Company's West Virginia
facility and the Company's hauling operations were adversely affected by severe
winter conditions in the first two months of the quarter ended March 31, 1996.
The Company also experienced a decrease in revenues at the Company's Kentucky
landfill and the Company's South Carolina landfill of $175,000 or 34.7% and
$21,000 or 1.5%, respectively. Additionally, revenues overall continue to be
depressed as the Company has only recently received a permit from the State of
Illinois to develop a landfill and a draft permit from the Kentucky Natural
Resources and Environmental Protection Cabinet on May 6, 1996 to construct the
Kentucky landfill's expansion area. See Liquidity and Capital Resources section
below for further discussion of capital requirements to develop these sites. The
decrease in revenues in the Company's long-haul transportation operations as
impacted by the severe weather conditions in the most recent quarter was
partially offset by increased involvement in hauling soils and contaminated
construction and demolition debris. Despite the overall decrease in revenues at
the Company's West Virginia facility, the Company's municipal solid waste (MSW)
revenues remained static, with a greater than 100% increase in construction and
demolition debris and other industrial waste streams. These operating levels
were offset by a 4.3% decline in asbestos volumes (consistent with the Company's
strategy of reducing the acceptance of less profitable waste streams). The MSW
revenue level in West Virginia reflects the continuing increase in availability
of MSW as certain private and municipally owned landfills continue to close as a
result of the inability to comply with the federal Subtitle D regulations and
state regulations requiring more sophisticated liner systems along with the
Company's marketing of MSW waste through transfer station operations. Despite
the slight decrease of 1.5% of revenues at the South Carolina landfill, an
increase in disposal revenue at that landfill of 11.9% occurred, offset by
decreased subcontracted hauling services. The increase in disposal revenues in
South Carolina is a reflection of increased marketing efforts; penetration in
the local construction and demolition debris market assisted by the landfill
based roll-off operation; and improved sales integration with the Company's
long-haul transportation operations. At the Kentucky landfill, the Company
ceased placing waste in the disposal area and commenced operations of a newly
permitted transfer station as of July 1, 1995. The transfer station attempts to
assure that the municipal solid waste disposal needs of the local communities
served under the Company's ten year waste disposal franchise will continue to be
satisfied on a monthly basis until the expansion permit can be secured and the
first disposal cell constructed in the proposed expansion area. The Company has
operated the transfer station at a revenue level of approximately $40,000 per
month, which will continue to result in operating losses at this facility until
either an adequate rate increase is granted for this transfer station or the
final expansion permit is obtained and operations return to profitability.
10
<PAGE>
Cost of revenues for the nine months ending March 31, 1996 decreased from the
same period in fiscal 1995 by approximately $1,047,000 or 19.4% to $4,343,000.
Cost of revenues as a percent of revenues decreased from 81% in fiscal 1995 to
76% in fiscal 1996. The percentage decrease was due primarily to the closure at
June 30, 1995 of the Company's unprofitable hauling operations in Beaufort
County, South Carolina; a decrease in labor costs at the West Virginia landfill
with the reduction in asbestos handling and cost efficiencies of increased
integration of the South Carolina landfill with the Company's long-haul
transportation company. These positive developments were partially offset by
relatively fixed operating costs with current average waste acceptances of
approximately 56% of allowable waste acceptance volume at the Company's West
Virginia landfill in the first nine months of fiscal 1996; further decreases in
volume at the Company's Kentucky landfill with the current operations of a
transfer station only partially offset by reduction in daily operating costs;
and increased waste disposal costs to non-affiliated landfills to increase
logistic efficiencies at the Company's long-haul transportation company.
Selling, general and administrative expenses ("SG&A") decreased $331,000 or 15%
from $2,206,000 in the first nine months of fiscal 1995 to $1,875,000 in the
first nine months of fiscal 1996. SG&A expenses include substantially all
corporate overhead costs including the costs relating to the accounting,
finance, legal and engineering departments as well as the SG&A costs
specifically attributed to the landfill and waste hauling operations. The
decrease in SG&A costs reflects continued reduced salary and related benefit
costs at the corporate level and other overhead costs associated with the
Company's continuing cost containment program.
Other income decreased $96,000 for the nine months ended March 31, 1996 compared
to the same nine months of fiscal 1995 as a result of a gain on the sales of
certain assets of the Company's local waste collection business in South
Carolina recorded in fiscal 1995. Interest expense decreased by $57,000
resulting from a minimal reduction in average borrowing rates and an increase in
capitalized interest costs relating to construction of disposal sites of
$39,000.
The Company's effective income tax rate, including both federal and state taxes,
was 27% for the nine months ended March 31, 1995 with no tax benefit recorded in
the current year. The lack of a current year tax benefit and an effective tax
rate less than the federal and state statutory rates in the prior year are
primarily due to a valuation allowance recorded reducing the current and prior
year tax benefit of net operating loss carryforwards due to a lack of certainty
of realization of these loss carryforwards in future years as a result of
recently reported operating losses.
As a result of factors discussed above, a loss of $483,294 or $.09 per share was
recognized for the nine months ended March 31, 1996 as compared to a loss of
$666,106 or $.15 per share for the nine months ended March 31, 1995.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996, COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1995.
Results of operations for the three months ended March 31, 1996 compared to the
three months
11
<PAGE>
ended March 31, 1995, reflect a decrease in net sales of $575,000, and an
increase in net loss of $25,000. These changes were attributable to the same
factors discussed previously with respect to the nine month periods ended March
31, 1996, and March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, current liabilities of $4,283,000 exceeded current assets of
$2,796,000 which includes cash and cash equivalents of $597,000. The Company
obtained $792,000 of working capital through private placements of the Company's
equity securities in the first quarter of fiscal 1996. A significant portion of
working capital was expended during the first three quarters of fiscal year 1996
including $1,625,000 for development of landfill sites, and $135,000 for the
purchase of operating equipment.
On September 26, 1995, the Company entered into a four-year secured term loan
with First Fidelity Bank, N.A. ("FFB") which provided for borrowings of
$1,350,000 bearing an interest rate of 7.03% secured by a first lien security
interest in the equipment and vehicles of the Company. The agreement contains
certain affirmative and negative covenants and requires the maintenance of
certain levels of tangible net worth and the maintenance of certain working
capital and debt coverage ratios. A portion of the funds ($900,000) was utilized
to refinance the remaining balance of the $3,000,000 refinancing term loan with
Philadelphia National Bank ("PNB"). The remaining funds under the loan
($450,000) were disbursed to the Company in October 1995 and utilized for
working capital needs. The Company continues to maintain $1,500,000 secured
working capital and letter of credit revolving credit facility with PNB. The
secured revolving credit facility at May 6, 1996 had outstanding cash draws of
$250,000 and $921,000 in outstanding performance letters of credit. The PNB
credit facility provides for interest at prime plus 1/4% and is secured by first
mortgage liens on the South Carolina landfill and a security interest on
accounts receivable. The credit facility, as amended, contains warranties and
financial covenants similar to those contained in the FFB agreement. Certain
financial covenants based on results of operations and financial position for
the nine months ending March 31, 1996, were not achieved by the Company.
Appropriate waivers were obtained from the banks.
The Company has experienced liquidity problems due to its lack of revenues with
the Company currently operating only the waste hauling operation, the South
Carolina landfill, and the West Virginia landfill at approximately 56% of its
allowable monthly capacity during the first nine months of fiscal 1996. Aside
from these operations, the Company has only recently received a permit from the
State of Illinois to develop a landfill, and a draft permit from the Kentucky
Natural Resources and Environmental Protection Cabinet on May 6, 1996 to
construct the Kentucky landfill's expansion area. This lack of revenues and the
development status situation in Kentucky and Illinois, among other factors
described above, have led to operating losses with a continued need to invest in
additional transportation equipment, landfill permitting and development costs,
and disposal space cell construction. The Company has currently addressed such
issues, in the absence of significant long-term bank financing arrangements,
primarily by private placements of its equity securities with net proceeds of
$300,000 from sales of common stock in June 1995, and $792,000 in the first
quarter of fiscal 1996.
12
<PAGE>
The Company's operations to date have required substantial amounts of working
capital and the Company expects to expend substantial funds to support the
expansion of its disposal and transportation operations. The Company expects
capital expenditures of approximately $375,000 in the remainder of fiscal 1996
in furtherance of the final permit at Kentucky, and acquire necessary landfill
and transportation equipment. Significant capital reserves will be required to
construct initial disposal space at the Company's Illinois landfill for which
the Company recently received a development permit. Likewise, capital reserves
would be required to construct initial disposal space at the Company's Kentucky
landfill should the Company receive a final permit at this facility during
fiscal 1996 as anticipated. The Company currently does not have such necessary
capital reserves, estimated at $5,000,000 for both landfills combined. However,
the Company is actively working with several parties to raise additional funds
to meet its capital expansion and working capital requirements through either
bank financing or additional equity or debt placements, which may include the
sale of an equity interest in individual landfill sites. No assurance can be
given that additional financing will be available or, if available, that it will
be available on acceptable terms. However, management currently believes that
funds provided from operations, and other sources described above will be
sufficient to fund operations in effect through fiscal 1996.
The Company will have financial obligations related to closure and post-closure
monitoring and maintenance of these currently permitted and operating landfills.
While the exact amount of future closure obligations cannot be determined, the
Company estimates that the costs of final closure of the currently permitted and
operating areas at the Company's three landfills will be approximately
$5,108,000, of which $1,330,000 has been accrued as of March 31, 1996. The
Company estimates that the costs of post-closure monitoring of groundwater and
methane gas and other required maintenance procedures for the currently
permitted and expansion areas will approximate $27,000 - $120,000 per year for
30 years after closure at each of the Company's two municipal solid waste
accepting facilities and $10,000 per year for 30 years after closure at the
Company's industrial landfill site. The Company has accrued $691,000 for post-
closure obligations as of March 31, 1996, representing approximately 18% of the
present value of such future cash outlays. The Company maintains a bonding
facility pursuant to certain statutory requirements regarding financial
assurance for the closure and post-closure monitoring cost requirements for its
Kentucky and West Virginia disposal facilities. Bonds outstanding at March 31,
1996, total $1,321,607 and $314,571, as closure and post-closure financial
assurance, respectively, for the Company's Kentucky landfill and $214,000 as
closure financial assurance for the Company's West Virginia facility. The bonds
are collateralized by irrevocable letters of credit of $626,000 and trust fund
deposits of $104,134. Additionally, the Company has on deposit $195,807 as
financial assurance for landfill closure and post-closure for the closed
disposal area at its West Virginia disposal facility. The trust fund and the
certificates of deposit are restricted from current operations and are included
within other noncurrent assets. The Company anticipates that the West Virginia
bonding requirements will substantially increase as the State's solid waste
program is approved by the federal government. Financial assurance requirements
could increase to approximately $3,000,000 for closure and $3,600,000 for post-
closure monitoring and care. Additional collateral requirements will be imposed
upon the Company which will affect profitability of the Company. The Company
anticipates providing financial assurance incrementally over the life of the
facility as disposal cells are constructed and
13
<PAGE>
certified for acceptance of waste. Additionally, the Company anticipates that
prior to issuance of a final Kentucky expansion permit, additional closure and
post-closure financial assurance mechanisms will be required. The amounts are
estimated at $3,300,000 for closure and $300,000 for post-closure. Proposed
changes to the current Kentucky post-closure financial assurance regulations are
pending and the post-closure requirements could increase to $3,000,000. Under
the current financial assurance program, incremental posting of financial
assurance over the life of the facility as disposal cells are constructed and
certified for acceptance of waste is allowed. The Company's inability to obtain
necessary bonds or letters of credit in sufficient amounts or at acceptable
rates would have a material adverse impact on the Company's business and may
preclude it from obtaining or retaining landfill operating permits.
The Company recently received a development permit from the Illinois
Environmental Protection Agency approving development of a new municipal and
non-hazardous special waste landfill in Illinois. The landfill consists of 42
acres and approximately 5,700,000 cubic yards of airspace. The Company has the
right to operate the landfill under a management agreement in exchange for the
payment of a royalty to the landfill's owner of record. The Company has an
option to purchase the landfill within the next forty years for consideration
consisting of nominal cash and a continuing royalty. The Company has incurred
and capitalized legal, engineering, and other permitting costs totalling
$311,000 through March 31, 1996. Construction costs, closure and post-closure
costs will be comparable with those of the Company's West Virginia landfill
previously described.
The Company received approval of a Host Agreement and local approval for its 42
acre expansion area at its Kentucky landfill from the local Solid Waste
Management Board in December 1994 and has recently received a draft permit from
the Kentucky Natural Resources and Environmental Protection Cabinet on May 6,
1996 to construct the landfill's expansion area. The draft permit is subject to
a 30-day public notice period and possible adjudicatory appeal; accordingly,
there can be no assurance that a final permit will be obtained. Due to the
difficulty and time constraints on permitting, the Kentucky landfill did not
have the expansion area in operation by July 1, 1995, the date it was required
to cease accepting waste in the existing area. The Company is currently
operating a permitted transfer station to continue to service the waste needs of
the local host county under the Company's waste disposal franchise agreement
expiring in the Year 2002. The Company recorded an accrual at June 30, 1995 of
$150,000 representing the estimated operating loss relating to the Kentucky
operations during fiscal 1996, the Company's estimate of time required to obtain
the expansion permit and to construct the first disposal cell.
14
<PAGE>
ITEM 5. OTHER INFORMATION
The Company today announced that William C. Skuba, the Company's Chairman,
Chief Executive Officer and controlling shareholder, has entered into an
agreement to sell 500,000 shares of Company common stock to a group of
purchasers including George Moorehead, Louis D. Paolino, Jr., Environmental
Opportunities Fund, L.P. and Environmental Opportunities Fund (Cayman), L.P.
The purchasers also intend to acquire an additional 400,000 shares of Company
stock from other shareholders. In connection with the sale of Mr Skuba's stock,
all of his Class A Common Stock, which carries four votes per share, would be
converted into ordinary common stock, which carries one vote per share, and Mr.
Skuba would resign as an officer and member of the Board of Directors. The
purchasers would also acquire voting control over Mr. Skuba's 1.1 million
remaining shares of Company common stock. The purchasers have indicated that
they intend to appoint Mr. Paolino as President and Chief Executive Officer of
the Company.
The closing of this transaction, which is scheduled to take place within
two weeks following dissemination to the Company shareholders of an information
statement concerning the directors which the purchasers intend to appoint to the
Board, is subject to the satisfaction of various conditions, including the
replacement of the Company's existing Board. As a result, there can be no
assurance that the transaction will be completed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.28 Landfill Management Agreement by and between Lawrence County
Disposal Centre, Inc. ("LCDC"), Gary Simmons, individually and
as sole shareholder of LCDC, Big T Disposal, Inc. ("Big T"),
Sandra L. Simmons, individually and as sole shareholder of Big
T, and S&S Grading of Illinois, Inc. ("S&S") dated April 20,
1995.
10.29 Amendment dated February 29, 1996 to Severance Agreement dated
August 20, 1993, by and between Eastern Environmental Services,
Inc. and William C. Skuba (Pursuant to instruction 2 to Item 601
of Regulation S-K, the Amendments to the Severance Agreements,
which are substantially identical in all material respects
except as to the parties thereto, between the Company and the
following individuals are not being filed: Gregory M. Krzemien
and Michael A. Fioravante).
