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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 10, 1996
EASTERN ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Exact name of issuer as specified in charter)
Delaware 0-16102 59-2840783
(State or Other Jurisdiction Commission (I.R.S. Employer
or Incorporation or file number Identification
Organization) Number)
1000 Crawford Place, Mt. Laurel, New Jersey 08054
(Address of principal executive offices)
(609) 235-6009
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ----------------------------------------------
On December 10, 1996, the Registrant consummated the acquisition of R
& A Bender, Inc. and certain real estate owned by R & A Bender Property, Ltd.,
pursuant to the terms of an Agreement for the Sale and Purchase of Stock and
Real Estate dated December 2, 1996 and an Escrow Agreement dated December 2,
1996. The parties to the Purchase Agreement and Escrow Agreement were Eastern
Environmental Services, Inc.; Richard G Bender, Sr., Alice L. Fields Bender,
Richard G. Bender, Jr., Karen L. Bender, Teresa A. Bender Miller, Lynetta K.
Bender Mowery, Stephen R. Bender, Jeffrey L. Bender, and Douglas R. Bender
(collectively referred to as the "Stockholders"); and R & A Bender Property,
Ltd., a Pennsylvania limited partnership ("Partnership"). The Stockholders and
Partnership are collectively referred to as the "Sellers." The Sellers are not
affiliated with the Registrant nor with any of the Registrant's subsidiaries.
The description of the acquisition transaction set forth herein is qualified in
its entirety by reference to the Purchase Agreement, which is filed herewith as
an exhibit.
Pursuant to the Purchase Agreement and Escrow Agreement, Registrant
purchased all of the outstanding stock of R & A Bender, Inc. and certain real
estate owned by R & A Bender Property, Ltd, for total consideration of
approximately $16,800,000, including $15,800,000 in cash and 106,667 shares of
the Registrant's common stock valued at $9.375 per share (the closing price of
the Registrant's common stock on December 2, 1996.) Additionally, on the date of
closing the Purchase Agreement, R & A Bender, Inc. had approximately $1,209,000
of outstanding indebtedness. The Shareholders were also issued five year
stock warrants for 50,000 shares of the common stock of the Registrant having a
per share exercise price equal to the closing price of the Registrant's stock as
of December 2, 1996. The acquisition is being accounted for using the "purchase"
method of accounting. The Registrant has agreed to register the stock under the
Securities Act of 1933 within 120 days of the date of closing.
The acquisition includes substantially all of the outstanding assets
and liabilities relating to the operation of R & A Bender, Inc. The acquired
assets, including collection vehicles, containers and a 280-acre tract of real
estate, were used by R & A Bender, Inc. in the operation of a waste collection
and landfill business. The Registrant intends to continue to use the acquired
assets for this purpose. In connection with the acquisition, four of the
stockholders were hired by R&A Bender, Inc. to continue in their previous
responsibilities.
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Item 7. Financial Statements, Pro Form
Financial Information and Exhibits
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(a) Financial statements of businesses acquired. It is impracticable to provide
the required financial statements of R & A Bender, Inc. and R & A Bender
Property, Ltd. at the time of the filing of this report. The required
financial statements of R & A Bender, Inc. and R & A Bender Property, Ltd.
will be filed within the time period required in accordance with applicable
regulations under the Securities Exchange Act of 1934.
(b) Pro forma financial information
It is impracticable to provide the required pro forma financial information
of Eastern Environmental Services, Inc. at the time of the filing of this
report. The pro forma information will be filed within the time period
required in accordance with applicable regulations under the Securities
Exchange Act of 1934.
(c) Exhibits
10.1 Agreement for the Sale and Purchase of Stock and Real Estate dated
December 2, 1996 between Richard G Bender, Sr., Alice L. Fields Bender,
Richard G. Bender, Jr., Karen L. Bender, Teresa A. Bender Miller, Lynetta
K. Bender Mowery, Stephen R. Bender, Jeffrey L. Bender, Douglas R. Bender,
(collectively referred to as the "Stockholders"), and R & A Bender
Property, Ltd., a Pennsylvania limited partnership ("Partnership") and
Eastern Environmental Services, Inc., a Delaware corporation.
10.2 Escrow Agreement dated December 2, 1996, between Richard G. Bender, Sr.,
Alice L. Fields Bender, Richard G. Bender, Jr., Karen L. Bender, Teresa A.
Bender Miller, Lynetta K. Bender Mowery, Stephen R. Bender, Jeffrey L.
Bender, Douglas R. Bender (collectively the "Stockholders"), R&A Bender
Property, Ltd. ("Partnership"), Eastern Environmental Services, Inc.
("Purchaser'), Robert M. Kramer & Associates, P.C. ("RMK") and McNees,
Wallace & Nurick ("MWN").
10.3 Warrant Agreement dated December 2, 1996, between Eastern Environmental
Services, Inc. and Karen L. Bender for 8970 Shares (pursuant to instruction
2 to Item 601 of Regulation S-K, the Warrant Agreements, which are
substantially identical in all material respects except as to the parties
thereto and amount of shares of common stock issuable upon exercise of the
warrant, between the Registrant and the following individuals not being
filed: Richard G. Bender (3,905 shares), Alice L. Fields (7,380 shares),
Richard G. Bender, Jr. (6,600 shares), Teresa A. Bender Miller (2,680
shares), Lynetta K. Bender Mowery (4,475 shares), Stephen R. Bender (6,625
shares), Jeffrey L. Bender (6,625 shares), and Douglas R. Bender (2,680
shares)).
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Signature
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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 hereunto duly authorized.
EASTERN ENVIRONMENTAL SERVICES, INC.
Date: December 23, 1996 By: /s/ Louis D. Paolino, Jr.
----------------------------
Louis D. Paolino, Jr.
President
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.1 Agreement for the Sale and Purchase of Stock and Real Estate dated
December 2, 1996 between Richard G Bender, Sr., Alice L. Fields
Bender, Richard G. Bender, Jr., Karen L. Bender, Teresa A. Bender
Miller, Lynetta K. Bender Mowery, Stephen R. Bender, Jeffrey L.
Bender, Douglas R. Bender, (collectively referred to as the
"Stockholders"), and R & A Bender Property, Ltd., a Pennsylvania
limited partnership ("Partnership") and Eastern Environmental
Services, Inc., a Delaware corporation.
10.2 Escrow Agreement dated December 2, 1996, between Richard G. Bender,
Sr., Alice L. Fields Bender, Richard G. Bender, Jr., Karen L.
Bender, Teresa A. Bender Miller, Lynetta K. Bender Mowery, Stephen
R. Bender, Jeffrey L. Bender, Douglas R. Bender (collectively the
"Stockholders"), R&A Bender Property, Ltd. ("Partnership"), Eastern
Environmental Services, Inc. ("Purchaser'), Robert M. Kramer &
Associates, P.C. ("RMK") and McNees, Wallace & Nurick ("MWN") .
10.3 Warrant Agreement dated December 2, 1996, between Eastern
Environmental Services, Inc. and Karen L. Bender for 8970 shares
(pursuant to instruction 2 to Item 601 of Regulation S-K, the
Warrant Agreements, which are substantially identical in all
material respects except as to the parties thereto and amount of
shares of common stock issuable upon exercise of the warrant,
between the Registrant and the following individuals not being
filed: Richard G. Bender (3,905 warrant shares), Alice L. Fields
(7,380 warrant shares), Richard G. Bender, Jr. (6,600 warrant
shares), Teresa A. Bender Miller (2,680 warrant shares), Lynetta K.
Bender Mowery (4,475 warrant shares), Stephen R. Bender (6,625
warrant shares), Jeffrey L. Bender (6,625 warrant shares), and
Douglas R. Bender (2,680 warrant shares)).
<PAGE>
Exhibit 10.1
AGREEMENT FOR THE SALE AND PURCHASE
OF THE STOCK OF
R & A BENDER, INC.
AND REAL ESTATE OWNED BY
R & A BENDER PROPERTY, LTD.