(b) Reports on Form 8-K:
NONE
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /s/ William C. Skuba
------------------------------
William C. Skuba
Chairman
BY: /s/ Gregory M. Krzemien
------------------------------
Gregory M. Krzemien
Chief Financial Officer
DATE: May 9, 1996
16
<PAGE>
LANDFILL MANAGEMENT AGREEMENT
BY AND BETWEEN LAWRENCE COUNTY DISPOSAL CENTRE, INC. ("LCDC"),
GARY SIMMONS, INDIVIDUALLY AND AS SOLE SHAREHOLDER OF LCDC,
BIG T DISPOSAL, INC. ("BIG T"),
SANDRA L. SIMMONS, INDIVIDUALLY AND AS SOLE SHAREHOLDER OF
BIG T, AND S&S GRADING OF ILLINOIS, INC. ("S&S")
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
I. RECITALS................................................................... -1-
II. REPRESENTATIONS AND WARRANTIES AND LEGAL OPINIONS.......................... -4-
A. Representations and Warranties of LCDC and Gary
-----------------------------------------------
Simmons............................................................... -4-
-------
1. Corporate Organization........................................... -4-
----------------------
2. Authorization.................................................... -4-
-------------
3. No Violation..................................................... -4-
------------
4. No Undisclosed Liabilities....................................... -5-
--------------------------
5. Compliance with Law.............................................. -5-
-------------------
6. Title to Assets.................................................. -6-
---------------
7. Sufficiency of Assets............................................ -7-
---------------------
8. Taxes............................................................ -7-
-----
9. Contracts and Commitments........................................ -7-
-------------------------
10. Consent and Approvals............................................ -8-
---------------------
11. Economic/Regulatory Conditions................................... -8-
------------------------------
12. Environmental Compliance......................................... -8-
------------------------
13. Permits and Capacity............................................. -9-
--------------------
14. Absence of Certain Practices..................................... -9-
----------------------------
15. Accuracy of Representations and Documents........................ -9-
-----------------------------------------
16. Validity, Enforceability, and no Default......................... -10-
----------------------------------------
B. Legal Opinions to be given to S&S..................................... -10-
---------------------------------
C. Representations and Warranties of Big T and Sandra
--------------------------------------------------
L. Simmons............................................................ -10-
----------
1. Corporate Organization........................................... -10-
----------------------
2. Authorization.................................................... -11-
-------------
3. No Violation..................................................... -11-
------------
4. No Undisclosed Liabilities....................................... -11-
--------------------------
5. Compliance with Law.............................................. -11-
-------------------
6. Taxes............................................................ -12-
-----
7. Contracts and Commitments........................................ -12-
-------------------------
8. Consent and Approvals............................................ -12-
---------------------
9. Environmental Compliance......................................... -12-
------------------------
10. Accuracy of Representations and Documents........................ -13-
-----------------------------------------
11. Validity, Enforceability, and no Default......................... -13-
----------------------------------------
D. Legal Opinions to be Given to S&S by Big T............................ -13-
------------------------------------------
E. Representations and Warranties of S&S................................. -13-
-------------------------------------
1. Validity, Enforceability......................................... -13-
------------------------
2. Economic Viability............................................... -13-
------------------
III. THE NEW LANDFILL MANAGEMENT, CONSULTING
AND COOPERATION AGREEMENT.................................................. -14-
1. Management and Use of New Landfill Property........................... -14-
-------------------------------------------
a. Term............................................................. -14-
----
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
b. Use............................................................. -14-
---
c. Improvements.................................................... -14-
------------
d. Maintenance and Repairs......................................... -15-
-----------------------
e. Taxes, Assessments and Utility Charges.......................... -15-
--------------------------------------
f. No Liens........................................................ -15-
--------
g. Insurance and Casualty.......................................... -16-
----------------------
h. Condemnation.................................................... -16-
------------
(1) Total Taking - Termination................................. -16-
--------------------------
(2) Partial Taking - Termination............................... -16-
----------------------------
(3) Partial Taking - Continuation.............................. -17-
-----------------------------
(4) Allocation of Award........................................ -17-
-------------------
(5) Voluntary Conveyance....................................... -17-
--------------------
(6) Closure/Post Closure....................................... -17-
--------------------
i. Memorandum of Agreement......................................... -17-
-----------------------
2. Rights and Duties of S&S............................................. -17-
------------------------
a. Operation....................................................... -17-
---------
b. Permitting...................................................... -18-
----------
c. Amendment to Host County Agreement.............................. -18-
----------------------------------
d. Purchase of Spillman Parcel..................................... -18-
---------------------------
3. Duties of LCDC....................................................... -18-
--------------
a. Consulting...................................................... -18-
----------
b. Gray Parcel..................................................... -19-
-----------
c. Cooperation with Business Decisions............................. -19-
-----------------------------------
d. Closure of Old Landfill......................................... -19-
-----------------------
4. Prohibition Against Further Contract or Encumbrance.................. -19-
---------------------------------------------------
5. Payment for Investigation Costs (Well 107)........................... -19-
------------------------------------------
6. Use of Name.......................................................... -20-
-----------
7. Exchange of Documents................................................ -20-
---------------------
8. Lease................................................................ -20-
-----
IV. WASTE DISPOSAL AND GUARANTEED TIPPING FEES................................ -21-
1. Obligation to Operate Waste Collection Business
-----------------------------------------------
and to Dispose of Waste Exclusively at New
------------------------------------------
Landfill............................................................. -21-
--------
2. S&S's Agreement to Accept Big T's and LCDC's Waste................... -21-
--------------------------------------------------
3. Tipping Fees......................................................... -22-
------------
a. Competitive Tipping Fees........................................ -22-
------------------------
b. Lowest Current Tipping Rates.................................... -22-
----------------------------
c. Guaranteed Tipping Fees......................................... -22-
-----------------------
d. Royalty......................................................... -23-
-------
e. Calculation of Set-offs......................................... -23-
-----------------------
f. Royalties During Period of Non-Operation........................ -23-
----------------------------------------
g. Collection of Royalties/Tipping Fees after
------------------------------------------
Application of Set-off.......................................... -23-
----------------------
4. Termination of Rights under Article IV............................... -24-
--------------------------------------
a. Termination of Right to Bring Waste To
--------------------------------------
Landfill........................................................ -24-
--------
b. Big T's and LCDC's Right to Suspend Use of
------------------------------------------
the New Landfill................................................ -24-
----------------
5. Nature of Waste...................................................... -24-
---------------
6. Inspection of Documents/Waste........................................ -24-
-----------------------------
7. Excuse of Performance................................................ -25-
---------------------
8. Operating Restrictions............................................... -25-
----------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
9. Compliance........................................................... -25-
----------
10. Right of First Refusal to Big T in the Event S&S
------------------------------------------------
Intends to Subcontract Hauling of Lead and
------------------------------------------
Asbestos............................................................. -25-
--------
V. COOPERATION................................................................ -25-
1. Mutual Cooperation................................................... -25-
------------------
2. Provision of Labor and Equipment in Connection
----------------------------------------------
with Cover Installation on Old Landfill.............................. -26-
---------------------------------------
3. Reimbursement of LCDC................................................ -26-
---------------------
4. Removal of Unpermitted Encumbrances.................................. -26-
-----------------------------------
VI. COVER MATERIAL HAULING.................................................... -27-
1. Term................................................................. -27-
----
2. Scope of S&S Services................................................ -27-
---------------------
3. Amount of Cover Material to be Hauled................................ -27-
-------------------------------------
4. Cooperation/Excuse of Performance.................................... -28-
---------------------------------
5. Definition of "Cover Material."...................................... -28-
-------------------------------
VII. NON-COMPETITION/NON-SOLICITATION......................................... -28-
1. Non-competition/non-solicitation..................................... -28-
--------------------------------
2. Non-competition by S&S............................................... -29-
----------------------
3. Enforcement.......................................................... -30-
-----------
VIII. INDEMNIFICATION......................................................... -30-
1. Indemnification of LCDC by S&S....................................... -30-
------------------------------
2. Indemnification of S&S by LCDC....................................... -30-
------------------------------
3. Indemnification of Big T by S&S...................................... -31-
-------------------------------
4. Indemnification of S&S by Big T...................................... -32-
-------------------------------
5. Definitions of "Response Costs"/"Environmental
----------------------------------------------
Laws"................................................................ -32-
-----
6. Survival of Indemnification and Hold Harmless
---------------------------------------------
Agreement............................................................ -33-
---------
IX. DEFAULT................................................................... -33-
1. Event of Default..................................................... -33-
----------------
2. Remedies on Default.................................................. -34-
-------------------
a. Prior to the Construction Start Date............................ -34-
------------------------------------
(1) Termination................................................ -34-
-----------
(2) Specific Performance....................................... -34-
--------------------
b. After the Construction Start Date............................... -34-
---------------------------------
(1) Termination................................................ -34-
-----------
(2) Specific Performance/Damages............................... -35-
----------------------------
(3) No Right to Terminate...................................... -35-
---------------------
c. Set-off......................................................... -35-
-------
3. Remedies not Exclusive............................................... -35-
----------------------
4. Good Faith........................................................... -35-
----------
5. Attorneys' Fees...................................................... -35-
---------------
X. TERM OF AGREEMENT.......................................................... -36-
1. Term................................................................. -36-
----
2. Termination.......................................................... -36-
-----------
a. General Right to Terminate This Agreement....................... -36-
-----------------------------------------
b. S&S's right to Terminate This Agreement or to
---------------------------------------------
Suspend Obligations Hereunder................................... -36-
-----------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(1) Closure............................................... -36-
-------
(2) Revocation of Permits and Licenses.................... -36-
----------------------------------
(3) Restriction of Rates.................................. -36-
--------------------
(4) Bankruptcy/Insolvency................................. -36-
---------------------
(5) Economic Viability.................................... -36-
------------------
(6) Denial of Permits..................................... -36-
-----------------
(7) Approval of Assignment of Host
------------------------------
County Agreement........................................... -37-
----------------
(8) Force Majeure......................................... -37-
-------------
(9) Material Adverse Impact of Old
------------------------------
Landfill................................................... -37-
--------
c. Rights and Obligations of the Parties
--------------------------------------
Following Termination or Suspension of
--------------------------------------
Obligations Hereunder........................................... -37-
---------------------
XI. OPTION TO PURCHASE NEW LANDFILL AND RIGHT OF FIRST
REFUSAL ON PURCHASE OF WASTE HAULING BUSINESS............................. -38-
1. Option to Purchase New Landfill and Assets
------------------------------------------
of LCDC.............................................................. -38-
-------
2. Right of First Refusal to Purchase Waste Hauling
------------------------------------------------
Business............................................................. -42-
---------
XII. ADDITIONAL TERMS......................................................... -43-
1. Confidentiality...................................................... -43-
---------------
2. Insurance............................................................ -44-
---------
3. Definition of Affiliate.............................................. -44-
-----------------------
4. Force Majeure........................................................ -44-
-------------
5. Independent Contractor............................................... -44-
----------------------
6. Assignment or Transfer............................................... -45-
----------------------
a. By S&S......................................................... -45-
------
b. By LCDC or Big T............................................... -45-
----------------
7. Notice............................................................... -45-
------
8. No Waiver............................................................ -46-
---------
9. Entire Agreement..................................................... -46-
----------------
10. Governing Law........................................................ -46-
-------------
11. Binding Effect....................................................... -46-
--------------
12. Severability/Enforceability.......................................... -46-
---------------------------
13. Counterparts......................................................... -47-
------------
14. Time is of the Essence............................................... -47-
----------------------
15. Third Party Beneficiary.............................................. -47-
-----------------------
16. Consent.............................................................. -47-
-------
17. Audit................................................................ -47-
-----
18. Future Use........................................................... -48-
----------
19. Further Assurances................................................... -48-
------------------
20. Condition Precedent to Contract Date................................. -48-
------------------------------------
</TABLE>
<PAGE>
EXHIBIT LIST
------------
Exhibit A - Legal Description - Old Landfill
Exhibit B - Legal Description - That Portion of the New Landfill Owned by
LCDC
Exhibit C - Legal Description - That Portion of the New Landfill Formerly
Owned by Big T
Exhibit D - Assets/Contracts/Permits/Authorizations Host County Agreement
Exhibit E - List of Adverse Matters (including oil exploration on Old
Landfill
Exhibit F - Spillman Agreement
Exhibit G - Form of Opinion Letter of LCDC Counsel
Exhibit H-1 - Memorandum of Agreement
Exhibit H-2 - Memorandum of Lease
Exhibit I - Gray Option Contract
ExhibiT J - Assignment of Rents, Leases and Agreements
ExhibiT K - Power of Attorney
Exhibit L - Permitted Exceptions to Title
Exhibit M-1 - Termination of Agreement
Exhibit M-2 - Termination of Option
-54-
<PAGE>
LANDFILL MANAGEMENT AGREEMENT
-----------------------------
This Landfill Management Agreement (this "Agreement") is executed this
_____ day of April, 1995, between LAWRENCE COUNTY DISPOSAL CENTRE, INC., an
Illinois corporation (hereinafter referred to as "LCDC"), GARY SIMMONS
individually and as sole shareholder of LCDC (with respect to matters set forth
in Article II), S&S GRADING OF ILLINOIS, INC., an Illinois corporation
(hereinafter referred to as "S&S"), BIG T DISPOSAL, INC., an Indiana corporation
(hereinafter referred to as "Big T"), and SANDRA L. SIMMONS, individually and as
sole shareholder of Big T (with respect to matters set forth in Article II).
I. RECITALS
------------
1. LCDC owns certain real property in Lawrence County, Illinois more
particularly described on Exhibit A attached hereto and incorporated by
---------
reference (hereinafter the "Old Landfill"), which property was formerly used as
a municipal solid waste landfill but which is currently subject to closure.
2. S&S intends to enter into the business of managing and operating
municipal and industrial landfill operations in the State of Illinois.
3. LCDC is the owner of certain property in Lawrence County, Illinois
more particularly described on Exhibits B and C attached hereto and incorporated
----------------
by reference (hereinafter collectively referred to as the "New Landfill"). That
portion of the New Landfill previously owned by Big T is hereinafter referred to
as the "20 Acre Parcel" and is described on Exhibit C.
---------
4. On December 2, 1992, LCDC obtained local approval from the Lawrence
County Board under the Illinois Environmental Protection Act for the
development, construction and operation of a new municipal solid waste landfill
on the New Landfill (the "Siting Approval"). The Siting Approval does not
extend to the 20 Acre Parcel.
5. A Host County Agreement was executed by LCDC and the County of
Lawrence during or about December, 1992 (the "Host County Agreement"), to which
Big T has consented, which among other things restricts usage of the 20 Acre
Parcel to auxiliary and support services for the landfill operations at the New
Landfill.
6. S&S wants to develop, construct and operate the New Landfill, and may
wish to own the New Landfill property.
7. On April 19, 1994, LCDC and S&S Grading, Inc., a West Virginia
corporation ("S&SWV"), executed a Management Agreement (the "MA"), which among
other matters, contemplated S&SWV would provide LCDC a right to receive future
royalties from the
<PAGE>
operation of the New Landfill, and which in general provided the terms under
which S&SWV would develop, construct, operate and manage the New Landfill. In
addition, LCDC also executed a document entitled Schedule of Additional
Representations and Warranties pertaining to the MA.
8. Among other things, the MA established an effective date (the "MA
Effective Date") of 60 days following April 19, 1994, later extended by mutual
agreement of the parties to June 24, 1994. The MA required that on or before
the MA Effective Date, certain documents were to be produced and executed by the
parties, and also provided that on or before the MA Effective Date either party
could terminate the MA under certain circumstances and conditions.
9. Prior to the MA Effective Date as extended, S&SWV conducted certain
testing at the New Landfill, including conducting groundwater analyses. One
groundwater analysis for Well 107 on the New Landfill property indicated the
presence of trichloroethylene ("TCE"). As of the date hereof, the parties have
made no definitive determination of the source of the TCE discovered in Well
107.
10. On June 23, 1994, S&SWV terminated the MA as a result of the discovery
of the TCE. Consequently, the MA Effective Date never occurred, and certain
matters required to be accomplished on or before the MA Effective Date were
never accomplished, including the preparation and execution of certain
documents.
11. Pursuant to the Illinois Environmental Protection Act, the Siting
Approval would have expired in December 1994 unless by that time an application
was submitted to the Illinois Environmental Protection Agency for a permit to
develop and construct the New Landfill.
12. Following the termination of the MA, S&SWV and LCDC negotiated in an
effort to reach an agreement regarding re-implementation of a management
agreement for the New Landfill. While those negotiations proceeded, S&SWV
compiled data, completed, and on November 7, 1994, submitted the application
with the Illinois Environmental Protection Agency ("IEPA"), to develop and
construct the New Landfill (the "Application").
13. All legal, engineering and other expenses (including the expenses of
Lawrence County) incurred by LCDC during the Siting Approval hearings or
otherwise have been paid by LCDC. All legal, engineering and other expenses
incurred in connection with the Application or otherwise by S&SWV, have been
paid by S&SWV.
14. Big T is the owner of a solid waste hauling company, including
transfer station, which does business in and around Lawrenceville, Illinois, and
Vincennes, Indiana. In addition, Big T was the former owner of the 20 Acre
Parcel.
-2-
<PAGE>
15. Big T and LCDC cooperated during the Siting Approval hearings and Big
T expressly consented to the 20 Acre Parcel being included as part of the New
Landfill, with the expectation that the siting would prove mutually beneficial
by allowing LCDC to develop the New Landfill, and by providing Big T with a
convenient facility for disposal of solid waste picked up during Big T's normal
operations, and by providing Big T with the possibility of entering into a long-
term guaranteed tipping fee agreement for disposal at the New Landfill.
16. On or about April 19, 1994, Big T and S&SWV entered into a Guaranteed
Tipping Fee Agreement (the "GTFA"), which expressly recognized that the
successful completion of the activities contemplated by the MA between LCDC and
S&SWV would be beneficial to Big T and S&SWV, as well as to LCDC.
17. S&SWV has assigned all S&SWV's right, title and interest in the New
Landfill to S&S.
18. As part of the consideration for the covenants and agreements
contained herein, S&S has agreed to excavate cover material from the New
Landfill property and to haul cover material from the New Landfill to the Old
Landfill in accordance with the schedule and conditions set forth below, for use
by LCDC in closing the Old Landfill.
19. In recognition of the fact that the viability of the New Landfill
depends, in part, on Big T's agreement to bring waste to the New Landfill, and
in light of LCDC's obligation to close the Old Landfill, LCDC and Big T
recognize the necessity of entering into an agreement to mutually cooperate to
further assure the successful completion of the activities contemplated herein.
Further, in consideration of the assignment of right to receive future royalties
and discounts given to Big T by LCDC as contemplated herein, Big T has agreed to
assist LCDC in the provision of manpower and equipment to grade and smooth cover
dirt upon the Old Landfill as more particularly described herein.
20. In order to accomplish the development and operation of the New
Landfill, the parties agree that it is in the best interest of Big T, LCDC, and
S&S that LCDC grant S&S a right to possess the New Landfill property described
on Exhibits B and C attached hereto to S&S, and that Big T and LCDC consult and
----------------
cooperate with S&S in developing and operating the New Landfill.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and for other good and valuable consideration, the parties agree that the
foregoing recitals are true and correct and are hereby incorporated in this
Agreement and further agree as follows:
-3-
<PAGE>
II. REPRESENTATIONS AND WARRANTIES AND LEGAL OPINIONS
------------------------------------------------------
A. Representations and Warranties of LCDC and Gary Simmons. LCDC and Gary
-------------------------------------------------------
Simmons, individually and on behalf of LCDC, hereby jointly and severally
represent and warrant to S&S as follows:
1. Corporate Organization.
----------------------
a. LCDC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois and has all requisite
power and authority to own and operate the Old Landfill and the New Landfill
(except for matters set forth herein with respect to S&S's rights).
b. LCDC is qualified or licensed to do business as a foreign
corporation in all jurisdictions in which such qualification and licensing is
required.
c. LCDC has no direct or indirect subsidiaries, and there is no
corporation, association, partnership or other entity or person currently or in
the past related in any way to LCDC as an affiliate, customer, supplier, lessor,
lessee or otherwise, in which any principal or affiliate of LCDC, directly or
indirectly, has or had any ownership interest in the New Landfill, except for
Big T with respect to the 20 Acre Parcel.
d. All of LCDC's capital stock and other securities are owned
legally, beneficially and of record directly by Gary Simmons and by no one else.
2. Authorization.
-------------
a. LCDC has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.
b. Except with respect to closure of the Old Landfill, the cost of
which is not known at this time, LCDC is economically and technically able to
comply with the terms of this Agreement. This Agreement is and when executed and
delivered and any amendments hereto or thereto will be, valid and binding upon
LCDC and enforceable in accordance with its terms.
3. No Violation. Neither the execution and delivery of this Agreement by
------------
LCDC nor the consummation of the transaction contemplated hereby or thereby will
(i) violate any provision of the Articles of Incorporation or ByLaws of LCDC,
(ii) be in conflict with, constitute a default under, result in the termination
or invalidity of, or accelerate the performance required by any agreement or
commitment to which LCDC is a party or by which it is bound or to which any of
the assets set forth on the asset list attached hereto as Exhibit D (the assets
---------
listed on Exhibit D and the New Landfill are collectively referred to herein as
---------
the "Assets") are subject, or (iii) violate any
-4-
<PAGE>
statute, law, judgment, decree, order, regulation or rule of any agency, court
or governmental authority.