KNOWN AS THE BENDER LANDFILL
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TABLE OF CONTENTS
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PAGE
----
RECITALS...................................................................... 1
ARTICLE I ACQUISITION; CLOSING................................................ 2
ARTICLE II TITLE INSURANCE................................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE SELLERS............................................................... 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER............................................................ 22
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS................................... 22
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER................................ 24
ARTICLE VII CONDITIONS OF PURCHASER.......................................... 27
ARTICLE VIII CONDITIONS OF SELLERS........................................... 28
ARTICLE IX INDEMNIFICATION................................................... 28
ARTICLE X OTHER PROVISIONS................................................... 31
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SCHEDULES
R.1 Legal Description of Property
1.4 Description of Assets to be Transferred
1.5 Description of the Excluded Assets
1.7(a)(iii) Form of Stock Warrant (including antidilution and registration
language along with substantive provisions of warrant, including
time for exercise)
1.7(b)(i) List of certificates of deposit and cash collateral held by
indemnity company/companies which will result in an increase in
the Purchase Price
1.7(c) Form of Escrow Agreement to be executed at Closing
1.8(d)(i) List of Stockholders who will receive
Employment Agreements
1.8(d)(ii) Form of Employment Agreement
1.8(e) Form of Garage Lease
1.8(f)(i) Description of the Evergreen National Indemnity Company bond
1.8(f)(i)(B) List of Evergreen Bond Guarantors
1.8(f)(ii) List of guaranteed Company indebtedness along with a list of the
guaranteeing Stockholders and their pledged assets which need to
be released
1.9(g) List of DEP Permits and Licenses
2.2 List of Permitted Exceptions
3.2 Description of Shareholder's Agreement
3.3 List of Material Documents
3.4 List of Personal Property
3.5 Customer List
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3.6 Real Property Interests
3.6(a) List of exceptions to governmental compliance
3.6(b) List of exceptions to lawful use of the Property
3.6(c) List of exceptions to conduct at Property in compliance with
Applicable Laws
3.6(e) List of exceptions to litigation or administrative proceedings
for violation of environmental laws
3.6(f) Definition of "Hazardous Materials" and Disclosed Environmental
Conditions
3.6(h) Wetlands
3.6(i) List of exceptions to mechanic's lienable work and mechanic's
liens
3.6(k) List of exceptions to proceedings which would affect use of the
Property
3.7(a) List of Company's Leased Personalty and Permitted Company Asset
Encumbrances
3.9(a)(ii) List of exceptions to liabilities arising since the Most Recent
Balance Sheet and not occurring in the ordinary course of
business
3.9(c) List of Liabilities and Accounts Receivable
3.10 Fiscal Condition of Company
3.12 List of Insurance Policies, etc.
3.13(a) List of Employment Agreements Not Terminable Without Penalty On
Notice of Two Weeks or Less
3.13(b) Employee Information
3.13(c) List of Employee Benefit Plans, Funds or Programs
3.14(a) List of exceptions to Company's operation in compliance with
laws, etc.
3.14(b) List of exceptions relating to environmental issues and liability
3.14(c) List of Notices of Violation
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3.14(e) Exceptions to Approvals
3.16 List of exceptions to right of Company to enter this Agreement
3.19 Investments in Competing Companies
3.22 List of Litigation
5.6 Proration of Closing Costs on the Property (real estate taxes,
transfer taxes, roll-back taxes, etc.)
10.2 Existing non-disclosure letter
10.6(b) Notice Address for Sellers' Representative
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AGREEMENT FOR THE SALE AND PURCHASE
OF STOCK AND REAL ESTATE
This Agreement for the Sale and Purchase of Stock and Real Estate
("Agreement") is made as of December 2, 1996, by and between RICHARD G. BENDER,
SR., ALICE L. FIELDS BENDER, RICHARD G. BENDER, JR., KAREN L. BENDER, TERESA A.
BENDER MILLER, LYNETTA K. BENDER MOWERY, STEPHEN R. BENDER, JEFFREY L. BENDER,
DOUGLAS R. BENDER, (collectively referred to as the "Stockholders"), and R & A
BENDER PROPERTY, LTD., a Pennsylvania limited partnership ("Partnership")
(Stockholders and Partnership may sometimes hereinafter be collectively referred
to as "Sellers"), on the one hand, and EASTERN ENVIRONMENTAL SERVICES, INC., a
Delaware corporation ("Purchaser"), on the other hand.
RECITALS
WHEREAS, the Stockholders are the owners of all of the outstanding
shares of stock ("Company Shares") of R & A Bender, Inc., a Pennsylvania
corporation ("Company"), which Company is in the business of operating a
landfill in or about Harrisburg, Pennsylvania, known as the Bender Landfill and
operating a related hauling business; and
WHEREAS, the Partnership owns the "Property" (hereinafter defined).
The term "Property" shall mean those certain tracts of land located in the
Township of Greene, County of Franklin, Commonwealth of Pennsylvania, known as
the Bender Landfill and containing approximately 280 acres, as more fully
described on Schedule R.1 attached hereto and incorporated herein by reference,
together with the buildings and improvements thereon, if any (collectively, the
"Property"). For purposes of this Agreement, "Property" shall also include (i)
all of the Partnership's right, title and interest in and to all easements,
rights-of-way, privileges and appurtenances thereto, (ii) all of the
Partnership's right, title and interest in and to the beds of all streets,
roads, avenues or highways, open or proposed, abutting the Property, (iii) all
of the Partnership's right, title and interest, if any, in and to any award in
condemnation, or damages of any kind, to which the Partnership may have become
entitled or may hereafter be entitled, by reason of any exercise of the power of
eminent domain with respect to the Property or any other right, title or
interest to be sold hereunder or any part thereof, and (iv) all of the
Partnership's right, title and interest in and to all surveys, architectural and
engineering plans, specifications, drawings, reports, etc., if any, presently
existing or hereafter prepared, with respect to the Property; and
WHEREAS, the Company operates its business at the Property, except for
the garage activity of the business which is located at a property (the
"Pleasant Hall Property") near the village of Pleasant Hall in Letterkenny
Township, Franklin County, Pennsylvania; and
WHEREAS, the Purchaser desires to purchase all of the Company Shares
and acquire the Company as well as acquire legal title to the Property, the
Stockholders desire to sell
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all of the Company Shares and sell the Company and the Partnership desires to
sell the Property, all subject to the terms and conditions contained herein.
ARTICLE I
Acquisition; Closing
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Section 1.1 Incorporation of Recitals. The recitals set forth above
-------------------------
are incorporated herein by reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this Agreement
--------------------------
shall take place on or before December 2, 1996, time being of the essence, at
the offices of Sellers' counsel, McNees, Wallace & Nurick at 100 Pine Street,
Harrisburg, Pennsylvania, or such other place as the parties hereto may agree
upon. The date that Closing occurs is referred to hereinafter as the "Closing
Date" and the act of closing as "Closing."
Section 1.3 Agreement to Sell Stock of Company. At the Closing the
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Stockholders agree to transfer and deliver to Purchaser all the Company Shares
and Purchaser agrees to purchase the Company Shares.
Section 1.4 Description of Company Assets. The assets, properties
-----------------------------
and contractual rights of the Company which the Purchaser will acquire through
ownership of the Company Shares include those described in Schedule 1.4 attached
hereto (the "Company Assets").
Section 1.5 Excluded Assets. The parties agree that the only
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tangible and intangible property owned by the Company and not being sold to the
Purchaser are those items described in Schedule 1.5 attached hereto (the
"Excluded Assets").
Section 1.6 Property. Upon the terms and subject to the conditions
--------
set forth in this Agreement, at the Closing, Partnership agrees to grant,
convey, sell, transfer and assign to Purchaser the Property.
Section 1.7 Consideration. The aggregate purchase price (the "Purchase
-------------
Price") for the Company Shares and the Property which the Purchaser agrees to
pay and the Stockholders and the Partnership collectively agree to accept at the
Closing shall be calculated as follows but shall be subject to a post-Closing
adjustment pursuant to Section 1.7(c) hereof:
(a) (i) $13,500,000 (subject to adjustment as hereinafter
provided) payable by federal wire transfer at Closing to a collective account
(the "Collective Account") for all Sellers established by the "Sellers'
Representative" (hereafter defined) for the Stockholders and the Partnership
("Cash Purchase Price"); (ii) restricted (subject to the terms and conditions of
Sections 5.1 and 6.2 of this Agreement) common stock of the Purchaser having a
market value of $1,000,000 (the "Consideration Stock") based on the closing
share price of the Purchaser's
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common stock ten days prior to closing or, if there is no closing share price on
such day, then on the first preceding day for which there is a closing share
price, delivered to Sellers' Representative in separate share certificates, each
in the names and for the amounts set forth in a Certificate to be executed by
the Sellers and delivered by Sellers to Purchaser at Closing; and (iii) stock
warrants for 50,000 shares of the common stock of the Purchaser (the "Warrants")
having a per share exercise price as of the date this Agreement has been fully
executed and in the form of warrant attached hereto as Schedule 1.7(a)(iii),
which form of warrant shall provide the substantive terms and provisions thereof
including, but not limited to, time for exercise thereof and anti-dilution
provisions, delivered to Sellers' Representative in separate warrants, each in
the names and for the warrant shares set forth in Exhibit A attached to Schedule
1.7(a)(iii). Four Million Dollars ($4,000,000) of the Purchase Price shall be
allocated to the Property, and the balance of the Purchase Price shall be
allocated to the Company Shares.
(b) The Purchase Price shall be subject to adjustment (with the net
adjustment being made to the cash portion described in Section 1.7(a)(i)) as
follows:
(i) Increased or decreased, as the case may be, by the
amount by which (i) current assets, including those certificates of deposit and
cash escrows which (A) are owned by the Company, (B) are held by an indemnity
company or companies or governmental units as collateral, (C) are listed on
Schedule 1.7(b)(i) hereof and (D) will, after Closing, belong to the Purchaser
as the sole owner of the Company Shares, exceeds or is exceeded by,
respectively, the sum of (ii) current liabilities of the Company, including
deferred revenue, and (iii) long-term debt of the Company (exclusive of deferred
closure fund liability);
(ii) Decreased by a bad debt reserve with respect to the
Company's accounts receivable in existence on the date of Closing, which bad
debt reserve shall be equal to the total of (A) five (5%) percent of all
accounts receivable outstanding for twenty nine (29) days or less, (B) ten (10%)
percent of all accounts receivable outstanding for between thirty (30) days and
fifty nine (59) days, (C) twenty (20%) percent of all accounts receivable
outstanding for between sixty (60) days and eighty nine (89) days, and (D)
ninety (90%) percent of all accounts receivable outstanding for ninety (90) days
or more ("Bad Accounts Reserve").
(iii) Increased by the sum of costs incurred to third parties
since January 1, 1996, for the construction of the expansion area and related
facilities at the Property (it being understood that some such costs which have
been incurred have not been paid by the date of Closing and such unpaid costs
will be paid by the Company post-Closing, with Purchaser receiving an adjustment
to the Purchase Price for the outstanding liability under 1.7(b)(i) above;
(iv) Increased or decreased, as the case may be, to reflect
additions and deletions, respectively, in the revenue equipment as listed in the
schedules previously submitted to Purchaser and such equipment on hand as of
Closing (exclusive of the pay loader and backhoe which are to be excluded from
the transaction); and
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(v) Decreased or increased, as the case may be, by the
amount by which the debt due the Stockholders at Closing exceeds or is exceeded
by, respectively, $500,000. It is expressly understood that simultaneously with
the Closing, the Company will repay all of the debt owed to the Stockholders,
the Purchaser will not object thereto and, after Closing, all the Company's
indebtedness to the Stockholders shall be deemed to have been fully satisfied.
(c) The calculation of the adjustments to the Purchase Price, as
provided for in Section 1.7(b) hereof, shall initially be made as of the close
of business on the Saturday immediately preceding Closing. At Closing, all
adjustments to the Purchase Price made pursuant to Section 1.7(b) hereof, shall
be estimated and made subject to a post-Closing final reconciliation which shall
occur no later than sixty (60) days after the date of Closing, except for the
Accounts Receivable Adjustment described in the next sentence. One hundred
eighty (180) days after Closing the following payments will be made by Purchaser
to Sellers or by Sellers to Purchaser, as applicable, ("Accounts Receivable
Adjustment"); (i) if the accounts receivable of the Company in existence at
Closing ("Accounts Receivable") which are not collected are less than the Bad
Accounts Reserve, Purchaser shall pay Sellers the amount equal to the Bad
Accounts Reserve, less the actual uncollected Accounts Receivable; or (ii) if
the Accounts Receivable which are not collected are greater than the Bad
Accounts Reserve, Sellers shall pay Purchaser the amount equal to actual
uncollected Accounts Receivable, less the Bad Accounts Reserve. Purchaser and
the Sellers agree to cooperate with each other in order to determine all
reconciliations set forth in this Section 1.7(c). The Sellers agree to reimburse
the Purchaser for any overpayment and the Purchaser agrees to pay the Sellers
the amount of any underpayment (by wiring same to the Collective Account) all as
determined by said reconciliations. In order to secure the Sellers' obligation
to reimburse the Purchaser for overpayment of the Purchase Price, if any,
$100,000 of the Purchase Price shall be paid into escrow at Closing with the
joint escrow agent named (i.e. McNees, Wallace & Nurick and Robert M. Kramer &
Associates, P.C.) in the Escrow Agreement attached as Schedule 1.7(c), which the
parties agree to execute at Closing. The $100,000 shall remain in the Escrow
Account until final reconciliation of the amounts set forth in Section 1.7(b)(i)
through (v). In order to secure the Sellers' obligation to pay Purchaser the
Accounts Receivable Adjustment due, if the uncollected Accounts Receivable
exceed the Bad Accounts Reserve, $25,000 of the Purchase Price shall remain in
the Joint Escrow Account, until the final determination of the Accounts
Receivable Adjustment. The Accounts Receivable Adjustment shall be determined
within 195 days after Closing. The Purchaser shall convey to the Sellers all
uncollected Accounts Receivable upon the Sellers payment to Purchaser of the
Accounts Receivable Adjustment due to Purchaser.
(d) The Purchase Price allocated to the Company Shares shall be
paid to the Stockholders in accordance with their proportionate equity ownership
in the Company and that allocated to the Property shall be paid to the partners
of the Partnership in accordance with their proportionate equity ownership in
the Partnership. At Closing, the Sellers' Representative shall certify such
allocations to Purchaser, and Purchaser shall be entitled to rely thereon.
Notwithstanding the foregoing, the Purchaser's only obligation with respect to
the payment of the cash portion of the Purchase Price shall be to effect the
wire transfer required by Section 1.7(a)
4
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hereof. The issuance of the Consideration Stock and the Warrants to the Sellers
shall be subject to the procedure set forth in this Section 1.7(d).
Section 1.8 Deliveries by Purchaser. At the Closing, Purchaser
------------------------
shall deliver, all duly and properly executed (where applicable):
(a) The payments due on the Closing Date, as provided in Section
1.7 above to be delivered to the Sellers;
(b) A certified copy of the resolutions of the Board of Directors
of Purchaser authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein;
(c) A favorable opinion from counsel for Purchaser, dated the day
of the Closing, to the effect that this Agreement has been duly and legally
authorized by all necessary corporate action on the part of Purchaser, has been
duly and legally executed and delivered by Purchaser, and is the valid,
enforceable and binding Agreement of Purchaser, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditor's rights generally;
(d) An Employment Agreement with those Stockholders listed on
Schedule 1.8(d)(i) attached hereto in the form and content of the Employment
Agreement attached hereto as Schedule 1.8(d)(ii); and
(e) A Lease (the "Lease") for the garages at the Pleasant Hall
Property in the form and content of the Lease attached hereto as Schedule
1.8(e). Notwithstanding the foregoing, it is agreed that the Purchaser shall be
entitled to substitute a subsidiary or other affiliate of Purchaser as the
tenant under the Lease provided that the Purchaser guarantees the substituted
tenant's obligations under the Lease.
(f) Evidence, to the reasonable satisfaction of the Sellers, that:
(i) with respect to that indemnity bond posted by Evergreen
National Indemnity Company which is more particularly described in Schedule
1.8(f)(i) attached hereto and incorporated herein by reference (the "Evergreen
Bond"), either:
A) Purchaser shall have posted or caused the posting of
an indemnity bond in substitution of the Evergreen Bond such that the Evergreen
Bond shall be released; or
B) Purchaser shall have arranged for the release of those
guarantors of the Evergreen Bond listed on Schedule 1.8(f)(i)(B) attached hereto
and incorporated herein by reference so that they no longer serve as guarantors
of the Evergreen Bond.
5
<PAGE>
Purchaser agrees to use its reasonable efforts to obtain the commitment of
Evergreen National Indemnity Company to maintain the confidentiality of this
transaction as to third parties, prior to negotiating the above arrangements.
(ii) Purchaser shall have obtained the unconditional release
of the guarantees of those Stockholders and of those assets of those
Stockholders which currently secure indebtedness of the Company, all as
described on Schedule 1.8(f)(ii) attached hereto and incorporated herein by
reference.
Section 1.9 Deliveries by Sellers. At the Closing, the Sellers shall
---------------------
deliver, all duly executed, the following:
(a) The Stockholders shall deliver to Purchaser duly executed
certificates in valid form evidencing all of the Company Shares, duly endorsed
to Purchaser or accompanied by duly executed stock powers attached or otherwise
executed in the presence of authorized representatives of Purchaser or, if not
executed in the presence of authorized representatives of Purchaser, then same
shall be guaranteed by a brokerage house acceptable to the Purchaser (the
certificates and stock powers referred to in this Section 1.9(a) are
collectively referred to as the "Endorsed Certificates or Stock Powers");
(b) Except as may be otherwise required by Purchaser, the written
resignations of all officers and directors of the Company at the time of
Closing;
(c) A release from each Seller, in a form and content satisfactory
to Purchaser, which provides that the Sellers are releasing the Company and the
Purchaser from any and all claims, causes of action, debts and obligations
whatsoever except any and all obligations of Purchaser arising under this
Agreement;
(d) Those Stockholders listed on Schedule 1.8(d)(i) attached hereto
shall execute an Employment Agreement with Purchaser, in the form and content
attached hereto as Schedule 1.8(d)(ii);
(e) The Partnership shall execute the Lease in the form and content
of the Lease attached hereto as Schedule 1.8(e).