4. No Undisclosed Liabilities. LCDC has no liabilities or obligations of
--------------------------
any nature (absolute, accrued, contingent or otherwise) in any way relating to
the Assets (including the New Landfill) or Old Landfill that have not been fully
disclosed to S&S in writing.
5. Compliance with Law.
-------------------
a. LCDC has complied and is presently complying in all material
respects with all applicable laws, rules, regulations, orders, building and
other codes, zoning and other ordinances, permits, licenses, authorizations,
judgments and decrees of all federal, state, local, foreign or other
governmental authorities that relate to the Assets or the New Landfill or the
Old Landfill, including transportation and disposal of waste at the same other
than as described on Exhibit E. Copies of all warning notices, notices of
---------
violation, consent orders, complaints, or threat of any of the foregoing are
attached, or facts that, with the passage of time are likely to give rise to one
of the foregoing, are described on Exhibit E attached hereto and incorporated by
---------
reference.
b. Specifically, LCDC represents and warrants that the use of the
Assets to develop a landfill has received all necessary county and local
approvals and is permitted under local zoning ordinances.
c. Except as shown on Exhibit E, LCDC is not aware of, nor has
---------
received from any third party (including employees and government agencies),
written or oral notification regarding, any present or past failure to comply or
of any present or future events, circumstances, activities or plans which may
(i) materially interfere with or prevent continued compliance with any such
laws, rules or regulations; (ii) give rise to any common law or statutory
liability, or (iii) otherwise form the basis of any claim, proceeding or
investigation.
d. Except as set forth on Exhibit E, there is not currently pending
---------
any claim, inquiry, proceeding or investigation of any nature whatsoever by or
before any court or regulatory or administrative agency, arbitration tribunal,
board, bureau, authority or commission with respect to or affecting LCDC or the
Assets. To LCDC's best knowledge after due inquiry, none of the same is
threatened against LCDC, S&S or any of the Assets, and there is no valid basis
for any of the same. The Assets of LCDC are not subject to any judgment, order
or decree which is or will be binding on S&S or otherwise impair S&S's rights
under this Agreement.
-5-
<PAGE>
6. Title to Assets . LCDC has good and marketable title to the Assets,
----------------
free and clear of any title defect or objection, mortgage, pledge, security
interest, charge, lien or other encumbrance or restriction of any nature
whatsoever, except for the Permitted Exceptions (as defined in Article XI).
If any title defect, mortgage, pledge, security interest, charge, lien or
other encumbrance or restriction is imposed against any of the Assets, except
for the Permitted Exceptions (an "Unpermitted Encumbrance"), LCDC shall remove
the Unpermitted Encumbrance to the reasonable satisfaction of S&S no later than
60 days after receiving written notice of the same from S&S. If LCDC fails to
remove the Unpermitted Encumbrance within the foregoing 60 day period, then, in
addition to any other remedy S&S may have under this Agreement, LCDC shall
indemnify and hold S&S harmless against any and all claims and losses, including
lost profits, that S&S may incur as a result of the Unpermitted Encumbrance in
accordance with the provisions of Article VIII of this Agreement.
With respect to the Patrick Engineering lien, S&S agrees that LCDC and Big
T shall have until April 13, 1996 to have the same removed.
With respect to the Spillman Waterline Easement recorded at O.R. Book 34,
Page 224, of the Public Records of Lawrence County, LCDC shall obtain a
corrective easement, executed by Spillman, which accurately describes the
location of the easement along the west boundary of the New Landfill as shown on
that certain sketch as attached thereto.
In the either the corrective easement have not been obtained on or before
June 15, 1995, LCDC agrees to take any further action required to correct such
legal description, including, without limitation, the filing and diligent
prosecution of a suit to require such action.
With respect to that certain lease between LCDC, as landlord, and Donny
Gray, as tenant, listed as Item 11 on Exhibit D (the "Farmland Lease"), LCDC
---------
represents and warrants to S&S that the Farmland Lease is a oral year-to-year
lease and permits Donny Gray to use the New Landfill solely for the purposes of
planting and harvesting crops. LCDC covenants and agrees to provide Donny Gray
with a written notice terminating the Farmland Lease on June 1, 1995 in order
for the Farmland Lease to be terminated as of a date no later than November 1,
1995; provided,
-6-
<PAGE>
however, that LCDC shall not provide the tenant with any notice of termination
until LCDC has obtained the Gray Option Contract, as defined in Article
III.3(b). In the event that the Gray Option Contract is not obtained on or
before June 1, 1995, S&S, in its sole discretion, shall either agree to extend
the termination date of the Farmland Lease or waive the requirement that LCDC
obtain the Gray Option Contract prior to notifying the tenant of the termination
of the Farmland Lease. In the event that the tenant fails to vacate the New
Landfill on or before November 1, 1995 (or such later date as may be agreed upon
in writing by S&S), LCDC agrees to take any further action required to terminate
the Farmland Lease and cause the tenant to vacate the New Landfill, including,
without limitation, the filing and diligent prosecution of a lawsuit to
accomplish the same.
7. Sufficiency of Assets. The Assets include all rights, properties and
---------------------
other assets necessary to permit S&S to file a state application for a permit to
operate the New Landfill on the real estate included with the Assets.
8. Taxes. LCDC has timely and accurately filed all tax reports,
-----
declarations and returns (including information returns) required to be filed in
connection with the Assets for all periods ending on or before the Contract Date
of this Agreement and has paid, or withheld or otherwise provided for, all
taxes, assessments, whether special or general, impact fees, permit fees and
other fees, and other charges due with respect to the New Landfill. There are
no tax liens upon any of the Assets except liens for current taxes not yet due.
There is no basis for the assessment of any tax liability against LCDC or any of
the Assets that has not been disclosed to S&S in writing.
9. Contracts and Commitments.
-------------------------
a. With respect to the Assets, including, without limitation, the
New Landfill, LCDC is not a party to or bound by any agreements, contracts,
arrangements or commitments, written or oral (including leases of personal or
real property, loans or indebtedness, or long-term contractual arrangements),
other than as set forth on the Assets listed on Exhibit D. LCDC has supplied a
---------
true and complete copy of each such agreement to S&S, including, without
limitation, the Host County Agreement, and all such agreements are in full force
and effect and without default and no event has occurred, after the passage of
time, which will constitute a default thereunder. LCDC is not restricted and
upon consummation of the Agreement, S&S will not be restricted, by any known
agreement, order, injunction or otherwise from developing the Assets as a
landfill.
b. Without limiting the generality of the foregoing Article
II(A)(9)(a), LCDC represents and warrants that there have been no amendments,
modifications or revisions to the Host County Agreement (attached on Exhibit D).
---------
-7-
<PAGE>
c. The Conditional Agreement to Purchase between LCDC and Jerry
Spillman and Terri Spillman, as husband and wife, dated July 21, 1992, a copy of
which is attached hereto and made a part hereof as Exhibit F (the "Spillman
---------
Agreement") is valid and binding upon LCDC and enforceable in accordance with
its terms, and all of LCDC's right, title and interest in the Spillman Agreement
may be assigned to S&S without the prior written consent of Jerry Spillman or
Terri Spillman and there have been no written or oral modifications of the
Spillman Agreement not attached on Exhibit F.
---------
10. Consent and Approvals. Except for the possible requirement of
---------------------
approval by Lawrence County pursuant to the Host County Agreement, no (i)
consent, approval, authorization, order or other action of, (ii) declaration,
filing or registration with, or (iii) giving of notice to, any domestic or
foreign governmental or regulatory authority or any other person or entity is
required in connection with (a) the execution, delivery and performance by LCDC
of this Agreement, (b) the consummation by LCDC of the transactions contemplated
hereby or thereby or (c) the legal, valid and enforceable transfer of the
management control, and potential lease of the Assets to S&S.
11. Economic/Regulatory Conditions. As of the Contract Date, no events or
------------------------------
transactions (including proposed changes in any laws or regulations) have
occurred and no information has come to the attention of LCDC (other than events
or information relating to general economic conditions) that would reasonably be
expected to have a material adverse effect on the Assets or their use as a
landfill or which would or could reasonably be expected to prevent or impair S&S
after the Contract Date from developing and using the Assets as a landfill.
Specifically, except for K/C Reclamation in Wabash County, Illinois, which to
the best of LCDC's knowledge has obtained siting approval but not a development
or operating permit, LCDC knows of no other site within Lawrence County or any
contiguous county that has currently received local approval to develop a
landfill.
12. Environmental Compliance. Except as described on Exhibit E, LCDC has
------------------------ ---------
not received any notice, oral or written, from any governmental entity or other
third party relating to any violation of, or noncompliance with, any statute,
law, ordinance, decree, order, rule or regulation, or the provisions of any
license or permit relating to environmental matters with respect to the Assets
or Old Landfill, and there is no basis for the same. Except as described on
Exhibit E, LCDC has not used, and has not permitted others to use, the Assets or
- ---------
the Old Landfill in connection with the generation, disposal, storage, treatment
or transportation of (i) hazardous substances, as defined under the
Comprehensive Environmental Response, Compensation and Liability Act and its
regulations or (ii) any waste, pollutant, hazardous substance, toxic substance,
hazardous waste, special waste, petroleum-based substance or waste, product or
by-product or any constituent of any such substance, waste or product, the
presence, use or removal of which is either regulated,
-8-
<PAGE>
controlled, limited or prohibited by any local, state or federal environmental
or pollution control laws, regulations or ordinances (substances described in
(i) and (ii) are collectively hereinafter referred to as "Hazardous
Substances"). Except as described on Exhibit E, there is no on-site or off-site
---------
location to which LCDC has transported Hazardous Substances and no person has
transported any Hazardous Substances related in any way to the Assets or Old
Landfill to any on-site or off-site location. Except as described on Exhibit E,
---------
there are not now, and never have been, any Hazardous Substances or underground
tanks located anywhere on the real estate contained as part of the Assets or Old
Landfill.
13. Permits and Capacity. Approximately 42 acres of real estate included
--------------------
in the Assets and New Landfill have current and valid Siting Approval from
Lawrence County to be developed as a landfill to accept and dispose of non-
hazardous solid waste. The 42 permitted acres have capacity of at least
5,500,000 cubic yards of air space which will provide 4,600,000 cubic yards of
in-place waste space. As of the Contract Date, the Assets are not subject to
any regulatory, contractual or other restrictions as to the amount of waste that
may be disposed of in any day, week, month or year, except as set forth in the
Host County Agreement, and in the Application.
14. Absence of Certain Practices. Except for the Host County Agreement
----------------------------
and Spillman Contract, neither LCDC nor any director, officer, agent, employee
or other person acting on behalf of LCDC, has given or agreed to give any gift
or similar benefit of more than nominal value to any customer, supplier, or
governmental employee or official or any other person who is or may be in a
position to hinder or assist LCDC in connection with any transaction or license,
permit, order or approval involving the Assets or LCDC, which gift or similar
benefit, if not given in the past, would have materially and adversely affected
the Assets or the prospects of LCDC. Neither LCDC nor any director, officer,
agent, employee, or other person acting on behalf of LCDC has (i) used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to, or on behalf of, government officials or others or (ii) accepted or received
any unlawful contributions, payments, gifts or expenditures.
15. Accuracy of Representations and Documents. No representation or
-----------------------------------------
warranty made by LCDC or Gary Simmons in this Agreement or the Exhibits thereto
(which are an integral part thereof) nor any statement, certificate or other
document furnished or to be furnished by any of the foregoing entities to S&S or
any of its representatives (i) is, or will be when so furnished, false or
misleading in any material respect, (ii) contains any material misstatement of
fact or (iii) omits to state any fact necessary to be stated to make the
statements made in any such representation or warranty or document not false or
misleading in any material respect.
-9-
<PAGE>
16. Validity, Enforceability, and no Default. This Agreement is and when
----------------------------------------
executed and delivered and any amendments hereto or thereto will be, valid and
binding upon LCDC and enforceable in accordance with its terms and will give S&S
the right to the economic benefit of operating the New Landfill. This Agreement
does not create or cause a default under the Host County Agreement or in any way
jeopardize Siting Approval granted by Lawrence County. Except for the Siting
Approval, the only other permit, license, or authorization required to develop
and operate the New Landfill are the development and operating permit to be
issued by the IEPA.
B. Legal Opinions to be given to S&S by LCDC on behalf of LCDC. On or before
------------------------------------------------------------
the date this Agreement is executed by all parties (the "Contract Date"), LCDC
will deliver to S&S a legal opinion in form and substance as set forth in
Exhibit G attached hereto and incorporated by reference of Illinois counsel,
- ---------
Ruth Gosnell, Esquire, with respect to the matters set forth in Paragraphs 1(a)-
(d), 2(a), 3(i), and 9(b) of Article II(A) and Mohan, Alewelt, et alia,
Springfield, Illinois, with respect to matters set forth in Paragraphs 3(ii) and
(iii), and 16 of Article II(A), and confirming that with respect to LCDC, this
transaction is not subject to the provisions of the Illinois Bulk Sales Act.
C. Representations and Warranties of Big T and Sandra L. Simmons. Big T and
-------------------------------------------------------------
Sandra L. Simmons, individually and on behalf of Big T, hereby jointly and
severally represent and warrant to S&S as follows:
1. Corporate Organization.
----------------------
a. Big T is a corporation duly organized, validly existing and in
good standing under the laws of the State of Illinois and has all requisite
power and authority to haul waste to the New Landfill.
b. Big T is qualified or licensed to do business as a foreign
corporation in all jurisdictions in which such qualification and licensing is
required.
c. Big T has no direct or indirect subsidiaries, and there is no
corporation, association, partnership or other entity or person currently or in
the past related in any way to Big T as an affiliate, customer, supplier,
lessor, lessee or otherwise, in which any principal or affiliate of Big T
directly or indirectly, has or had any ownership interest in the New Landfill.
d. All of Big T's capital stock and other securities are owned
legally, beneficially and of record directly by Sandra L. Simmons and by no one
else.
-10-
<PAGE>
2. Authorization.
-------------
a. Big T has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.
b. Big T is economically and technically able to comply with the
terms of this Agreement. This Agreement is and when executed and delivered and
any amendments hereto or thereto will be, valid and binding upon Big T and
enforceable in accordance with their respective terms.
3. No Violation. Neither the execution and delivery of this Agreement by
------------
Big T nor the consummation of the transaction contemplated hereby or thereby
will (i) violate any provision of the Articles of Incorporation or ByLaws of Big
T, (ii) except as set forth on Exhibit E, be in conflict with, constitute a
---------
default under, result in the termination or invalidity of, or accelerate the
performance required by any agreement or commitment to which Big T is a party or
by which it is bound or subject, or (iii) violate any statute, law, judgment,
decree, order, regulation or rule of any agency, court or governmental
authority.
4. No Undisclosed Liabilities. Big T has no liabilities or obligations
--------------------------
of any nature (absolute, accrued, contingent or otherwise) in any way relating
to the Assets (including the New Landfill) that have not been fully disclosed to
S&S in writing.
5. Compliance with Law.
-------------------
a. Big T has complied and is presently complying in all material
respects with all applicable laws, rules, regulations, orders, building and
other codes, zoning and other ordinances, permits, licenses, authorizations,
judgments and decrees of all federal, state, local, foreign or other
governmental authorities that relate to the Assets or the New Landfill or the
Old Landfill, including transportation and disposal of waste at the same other
than as described on Exhibit E. Copies of all warning notices, notices of
---------
violation, consent orders, complaints, or threat of any of the foregoing, or
facts that, with the passage of time are likely to give rise to one of the
foregoing, are described on Exhibit E attached hereto and incorporated by
---------
reference.
b. Except as shown on Exhibit E, Big T is not aware of, or has
---------
received from any third party (including employees and government agencies),
written or oral notification regarding, any present or past failure to comply or
of any present or future events, circumstances, activities or plans which may
(i) materially interfere with or prevent continued compliance with any such
laws, rules or regulations; (ii) give rise to any common law or statutory
liability, or (iii) otherwise form the basis of any claim, proceeding or
investigation.
-11-
<PAGE>
c. Except as set forth on Exhibit E, there is not currently pending,
---------
any claim, inquiry, proceeding or investigation of any nature whatsoever by or
before any court or regulatory or administrative agency, arbitration tribunal,
board, bureau, authority or commission with respect to or affecting Big T's
ability to perform its obligations under this Agreement. To Big T's best
knowledge after due inquiry, none of the same is threatened against Big T or the
20 Acre Parcel and there is no valid basis for any of the same. To the best
knowledge of Big T, the 20 Acre Parcel is not subject to any judgment, order or
decree which is or will be binding on S&S or otherwise impair S&S's rights under
this Agreement.
6. Taxes. Big T has timely and accurately filed all tax reports,
-----
declarations and returns (including information returns) required to be filed in
connection with the 20 Acre Parcel for all periods ending on or before the
Contract Date of this Agreement and has paid, or withheld or otherwise provided
for, all related taxes and other charges due from either with respect to the New
Landfill. To the best knowledge of Big T, there is no basis for the assessment
of any tax liability against Big T or the 20 Acre Parcel that has not been
disclosed to S&S in writing.
7. Contracts and Commitments. Big T is not a party to or bound by any
-------------------------
agreements, contracts, arrangements or commitments, written or oral (including
leases of personal or real property, loans or indebtedness, or long-term
contractual arrangements), other than as set forth on Exhibit E. Big T has
---------
supplied a true and complete copy of each such agreement to S&S and all such
agreements are in full force and effect and without default and no event has
occurred, after the passage of time, which will constitute a default thereunder.
Big T is not restricted and upon consummation of this Agreement, S&S will not be
restricted, by any known agreement, order, injunction or otherwise from
developing the Assets as a landfill or fulfilling its obligations hereunder.
8. Consent and Approvals. No (i) consent, approval, authorization, order
---------------------
or other action of, (ii) declaration, filing or registration with, or (iii)
giving of notice to, any domestic or foreign governmental or regulatory
authority or any other person or entity is required in connection with (a) the
execution, delivery and performance by Big T of this Agreement, or (b) the
consummation by Big T of the transactions contemplated hereby or thereby.
9. Environmental Compliance. Except as described on Exhibit E, Big T has
------------------------ ---------
not received any notice, oral or written, from any governmental entity or other
third party relating to any violation of, or noncompliance with, any statute,
law, ordinance, decree, order, rule or regulation, or the provisions of any
license or permit relating to environmental matters with respect to the 20 Acre
Parcel, and there is no basis for the same. Except as described on Exhibit E,
---------
Big T has not used, and has not permitted others to use, the 20 Acre Parcel in
connection with
-12-
<PAGE>
the generation, disposal, storage, treatment or transportation of Hazardous
Substances. Except as described on Exhibit E, there is no on-site or off-site
---------
location to which Big T has transported Hazardous Substances. No person has
transported any Hazardous Substances related in any way to the 20 Acre Parcel to
any on-site or off-site location. Except as described on Exhibit E, there are
---------
not now, and never have been, any Hazardous Substances or underground tanks
located anywhere on the real estate contained as part of the 20 Acre Parcel.