(f) The Sellers shall have delivered to Purchaser a current
certificate of good standing for each of the Company and the Partnership from
the Pennsylvania Secretary of State.
(g) A favorable opinion from counsel for the Sellers, dated the
date of the Closing, in form and substance satisfactory to counsel for
Purchaser, to the effect (i) that this Agreement has been duly and legally
authorized, executed and delivered by the Sellers and is the valid, enforceable
and binding Agreement on the Sellers, except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the
6
<PAGE>
enforcement of creditor's rights generally, (ii) those permits and licenses
issued by the DEP listed on Schedule 1.9(g) attached hereto and incorporated
herein by reference are valid, have been duly issued and are in full force and
effect, and (iii) the Company is a business corporation duly organized, validly
existing and in a condition of good standing under the laws of the Commonwealth
of Pennsylvania, and is authorized to do business therein.
(h) The books and records of the Company, including, without
limitation, all original financial and operating records, the corporate minute
book, the corporate stock ledgers and title documents.
(i) A Special Warranty Deed to the Property from the Partnership to
the Company (the "Deed"), subject only to those title exceptions permitted under
Section 2.2 hereof (the "Permitted Exceptions");
(j) Actual and physical possession of the Property, free and clear
of any and all leases, tenancies and occupancies or claims therefor of any
nature whatsoever, excepting only the "Permitted Exceptions" (hereinafter
defined) and the rights of the Company.
(k) A termination document, in form and substance reasonably
satisfactory to the Purchaser, terminating the "Shareholder's Agreement"
(hereinafter defined) and the rights and obligations of all parties thereto.
(l) A Certification executed by the Sellers regarding their
ownership of the Company Shares and certain other matters concerning the receipt
of the Consideration Stock and Warrants under Rule 505 promulgated under the
Securities Act of 1933.
ARTICLE II
TITLE INSURANCE
---------------
Section 2.1 Owners Title Policy. At Closing, Partnership shall
-------------------
furnish to Purchaser (at Purchaser's expense) with respect to the Property, an
extended coverage owners policy of title insurance from First American Title
Insurance Company (the "Title Company") in the amount of $4,000,000 and
including comprehensive, access and contiguity endorsements, insuring title to
the Property to be in fee simple in Company subject only to the Permitted
Exceptions permitted by Section 2.2 hereof (the "Owners Policy").
Section 2.2 Permitted Exceptions. The Owners Policy shall insure
--------------------
Company's interest in the Property to be free and clear of all encumbrances and
exceptions whatsoever except those listed on Schedule 2.2 attached hereto.
Section 2.3 Survey. The Sellers shall furnish Purchaser with a copy
------
of any plan or survey they have in their possession relating to the Property and
shall provide Purchaser with
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access to the Property, as is reasonably necessary, if Purchaser desires to have
a survey performed at Purchaser's expense.
ARTICLE III
Representations and Warranties of the Sellers
---------------------------------------------
With knowledge that Purchaser is relying upon the representations,
warranties and covenants herein contained, the Sellers each individually and
jointly represent and warrant to Purchaser and make the following covenants for
Purchaser's benefit. The Sellers represent and warrant that the representations
and warranties contained in this Article III are true on the date hereof and
shall be true on the Closing Date.
Certain of the following representations and warranties are made "to
Sellers' knowledge" or "to Sellers' actual knowledge." When so used, these
phrases shall have the following meanings:
"Seller's knowledge" shall mean "Seller's actual knowledge" (as
hereinafter defined) together with that knowledge which the Sellers (or any one
of the Sellers) would have acquired through the proper exercise of its/his/her
duty, if any, to investigate the particular matter in question. Purchaser shall
bear the burden of establishing the failure to properly exercise any such duty.
"Seller's actual knowledge" shall mean the actual conscious awareness,
without regard to any duty to investigate, of each and every one of the Sellers,
including, in the case of the Partnership, every partner thereof and, in the
case of R & A Bender Sanitary Landfill, Inc., every officer and shareholder
thereof.
Section 3.1 Organization and Standing. The Company is a corporation
-------------------------
and the Partnership is a limited partnership, each duly organized, legally
existing and in good standing under the laws of the state of its incorporation
or formation, with full power and authority to own its properties and conduct
its business as now being conducted. Neither the Company nor the Partnership
owns any stock or interest in any other corporation, partnership, or other
business organization.
Section 3.2 Company Stock. All of the authorized, issued, and
-------------
outstanding shares of capital stock and other securities of the Company are
owned by the Stockholders, including without limitation equity securities, debt
securities and options. The Stockholders are the only owners of the securities
of the Company. The Company Shares each Seller owns are legally and validly
authorized and issued, fully paid and nonassessable and free and clear of all
liens, claims and encumbrances of every kind and nature and are not subject to
any agreement or instrument relating to the transfer, disposition or voting of
such securities. There are no outstanding rights of any kind to acquire
additional shares of any class from the Company nor has any person
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claimed any such rights. All of the outstanding shares of the Company's capital
stock have been duly authorized, issued, and are fully and validly paid and non-
assessable. Notwithstanding the foregoing, certain of the Company Shares are
subject to that shareholders' agreement more particularly described in Schedule
3.2 attached hereto and incorporated herein by reference (the "Shareholders'
Agreement") which, pursuant to Section 1.9(k) hereof, shall be terminated at or
prior to Closing.
Section 3.3 Contracts, Permits and Material Documents. The items
-----------------------------------------
listed in Schedule 3.3 attached, are all of the following with respect to the
Company ("Material Documents"): (i) leases for real and personal property, (ii)
licenses, (iii) franchises, (iv) promissory notes, guarantees, bond, mortgages,
liens, pledges, and security agreements under which the Company is bound or
under which the Company is a beneficiary (v) collective bargaining agreements,
(vi) patents, trademarks, trade names, copyrights, trade secrets, proprietary
rights, symbols, service marks, and logos, (vii) all permits, licenses, consents
and other approvals from governments, governmental agencies (federal, state and
local) and/or third parties relating to, used in or required for the operation
of the Company's businesses, including the license authorizing the Company to
operate a landfill at the Property, and (viii) other contracts, agreements and
instruments not listed on another Schedule attached to this Agreement (such as
the customer contracts listed on Schedule 3.5) which are binding on the Company
or any of its property or pursuant to which the Company derives any material
benefit or has imposed upon it any material detriment. For purposes of this
Section 3.3 a material benefit or material detriment shall be anything which
provides a benefit or imposes a detriment having a value of $25,000 or more. The
Material Documents listed on Schedule 3.3 are organized under subheadings for
each of the different type of documents listed. Neither the Company nor, to
Seller's knowledge, any person or party to the any of the Material Documents or
bound thereby is in material or knowing default under any of the Material
Documents, and no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The Company is not a party to, and the
Company's property is not bound by any agreement or instrument which is material
to the continued conduct of its business operations as now being conducted or
with respect to which a default might materially and adversely affect its
properties, business operations, or financial condition of the Company, except
as listed in Schedule 3.3. To the Seller's knowledge, the documents listed on
Schedule 3.3 confer on the Company all rights necessary to enable the Company to
conduct its operations as now being conducted.
Section 3.4 Personal Property. Attached hereto, made a part hereof
------------------
and marked Schedule 3.4 is a listing of all material tangible assets of the
Company, including items specifically described in subparagraphs "a" through
"e", organized by subparagraph.
(a) All furniture, office equipment and other equipment used
in the Company's business operations, all of which are owned by the Company
except as listed on Schedule 3.4(a);
(b) All rolling stock, including motor vehicles, trucks, front
and rear end loaders, and compactors and accessories and attachments to the
rolling stock used in the Company's
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business operations together with information as to the make, description of
body and chassis, model number, serial number and year of each such vehicle, all
of which are owned by the Company, except as listed on Schedule 3.4(b);
(c) All containers used in the Company's business operations
together with information as to container size and year of manufacture, all of
which are owned by the Company, except as listed on Schedule 3.4(c);
(d) The inventory of parts, tires and accessories owned by the
Company shall be maintained through the Closing Date at levels consistent with
the Company's past practices;
(e) The shop tools owned by the Company shall be maintained
through the Closing Date at levels consistent with the Company's past practices;
The Purchaser acknowledges that the Sellers make no representation or
warranty about the condition of any particular items of personal property;
provided that Sellers represent and warrant that, in the aggregate, the personal
property of the Company is sufficient for the Company to carry on its business
as previously conducted.
Section 3.5 Customers. Sellers have supplied to Purchaser the name
---------
and address of each customer the Company serves (except for residential
customers) together with such information relating to each customer as is
contained on the Company's computerized record system, and the information
supplied is true, correct, and complete, in all material aspects. Neither the
Company nor, to the Sellers' knowledge, any person or party to the any of the
customer contracts is in material or knowing default under any of the customer
contracts, and no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The Company has received no notice
that any material customer intends to not renew any contract or otherwise cease
or curtail doing business with the Company.
Section 3.6. The Property. The Company has never owned, leased or
------------
otherwise occupied, had an interest in or operated any real property other than
the Property and the Pleasant Hall Property, except as listed on Schedule 3.6
attached hereto and incorporated herein by reference. The Partnership has good,
marketable and insurable title to the Property except for the Permitted
Exceptions.
(a) In all material respects, except as set forth in Schedule
3.6(a) attached hereto and incorporated herein, the Property is, and at all
times during operation of the landfill and hauling business thereon has been,
licensed, permitted and authorized for the operation of such business under all
federal, state and local statutes, laws, rules, regulations, orders, permits
(including, without limitation, zoning restrictions and land use requirements)
and licenses and all administrative and judicial judgments, rulings, decisions
and orders affecting or otherwise applicable to the protection of the
environment, the Property and the conduct of such business thereon
(collectively, the "Applicable Laws").
10
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(b) To Sellers' knowledge, except as set forth in Schedule 3.6(b)
attached hereto and incorporated herein by reference, the Property is usable for
its current uses, and the Property can be used by the Company after the Closing
to operate such business as is currently operated, without violating any
Applicable Law or private restriction, and such uses are legal conforming uses.
(c) To Seller's knowledge, except as set forth in Schedule 3.6(c)
attached hereto and incorporated herein by reference, all activities and
operations conducted on the Property, whether by Seller or by third parties, are
now being conducted and have always been conducted in compliance with all
Applicable Laws.
(d) The Stockholders, Partnership and Company shall make available on
Purchaser's reasonable request all material engineering, geologic and other
similar reports, documentation and maps relating to the Property in the
possession or control of the Stockholders, the Partnership or the Company which
include, without limitation, those materials located at the offices of the
following professionals hired by the Company (i) consulting engineers, Martin &
Martin, Inc. (Chambersburg); (ii) wetlands consultant, Skelly & Loy, Inc.
(Harrisburg), and (iii) hydro-geologist Thomas Earl, Ph.D. of Meiser & Earl,
Inc. (State College).
(e) Except as set forth in Schedule 3.6(e) attached hereto and
incorporated herein by reference, neither Sellers nor the Property now is or
ever has been involved in any litigation or administrative proceeding seeking to
impose fines, penalties or other liabilities or seeking injunctive relief for
violation of any Applicable Laws relating to the environment.
(f) To Sellers' knowledge, there have been no spills, leaks, deposits
or other releases into the environment or onto or under the Property of any
Hazardous Materials as defined in Schedule 3.6(f) attached hereto or other
material environmental conditions other than as disclosed on Schedule 3.6(f).
(g) No party, other than the Partnership and the Company, has a
present or future right to possession of all or any part of the Property, except
for any right defined in, under or by any of the Permitted Exceptions.
(h) To Seller's knowledge, no portion of the Property contains any
areas that could be characterized as disturbed, undisturbed or man-made wetlands
or as "waters of the United States" pursuant to any Applicable Laws or the
procedural manuals of the Environmental Protection Agency, U.S. Army Corps of
Engineers or the Pennsylvania Department of Environmental Protection ("DEP")
whether such characterization reflects current conditions or historic conditions
which have been altered without the necessary permits or approvals, except as
listed on Schedule 3.6(h) attached hereto and incorporated herein by reference.
(i) There are no mechanic's liens affecting the Property and no work
has been performed on the Property within four (4) months of the date hereof for
which a mechanic's lien
11
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could be filed, except as set forth in Schedule 3.6(i) attached hereto and
incorporated herein by reference.
(j) There are no levied or pending special assessments affecting all
or any part of the Property owed to any governmental entity and none is
threatened.
(k) There are no proceedings or amendments pending and brought by or
threatened by, any third party which would result in a change in the allowable
uses of the Property or which would modify the right of the Company or the
Partnership to use the Property for a solid waste landfill after the Closing
Date, except as set forth in Schedule 3.6(k) attached hereto and incorporated
herein by reference.
Section 3.7 Title.
-----
(a) The Company. The Company has good and marketable title to all of
-----------
its assets, both real property and personal property, tangible and intangible,
including, without limitation, all of the assets reflected on the "Most Recent
Balance Sheet" (hereinafter defined), all personal property currently located on
its premises, all accounts receivable set forth in Schedule 3.9(c) attached
hereto, all items of personal property set forth on Schedule 3.4 hereto, and all
trademarks and other intellectual property used in the Company's business,
except in each case, the Excluded Assets and that personal property which the
Company leases, all of which is listed on Schedule 3.7(a) attached hereto and
incorporated herein by reference. All of such assets are owned by the Company
free and clear of any mortgage, pledge, lien, encumbrance, charge, claim,
security agreement, agreement regarding or restricting transfer or title
retention or other security arrangement, except the items set forth in
subparagraphs "(i)" through "(iv)", and the items listed on Schedule 3.7(a)
("Permitted Company Assets Encumbrances"). Schedule 3.7(a) identifies all liens
by amount and by the document, instrument or law under which it arises.
(i) Liens imposed by law and incurred in the ordinary
course of business for indebtedness not yet due to carriers, warehousemen,
laborers or materialmen and the like;
(ii) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation;
(iii) Liens for property taxes, assessments, or governmental
charges not yet subject to penalties for nonpayment;
(iv) Other liens, charges and encumbrances incidental to the
conduct of the business operations or the ownership of the properties which do
not exceed $5,000 in the aggregate.
(b) The Partnership. The Partnership has good, marketable and
---------------
insurable title to the Property free and clear of any mortgages, pledges, liens,
encumbrances, charge, claim,
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<PAGE>
security agreement or title retention or other security arrangement, except for
the Permitted Exceptions.
Section 3.8 Financial Statements. Sellers have delivered to
--------------------
Purchaser true and correct copies of the following financial statements of the
Company (the "Financial Statements"):
(a) Balance Sheets for the Company as of December 31, 1993, as
of December 31, 1994 and as of December 31, 1995, and statements of income, cash
flow and retained earnings for the same periods, all prepared on a tax basis by
Boyer & Ritter, CPA.
(b) A balance sheet for the Company as of September 30, 1996
("Most Recent Balance Sheet"), and a statement of income, cash flow and retained
earnings for the period ended, September 30, 1996 ("Most Recent Income
Statement"), both prepared on a tax basis by the Company. The Most Recent
Balance Sheet and Most Recent Income Statement are hereafter referred to as the
"Most Recent Financial Statements."
The Financial Statements have been prepared by the regular accountants of the
Company, in accordance with the hybrid "income tax" method of accounting which
deviates from generally accepted accounting principles ("GAAP") in certain
respects. All notes and contingent labilities required to be stated and
reflected under the income tax method are stated and reflected on the Financial
Statements. Each of the Financial Statements (including all footnotes thereto)
is true, complete and correct in all material respects except that any Financial
Statements which are not as of a fiscal year end may be subject to normal
recurring year end adjustments made to interim financial information in
connection with the preparation of annual financial statements and provided
further that Purchaser acknowledges that the Financial Statements reflect the
Excluded Assets and the business activities involving the Excluded Assets, and
that the Financial Statements of the Company immediately after Closing will not
reflect the Excluded Assets and the business activities involving the Excluded
Assets. The balance sheets present fairly and accurately the financial condition
of the Company as of the dates indicated thereon and the statements of income
present fairly and accurately on an income tax basis the results of the
operations of the Company for the periods indicated thereon. Since July 1, 1991,
when it converted from the cash method to the income tax method of accounting,
the Company has not (i) made any material change in its accounting policies or
(ii) effected any prior period adjustment to, or other restatement of, its
financial statements for any period. The Financial Statements are consistent
with the books and records of the Company (which books and records are correct
and complete). Since the date of the Most Recent Financial Statements, there has
not been any material adverse change in the income, expenses, assets,
liabilities or financial condition of the Company except for the impact on the
financial condition of the Company resulting from the construction of the
expansion area and related facilities at the Property.
Notwithstanding the foregoing, on or prior to Closing, Sellers shall
deliver to the Purchaser both: (i) audited Financial Statements for the Company
(including balance sheets for the Company and statements of income, cash flow
and retained earnings) prepared by the regular
13
<PAGE>
accountants of the Company (the "Company's Accountants") in accordance with GAAP
for each of the three (3) full fiscal years of the Company immediately preceding
Closing (the "Company's Audited Financial Statements"), and (ii) unaudited
Financial Statements for the Company (including balance sheets for the Company
and statements of income, cash flow and retained earnings) prepared by the
Company's Accountants in accordance with GAAP covering each and every full (as
of Closing) fiscal quarter of the Company in the Company's fiscal year in which
Closing occurs (the "Company's Stub Period Financial Statements").