10. Accuracy of Representations and Documents. No representation or
-----------------------------------------
warranty made by Big T or Sandra L. Simmons in this Agreement or the Exhibits
thereto (which are an integral part thereof) nor any statement, certificate or
other document furnished or to be furnished by any of the foregoing entities to
S&S or any of its representatives (i) is, or will be when so furnished, false or
misleading in any material respect, (ii) contains any material misstatement of
fact or (iii) omits to state any fact necessary to be stated to make the
statements made in any such representation or warranty or document not false or
misleading in any material respect.
11. Validity, Enforceability, and no Default. To the best knowledge of
----------------------------------------
Big T, this Agreement is valid and enforceable and will give S&S the right to
the economic benefit of operating the New Landfill with respect to the 20 Acre
Parcel. This Agreement is and when executed and delivered and any amendments
hereto or thereto will be, valid and binding upon Big T and enforceable in
accordance with its terms.
D. Legal Opinions to be Given to S&S by Big T. On or before the date this
------------------------------------------
Agreement is executed by all parties (the "Contract Date"), Big T will deliver
to S&S a legal opinion in form and substance as set forth in Exhibit G attached
---------
hereto and incorporated by reference of Illinois counsel, Ruth Gosnell, Esquire,
with respect to the matters set forth in Paragraphs 1(a)-(d), 2(a), and 3(i) of
this Article II(C) and Mohan, Alewelt, et alia, Springfield, Illinois, with
respect to matters set forth in Paragraphs 3(ii), 3(iii), and 11 of this Article
II(C).
E. Representations and Warranties of S&S.
-------------------------------------
1. Validity, Enforceability. S&S expressly warrants and represents that
------------------------
this Agreement is valid and binding upon S&S and enforceable in accordance with
its terms.
2. Economic Viability. S&S expressly warrants and represents that this
------------------
Agreement is valid and enforceable, that S&S is economically and technically
able to comply with the terms of this Agreement and to develop, construct,
operate and close the New Landfill, and that all representations by S&S as to
its ability to do so have been true and accurate.
-13-
<PAGE>
III. THE NEW LANDFILL MANAGEMENT, CONSULTING
------------------------------------------
AND COOPERATION AGREEMENT
-------------------------
1. Management and Use of New Landfill Property. In consideration of the
-------------------------------------------
obligations and covenants of S&S hereunder and for other good and valuable
consideration, the receipt and sufficiency of which is acknowledged by the
parties, LCDC hereby grants S&S an exclusive right to manage and operate the New
Landfill property described on Exhibits B and C attached hereto and made a part
----------------
hereof upon the terms and conditions set forth in subparagraphs a. through h.
below, and the terms and conditions of this Agreement.
a. Term. The term of this Agreement shall commence on the Contract
----
Date of this Agreement and shall terminate on the date of termination of this
Agreement in accordance with Article X.
b. Use. During the term of this Agreement, S&S shall use the New
---
Landfill for the construction, development, operation and management of a
landfill, recycling or transfer center, or any other activity reasonably related
to the transportation, handling, use, or disposal of solid waste (including
without limitation, recycling facility, waste-to-energy facility, transfer
facility, etc.) and for no other purpose without LCDC's prior written consent,
which consent shall not be unreasonably withheld or delayed. During the term of
this Agreement, S&S shall have exclusive possession of the New Landfill and, as
such, shall have the exclusive right, power and authority to develop, construct,
manage, and operate the New Landfill as a landfill and to enter into all
agreements, contracts, permits and authorizations of any kind or nature
pertaining thereto, for the design, construction, management and operation of
the New Landfill, including, without limitation, the application for and
modification of any agreements, contracts, permits and authorizations pertaining
to the construction, operation or closure of the New Landfill. Without limiting
the generality of the foregoing, and subject to the provisions of Article VI,
LCDC hereby acknowledges and agrees that S&S or any Affiliate of S&S shall have
the right to excavate and sell soil from the New Landfill, accept solid wastes
for the New Landfill at fees to be established by S&S in its sole discretion
(subject to the provision of Article IV, hereof), operate waste hauling
operations (except for municipal solid waste hauling in Lawrence County and
contiguous counties), conduct soil borings and sampling of surface and ground
water, install monitoring wells and complete any environmental studies of the
surface and subsurface conditions of the New Landfill, that S&S may deem to be
appropriate. All of S&S's rights under this subparagraph are hereinafter
referred to as the "Permitted Uses."
c. Improvements. S&S, without the consent of LCDC, may construct
------------
any and all buildings and other improvements on the New Landfill that S&S, in
its reasonable judgment, believes are necessary or desirable in connection with
the Permitted Uses.
-14-
<PAGE>
All improvements made to the New Landfill property by S&S during the term of
this Agreement shall remain the property of S&S; provided, however, that upon
expiration of this Agreement, for any reason whatsoever, title to all such
improvements located on the property described on Exhibits B and C attached
----------------
hereto and made a part hereof shall vest in LCDC. S&S shall have the right to
install on the New Landfill such equipment, fixtures and machinery as S&S sees
fit; title thereto shall remain in S&S and S&S shall have the right to remove
any such equipment, fixtures or machinery, even though such equipment, fixtures
and machinery may be attached to the buildings installed on the New Landfill,
provided S&S repairs any damage caused by such removal. S&S shall have thirty
(30) days following the expiration or termination of this Agreement to remove
such items.
d. Maintenance and Repairs. S&S shall keep all buildings and
-----------------------
improvements in good condition and repair, ordinary wear and tear excepted.
e. Taxes, Assessments and Utility Charges. S&S shall pay, prior to
--------------------------------------
delinquency, all real estate taxes or assessments, whether special or general,
and all other charges, taxes and assessments which may be levied, imposed or
assessed upon or against the land described on Exhibits B and C attached hereto
----------------
and any buildings or improvements now or hereafter located on such land
("Taxes"). S&S shall have no obligation to pay any real estate taxes or
assessments which are due and payable during the term of this Agreement, but
were levied, imposed or assessed for periods of time not included within the
term of this Agreement. (By way of illustration, S&S shall have no obligation
to pay taxes which are due and payable in 1995 since such taxes are assessed for
the year of 1994. S&S's first obligation to pay Taxes under this Agreement
shall arise in May of 1996 when Taxes for the year of 1995 are due and payable).
All Taxes assessed for the year of 1995 shall be prorated between S&S and LCDC
as of the Contract Date of this Agreement and Taxes assessed for the last year
of this Agreement shall be prorated between LCDC and S&S as of the termination
date of this Agreement (but only if S&S has not exercised the Option pursuant to
Article XI). If any Taxes can be paid in installments, S&S may pay such taxes
on an installment basis. S&S shall have the right to contest the amount or
validity of any Taxes by appropriate proceedings so long as such proceedings
shall operate to prevent the sale of the New Landfill.
S&S shall pay all charges for all utilities and services furnished to the
New Landfill including, but not limited to, all charges for the installation of
utilities, sewage connection and disposal, janitorial services, electricity,
telephone, water, and gas furnished to or consumed upon the New Landfill.
f. No Liens. LCDC's interest in the New Landfill shall not be
--------
subject to liens for improvements made by S&S, and S&S shall have no power or
authority to create any lien or permit any lien to attach to the premises or to
the present estate,
-15-
<PAGE>
reversion or other estate of LCDC in the New Landfill. All materialmen,
contractors, artisans, mechanics and laborers and other persons contracting with
S&S with respect to the New Landfill or any part thereof, are hereby charged
with notice that such liens are expressly prohibited and that they must look
solely to S&S to secure payment for any work done or material furnished for
improvements by S&S or for any other purpose during the term of this Agreement.
S&S shall advise all persons furnishing designs, labor, materials or services to
the New Landfill in connection with S&S's improvements thereof of the provisions
of this Section. S&S shall remove or bond over any lien to the reasonable
satisfaction of LCDC no later than 60 days after receiving written notice of the
same from LCDC. If S&S fails to remove or bond over the lien within the
foregoing 60 day period, then, in addition to any other remedy LCDC may have
under this Agreement, S&S shall indemnify and hold LCDC harmless against any and
all claims and losses, including lost profits, that LCDC may incur as a result
of the lien in accordance with the provisions of Article VIII of this Agreement.
g. Insurance and Casualty. During the term of this Agreement, S&S,
----------------------
at its own expense, shall procure and maintain fire, windstorm and extended
coverage insurance for all buildings and other permanent improvements
constructed on the New Landfill, in such amounts as S&S reasonably deems
appropriate. All insurance required under this Agreement shall be written with
an insurance company or companies authorized to do business in the State of
Illinois and the cost of all premiums on the policy shall be paid by S&S. In the
event that any buildings or other permanent improvements located on the New
Landfill are damaged by a casualty or other loss during the term of this
Agreement, S&S shall, to the extent of the insurance proceeds actually paid to
S&S for repairs, repair the damaged buildings and improvements. S&S shall have
no obligation to spend any sums on repair in excess of the insurance proceeds
actually received by S&S for the repair of any buildings or permanent
improvements located on the New Landfill.
h. Condemnation. If the New Landfill or any part thereof shall be
------------
taken for public purpose by condemnation as a result of any action or proceeding
in eminent domain, or shall be transferred in lieu of condemnation to any
authority entitled to exercise the power of eminent domain, the interests of
LCDC and S&S in the award or consideration for such transfer, and the allocation
of the award and the other effects of the taking or transfer upon this
Agreement, shall be as follows:
(1) Total Taking - Termination. If the entire New Landfill is
--------------------------
taken or so transferred, this Agreement and all of the right, title and interest
hereunder shall cease on the date title to such land so taken or transferred
vests in the condemning authority.
(2) Partial Taking - Termination. In the event of the taking or
----------------------------
transfer of only a part of the New Landfill,
-16-
<PAGE>
leaving the remainder of the New Landfill in such location, or in such form,
shape or reduced size as to be not effectively and practicably usable in the
sole reasonable opinion of S&S for the Permitted Uses, this Agreement and all
right, title and interest thereunder may be terminated by S&S giving, within
sixty (60) days of the occurrence of such event, thirty (30) days' notice to Big
T and LCDC of S&S's intention to terminate.
(3) Partial Taking - Continuation. In the event of such taking
-----------------------------
or transfer of only a part of the New Landfill leaving the remainder of the New
Landfill in such location and in such form, shape or size as to be used
effectively and practicably in the sole reasonable opinion of S&S for the
Permitted Uses, this Agreement shall terminate as to the portion of the New
Landfill so taken or transferred as of the date title to such portion vests in
the condemning authority, but shall continue in full force and effect as to the
portion of the New Landfill not so taken or transferred.
(4) Allocation of Award. Any compensation or damages awarded or
-------------------
payable ("Compensation") because of the taking of all or any portion of the New
Landfill by eminent domain shall be awarded first to (i) all real property taxes
constituting a lien on the New Landfill, then to (ii) any increase in the cost
of closure, post-closure attributable to or arising out of such taking, then to
(3) the parties as their relative interests then appear, taking into account the
equities of the situation at the time. The time of taking shall mean 12:01 a.m.
of, whichever shall first occur, the date of title or the date physical
possession of the portion of the New Landfill is taken by the taking agency or
entity.
(5) Voluntary Conveyance. A voluntary conveyance by LCDC or S&S
--------------------
to a public utility, agency or authority under threat of a taking under the
power of eminent domain in lieu of formal proceedings shall be deemed a taking
within the meaning of this paragraph III(1)(h).
(6) Closure/Post Closure. Notwithstanding the above, nothing
--------------------
herein shall be deemed to affect S&S's closure and post-closure obligations with
respect to those portions of the New Landfill used for in ground waste disposal,
except to the extent that the condemning authority shall be required or
obligated to complete same.
i. Memorandum of Agreement. A memorandum of this Agreement and
-----------------------
Option to Purchase, in the form attached hereto as Exhibit H-1, may be recorded
-----------
by either party in the public records of Lawrence County, Illinois.
2. Rights and Duties of S&S. S&S agrees to perform with respect to the
------------------------
New Landfill the following:
a. Operation. S&S will use its reasonable best efforts to develop,
---------
construct and operate LCDC's property and the
-17-
<PAGE>
Assets related to the New Landfill, as a municipal and non-hazardous special
solid waste landfill in material compliance with state and federal laws and
regulations and with the Host County Agreement and Siting Approval, and
otherwise in a proper manner. S&S shall pay all costs of development,
permitting, construction, operation, closure and post-closure care of the New
Landfill after the Contract Date of this Agreement, holding LCDC harmless
therefrom, except as expressly set forth herein. Except as expressly set forth
herein, all costs incurred prior to the Contract Date in connection with the
development, permitting, construction, operation, closure and post-closure care
of the New Landfill shall be borne by the party which contracted for such work.
b. Permitting. S&S will use its reasonable best efforts to design
----------
and apply for permits as required to keep the current Siting Approval for the
New Landfill, and S&S shall be responsible for all costs of developing,
permitting, constructing, operating, closing and post-closure care of the New
Landfill after the Contract Date of this Agreement, holding LCDC harmless
therefrom, except as expressly set forth herein.
c. Amendment to Host County Agreement. S&S will have the right at
----------------------------------
its discretion to seek amendments to the Host County Agreement, and LCDC will
cooperate to help obtain such changes.
d. Purchase of Spillman Parcel. Upon receipt by S&S of a final
---------------------------
state permit to operate the New Landfill as a landfill, S&S covenants and agrees
to purchase the 15-acre parcel of real estate including improvements located
thereon which is adjacent to the southern boundary of the New Landfill in
accordance with the terms and conditions of the Spillman Agreement. In order to
accomplish the purchase of the 15-acre parcel by S&S in accordance with the
Spillman Agreement, LCDC agrees to assign all its right, title and interest in
the Spillman Agreement to S&S, at the option of S&S.
3. Duties of LCDC . LCDC agrees to perform for S&S any and all services
---------------
generally performed by LCDC in its business, including, but not limited to, the
following:
a. Consulting. During the first five (5) years of this Agreement
----------
Gary Simmons shall, on behalf of LCDC and at no extra charge or cost to S&S:
(1) act as consultant to S&S in the development and operation of
the New Landfill under the direction of S&S; and
(2) be available to S&S for such services in Illinois and
Indiana at dates and times as reasonably required by S&S, for a minimum of 15
hours per month, and a maximum (with additional reasonable compensation to be
agreed to by the parties for such services over 15 hours per month) of 30 hours
per month, excluding travel time; which obligation to provide services shall not
accrue from month to month, such services to include, but not
-18-
<PAGE>
be limited to, the recruitment of new customers and local sales, public
relations efforts, meetings and filings with the IEPA, local relations and state
lobbying efforts.
b. Gray Parcel. Gary Simmons shall use reasonable and diligent
-----------
efforts to obtain for S&S an option to purchase that certain parcel of real
estate adjacent to the New Landfill owned by Donald Lee Gray and Celia Jane Gray
(collectively referred to herein as "Gray") that may allow rail access to the
New Landfill, pursuant to the terms of a contract substantially in the form
attached hereto as Exhibit I (the "Gray Option Contract"). If Donny Gray will
---------
not execute the Gray Option Contract unless Gary Simmons is shown as the
purchaser, Gary Simmons shall use reasonable and diligent efforts to obtain the
Gray Option Contract showing Gary Simmons as the purchaser and containing no
provision prohibiting the assignment of the Gray Option Contract by Gary
Simmons, and no later than 10 days after Gary Simmons has obtained the Gray
Option Contract executed by Gray, Gary Simmons shall assign all his right, title
and interest in the Gray Option Contract to S&S.
c. Cooperation with Business Decisions. LCDC agrees to abide by and
-----------------------------------
cooperate with all reasonable decisions made in good faith by S&S relating to
the Permitted Uses.
d. Closure of Old Landfill. Without limiting the generality of
-----------------------
Article II(A)(9)(a), LCDC represents and warrants that LCDC remains obligated
for, and shall use its best efforts to complete closure of the Old Landfill in
accordance with all applicable law and the requirements of regulatory agencies
having jurisdiction over the Old Landfill to any extent necessary to avoid
prejudice to the other parties hereto.
4. Prohibition Against Further Contract or Encumbrance. During the term
---------------------------------------------------
of this Agreement, neither LCDC nor Gary Simmons are authorized to and will not
enter into any contract or agreement regarding the New Landfill (including
without limitation, any hauling agreement), which will make any commitment or
otherwise bind or encumber S&S or the New Landfill in any way without S&S's
express prior consent, which consent may be withheld in S&S's sole discretion.
5. Payment for Investigation Costs (Well 107). LCDC shall pay to S&S
------------------------------------------
within six months following the time the New Landfill begins accepting waste as
a permitted landfill the costs incurred by S&S subsequent to June 23, 1994 but
prior to the date of this Agreement for testing Well 107 for the presence of TCE
provided, however, that any such costs to be paid by LCDC shall be limited to
$3,000; otherwise, all costs of testing, engineering, analysis, modeling,
developing or otherwise gathering information and data and preparing the New
Landfill for permit applications, incurred by S&S before the Contract Date shall
be borne in full by S&S alone, and S&S shall hold LCDC harmless therefrom,
except as set forth in Article VIII(2)(e).
-19-
<PAGE>
6. Use of Name. LCDC hereby authorizes S&S to use the trade name
-----------
"Lawrence County Disposal Centre" in connection with the New Landfill; provided,
however, S&S's use, if any, of the trade name shall at no time and in no way
interfere with LCDC's activities and efforts to close the Old Landfill, nor
shall such use by S&S be deemed to impose any obligation upon S&S in connection
with the Old Landfill.
7. Exchange of Documents. Each party agrees and covenants to submit to
---------------------
the other party any and all documents received by it or its agents from, and any
and all documents transmitted by it or its agents to, any governmental entity
with jurisdiction over the New Landfill, said governmental agencies, including,
but not limited to, Lawrence County officials or agents, agents or officials of
the IEPA, Department of Energy and Natural Resources, Pollution Control Board,
Department of Public Health, or Office of State Fire Marshal, and the United
States Environmental Protection Agency, the United States Department of
Transportation, the United States Department of the Interior, or any of their
subagencies, and any other similar governmental entity; moreover, said documents
include, but are not limited to, documents relating to permit requests,
allowances and/or denials, administrative citations and/or enforcement actions,
monthly, quarterly and annual tipping fee records and reconciliation and payment
forms, annual remaining capacity reports, and any other similar documents. The
foregoing provision of this Article III(7) shall apply only to documents
relating to the New Landfill, the Old Landfill, or operations on either. In the
event that any party reasonably believes that release of information hereunder
would prejudice any privileged communication with any regulatory agency that
would not otherwise be subject to public disclosure, said party shall promptly
provide a written summary or redacted version of such document to the other
party.