Notwithstanding the foregoing, on or prior to Closing, Sellers shall
deliver to the Purchaser both: (i) audited Financial Statements for the
Partnership (including balance sheets for the Partnership and statements of
income, cash flow and retained earnings) prepared by the regular accountants of
the Partnership (the "Partnership's Accountants") in accordance with GAAP for
each of the three (3) full fiscal years of the Partnership immediately preceding
Closing (the "Partnership's Audited Financial Statements"), and (ii) unaudited
Financial Statements for the Partnership (including balance sheets for the
Partnership and statements of income, cash flow and retained earnings) prepared
by the Partnership's Accountants in accordance with GAAP covering each and every
full (as of Closing) fiscal quarter of the Partnership in the Partnership's
fiscal year in which Closing occurs (the "Partnership's Stub Period Financial
Statements").
The Company's Audited Financial Statements and the Partnership's
Audited Financial Statements are sometimes collectively referred to herein as
the "Audited Financial Statements". The Company's Stub Period Financial
Statements and the Partnership's Stub Period Financial Statements are sometimes
collectively referred to herein as the "Stub Period Financial Statements."
While Sellers' delivery to the Purchaser of the Audited Financial
Statements and the Stub Period Financial Statements is a condition to the
Purchaser's obligation to proceed to Closing under this Agreement, Purchaser
shall waive this condition as a pre-Closing requirement if the Purchaser
receives assurances from the Company's Accountants and the Partnership's
Accountants, reasonably acceptable to the Purchaser, that the Purchaser will
have received the Audited Financial Statements and the Stub Period Financial
Statements within thirty (30) days from the date of Closing.
Section 3.9 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent
(except for possible contingent liabilities relating to an environmental
condition for which no claim by a third party has actually been asserted to
Sellers' knowledge), other than:
(i) liabilities fully reflected in the Most Recent Balance
Sheet;
(ii) except as set forth in Schedule 3.9(a)(ii) attached
hereto and incorporated herein by reference, liabilities arising since the date
of the Most Recent Balance Sheet
14
<PAGE>
in the ordinary course of business under contracts or other agreements which
were supplied to the Purchaser for review and which are binding on the Company
or any of its property or pursuant to which the Company derives any material
benefit or has imposed upon it any material detriment, where for purposes of
this Section 3.9(a)(ii), a material benefit or material detriment shall be
anything which provides a benefit or imposes a detriment having a value of
$25,000 or more; and
(iii) liabilities incurred since the date of the Most Recent
Balance Sheet created in the ordinary course of business.
(b) All accounts receivable of the Company less the Bad Accounts
Reserve, are valid accounts receivable, and will be fully collectable within 180
days of Closing, subject to the Company exercising collection efforts comparable
to those heretofore employed by the Company. All accounts receivable have been
generated in the ordinary course of the Company's business and all services
required to be rendered for the accounts receivable to be due have been
rendered. To Sellers' knowledge, there are no defenses or set-offs to any of
the accounts receivable. On the Closing Date, the accounts receivable of the
Company shall exceed the accounts payable of the Company.
(c) The Company's liabilities, and accounts receivable, as of October
31, 1996, are attached hereto, made a part hereof and marked Schedule 3.9(c).
Schedule 3.9(c) gives the aging of each of the liabilities and accounts
receivable. Schedule 3.9(c) accurately reflects the books and records of the
Company as of the date of Schedule 3.9(c). The Company's liabilities and
accounts receivable shall be calculated as of the date of Closing and shall be
reconciled no later than sixty (60) days after the date of Closing, pursuant to
Section 1.7(c) hereof.
Section 3.10 Fiscal Condition of Company. Since the date of the Most
---------------------------
Recent Balance Sheet, except as set forth on Schedule 3.10, there has not
(except as otherwise specifically permitted by this Agreement) been:
(a) Except that resulting from the construction of the expansion area
and related facilities at the Property, any material change in the financial
condition, business organization or personnel of the Company or in the
relationships of the Company with suppliers, customers or others, other than
changes occurring in the ordinary course of business;
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock (this, however, shall not prohibit the partial redemption by the Company
at or prior to Closing of certain of the Company's Shares to facilitate the
withdrawal of the Excluded Assets from the Company by certain Stockholders);
(c) Any sale or other disposition of any asset owned by the Company
(other than the Excluded Assets) at the close of business on the date of the
Most Recent Balance Sheet, or
15
<PAGE>
acquired by it since that date, other than in the ordinary course of business or
which individually do not exceed $10,000 or in the aggregate, do not exceed
$25,000;
(d) Any expenditure or commitment by the Company for the
acquisition of any single asset having an acquisition price of $50,000 or more,
except those relating to the construction of the expansion area and related
facilities at the Property;
(e) Any damage, destruction or loss (whether or not insured)
adversely affecting the property, business or prospects of the Company, except
damage, destruction or loss which does not exceed $50,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to
become payable by the Company to any officer or key employee which have not been
paid prior to the Closing Date;
(g) Any loans or advances to the Company other than renewals or
extensions of existing indebtedness;
(h) Any change in accounting method or practice.
Section 3.11 Tax Returns. The Company has filed all Federal and
-----------
other tax returns for all periods on or before the due date of such return (as
may have been extended by any valid extension of time) and has paid all taxes
due for the periods covered by the said returns. The Company has no liability
for taxes incurred by its operations prior to Closing, except for taxes for the
current calendar year in an amount not exceeding the reserve therefor on the
Most Recent Balance Sheet. The Company is a Subchapter "S" corporation under the
Internal Revenue Service Code. Sellers warrant that they will pay with their own
funds any and all federal, state and local taxes due and payable by the Company
with respect to all periods prior to the Closing, to the extent such taxes
exceed the reserves for taxes established on the Company's Most Recent Balance
Sheet, including, without limiting the generality of the foregoing, all federal,
state and local income, sales, use franchise, excise and property taxes. The
reserves for all taxes reflected in the Most Recent Balance Sheet, if any, are
adequate to cover all taxes, interest and penalties in connection therewith that
may be assessed with respect to the property and business operations for the
period(s) ending on the Date of Closing and for all prior periods. The Company
has filed, and will file, in a timely manner all requisite federal, state, local
and other tax returns due for all fiscal periods ended on or before the date
hereof and as of the Closing shall have filed in a timely manner all such
returns due for all periods ended on or before the Closing Date. No federal,
state, local or other tax returns or reports filed by the Company (whether filed
prior to, on, or after the date hereof), will result in any taxes, assessments,
fees or other governmental charges in excess of the amounts reserved for on the
Most Recent Balance Sheet. The Company has duly withheld and collected all taxes
which the Company is required to withhold or collect by law, has paid over to
the proper authorities all such amounts required to be paid, and has in reserve
all amounts so withheld or collected which have not yet been required to be
paid. No taxing authority has
16
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asserted any deficiency for any prior tax period of the Company, and the Sellers
are not aware of any facts which would constitute the basis for the assertion of
such a deficiency.
Section 3.12 Policies of Insurance. All insurance policies,
---------------------
performance bonds, and letters of credit insuring the Company or which the
Company has had issued and which has not expired are listed on Schedule 3.12
attached hereto. Schedule 3.12 includes, the names and addresses of the
insurers and sureties, policy and bond numbers, types of coverage or bond, time
periods or projects covered and the names and addresses of all known agents or
agencies with respect to each listed insurance policy, performance bond and
letter of credit. The Company's current insurance policies, performance bonds
and letters of credits are still in force and effect and the premiums thereon
are not delinquent. The Company has not received notification from any
insurance carrier denying or disputing any claim made by the Company or denying
or disputing any coverage for any such claim or denying or disputing the amount
of any claim. The Company does not have any claim against any of its insurance
carriers under any policies insuring it pending or anticipated and there has
been no occurrence of any kind which would give rise to any such claim.
Section 3.13 Employees, Pensions and, ERISA.
-------------------------------
(a) The Company does not have any contract of employment with
an officer or other employee that is not terminable without penalty on notice of
two weeks or less, except as listed on Schedule 3.13(a).
(b) No employee of the Company is represented by any union. The
name, social security number and current rate of compensation of each of the
Company's employees and department in which each person is employed is listed on
Schedule 3.13(b) attached. There is no pending or threatened dispute between the
Company and any of its employees which might materially and adversely affect the
continuance of any Company's business operations.
(c) Attached hereto made a part hereof and marked Schedule
3.13(c) lists all employee benefit plans, funds or programs (within the meaning
of the Internal Revenue Code of the United States ("Code") or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which are
currently maintained and/or were established or sponsored by the Company
(whether or not they are now terminated) or to which the Company currently
contributes, or has an obligation to contribute in the future, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions ("Plans"), whether or not the Plans are or are
intended to be (i) covered or qualified under the Code, ERISA or any other
applicable law, (ii) written or oral, (iii) funded or unfunded, or (iv)
generally available to all employees of the Company.
(d) The Company has delivered to the Purchaser (i) true and
complete copies of all Plan documents and other instruments relating thereto,
(ii) accurate and complete detailed summaries of all oral Plans, (iii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iv) true and complete copies of all annual reports for any Plan prepared
17
<PAGE>
within the past 5 years, and (v) all filings submitted to and any correspondence
received from any government agency relating to any Plan within the past 5
years.
(e) Each Plan which is intended to be qualified under Section 401(a)
and exempt from tax under Section 501(a) of the Code has been determined by the
IRS to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA except as set forth on Schedule 3.13 (e), attached hereto made a part
hereof. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other law applicable to such Plans, and, in all material respects, have
been administered, operated and managed in substantial accordance with the
governing documents of the Plan and the requirements of ERISA. The Company has
no unfunded obligations or liabilities with respect to any Plan and the present
value of the benefit liabilities of each Plan which is a Pension Plan is less
than the fair market value of the assets of such Plan.
(g) There is no matter, action, audit, suit or claim pending or, to
the best knowledge of Sellers, after due inquiry of the Company, threatened
relating to any Plan, fiduciary of any Plan or assets of any Plan, before any
court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no material adverse
change in the condition of the Plan since the date of the most recent Form 5500,
audited annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any
liability under the Plans because of an acceleration of any rights or benefits
to which any employee may be entitled thereunder.
(j) The Company has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.
18
<PAGE>
Section 3.14 Legality of Operation. In regard to the Company, to the
---------------------
Sellers' knowledge:
(a) Except as listed in Schedule 3.14(a) attached hereto and
incorporated herein by reference, the Company has operated from the Company's
inception and will continue to operate to the Closing Date in compliance with
all Federal, state and local laws, rules, pronouncements and regulations
("Law"); permits; franchises; licenses; and orders, as applicable to it and its
property and operations, including, without limitation, any order, decree,
directive or pronouncement of any court or federal, state, municipal, or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located, any environmental law, land use Law, federal, state and local
permits, orders, franchises and consents, and payroll, employment, labor, anti-
trust, fair competition and safety Laws; and, there are no claims, actions,
suits or proceedings pending, or threatened against or affecting Company, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
wherever located, which would result in any adverse change of $10,000 or greater
in the financial condition or business of Company or which would question the
validity or propriety of this Agreement or of any action taken or to be in
accordance with or in connection with this Agreement. The Company has not
transported, stored, treated or disposed, nor has allowed third persons to
transport, store, treat or dispose waste to or at (i) any location other than a
site lawfully permitted to receive such waste for such purpose or, (ii) any
location currently designated for remedial action pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"); or any
similar federal or state statute; nor has it performed, arranged for or allowed
by any method or procedure such transportation or disposal in contravention of
state or federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and it has not disposed, nor has
it knowingly allowed third parties to dispose of waste upon property owned or
leased by the Company other than as permitted by, and in conformity with,
applicable Law. The Company has not received notification of any past or present
failure by the Company to comply with any law, permits, franchises, licenses or
orders applicable to it or its assets. Without limiting the generality of the
foregoing, the Company has not received any notification (including requests for
information directed to the Company or an owner thereof) from any governmental
agency asserting that the business is or may be a "potentially responsible
person" for a remedial action at a waste storage, treatment or disposal
facility, pursuant to the provisions of CERCLA, or any similar federal or state
statute assigning responsibility for the costs of investigating or remediating
releases of contaminants into the environment. The Company has not received
hazardous waste as defined in the Resource Conservation and Recovery Act, 42
USCA Section 6901 et seq., or in any similar federal or state statute.
-- ---
(b) Except as listed in Schedule 3.14(b) attached hereto and
incorporated herein by reference, the Company has never owned, operated, had an
interest in, engaged in and/or leased a waste transfer, recycling, treatment,
storage, landfill or other disposal facility except for the facility located at
the Property. The Company has obtained and maintained, when required to do so
under applicable Laws, trip tickets, signed by the applicable waste generators
demonstrating the nature of all waste deposited and or transported by the
Company. No employee, contractor
19
<PAGE>
or agent of the Company has, in the course and scope of employment with the
Company, been harmed by exposure to hazardous materials, as defined under the
Laws. No liens with respect to environmental liability have been imposed against
the Company under CERCLA, any comparable Pennsylvania, statute or other
applicable Law, and no facts or circumstances exist which would give rise to the
same.
(c) Attached hereto as Schedule 3.14(c) is a list of all Notice of
Violations issued to the Company by any federal, state or local regulatory
agency. There are no notices of violation either from a federal, state or local
authority received by the Company or outstanding, except as listed in Schedule
3.14(c).
(d) The Company is not under investigation by any District Attorney
or similar state or local official or the Justice Department of the United
States of America for the violation of any Laws, including, without limitation,
racketeering, unfair competition, or anti-trust. No facts or circumstances
exist which would cause the Company to be liable for the violation of any Laws
including, without limitation, racketeering, unfair competition, or anti-trust.
(e) Except as set forth in Schedule 3.14(e), all licenses, approvals,
permits and certificates ("Government Authorizations") needed or required for
the operation of the Company's business are set forth on Schedule 3.3. All such
Government Approvals are in full force and effect, the Company is in compliance
with all such Government Approvals, and all such Government Approvals have been
validly and legally obtained by the Company.
Section 3.15. Corrupt Practices. To the Seller's knowledge, the Company
-----------------
has not made, offered or agreed to offer anything of value to any employees of
any customers of the Company for the purpose of attracting business to the
Company or any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
representatives, nor has the Company otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
Section 3.16 Legal Compliance. Except as listed in Schedule 3.16
----------------
attached hereto and incorporated herein, the Sellers and the Partnership have
the right, power, legal capacity and authority to enter into, and perform their
respective obligations under this Agreement, and no approvals or consents of any
other persons are necessary in connection with the transactions contemplated by
this Agreement, except for any consent or approval of the Pennsylvania
Department of Environmental Protection which may be required in relation to the
Company's permit to operate a landfill. Notwithstanding the foregoing, the
Sellers make no warranty or representation as to whether there has been
compliance with any Hart Scott Rodino requirement. The execution, delivery and
performance of this Agreement have been duly authorized by all necessary
Partnership action of the partners of the Partnership. The execution, delivery
and performance of this Agreement will not result in a breach of or constitute a
default or result in the loss of any material right or benefit under:
20
<PAGE>
(a) Any charter, by-law, agreement or other document to which
the Company is a party or by which the Company or the Partnership, or any of
their property is bound; or
(b) Any decree, order or rule of any court of governmental
authority which is binding on the Company or the Partnership or on the property
of the Company or the Partnership.
Section 3.17 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the authority of the Company, the Partnership or any
of the Sellers is entitled to any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
Section 3.18 Intellectual Property. To the Sellers' knowledge, the
---------------------
Company has not infringed and is not now infringing, on any trade name,
trademark, service mark, copyright, trade secret or patent belonging to any
person, firm or corporation ("Intellectual Property") and no one has or is
infringing any Intellectual Property right of the Company.
Section 3.19 Competition. No salaried officer, or employee of the
-----------
Company, nor any spouse, child or other relative of any of them, has any direct
or indirect interest in any competitor of the Company within the geographical
area in which the Company currently conducts business, or an interest in any
supplier or customer of the Company or in any person from whom or to whom the
Company leases any real or personal property, or in any other person with whom
the Company is doing business which interest adversely or materially affects the
business of the Company, excepting only those investments of not more than five
percent of the capital stock of a business, the stock of which is traded on a
national securities exchange or over-the-counter, where such investments are set
forth on Schedule 3.19 attached hereto and incorporated herein by reference.
Section 3.20 Disclosure. Neither the representations and warranties
----------
of the Sellers contained in this Agreement nor any information contained in any
Exhibit or Schedule or other document delivered by the Sellers, the Company or
the Partnership to Purchaser contains any untrue statement of a material fact,
or, to Sellers' knowledge, omits to state any statement of a material fact
necessary to make the statements contained therein or herein not misleading. No
investigation conducted by the Purchaser shall be deemed to limit or vitiate in
any way the effect of the representations and warranties made herein, however,
Purchaser shall disclose in writing to Sellers at or prior to Closing any
representation or warranty which Purchaser shall have found to be untrue or
incorrect.
Section 3.21 Continuation of Legal Status. To Seller's knowledge, no
----------------------------
written agreement between the Company and any third party shall be impaired or
in any way limited by the transactions contemplated by this Agreement.