8. Lease. At any time after the Contract Date, subject to and in
-----
accordance with the same terms and conditions of this Agreement, S&S shall have
the option, upon prior written notice to the parties, to convert its right of
access and use under this Agreement to include the lease of the New Landfill,
upon the amendment of the Host County Agreement to the satisfaction of S&S, or
the waiver of S&S of such amendment, in S&S's sole discretion. Upon such
written notice, LCDC shall thereafter demise, lease and let to S&S and S&S shall
hire and take from LCDC, the New Landfill and any and all improvements thereon.
Upon commencement of the lease hereunder, the parties agree to execute a
memorandum of lease in recordable form, confirming S&S's leasehold interest
hereunder as set forth on Exhibit H-2.
-20-
<PAGE>
IV. WASTE DISPOSAL AND GUARANTEED TIPPING FEES
-----------------------------------------------
1. Obligation to Operate Waste Collection Business and to Dispose of
-----------------------------------------------------------------
Waste Exclusively at New Landfill.
---------------------------------
a. During the first twenty (20) years of this Agreement, LCDC and
Big T and any Affiliate of either shall dispose of all solid waste received and
hauled in the regular course of business, from operation of any waste collection
business in the States of Illinois and Indiana, through transfer station(s) or
otherwise (hereinafter "Contract Waste"), exclusively at the New Landfill, to
the extent the New Landfill is permitted to accept such waste, and has the
ability to accept such waste when delivered, except for the M&M Scavenger
Agreement described on Exhibit E. Notwithstanding this paragraph or any other
---------
provision of this Agreement, however, the obligation to deposit Contract Waste
at the New Landfill as set forth herein shall apply only to the extent that the
tipping fee charged by S&S for any particular waste stream is "competitive" (as
hereinafter defined) with tipping fees being charged by other nearby landfills
to which waste could conveniently be diverted (the "Competing Landfill"), except
that in no circumstance, even if the rates charged by the New Landfill are not
competitive, shall LCDC or Big T, nor any Affiliate of either, ever transfer
waste to or use for waste disposal (i) any landfill or transfer station located
in Knox County, Indiana, and contiguous counties, Lawrence County, Illinois, and
contiguous counties, Effingham or Wayne County, Illinois (except such a transfer
station owned or operated by Big T), or (ii) any landfill or transfer station
owned or operated by Mid-America (also known as Mid-America Waste Services,
Inc.) or its Affiliates or successors or assigns.
b. If LCDC or Big T or any Affiliate hauling operation of either, is
sold to any party other than S&S, it shall be a condition of the contract for
purchase that the buyer and any successor or assigns of the buyer use the New
Landfill as its exclusive disposal facility at S&S's going rates provided those
rates are "competitive" as defined below.
c. During the five (5) years period following the commencement of
waste disposal at the New Landfill Big T and LCDC respectively shall each use
their respective best efforts to bring to the New Landfill, a volume of solid
waste commensurate with the volume hauled by either prior to the Contract Date,
it being acknowledged by the parties that Big T and LCDC's obligation hereunder
is given as material consideration with respect to the S&S's agreement to pay
Big T the minimum royalty payment described herein.
2. S&S's Agreement to Accept Big T's and LCDC's Waste.
--------------------------------------------------
Throughout the term of this Agreement, S&S shall permit Big T and LCDC to
dispose at the New Landfill all Contract Waste collected by either in the normal
course of its refuse collection services.
-21-
<PAGE>
3. Tipping Fees.
------------
a. Competitive Tipping Fees. For the purposes of this Article,
------------------------
S&S's tipping fee shall be deemed "competitive" if the S&S tipping fee after
set-off of royalty payments and discounts is not more than the net tipping fee
offered by the Competing Landfill (the "Competing Offer"), plus the difference
in the distance, computed at $1.50/mile, between the distance from Big T's
headquarters in Vincennes, Indiana to the Competing Landfill, as compared
against the distance between Big T's headquarters in Vincennes, Indiana to the
New Landfill. All such Competing Offers shall be in writing, shall affirmatively
acknowledge S&S's rights under this paragraph, and shall be expressed in terms
of a price per ton and not on a yardage basis, accompanied by a sworn statement
from the principal of LCDC or Big T, as applicable, that there is no
consideration, whether monetary or non-monetary, being paid for the rights under
the Offer, except as expressly stated therein. Notwithstanding the above, during
the twenty (20) years following the Contract Date, S&S reserves the right to
match at any time any rate Offered to LCDC or Big T, or to lower at any time
S&S's tipping fees to make such tipping fee competitive hereunder, whereupon
LCDC or Big T shall, within seven (7) days after written notice of adjustment of
rates to a competitive rate, redirect the relevant solid waste stream to the New
Landfill. Big T and LCDC covenant and agree not to sign any disposal agreement
with any other landfill which would prevent S&S from exercising its right to
adjust tipping fees as described above and to require disposal of such waste
stream at the New Landfill within the seven (7) day period specified above.
b. Lowest Current Tipping Rates. For the purposes of this Article,
----------------------------
"lowest current tipping rates" shall mean the tipping rate offered by S&S for
the New Landfill for municipal solid waste for comparable flow rate, time period
and geographic area, including in-kind discounts. Without limiting the
generality of the foregoing, the "lowest current tipping rates" shall not
include one time special volume pricing on contracts that will provide a minimum
of 500 tons in any month.
c. Guaranteed Tipping Fees.
-----------------------
(1) For all municipal solid waste picked up by Big T from
accounts in Crawford and Terre Haute Counties, Indiana, S&S will charge Big T a
tipping fee not to exceed ten percent (10%) less than the "lowest current
tipping rates" as defined below, for municipal solid waste streams then being
charged by the New Landfill for those counties designated above, provided that
in no case will the discount apply to reduce the tipping fee for municipal solid
waste from those counties to be less than $28.25 per ton.
(2) For all municipal solid waste received and hauled by Big T
to the New Landfill from accounts in areas other
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<PAGE>
than as specified above, S&S shall charge a tipping fee not to exceed the
"lowest current tipping rates" as defined above.
d. Royalty. S&S shall pay a royalty to Big T (the "royalty")
-------
throughout the term of this Agreement, based on the tipping fee for all waste
disposed of by any hauler or carrier (including without limitation, LCDC or Big
T), in the New Landfill (excluding only those volumes subject to the ten percent
(10%) discount set forth in paragraph B.1. above). Royalties shall be calculated
according to the schedule below:
<TABLE>
<CAPTION>
Tipping Fees/Ton of
Waste Disposed Big T's Royalty/Ton
-------------- -------------------
<S> <C>
$ 0.00 to $25.00 $0.00
$25.01 to $30.00 $ .50
$30.01 to $35.00 $ .75
$35.01 to $40.00 $1.00
$40.01 and up $1.50
</TABLE>
Notwithstanding the above, but subject to the provisions of Article IV(3)(f),
below, the minimum royalty to be paid to Big T shall be $2,500 per month,
commencing on the date that waste disposal activities commence at the New
Landfill.
e. Calculation of Set-offs. During the term of this Agreement, the
-----------------------
royalty payment owed by S&S to Big T shall be set off against tipping fees to be
paid by Big T to S&S. The amount to be set-off shall be calculated by S&S and
transmitted to Big T on or before the last business day of the month following
receipt by S&S of payment for those particular waste deposits or for waste
deposited by Big T pursuant to this Article, on or before the last business day
of the month following the month in which Big T deposited the waste. If the
amount of the royalty owed to Big T by S&S exceeds the tipping fees payable to
S&S by Big T for a given month, then S&S shall pay Big T the excess amount on or
before the last business day of each month following the calculation. If the
amount of the tipping fee owed to S&S by Big T exceeds the royalty payable to
Big T by S&S for a given month, then Big T shall pay S&S the excess amount on or
before the last business day of each month following the calculation.
f. Royalties During Period of Non-Operation. In the event that
----------------------------------------
disposal of waste at the New Landfill is halted for any reason prior to the date
all remaining capacity of the New Landfill is filled, then for the period of
time that disposal of waste at the New Landfill is halted, the minimum royalty
amount shall not continue to accrue.
g. Collection of Royalties/Tipping Fees after Application of
---------------------------------------------------------
Set-off. Any balance due to either party outstanding for more than 45 days
- -------
following transmission of the set-off calculation by S&S as set forth above
shall bear interest at the rate equal to 1 1/2 percent per month or the maximum
rate allowable by law, whichever is greater. In addition to any other
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<PAGE>
remedy that either party may have under this Agreement, in the event either
party is required to institute a collection action against the other on an
unpaid balance following set-off computation, all costs of collection, including
reasonable attorney's fees and costs, whether incurred in court, out of court,
in bankruptcy or administrative proceedings or on appeal, shall also be
recoverable.
4. Termination of Rights under Article IV.
--------------------------------------
a. Termination of Right to Bring Waste To Landfill. In addition to
-----------------------------------------------
any other remedy it has under the terms of this Agreement, S&S, in its sole
discretion, may terminate the right of LCDC, Big T, or any Affiliate of either,
to bring waste to the New Landfill under the following conditions:
(1) If such party fails to comply with Article IV(5) within the
time limits specified herein or otherwise defaults on its obligations hereunder
and fails to cure such noncompliance or default within 7 days after notice from
S&S; or
(2) If the non-compliance pursuant to Article IV(4)(a)(1),
above, constitutes a subsequent or continuing substantive non-compliance within
12 months of a written notice of non-compliance by S&S to such party and S&S's
intent to terminate the party's right to bring waste to the New Landfill as a
result of same.
b. Big T's and LCDC's Right to Suspend Use of the New Landfill. In
-----------------------------------------------------------
addition to any other remedy hereunder, in the event of a default by S&S under
Article IV, Big T or LCDC, or any affiliate of either, may suspend until such
breach is cured, any obligation to use the New Landfill.
5. Nature of Waste. Big T and LCDC agree that the Contract Waste will not
---------------
contain radioactivity in excess of permitted state, federal or other regulatory
limitations, will not contain any PCBs or other hazardous or toxic waste, or any
waste other than that will conform to all requirements of any regulatory agency
having jurisdiction over the New Landfill and any generally applicable
limitations imposed by S&S on waste deposited at the Landfill of which Big T and
LCDC have been provided with prior written notice. S&S shall be entitled to
conduct testing of the Contract Waste from time to time at its own expense to
verify the nature and character of the waste.
6. Inspection of Documents/Waste. In addition to rights granted under
-----------------------------
Article IV(5) and (9), each party shall have the right to (i) inspect and obtain
copies of all written licenses, permits or approvals, issued by any governmental
entity or agency to any other party that are applicable to performance under
this Article, (ii) inspect and test the Contract Waste and related
transportation vehicles, vessels or containers and (iii) inspect any handling,
loading, transportation, storage, treatment or
-24-
<PAGE>
other operation conducted by any party in performance of this Agreement.
7. Excuse of Performance. The performance of obligations under this
---------------------
Article IV may be suspended by either party if the delivery, transportation,
storage, treatment or disposal of the Contract Waste is prevented by or as the
result of a Force Majeure, as defined in Article XII(4); provided, however,
except as expressly provided in Article X(3), a Force Majeure shall not suspend
the obligation of: (1) any party to pay for services already rendered; or (2)
S&S's duty to compute, calculate and apply set-offs to Big T and/or to pay the
set-off amounts as compensation to Big T, pursuant to the provisions hereof for
waste collected prior to the force majeure.
8. Operating Restrictions. Big T and LCDC shall abide by S&S's
----------------------
reasonable operating procedures, safety procedures and operations schedule as
amended by S&S from time to time. Both parties shall conduct their performance
hereunder in material compliance with all applicable laws, regulations and
permits.
9. Compliance. S&S shall have the right to reject any load of Contract
----------
Waste that it reasonably and in good faith believes does not comply with the
terms of Article IV(5).
10. Right of First Refusal to Big T in the Event S&S Intends to
-----------------------------------------------------------
Subcontract Hauling of Lead and Asbestos. Article VII sets forth certain
- ----------------------------------------
agreements not to compete with S&S by LCDC and Big T as set forth therein.
During the term of this Agreement, in the event that S&S elects to subcontract
to any third party the right to transport or haul lead contaminated materials or
asbestos containing waste to the New Landfill, which right is reserved to S&S
pursuant to Article VII(1)(e) of this Agreement, Big T shall have a first right
of refusal to perform such work. In that event, S&S shall so notify Big T and
shall furnish with such notice a copy of the contract or offer that S&S desires
to accept or effect. Big T shall have a period of fifteen (15) days from and
after its receipt of such notice within which to elect in writing to contract
with S&S to perform such hauling upon the same terms as described in such offer.
If Big T does not elect to so subcontract for such work with S&S, then S&S shall
be free to contract for such waste hauling to the person designated in the
notice upon the terms rejected by Big T at any time within sixty (60) days after
S&S's receipt of the election of rejection (or after the expiration of the 15
day period if no election of rejection or acceptance is received) but all of Big
T's rights under this paragraph including the rights described in this paragraph
relating to a right of first refusal on further hauling subcontracts as
described above shall continue.
V. COOPERATION
---------------
1. Mutual Cooperation. Big T, LCDC and S&S agree to cooperate fully with
------------------
each other with respect to the New Landfill,
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<PAGE>
to help assure that the activities contemplated herein can be fulfilled with
respect to the New Landfill. With respect to LCDC and S&S, such obligation shall
include, without limitation, the execution of all applications, permits, or
further documents required of LCDC in connection with the operation of the New
Landfill or reasonably required of LCDC, and S&S to effectuate the intention of
the parties hereunder. On the Contract Date, LCDC shall deliver to S&S an
original executed power of attorney in accordance with Exhibit K authorizing S&S
---------
to act on its behalf with respect to such matters. Notwithstanding the
foregoing, for each such document requiring the signature of LCDC, S&S shall
provide LCDC with a written request for execution of such document. If such
party unreasonably withholds its execution of such document within three (3)
business days of such written request, then S&S may use the executed power of
attorney to execute such document on behalf of the appropriate party; provided,
however, it shall be an event of default hereunder if a party unreasonably fails
to execute such document within the time specified. In addition to the
foregoing, LCDC agrees to transfer the Siting Approval to S&S as soon as such
Siting Approval may be transferred without impairing or jeopardizing same.
2. Provision of Labor and Equipment in Connection with Cover Installation
----------------------------------------------------------------------
on Old Landfill. Big T agrees to provide manpower and equipment, as required
- ---------------
by LCDC to smooth and grade the cover material to be placed at the Old Landfill
pursuant to Article VI of this Agreement. Big T agrees to use its reasonable
best efforts to conduct such work in accordance with any schedule for same
required by regulatory agencies having jurisdiction over the Old Landfill, or in
accordance with a schedule reasonably acceptable to the parties hereunder in
order to accommodate S&S's schedule for excavation of the New Landfill and S&S's
obligations under Article VI, below, whichever shall first occur. LCDC agrees
to use its reasonable best efforts to establish a schedule for performance of
the work satisfactory to Big T, and shall cooperate with Big T in negotiating
such schedule with any regulatory agency. In performing said duties, it is
expressly agreed between the parties that Big T will act as an independent
contractor, and not as an agent or employee of LCDC, and that Big T hereby
assumes no liability or responsibility for the closure or post-closure care of
the Old Landfill, beyond the mere obligation to provide equipment and manpower
to perform physical labor as set forth in this paragraph.
3. Reimbursement of LCDC. Big T agrees to reimburse LCDC, at such time
---------------------
that Big T begins to receive royalties pursuant to Article IV, for the amounts
LCDC is required to pay to S&S pursuant to Article V(3).
4. Removal of Unpermitted Encumbrances. Big T agrees to assist LCDC,
-----------------------------------
including the payment of money, in removing any Unpermitted Encumbrance from the
New Landfill as described in Article II(6).
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<PAGE>
VI. COVER MATERIAL HAULING
---------------------------
1. Term. The obligations of the parties pursuant to this Article VI
----
shall commence no later than six (6) months following issuance of the IEPA
permit to construct the New Landfill, and shall terminate upon conclusion of all
cover material hauling activities identified herein, which shall be completed no
later than twelve (12) months following issuance of the IEPA permit to construct
the New Landfill, except as otherwise agreed in writing by the parties hereto.
2. Scope of S&S Services. S&S agrees to provide equipment and labor
---------------------
necessary to excavate and haul soil from the New Landfill property to the Old
Landfill property. It is expressly understood that S&S will not be required to
spread the soil after the soil is deposited at the Old Landfill property. S&S
will deposit the soil on the Old Landfill property where specified by LCDC. The
obligations of S&S set forth herein shall extend only to excavating, hauling and
delivering the cover material to the Old Landfill. It is expressly understood
between the parties hereto that S&S is hereunder incurring no obligation or
commitment to perform any other services with respect to the Old Landfill or
cover material to be used at the Old Landfill, including but not limited to
compaction and suitability testing of cover materials, cover material depth
calculation and certification, contour modeling or certification, permit
applications, discussions or negotiations, or final seeding and maintenance of
the installed cover. It is expressly understood by and between the parties that
in acting pursuant to this Agreement, S&S is acting as an independent
contractor.
3. Amount of Cover Material to be Hauled. LCDC has estimated that
-------------------------------------
approximately 186,700 cubic yards of cover material will need to be excavated
and hauled from the New Landfill property to the Old Landfill property.
However, the parties expressly understand that this is not a representation, but
merely an estimate, and that actual soil volumes may exceed or be less than that
estimate. Notwithstanding the above, if more than 205,370 cubic yards of cover
material is necessary, LCDC agrees to pay S&S $2.00 per each cubic yard S&S
hauls in excess of 205,370; provided in no event shall S&S be obligated to
provide LCDC with more than 225,000 cubic yards of cover material.
Alternatively, LCDC, at its discretion, may use a different party (a "Substitute
Hauler") to complete the excavation and hauling of soils from the New Landfill
property and deposit same onto the Old Landfill property subject to reasonable
operational and insurance requirements which may be imposed by S&S on the
Substitute Hauler, in which instance S&S's performance hereunder will be deemed
completed. In the event that LCDC shall use a Substitute Hauler to complete the
excavation and hauling of soils from the New Landfill property to the Old
Landfill, LCDC shall have no obligation to pay S&S $2.00 per each cubic yard for
such soil or hauling.
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<PAGE>
4. Cooperation/Excuse of Performance. The parties mutually covenant and
---------------------------------
agree to cooperate fully with each other and with the IEPA to assure that none
of the activities set forth herein will in any way affect the efforts of S&S to
obtain permits, or to develop, construct or operate the proposed municipal solid
waste landfill at the New Landfill property. In the event and to the extent
that the activities agreed upon in this Article VI will materially affect S&S's
ability to obtain or maintain construction, development or operating permits for
the New Landfill property or the time within which such permitting can be
obtained, S&S is pro tanto excused from performance hereunder until such time
that the performance hereunder will no longer materially affect such ability,
after which time performance hereunder shall be completed as soon as practical.
5. Definition of "Cover Material." As used herein, "cover material"
-----------------------------
means that amount of soil, including a mixture of soil and clay, to be excavated
from the New Landfill in the normal order of excavation and landfill
construction and hauled to and deposited on the Old Landfill by S&S, that will
result in a cover for the Old Landfill six feet thick. S&S makes no
representation or warranty to LCDC as to whether or not the cover material
removed from the New Landfill will fulfill regulatory requirements for a cap of
soil, clay and other materials over closed landfills, and S&S shall be under no
obligation to select or limit the soil removed and hauled to the Old Landfill to
any particular quality, nature or composition. LCDC shall have sole
responsibility for designing, permitting and constructing the cap for the Old
Landfill.
VII. NON-COMPETITION/NON-SOLICITATION
--------------------------------------
1. Non-competition/non-solicitation. Until the fifth (5th) anniversary
--------------------------------
of the date that waste is first disposed of at the New Landfill, neither Big T,
LCDC, nor any Affiliate of either, as an individual for his, her or its own
account, as a partner, joint venturer, employee, agent, or salesman for any
person, or as an officer, director or stockholder (other than a beneficial
holder of not more than 2% of the outstanding voting stock) of a corporation, or
otherwise, directly or indirectly, knowingly take any of the following actions,
in each case within the states of Illinois, Indiana, Pennsylvania, Georgia,
Ohio, West Virginia, Kentucky or South Carolina:
a. enter into or engage in the business of ownership or operation of
a landfill or other lead contaminated materials or asbestos or solid waste
disposal facility or a business of transportation of lead contaminated materials
or asbestos containing waste, without the prior written consent of S&S, which
consent may be withheld in S&S's sole discretion;
b. solicit or attempt to solicit any of S&S's or its Affiliates'
customers with the intent or purpose to perform for such customer asbestos or
solid waste landfill disposal services
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<PAGE>
previously or then provided to such customers by S&S or its Affiliates;
c. employ or solicit, or attempt to employ or solicit, for
themselves or any third party, any of S&S's or its Affiliates' landfill
employees;
d. induce or attempt to induce any supplier, employee, consultant or
agent of S&S or its Affiliates to discontinue landfill-related services to S&S
or its Affiliates; or
e. take any other action intended, directly or indirectly, to impair
the goodwill or business reputation of S&S or its Affiliates in so far as it
relates to asbestos or solid waste landfill disposal services or the business of
transportation or hauling of lead contaminated materials or asbestos containing
waste, or to be otherwise detrimental to the interests of S&S or its Affiliates
related to lead contaminated materials, asbestos or solid waste landfill
disposal transportation or hauling, including any action intended, directly or
indirectly, to benefit an asbestos, lead contaminated materials or solid waste
landfill disposal competitor of S&S or its Affiliates, such as assisting any
person to develop or obtain a permit for a landfill within the geographic area
covered by this Article.
f. For the purposes of this Article, "solid waste" shall include,
without limitation, any solid waste as that term is defined under federal, state
or local law, including, without limitation, municipal solid waste, asbestos,
special or industrial waste, tires, medical waste, contaminated soil, and the
like.
g. During any period during which operation of the New Landfill is
terminated or suspended for less than one (1) year, this non-competition
agreement shall remain in full force and effect. In the event that operation of
the New Landfill is suspended or terminated for a period of more than one (1)
year, then after the expiration of each such one (1) year period, the term of
this non-competition agreement shall be tolled until operation of the New
Landfill recommences.
2. Non-competition by S&S. During the term of this Agreement, neither
----------------------
S&S nor any Affiliate, as an individual for his, her or its own account, as a
partner, joint venturer, employee, agent, or salesman for any person, or as an
officer, director or stockholder (other than a beneficial holder of not more
than 2% of the outstanding voting stock) of a corporation, or otherwise,
directly or indirectly, knowingly take any of the following actions, in each
case within Lawrence County, Illinois and contiguous counties in Indiana and
Illinois, enter into or engage in the business of ownership or operation of a
business of transportation of municipal solid waste, without the prior
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written consent of Big T, which consent may be withheld in Big T's sole
discretion.
3. Enforcement. In the event of the breach by any party or any Affiliate
-----------
of either, of any of the terms and conditions of this Article VII, the non-
breaching party shall be entitled, if it so elects, and in addition to any other
remedies it may have under this Agreement, to institute and prosecute
proceedings in any court of competent jurisdiction, either at law or in equity,
to (i) obtain damages for any such breach, (ii) enforce the specific performance
hereof, or (iii) enjoin the breaching entity from performing acts prohibited
above during the period herein covered, provided that nothing in this Agreement
shall be construed to prevent such other remedy in the courts or otherwise as
the non-breaching party may elect to invoke.
VIII. INDEMNIFICATION
----------------------
1. Indemnification of LCDC by S&S. Unless caused in whole or in part by
------------------------------
LCDC, its Affiliates, or its agents or employees, or the Old Landfill, S&S shall
defend, indemnify and hold LCDC and its Affiliates and the directors, officers
and employees of each harmless from and against all demands, claims, actions or
causes of action, losses, liabilities, damages, assessments, deficiencies, costs
and expenses, including, without limitation, interest, fines, penalties
(including civil or criminal monetary penalties), Response Costs and reasonable
attorney's fees, fees of expert witnesses and expenses asserted against, imposed
upon or paid, incurred or suffered by reason of, or arising out of, any of the
following:
a. any negligent act or omission by S&S in the use made of all or
part of the New Landfill property during the term of this Agreement;
b. S&S's failure to comply with any of its obligations under this
Agreement, including, but not limited to, its obligations to comply with
Environmental Laws, with the Host County Agreement, and with the Site Approval;
or
c. a breach of the Host County Agreement as may be entered into
between S&S and Lawrence County relating to the New Landfill as amended from
time to time, and the Siting Approval for the New Landfill.
2. Indemnification of S&S by LCDC. Unless caused in whole or in part by
------------------------------
S&S or its Affiliates or its agents or employees, or the New Landfill, LCDC
shall defend, indemnify and hold S&S and its Affiliates, and the directors,
officers, and employees of each harmless from and against all demands, claims,
actions or causes of action, losses, liabilities, damages, assessments,
deficiencies, costs and expenses, including, without limitation, interest,
fines, penalties (including civil or criminal monetary penalties), Response
Costs and reasonable attorney's fees, fees
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of expert witnesses and expenses asserted against, imposed upon or paid,
incurred or suffered by reason of, or arising out of, any of the following:
a. any use made of all or part of the Old Landfill property during
or prior to the term of this Agreement, including, without limitation any
accident, injury or damage, act or thing done or omitted, upon or about the Old
Landfill premises during or prior to the term of this Agreement, including,
without limitation, costs of closure, post-closure care or corrective action,
investigation, assessment or Response Costs of the Old Landfill of any kind or
nature whatsoever, it being the intention of the parties that S&S shall have no
liability to LCDC, Big T or any regulatory agency or private party whatsoever
for conditions existing at the Old Landfill;
b. a breach by LCDC or Gary Simmons of any representation, warranty,
covenant or provision of this Agreement, including, but not limited to, its
obligations to comply with Environmental Laws, with the Host County Agreement,
and with the Site Approval;
c. a breach of the Host County Agreement between LCDC and Lawrence
County relating to the Old Landfill, and any other regulatory approvals
pertaining to the Old Landfill;
d. any property or personal injuries or damages resulting from or
relating to the performance by any Substitute Hauler (as defined in Article
VI(3), below) of its obligations set forth in Article VI; or
e. 100% of any costs incurred by S&S at any time after the Contract
Date for conducting any testing, evaluation, treatment, removal or remediation
required to be performed by S&S by any federal, state or local agency with
respect to contamination detected in Well 107, including, without limitation,
additional costs incurred in connection with perfecting the Application
(collectively referred to as the "107 Costs") if such contamination arises from
the Old Landfill or the New Landfill pre-Contract Date; and 50% of such 107
Costs if such contamination arises from some source other than the Old Landfill
or the New Landfill pre-Contract Date.
3. Indemnification of Big T by S&S. Unless caused in whole or in part by
-------------------------------
Big T or its Affiliates or its agents or employees, S&S shall defend, indemnify
and hold Big T and its Affiliates and the directors, officers and employees of
each, harmless from and against all demands, claims, actions or causes of
action, losses, liabilities, damages, assessments, deficiencies, costs and
expenses, including, without limitation, interest, fines, penalties (including
civil or criminal monetary penalties), Response Costs and reasonable attorney's
fees, fees of expert witnesses and expenses asserted against, imposed upon or
paid, incurred or suffered by reason of, or arising out of, any of the
following:
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a. the negligence of S&S in connection with or incident to this
Agreement;
b. a breach by S&S of any representation, warranty, covenant or
provision of this Agreement made to Big T, including, but not limited to, its
obligations to comply with Environmental Laws, with the Host County Agreement,
and with the Site Approval;
c. the negligent treatment, handling or disposal of the Contract
Waste by S&S; or
d. Any contamination of, injury or damage to, or adverse effects on
the environment or natural resources, or any violation or alleged violation of
any Environmental Law, or arising out of S&S's negligent disposal of the
Contract Waste; provided the Contract Waste conforms to the requirements set
forth in Article IV(5), above.
4. Indemnification of S&S by Big T. Unless caused in whole or in part by
-------------------------------
S&S or its Affiliates or its agents or employees, Big T shall defend, indemnify
and hold S&S and its Affiliates, and the directors, officers, and employees of
each, harmless from and against all demands, claims, actions or causes of
action, losses, liabilities, damages, assessments, deficiencies, costs and
expenses, including, without limitation, interest, fines, penalties (including
civil or criminal monetary penalties), Response Costs and reasonable attorney's
fees, fees of expert witnesses and expenses asserted against, imposed upon or
paid, incurred or suffered by reason of, or arising out of, any of the
following:
a. the negligence of Big T in connection with or incident to this
Agreement;
b. a breach by Big T of any representation, warranty, covenant or
other provision of this Agreement, including, without limitation, Article IV(5);
c. any contamination of, injury or damage to, or adverse affects on
the environmental or natural resources, or any violation or alleged violation of
Environmental Laws, directly or indirectly caused by, or arising out of Big T's
negligent handling, transportation, storage, treatment or otherwise dealing with
the Contract Waste; or
d. any use made of all or part of the 20 Acre Parcel prior to the
term of this Agreement, including, without limitation, any accident, injury or
damage, act or thing done or omitted, upon or about the 20 Acre Parcel during or
prior to the term of this Agreement.
5. Definitions of "Response Costs"/"Environmental Laws".
----------------------------------------------------
a. For the purposes of this Article, "Response Costs" shall be
defined to include the costs of response, removal,
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remediation, containment and cleanup costs which may be incurred by reason of
the indemnitor's or any Affiliate's alleged violation of, failure to comply
with, or liability arising under or in connection with any Environmental Law, as
hereinafter defined.
b. For the purposes of this Article, "Environmental Laws" shall be
defined to include any federal, state or local statute, ordinance, order,
permit, regulation, rule or common law cause of action, in existence upon the
Contract Date or at any time thereafter, relating in any way to the development,
construction, operation, closure or post-closure care of solid waste landfills,
the pollution or contamination by any means of land, air, water or groundwater,
or the remediation of same, including, without limitation, CERCLA 42 U.S.C. (S)
9601 et seq. or RCRA, 42 U.S.C. (S) 6901 et seq., the safety of or provision of
-- --- -- ---
notices of any sort to workers, employees and/or citizens, the collection,
accounting and transference of taxes or fees to any governmental body.
6. Survival of Indemnification and Hold Harmless Agreement. The
--------------------------------------------------------
obligations of the parties under this Article VIII shall survive the termination
of this Agreement.
IX. DEFAULT
-----------
1. Event of Default. The occurrence of any of the following shall
----------------
constitute an event of default hereunder:
a. The failure to make any payment required hereunder when due, if
such payment is not made within 7 days of written notice by the demanding party
of such failure to make payment;
b. The failure to perform or observe any other material term,
covenant, or condition to be performed or observed hereunder, if such failure is
not cured or corrected within 7 days of written notice of such failure;
provided, however, that if the failure cannot reasonably be cured or corrected
within the 7 day period, then such failure shall not constitute a default
hereunder if the party commences the cure or correction thereof within the 7 day
period and diligently prosecutes the same to completion;
c. If any party hereto shall: (1) file a voluntary petition in
bankruptcy or a petition seeking any reorganization, arrangement or similar
relief under any state or federal statute relating to bankruptcy or insolvency;
(2) seek or consent to the appointment of a receiver or trustee for itself or
for all or any part of its property; or (3) make a general assignment for the
benefit of creditors;
d. If a court of competent jurisdiction shall enter an order,
judgment or decree appointing, with or without the consent of a party, a
receiver or trustee for the party for all
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<PAGE>
or any part of the property of that party or approving a petition filed against
the party seeking relief under the bankruptcy or other similar laws of the
United States or any state or other competent jurisdiction, and such order,
judgment or decree shall remain in force undischarged or unstayed for a period
of sixty (60) days;
e. If any material representation or warranty hereunder is false in
any material way; or
f. If a party shall dissolve or liquidate without the prior written
consent of the other parties to this Agreement, which consent may be withheld in
a party's sole discretion.
2. Remedies on Default. In the event of a default under this Agreement,
-------------------
any non-breaching party at its sole discretion upon prior written notice to the
breaching party or parties may, at its option, exercise any, some, or all of the
following remedies, concurrently or consecutively, subject to the limitations
set forth below:
a. Prior to the Construction Start Date. Prior to the earlier of
------------------------------------
the date on which construction commences on the New Landfill or the date on
which any closure or post-closure financial assurance posted by S&S on the New
Landfill becomes irrevocable (the "Construction Start Date"), the remedies of
the parties shall be as follows:
(1) Termination. Any party may terminate this Agreement. The
-----------
parties agree that it is difficult or impossible to accurately determine the
amount of damages that would, or might, be incurred by either party in the event
of a termination for default as described in this subsection IX(2)(a)(1).
Accordingly, the parties have agreed that the stipulated damages in such event
shall be as follows: (A) for default by LCDC or Big T hereunder resulting in
termination, the stipulated damages due to S&S shall be $400,000 from the
defaulting party; and (B) for default by S&S hereunder resulting in termination,
the total stipulated damages due to LCDC and Big T shall be $250,000 which shall
be paid jointly to Big T and LCDC by S&S.
(2) Specific Performance. Any party may demand strict
--------------------
compliance with the terms hereof, and further may seek any appropriate relief,
judicial, administrative or otherwise whether in law or in equity, to enforce
the terms of this Agreement, excluding monetary damages. The terms of this
Agreement shall be specifically enforceable.
b. After the Construction Start Date. After the Construction
---------------------------------
Start Date, the remedies of the parties shall be as follows:
(1) Termination. S&S may terminate this Agreement.
-----------
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<PAGE>
(2) Specific Performance/Damages. Any party may demand strict
----------------------------
compliance with the terms hereof, and further may seek any appropriate relief,
judicial, administrative or otherwise whether in law or in equity, to enforce
the terms of this Agreement, including, without limitation, a suit for damages.
The terms of this Agreement shall be specifically enforceable.
(3) No Right to Terminate. Notwithstanding anything herein to
---------------------
the contrary: (i) LCDC shall not have the right to terminate S&S's right to
operate the New Landfill after the Construction Start Date; and (ii) except as
expressly provided in Article IV, S&S shall not have the right to terminate Big
T's right to bring waste to the New Landfill after the Construction Start Date.
c. Set-off. In addition to any other remedy hereunder: (i) in the
-------
event of a default by LCDC or Big T or any Affiliate of either, including,
without limitation, a failure of a party to indemnify or hold any other party
harmless under Article VIII or LCDC's failure to close the Old Landfill in
accordance with this Agreement and applicable law, in the case of S&S, S&S may
set-off against any royalties to be paid to Big T pursuant to Article IV, any
sums incurred by S&S and otherwise due from LCDC or Big T or any Affiliate or
either under the terms of this Agreement, including, without limitation,
pursuant to Article VIII, and may terminate, until such breach is cured, any
discount on tipping fees provided to Big T or LCDC under Article IV; and (ii) in
the case of a default by S&S, Big T or LCDC may set-off against any tipping fees
to be paid to S&S pursuant to Article IV any sums incurred by Big T or LCDC and
otherwise due to S&S.
3. Remedies not Exclusive. No remedy for breach shall be deemed
----------------------
exclusive, and pursuit of any form or forms of relief shall not be deemed a
waiver of any other relief.
4. Good Faith. In the event that a dispute shall arise between the
----------
parties concerning an interpretation of the terms and conditions of this
Agreement or its application to the business of the New Landfill or the
respective rights and obligations of the parties hereunder, the parties covenant
that they will exercise diligence and good faith in attempting to resolve such
dispute. The parties covenant and agree to act in good faith and fair dealing
in negotiating, executing and performing under this Agreement.
5. Attorneys' Fees. In the event either party at any time brings any
---------------
action to enforce the terms of this Agreement, the prevailing party in such
action shall be entitled to recover its costs of suit, including reasonable
attorneys' fees and expert consultant and/or witness fees, whether in court, out
of court, in bankruptcy, administrative proceedings or on appeal.
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<PAGE>
X. TERM OF AGREEMENT
---------------------
1. Term. The term of this Agreement shall commence on the Contract Date
----
and shall terminate on the seventy-fifth (75th) annual anniversary of the
Contract Date, unless terminated in accordance with the provisions of this
Article X(2). Upon termination of this Agreement, the parties shall execute the
Termination of Agreement set forth on Exhibit M-1 for recordation in the public
-----------
records of Lawrence County, Illinois.
2. Termination.
-----------
a. General Right to Terminate This Agreement. Any party may
-----------------------------------------
terminate this Agreement upon default as set forth in Article IX(2)(a), above.
b. S&S's right to Terminate This Agreement or to Suspend Obligations
-----------------------------------------------------------------
Hereunder. Under the following circumstances, S&S may suspend performance
- ---------
under the terms of this Agreement from time to time for successive periods not
to exceed one year each, or may terminate this Agreement (provided, however,
once waste has been disposed of at the New Landfill, S&S shall complete closure
and post-closure of the New Landfill) or arrange alternate means for completing
same reasonably satisfactory to LCDC, and thereafter none of the parties hereto
shall have any further rights or obligations under this Agreement, except as
expressly set forth herein:
(1) Closure. When S&S, in its reasonable judgment, believes
-------
that the New Landfill property no longer has the capacity to accept waste and
S&S has completed all closure and post-closure obligations regarding the closure
of the New Landfill; or
(2) Revocation of Permits and Licenses. If the New Landfill
----------------------------------
ceases operation for any reason, if S&S's permits are revoked or expire or S&S
is prohibited from accepting the Contract Waste for any other reason; or
(3) Restriction of Rates. If the rates that S&S may charge
--------------------
for waste disposal become regulated or restricted by any governmental regulation
or authority; or
(4) Bankruptcy/Insolvency. If Big T or LCDC shall be in
---------------------
default under Article IX(c)-(d); or
(5) Economic Viability. If S&S determines that the facility
------------------
is not economically viable in S&S's sole reasonable discretion; or
(6) Denial of Permits. In the event that prior to placement
-----------------
of waste in the New Landfill pursuant to the terms of this Agreement, S&S in its
sole reasonable discretion concludes that the Application (including, without
limitation, any appeal from denial thereon) or any other permit, license,
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<PAGE>
authorization or the like required for the operation of the New Landfill may be
denied or will not be approved; or
(7) Approval of Assignment of Host County Agreement. The Host
-----------------------------------------------
County Agreement, among other matters, may impose certain obligations on LCDC
with respect to the Old Landfill, and obligation to indemnify Lawrence County
and stipulated damages provisions for violations of the terms thereof. It is not
the intention of the parties to this Agreement that S&S be required to undertake
any obligation of LCDC whatsoever with respect to the Old Landfill, except for
the delivery of cover material as described in Article VI, below. S&S may
terminate this Agreement upon written notice to the parties if as a condition of
approval of assignment of the Host County Agreement: (1) Lawrence County
requires S&S to undertake any obligation of any kind or nature with respect to
the Old Landfill, other than those express obligations of S&S with respect to
delivery of cover material pursuant to Article VI of this Agreement; or (2)
Lawrence County requires modification of any other term or condition of the Host
County Agreement not acceptable to S&S in its sole discretion; or
(8) Force Majeure. In the event of a "force majeure", as
-------------
hereinafter defined; or
(9) Material Adverse Impact of Old Landfill. In the event that
---------------------------------------
the Old Landfill, or any enforcement action, contamination, closure obligation,
or any other matter or circumstance relating to the Old Landfill, threatens the
economic viability of the New Landfill, S&S, or the operation of the New
Landfill.
S&S shall provide LCDC with thirty (30) days prior written notice of its
intention to suspend performance or to terminate this Agreement. If S&S elects
to suspend operation of the New Landfill, such notice shall include a statement
of the time period for which it intends to suspend operation (the "suspension
period"). Such suspension period may be renewed from time to time by S&S upon
written notice to the parties at least thirty (30) days prior to the termination
of the then existing suspension period. Notwithstanding the above, S&S may
terminate any suspension period and recommence operation upon thirty (30) days
prior written notice to the parties, whereupon all obligations of the parties
hereunder shall recommence.
c. Rights and Obligations of the Parties Following Termination or
--------------------------------------------------------------
Suspension of Obligations Hereunder .
- -----------------------------------
(1) Notwithstanding the above, the parties agree that should S&S
commence operation of the New Landfill following a suspension or termination
hereunder, then all terms and conditions of this Agreement shall remain in full
force and effect, including, without limitation, S&S's agreement to provide
guaranteed tipping fees and to pay royalties to Big T, and Big T
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and LCDC's agreement to dispose of all waste at the New Landfill and agreement
not to compete with S&S.
(2) If, following termination of this Agreement by S&S, LCDC
desires or intends to reopen the New Landfill, then LCDC shall first offer S&S,
in writing, the option to renew operation of the New Landfill subject to the
terms and conditions of this Agreement. S&S shall have sixty (60) days from
receipt of LCDC's notice of intention to reopen the New Landfill to provide LCDC
with written notice of its election to renew operation of the New Landfill under
the terms of this Agreement. If S&S shall fail to advise LCDC of its intention
to renew operation of the New Landfill within the 60 day period, LCDC shall be
free to reopen the New Landfill without participation by S&S, provided, however,
LCDC shall provide financial assurance for any remaining closure and post-
closure obligations, such that S&S shall be released therefrom, and LCDC shall
comply with the provisions of Article XII(1) in connection with use of the S&S
information and documents pertaining to the New Landfill.
d. In the event of a termination pursuant to Article IX(2)(a)(1),
above, none of the parties hereto shall have any further rights or obligations
hereunder except as expressly set forth herein and S&S shall not be responsible
to LCDC or Big T for damages, and neither LCDC nor Big T shall be responsible to
S&S for reimbursement of the costs of preparing and submitting the Application
or seeking assignment of the Host County Agreement subject to the foregoing
conditions.
e. In the event that this Agreement is terminated after the
placement of waste in the New Landfill, then S&S shall complete closure and post
closure activities with respect to such waste disposed of at the New Landfill
prior to such termination by S&S.
XI. OPTION TO PURCHASE NEW LANDFILL AND RIGHT OF FIRST REFUSAL
---------------------------------------------------------------
ON PURCHASE OF WASTE HAULING BUSINESS
-------------------------------------
1. Option to Purchase New Landfill and Assets of LCDC .
--------------------------------------------------
a. In consideration of the sum of Ten and no/100 Dollars paid by S&S
to LCDC (the "Option Money"), S&S's obligation to undertake cover material
hauling for the Old Landfill under this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, LCDC hereby grants to S&S the exclusive and irrevocable option (the
"Option") to purchase the New Landfill, together with all improvements located
thereon, in accordance with the terms and conditions set forth in this Paragraph
1 of this Article XI for a purchase price of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties. The Option may be assigned by S&S
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at any time during the term of this Agreement without the consent of LCDC.
b. At any time during the term of this Agreement, S&S may exercise
the Option herein granted by executing and delivering to LCDC a written notice
stating that S&S has exercised the Option, whereupon S&S agrees to purchase the
New Landfill and LCDC agrees to sell the New Landfill to S&S upon the terms and
conditions set forth in Paragraph 1 of this Article XI. The Option shall expire
on the fortieth (40th) anniversary of this Agreement unless terminated or
exercised prior to the fortieth (40th) anniversary of this Agreement.
c. LCDC has provided to S&S a title insurance policy issued by First
American Title Insurance Company insuring S&S's interest in the New Landfill and
option to purchase the New Landfill and a survey of the New Landfill prepared by
Lamac Engineering. During the term of this Option, LCDC agrees to keep the
title to the New Landfill free from all easements, restrictions, mortgages,
rights of way, liens, encumbrances and other matters, except for the matters
shown on the Survey, the exceptions shown on Exhibit L, matters created by S&S
---------
or eminent domain (the "Permitted Exceptions").
d. No later than thirty (30) days after S&S has exercised its
Option, LCDC, at its sole cost and expense, shall provide S&S with an owner's
title insurance commitment (the "Commitment") issued by First American Title
Insurance Corporation or such other title insurance company as may be reasonably
acceptable to S&S (the "Title Company") agreeing to insure fee simple title to
the New Landfill in the name of S&S in an amount equal to the appraised value of
the New Landfill. The appraised value of the New Landfill shall be determined by
an appraisal of the New Landfill which shall be obtained by S&S, at its sole
expense. The Commitment shall show no exceptions other than the Permitted
Exceptions and taxes for the year of Closing, and shall commit to provide S&S
with a comprehensive endorsement, contiguity endorsement and such other
endorsements as may be required by S&S. No later than thirty (30) days after S&S
has exercised its Option, S&S, at its sole cost and expense, shall obtain an
updated survey of the New Landfill (the "Survey") which shall be completed by
Lamac Engineering or such other surveyor as may be reasonably acceptable to S&S.
The Survey shall be performed in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys established and adopted by the American Land
Title Association and American Congress on Surveying and Mapping; certified to
S&S, LCDC, and the Title Company; and contain such certifications as may be
required by either the Title Company or S&S. The Survey shall show the size,
location and type of all improvements located on the New Landfill, the boundary
lines of the New Landfill, all applicable setback lines of the New Landfill, all
easements affecting the New Landfill, and such other matters as may be required
by S&S or the Title Company.
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<PAGE>
e. If the Commitment or Survey discloses any exceptions other than
the Permitted Exceptions and taxes not yet due and payable as of Closing, which
are unacceptable to S&S ("Title Defects"), S&S shall notify LCDC of the Title
Defects within ten (10) days after the receipt of the latter of the Commitment
and Survey and the parties expressly agree and acknowledge that S&S may
condition its exercise of the Option upon the curing of all Title Defects. LCDC
shall exercise all reasonable diligence and efforts, at LCDC's sole expense,
that S&S or the Title Company may reasonably request to correct or cure all
Title Defects, including the prosecution of a suit to quiet title, if necessary.
LCDC shall have a period of one hundred twenty (120) days after the date of
LCDC's receipt of a notice of S&S's objections to any Title Defects within which
to cure such Title Defects to the reasonable satisfaction of S&S and the Title
Company. The sale and purchase shall be closed on the latter of the date
specified in subparagraph f. below or within twenty (20) days after written
notice of such curing has been provided by LCDC to S&S and the Title Company,
and the Title Company has issued an endorsement to the Commitment showing that
the Title Defects are no longer shown as exceptions to the Commitment. S&S, in
its sole discretion, may extend the time allowed for removing or curing a Title
Defect for such reasonable additional periods as may be necessary to complete
the curing of the Title Defects. If LCDC cannot cure the Title Defects within
the foregoing one hundred twenty (120) day period (or such additional period of
time as may have been granted by S&S), S&S, in its sole discretion, may elect to
either purchase the New Landfill subject to the Title Defects or to rescind its
Option and thereafter the Option and all obligations of the parties hereunder to
purchase and sell the New Landfill shall be null and void and without further
force and effect.
f. The closing of the purchase and sale of the New Landfill (the
"Closing") shall occur on the forty-fifth (45th) day after the date that S&S
exercises its Option to purchase the New Landfill. The Closing shall be closed
through an escrow with the Title Company and the cost of the escrow shall be
divided equally between LCDC and S&S. At the Closing, LCDC shall deliver to S&S
(i) a general warranty deed to the New Landfill subject to no exceptions other
than the Permitted Exceptions and taxes not yet due and payable as of Closing;
(ii) an affidavit certifying that LCDC is not a foreign person as defined in
Section 1445 of the Internal Revenue Code; (iii) an affidavit in a form
acceptable to the Title Company to delete the standard exceptions to the
Commitment, and such other documents as may be required by the Title Company to
issue an owner's title insurance policy insuring S&S's marketable title to the
New Landfill, subject only to the Permitted Exceptions and taxes for the year of
Closing; (iv) a certificate from the Secretary of State of the State of Illinois
certifying that LCDC is an Illinois corporation in good standing; (v) a
certified copy of a resolution of the Board of Directors of LCDC authorizing the
sale of the New Landfill to S&S and authorizing officers of LCDC to execute all
the documents necessary to consummate the sale; (vi) a document, in form
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<PAGE>
acceptable to S&S, assigning to S&S all of LCDC's right, title and interest in
all licenses and permits affecting the New Landfill; (vii) within no less than
fifteen (15) days prior to the date of the Closing, LCDC shall deliver to S&S
releases issued by the Illinois Department of Revenue and the Illinois
Department of Employment Security evidencing that LCDC does not have any
liability for the payment of any assessed, but unpaid tax, contribution, penalty
or interest under Section 902(d) of the Illinois Income Tax Act (Ill. Rev. Stat.
ch. 120, (S) 9-902(d)), Section 5(j) of the Illinois Retailers' Occupation Tax
Act (Ill. Rev. Stat. ch. 120 (S) 444(j)) or Section 2600 of the Illinois
Unemployment Insurance Act (Ill. Rev. Stat. ch. 48 (S) 750); and (viii) a
document in substantially the form attached hereto as Exhibit J assigning to S&S
---------
all of LCDC's right, title and interest in the Farmland Lease, the Declaration
and Notice of Pooling Oil and Gas Leases listed on Exhibit D as Item 12 and the
---------
oil and gas lease listed on Exhibit D as Item 13 and any other mineral or other
---------
leases affecting the New Landfill (provided that the foregoing are still in
effect as of the Closing). At the Closing, S&S shall deliver to LCDC (i) the sum
of $10.00; (ii) a certificate from the Secretary of State of the State of
Illinois certifying that S&S is an Illinois corporation in good standing; and
(iii) a certified copy of a resolution of the Board of Directors of S&S
authorizing the purchase of the New Landfill by S&S. In addition, S&S and LCDC
shall execute such other documents as may be reasonably requested by the other
party or the Title Company to consummate the purchase and sale of the New
Landfill.
g. At the Closing, LCDC shall execute all real estate transaction
declarations as may be required by the State of Illinois, Lawrence County, or
any other governmental agency to transfer title to the New Landfill to S&S. All
transfer and transaction taxes shall be paid by LCDC at the Closing; provided,
however, that to the extent that any increase in such transfer or transaction
taxes is due to the value of improvements made to the New Landfill by S&S or as
the result of an increase in value of the New Landfill as a result of S&S's
operations of a landfill thereon, S&S shall pay such additional transfer or
transaction taxes. LCDC shall also pay the title insurance premium and all
endorsement fees, search fees, and other charges for the Commitment. S&S shall
pay the cost to record the general warranty deed. All rents, fees, royalties or
other payments under the Farmland Lease, the Declaration and Notice of Pooling
Oil and Gas Leases listed on Exhibit D as Item 12, the oil and gas lease listed
---------
on Exhibit D as Item 13 and any other mineral leases affecting the New Landfill
---------
(provided the foregoing are still in effect as of the Closing) shall be prorated
between LCDC and S&S as of the Closing.
h. LCDC represents and warrants to S&S that LCDC has not dealt with
any broker or other finder in connection with the Option and will indemnify and
hold harmless S&S from and against any and all claims, loss, liability, costs
and expenses resulting from any claims that may be made against S&S by reason of
LCDC's
-41-
<PAGE>
failure to pay any commission or other fee due to any broker or other person
claiming a commission, fee or other compensation by reason of the Option.
i. S&S represents and warrants to LCDC that S&S has not dealt with
any broker or other finder in connection with the Option and will indemnify and
hold harmless LCDC from and against any and all claims, loss, liability, costs
and expenses resulting from any claims that may be made against LCDC by reason
of S&S's failure to pay any commission or other fee due to any broker or other
person claiming a commission, fee or other compensation by reason of the Option.
j. The parties further agree that in the event for whatever reason
title to the New Landfill is never transferred to S&S pursuant to this
Agreement, and/or that the activities contemplated herein are never successfully
completed, nothing herein shall be construed as in any manner affecting LCDC's
ownership interest in the New Landfill property, or its right to exercise all
ownership rights with respect to that property subject to S&S's rights
hereunder, including, without limitation, the Option under this Article X.
k. Either party may record a notice of the Option, in the form
attached hereto as Exhibit H-1 in the public records of Lawrence County,
-----------
Illinois. The Option shall expire upon the fortieth (40th) anniversary of the
Contract Date, unless earlier terminated. Upon termination by any party, the
parties shall execute the Termination of Option set forth on Exhibit M-2 for
-----------
recordation in the public records of Lawrence County, Illinois.
2. Right of First Refusal to Purchase Waste Hauling Business. During the
---------------------------------------------------------
term of this Agreement, S&S shall have the first right of refusal to purchase
any waste hauling business owned by LCDC, Big T, or any Affiliate of either,
while the New Landfill is operating and accepting waste. While the New Landfill
is operating and accepting waste, if LCDC, Big T, or any Affiliate of either
desires to sell or convey any waste hauling business, including, without
limitation, any sale of more than 5% of the stock of such entity, then the
offering entity shall so notify S&S and shall furnish with such notice a copy of
the contract or offer that the offering party desires to accept or effect. S&S
shall have a period of thirty (30) days from and after its receipt of such
notice within which to elect in writing to purchase upon the same terms as
described in such offer. If S&S does not elect so to purchase upon such terms,
then the offering party shall be free to close the sale of the waste hauling
business to the person designated in the offering party's notice upon the terms
rejected by S&S at any time within sixty (60) days after the offering party's
receipt of S&S's election of rejection (or after the expiration of the 30 day
period if no election of rejection or acceptance is received) but all of S&S's
rights under this paragraph including the rights described in this paragraph
relating to a right of first refusal on further
-42-
<PAGE>
sales of waste hauling businesses by LCDC, Big T or any Affiliate of either
shall survive the closing of such sale or transfer.
III. ADDITIONAL TERMS
----------------------
1. Confidentiality. Unless: (a) waived in writing by a party, (b)
---------------
compelled by law or legal process, (c) described in any instrument to be
recorded under this Agreement, or (d) required in connection with the closure of
the Old Landfill or transference or amendment of the Host County Agreement, each
party hereto covenants and agrees to maintain the confidentiality of, and not
use or disclose, in any form or manner (i) the terms and conditions of this
Agreement or ancillary agreements, if any, (ii) any trade secrets, know-how,
drawings, plans, specifications, agreements, customer lists, vendor lists,
quotations, or other confidential information of a similar nature that is
learned during the course of or in connection with the negotiation, execution,
performance or termination of this Agreement or (iii) other information of a
proprietary, sensitive or confidential nature learned during operation of the
New Landfill prior or subsequent to the Contract Date of this Agreement or
during the course of, or in connection with, the negotiation, execution,
performance or termination of this Agreement, which information if disclosed to
third parties could in any manner and to any extent damage the business of LCDC,
Big T or S&S, including their competitive positions. This provision by mutual
agreement shall survive any and all terminations of this Agreement. Each party
shall be entitled to equitable remedies, including specific performance and
injunctive relief, to enforce the terms of this Paragraph.
In the event that any party determines that information obtained in the
course of performing obligations under this Agreement must be disclosed to third
parties, that party agrees to provide the other parties with five (5) days'
prior written notice of such planned disclosure except where such disclosure is
made because that party deems there to be an imminent hazard to life or property
or where such disclosure is required pursuant to warrant, court order, or other
administrative or regulatory demands such as do not allow time for such notice.
In those cases, that party will provide written notice as soon as possible.
Except for any information created, compiled and collected by LCDC in
connection with the Siting Approval, in the event that any party (other than
S&S) wishes to make use of the information created, compiled and collected by
S&S in the Application, or any other materials, documents, information of any
kind or nature developed by S&S in connection with the New Landfill, S&S may, in
its sole discretion, agree to sell such materials, documents or information,
provided such party agrees to pay to S&S a reasonable fee for same.
-43-
<PAGE>
2. Insurance. In addition to other obligations to procure and maintain
---------
insurance or other financial assurance set forth in this Agreement or required
by any statute, regulation or ordinance, Big T, LCDC and S&S shall each procure
and maintain, at their own expense, during the term of this Agreement, at least
the following insurance from carrier(s) licensed and authorized to do business
in Illinois and Indiana, with a rating of A or better from A.M. Best & Company,
covering activities performed under this Agreement:
COVERAGE LIMITS
(a) Worker's Compensation Statutory
(b) Employer's Liability $500,000 each occurrence
(c) Comprehensive General $1,000,000 combined
Liability single limit
(d) Comprehensive Automobile $1,000,000 combined
Liability single limit
To the extent possible, each party shall be named as an additional insured
on all such insurance policies, and each party hereto agrees to furnish
insurance certificates, showing compliance with this paragraph, upon written
request of any other party. Such policies shall contain a prohibition against
termination without thirty (30) days notice. Each party shall have the right to
increase the coverage amounts contained hereunder, from time to time, as it
reasonably requires.
3. Definition of Affiliate. As used in this Agreement, the term
-----------------------
"Affiliate" shall mean a person or entity that controls, is controlled by, or is
under common control with or by the referenced person or entity.
4. Force Majeure. Whenever a period of time is herein prescribed for
-------------
action to be taken by either party, that party shall not be liable or
responsible for, and there shall be excluded from the computation for any such
period of time, any delays due to any causes of any kind whatsoever which are
beyond the reasonable control of that party; such causes shall include but not
be limited to: acts of God; acts of war; riot; fire; explosion; accident; flood;
sabotage; lack of adequate fuel, power, raw materials, labor or transportation
facilities; governmental laws, regulations, requirements, orders or actions;
breakage or failure of machinery or apparatus; national defense requirements;
injunctions or restraining orders; labor trouble, strike, lockout or injunction,
theft, public enemy, and government requisition.
5. Independent Contractor. Each party is and shall perform its
----------------------
obligations under this Agreement as an independent contractor, and as such, each
party shall have and maintain complete control over all of its employees, agents
and operations. No party to this Agreement shall have any authority to employ
any person or agent or employee for or on behalf of any other party for any
purpose, and no party to this Agreement, nor any person performing any duties or
engaging in any work at the
-44-
<PAGE>
request of such party, shall be deemed to be an employee or agent of any other
party to this Agreement.
6. Assignment or Transfer .
----------------------
a. By S&S. Except as set forth in Article XII(6)(b), below, this
------
Agreement or any portion thereof may be assigned by S&S without prior written
consent of LCDC or Big T; provided, however, that S&S covenants and warrants
that (1) it will provide LCDC and Big T with written notice of such transfer
prior to completion of such transfer; (2) it will only assign the Agreement, if
ever, to a party ready, willing and able to commence or continue the S&S's
obligations hereunder, and that any such assignment will expressly include an
assignment of all benefits and burdens of this Agreement, and (3) that this
Agreement shall remain fully enforceable for LCDC's and Big T's benefit against
both S&S and any assignee jointly and severally.
b. By LCDC or Big T. LCDC shall not sell, convey, transfer, lease,
----------------
pledge, or further encumber the New Landfill or Assets, or any interest in or
any part of the New Landfill or Assets, nor shall LCDC or Big T sell, convey,
transfer, lease, pledge, or further encumber any interest in Big T or LCDC,
without the prior written consent of S&S, which shall not be withheld without
good cause, provided that any such sale shall be subject to the terms of this
Agreement, which shall remain fully enforceable for S&S's benefit against both
LCDC, Big T and any assignee jointly and severally.
Notwithstanding the preceding sentence, LCDC or Big T may at any time
pledge its rights under and interest in this Agreement as collateral for one or
more loans; provided, however, that no encumbrance shall be placed on the New
Landfill or Assets after the Contract Date.
7. Notice . Any notice, payment or other communication under this
------
Agreement required hereunder or desired by the party giving such notice shall be
given by a writing delivered by hand or through the instrumentalities of
certified mail of the United States Postal Service or private courier service
such as Federal Express. Unless all parties are notified in writing of a new
address, notice shall be made to each party as follows:
to S&S:
S&S Grading of Illinois, Inc.
RR#4, Box 4452
Drums, Pennsylvania 18222
Attn: William Skuba
-45-
<PAGE>
to Big T or Sandra L. Simmons:
Big T Disposal, Inc.
1626 North Sixth Street
P. O. Box 267
Vincennes, Indiana 47591
Attn: Sandra L. Simmons
to LCDC or Gary Simmons:
Lawrence County Disposal Centre, Inc.
1626 North Sixth Street
P.O. Box 267
Vincennes, Indiana 47591
Attn: Gary Simmons
Notice shall be deemed effective upon receipt unless delivery of notice is
refused.
8. No Waiver. No waiver by any party of any term or provision of this
---------
Agreement shall be construed or deemed to be a waiver of any similar term or
provision or a waiver of the same term or provision at any other time, past or
future.
9. Entire Agreement. This Agreement including the Exhibits constitutes
----------------
the entire agreement of the parties regarding the matters described. All prior
representations, whether written or verbal, are included in this written
agreement. Any subsequent modification hereof must be in writing.
10. Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Illinois.
11. Binding Effect. This Agreement is and shall be binding upon and shall
--------------
inure to the benefit of any and all assignees, successors-in-interest, heirs,
devisees, executors, administrators or purchasers of all parties hereto, but
nothing herein shall be deemed to permit an assignment of any right hereunder,
except as expressly permitted by this Agreement.
12. Severability/Enforceability. This is intended to be a valid, legally
---------------------------
binding and enforceable agreement in each and every respect. If any provision
of this Agreement (including, without limitation, any provisions regarding non-
competition, non-solicitation, or provision of personal services), is found by a
court or other tribunal to be unenforceable or invalid (including a finding of
unenforceability or invalidity because of the scope of the geographic area,
scope of the business prohibited or the length of the term of this agreement),
the parties intend that this Agreement be modified and enforced to the maximum
extent allowable by law.
In the event any court or other body of competent jurisdiction determines
that any part of this Agreement is
-46-
<PAGE>
unenforceable for any reason and cannot be cured by the application of the
foregoing procedure, said provisions shall be considered severed from the
remainder of the Agreement, which shall remain in full force and effect as
though the severed portions had never been a part hereof.
13. Counterparts. This Agreement shall be executed in triplicate, each of
------------
which shall be deemed an original; and any party or signatory hereto may execute
this Agreement by signing any such counterpart and delivering a telecopy of such
counterpart to the other parties.
14. Time is of the Essence. Time is of the essence in fulfillment of each
----------------------
and every obligation of this Agreement of all parties under this Agreement.
15. Third Party Beneficiary. The parties agree that this Agreement is
-----------------------
comprised of numerous covenants running between LCDC and S&S, and LCDC and Big
T, and Big T and S&S, and it is agreed that each party to this Agreement is a
third party beneficiary of each and every covenant and agreement contained
herein between the other parties.
16. Consent. Where this Agreement calls for the consent of a party, such
-------
consent shall not be unreasonably withheld, except as expressly set forth
herein.
17. Audit. Commencing after the New Landfill accepts waste for disposal,
-----
S&S shall keep at the New Landfill, and Big T, LCDC and their respective
Affiliates, shall each keep at their regular places of business to be located in
Lawrence County or Vincennes, Indiana (or such other address as S&S may approve
in writing), true and accurate records and accounts, in accordance with approved
accounting practices, as follows: all the Gross Receipts, as hereinafter
defined, made on or from the New Landfill and copies of all tipping fee
agreements, hauling agreements or contracts, offers to haul, and records of
Gross Receipts pertaining to such agreements or contracts, and any other records
reasonably required to ensure a proper accounting among the parties pursuant to
Article IV.
The term "Gross Receipts" as used herein shall be construed to include the
entire amount of the actual price, whether for cash or otherwise, of tipping
fees and the amounts of all other receipts and income whatsoever of all
businesses and services performed or conducted by or through such party, in
order to ensure compliance with the terms and conditions of this Agreement.
Such records shall be kept for a period of at least three (3) years after
completion of such business and services and all of such records and accounts
shall, during the period they are required to be so kept and maintained, be open
for inspection and audit by any party or its duly authorized agent upon seven
(7) days prior written notice.
-47-
<PAGE>
If any such audit by any party shall disclose any inaccuracies in the
records or statements rendered by the other party which shall have produced a
deficiency of One Thousand Dollars ($1,000.00) or more, then and in that event,
the party whose payments were in error shall pay the reasonable cost of such
audit together with the deficiency. Any deficiency revealed by such audit shall
be paid within ten (10) days after delivery of the audit confirming the
deficiency.
18. Future Use. The parties acknowledge that it may become desirable in
----------
the future to use portions of the New Landfill that have been subject to closure
(or are no longer required for operation), for other uses in order to generate
revenue for post-closure activities and for other purposes mutually agreeable
to the parties. The parties agree to negotiate in good faith to facilitate and
accommodate reasonable future use of the New Landfill by both S&S and LCDC,
provided nothing herein shall be deemed to impose any additional obligation,
financial or otherwise, on S&S with respect to the nature or form of closure to
be undertaken, or to create any right in any party to use or operate the New
Landfill during the term of this Agreement, except as expressly set forth
herein. Any such future use shall be the subject of an amendment to this
Agreement between LCDC and S&S.
19. Further Assurances. Each of the parties agrees to execute any and all
------------------
agreements, instruments and documents that may be requested by another party to
this Agreement in order to document and consummate all of the transactions
contemplated by this Agreement.
20. Condition Precedent to Contract Date. The parties desire to execute
------------------------------------
this Agreement in its present form notwithstanding the fact that certain matters
required to be completed, prepared, or executed as a condition precedent to
execution of this Agreement have not been completed, prepared or executed, as
appropriate. Therefore, notwithstanding anything herein to the contrary, this
Agreement shall be contingent upon, and the Contract Date shall not be deemed to
have occurred, until the following conditions precedent have been either (i)
completed to the satisfaction of S&S in its sole discretion, or (ii) waived by
S&S in writing:
a. The issuance by the Title Company of a commitment to insure the
leasehold interest and option to purchase to be conveyed to S&S under this
Agreement in form and content satisfactory to S&S in its sole discretion
(including without limitation as to fee title, title to mineral rights,
exceptions to title, and survey matters);
b. The delivery to S&S by LCDC of (i) a zoning letter from Lawrence
County confirming that zoning for the New Landfill permits the Permitted Uses,
or that there is no zoning or similar restrictions on land use prohibiting use
of the New Landfill in accordance with the Permitted Uses; and (ii) a letter
from
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<PAGE>
Lawrence County attaching a copy of the Host County Agreement, in form and
substance as attached on Exhibit D, and certifying that the attached Host County
---------
Agreement is a true and correct copy and that there are no amendments or
modifications thereto;
c. The delivery to S&S of (i) corporate authorizations from Big T as
follows: Consent to Host County Agreement, Consent to sale of 20 Acres Parcel
to LCDC, Consent to this Agreement; and from LCDC as follows: Consent to this
Agreement; and (ii) certificate of good standing for Big T from the Secretary of
State of the State of Indiana;
d. The delivery to S&S of releases or confirmations, as appropriate,
from the Illinois Departments of Revenue and Employment Security, confirming
that all LCDC tax or payment obligations pertaining to such Departments have
been satisfied in full;
e. The reformation of all exhibits to this Agreement, including,
without limitation, Exhibits D, E, L, M-1 and M-2 to memorialize any matters
-----------------------------
disclosed following execution of the Agreement or otherwise to be completed, all
to be in form and content satisfactory to S&S in its sole discretion;
f. The issuance of an ALTA survey of the New Landfill in form and
content satisfactory to S&S in its sole discretion.
In the event any of the conditions precedent (a)-(e) have not occurred or been
satisfied on or before May 20, 1995, S&S in its sole discretion may (i) waive
such conditions precedent to this Agreement; (ii) waive such conditions
precedent to this Agreement, but declare a default by the party which has failed
to perform the condition precedent or has otherwise defaulted under this
agreement, including without limitation a breach of representation or warranty;
or (iii) terminate the Agreement and thereafter the Agreement shall be of no
further force or effect.
IN WITNESS WHEREOF, LCDC, Gary Simmons, Big T, Sandra L. Simmons and S&S
hereby execute this Agreement on this 20TH day of April, 1995.
LAWRENCE COUNTY DISPOSAL CENTRE, INC.
/s/ Linda Hacker
- -----------------------------
Witness
/s/ Joyce Hatton
- -----------------------------
Witness BY:/s/ Gary Simmons__________________
Gary Simmons, President
/s/ Sandra Simmons___________________
__________________, Secretary
-49-
<PAGE>
/s/ Linda Hacker
- -----------------------------
Witness
/s/ Joyce Hatton
- -----------------------------
Witness BY:/s/ Gary Simmons__________________
Gary Simmons, Individually
BIG T DISPOSAL, INC.
/s/ Linda Hacker
- -----------------------------
Witness
/s/ Joyce Hatton
- -----------------------------
Witness BY:/s/ Gary Simmons__________________
Gary Simmons, President
_____________________________________
Sandra L. Simmons, Secretary
_____________________________
Witness
_____________________________
Witness BY:/s/ Sandra Simmons, as pertains
Sandra L. Simmons, Individually
Paragraph II___________
/s/ A. M. Norris
- -----------------------------
Witness
/s/ Lawrence E. Patton, Jr.
- -----------------------------
Witness
/s/ Kathy A. Waugh
- -----------------------------
Witness
/s/ Carol Moore
- -----------------------------
Witness S&S GRADING OF ILLINOIS, INC.
BY:/s/ William C. Skuba______________
William C. Skuba, President
/s/ Michael A. Fioravante____________
Michael A. Fioravante, Secretary
-50-
<PAGE>
AMENDMENT
This Amendment hereby amends the Severance Agreement (the "Agreement")
dated August 20, 1993, by and between EASTERN ENVIRONMENTAL SERVICES, INC. (the
"Corporation") and WILLIAM C. SKUBA (the "Executive").
WHEREAS, in accordance with the purposes of the Agreement and in order to
further induce the Executive to continue to be employed by the Corporation, the
Corporation and the Executive have agreed to amend the Agreement, as more
particularly set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Agreement and intending to be legally bound, the Corporation and the Executive
hereby agree as follows:
1. Paragraph 4 of the Agreement shall be amended to read in its entirety
as follows:
"4. Control Change. If Executive's employment is voluntarily or
--------------
involuntarily terminated for any reason or no reason within one year of a
Control Change (as defined below), then the Corporation shall, within 30 days of
such termination, pay Executive (or his estate or designated beneficiary) a lump
sum severance benefit in cash in the amount of (i) his then current annual
salary (which the Corporation agrees not to reduce below its current level)
multiplied by 2.0 or (ii) such larger amount as the Board of Directors shall
deem appropriate. For purposes of this paragraph, a "Control Change" shall mean
(i) a merger, consolidation, reorganization, sale of outstanding shares or a
similar transaction involving the Corporation pursuant to which there is an
actual change in control of 20% or more in voting power of the Corporation, (ii)
a sale of substantially all of the assets of the Corporation or (iii) any
similar or other transaction involving an actual change in control of the
Corporation, which shall be deemed to include, without limitation, (A) a change
in a majority of the members of the Board of Directors of the Corporation as
compared to the members of the Board of Directors on the date hereof
(accompanied by, preceding or following the resignation by William C. Skuba as a
director or the failure of Mr. Skuba to be reelected at any meeting of the
Corporation's stockholders at which directors are being elected), (B) the
acquisition by any person or group acting in concert of at least 30% of the
voting power of the Corporation (including, without limitation, through any
proxy or voting agreement, other than a revocable proxy given in response to a
proxy solicitation made to more than 10 persons), or (C) the reduction in the
voting power of William Skuba to below 30% of the total voting power of all
classes of capital stock of the Corporation. In the event that the terms of
this Agreement would require that a payment be made to Executive pursuant to
both Section 3 and this Section 4, then notwithstanding anything to the contrary
contained herein, no payment shall be made pursuant to Section 3, and only the
payment required pursuant to this Section 4 shall be made."
2. All other terms and provisions of the Agreement not affected by this
Amendment shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
executed as of the 29th day of February, 1996.
/s/ William C. Skuba
----------------------------------------
WILLIAM C. SKUBA
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Gregory M. Krzemien
-------------------------------------
Gregory M. Krzemien
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1996
<PERIOD-START> JAN-01-1996 JUN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1996
<CASH> 0 596,633
<SECURITIES> 0 0
<RECEIVABLES> 0 1,611,852
<ALLOWANCES> 0 430,505
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 2,796,245
<PP&E> 0 19,923,260
<DEPRECIATION> 0 7,784,932
<TOTAL-ASSETS> 0 16,252,240
<CURRENT-LIABILITIES> 0 4,283,210
<BONDS> 0 1,789,398
0 0
0 0
<COMMON> 0 57,143
<OTHER-SE> 0 8,706,188
<TOTAL-LIABILITY-AND-EQUITY> 0 16,252,240
<SALES> 1,531,180 5,713,966
<TOTAL-REVENUES> 1,531,180 5,713,966
<CGS> 1,200,324 4,342,810
<TOTAL-COSTS> 1,200,324 4,342,810
<OTHER-EXPENSES> 635,252 1,875,295
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 37,644 110,441
<INCOME-PRETAX> (297,431) (483,294)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (297,431) (483,294)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (297,431) (483,294)
<EPS-PRIMARY> (.06) (.09)
<EPS-DILUTED> 0 0
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