Section 3.22 Litigation. All pending or, to Sellers' knowledge,
----------
threatened litigation, administrative or judicial proceedings or investigations
by any governmental agency or officials involving the Company, the Partnership
or either of their assets, liabilities or the Company Shares
21
<PAGE>
and a description of all such proceedings is set forth on Schedule 3.22
attached. There is no pending or, to Sellers' knowledge, threatened litigation,
administrative or judicial proceedings or investigation involving the Company,
the Partnership, or their assets, liabilities or the Company Shares, except as
listed on Schedule 3.22.
Section 3.23 Bin Stability Requirements (15 U.S.C. 2051, et. seq.)
-----------------------------------------------------
All containers of the Company are in compliance with the bin stability
requirements of the Consumer Product Safety Act, 15 U.S.C. 2051 et. seq.
ARTICLE IV
Representations and Warranties of Purchaser
-------------------------------------------
Purchaser represents and warrants to the Sellers that the
representations and warranties contained in this Article IV are true on the date
hereof and shall be true on the Closing Date.
Section 4.1 Structure. Purchaser is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
Section 4.2 Authorization to Proceed with this Agreement. Purchaser
--------------------------------------------
has, by proper corporate proceedings, duly authorized the execution, delivery
and performance of this Agreement.
Section 4.3 Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Purchaser's authority will be entitled to make any
claim against the Company or against the Sellers for any commission or finder's
fee in connection with the transactions contemplated by this Agreement.
Section 4.4 Public Reports. Purchaser has delivered to Sellers
--------------
current (for the quarter ending June 30, 1996) and historical filings made by
Purchaser on Forms 10-K and 10-Q timely filed with the Securities and Exchange
Commission. Such filings accurately and completely described, in all material
respects, Purchaser's financial status, business operations and prospects as of
the date of such filings, do not contain a misstatement of material fact(s) and
do not omit any material fact(s) necessary to make the information contained in
the filings not misleading.
ARTICLE V
Additional Agreements of Sellers
--------------------------------
The Sellers covenant and agree with Purchaser as follows:
22
<PAGE>
Section 5.1 Restrictions on Transfer of Unregistered Stock. The
----------------------------------------------
Consideration Stock delivered to Sellers at Closing will not be registered under
the Securities Act of 1993 (the "Act"), and the Sellers understand and agree
that the following restrictions and limitations are applicable to the Seller's
purchase and resale or other transfer of the Consideration Stock, pursuant to
the Act. Under Section 6.2, Purchaser is obligated to have the Consideration
Stock registered under the Act after Closing.
(a) Sellers agree that the Consideration Stock and common stock
issuable upon exercise of the Warrant shall not be sold or otherwise
transferred, unless the Consideration Stock is registered under the Act and
state securities laws or is exempt therefrom.
(b) Until the Consideration Stock is registered under the Act, a
legend in substantially the following form will be placed on the certificates
evidencing the Consideration Stock and any common stock issued upon exercise of
the Warrant:
The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state securities
act. These shares have been acquired for investment and may not be
sold, transferred, pledged or hypothecated unless (i) they shall have
been registered under the Securities Act of 1933 and any applicable
states securities act or (ii) Eastern Environmental Services, Inc.
shall have been furnished with an opinion of counsel, satisfactory to
counsel for Eastern Environmental Services, Inc., that registration is
not required under any such acts.
(c) Stop transfer instructions will be imposed with respect to the
Consideration Stock issued to Sellers pursuant to this Agreement so as to
restrict resale or other transfer thereof except in accordance with the
foregoing provisions of this Section 5.1.
Section 5.2 Access to Records and the Property. The Sellers will cause
----------------------------------
the Company to give to Purchaser and its representatives, experts and advisors,
from and after the date of execution of this Agreement and up until Closing,
full access to all of the properties (including the Property), assets, books,
contracts, documents, records, contracts and customer lists of the Company, and
to make available to Purchaser and its representatives, experts and advisors all
additional financial statements of and all information with respect to the
business and affairs of the Company that Purchaser may reasonably request.
Purchaser and its representatives shall have the right to copy any information
or documentation the Purchaser is entitled to inspect under this Section 5.2.
Notwithstanding the foregoing, all the foregoing access shall be scheduled
exclusively through Karen Bender and shall be conducted off site, to the extent
reasonably practicable (which the Sellers understand cannot be done with respect
to the Purchaser's physical inspection of the Property), so as to preserve
confidentiality.
23
<PAGE>
Section 5.3 Continuation of Business. The Sellers will operate the
------------------------
Company until the time of Closing, using prudent business judgment so as to
preserve its business organization intact, to assure, to the extent possible,
the availability to Purchaser of the present key employees of the Company, and
to preserve for Purchaser the relationships of the Company with suppliers,
customers, and others, all to the end that every bona fide effort be made that
---- ----
the ongoing business of the Company will not be impaired at the time of Closing.
Section 5.4 Continuation of Insurances. The Sellers will cause the
--------------------------
Company to keep in existence all policies of insurance insuring the Company
against liability and property damage, fire and other casualty through the time
of Closing.
Section 5.5 Standstill Agreement. Unless and until this Agreement is
--------------------
terminated without the Closing having taken place, the Company and the Sellers
will not directly or indirectly solicit offers for the Property, the Company
Shares or the assets of the Company or for a merger or consolidation involving
the Company, or respond to inquiries from, share information with, negotiate
with or in any way facilitate inquiries or offers from, third parties who
express or who have heretofore expressed an interest in acquiring the Company by
merger, consolidation or other combination or acquiring any of Company' assets;
nor will the Sellers permit the Company to do any of the foregoing.
Section 5.6 Closing Costs on Sale of Property. Closing costs relating
---------------------------------
to the sale of the Property shall be apportioned between Purchaser and Sellers
in accordance with Schedule 5.6 attached hereto. Seller shall pay all sums
required under such Schedule at Closing.
Section 5.7 FIRPTA Certificate. Purchaser and Partnership acknowledge
------------------
that the financial provisions of this Agreement are subject to the requirements
of the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Purchaser in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Purchaser. Among other circumstances, Purchaser is not required to withhold
said amount if Partnership furnishes Purchaser with a certificate stating the
Partnership's U.S. Taxpayer Identification Number and that the Partnership is
not a foreign person within the meaning of the Code. Partnership agrees to
provide to Purchaser at Closing such certificate as is reasonably necessary to
insure that such withholding is not required under FIRPTA.
ARTICLE VI
Additional Agreements of Purchaser.
-----------------------------------
Section 6.1 Payment of Expenses. Purchaser will pay all expenses
-------------------
(including legal fees) incurred by it in connection with the negotiation,
execution and performance of this Agreement. The Sellers will pay all expenses
incurred by the Sellers (including legal fees) in connection with the
negotiation, execution and performance of this Agreement. If the Sellers pay
any or all of such expenses with funds of the Company prior to the Closing, the
effect thereof shall be to decrease
24
<PAGE>
the Company's current assets, thereby decreasing the Purchase Price by a
concomitant amount, pursuant to Section 1.7(b)(i) hereof. Additionally, the cost
of preparing the Audited Financial Statements and the Stub Period Financial
Statements shall be borne equally between the Purchaser and the Sellers. If the
Sellers pay any or all of their one-half portion of the cost thereof with funds
of the Company prior to Closing, the effect thereof shall be to decrease the
Company's current assets, thereby decreasing the Purchase Price by a concomitant
amount pursuant to Section 1.7(b)(i) hereof. The obligation of Purchaser and
Sellers to split equally the cost of preparing the Audited Financial Statements
and the Stub Period Financial Statements shall survive Closing and Purchaser and
Sellers agree to indemnify, defend and hold each other harmless from and against
any claim made by any third party for the other's one-half share.
Section 6.2 Registration Rights.
-------------------
(a) If the Consideration Stock delivered at Closing is not registered
under the Act, and the parties contemplate that it will not be, then, within one
hundred twenty (120) days of the Closing Date, Purchaser shall file a
registration statement to register the Consideration Stock and the common stock
issuable upon exercise of the Warrants ("Unregistered Stock") under the Act for
sale to the public pursuant to a "shelf registration" under Rule 415 of the Act.
Purchaser will give written notice to the Sellers of the "shelf" registration at
least 15 days before the registration statement is filed. After receiving the
notice of the "shelf" registration, each of the Sellers which received
Unregistered Stock will advise Purchaser in writing of the intended method of
disposition of the Unregistered Stock to be registered. Notwithstanding
anything in this Section, the Purchaser's obligation to file the shelf
registration and/or keep the shelf registration continuously effective shall be
suspended, for any period that there exists material, non-public information
relating to Purchaser.
(b) With respect to the registration of the Unregistered Stock,
Purchaser will, as expeditiously as possible: (i) furnish to the Sellers a
prospectus, including copies of a preliminary prospectus, prepared in conformity
with the requirements of the Act, and such other documents, as the Sellers may
reasonably request in order to facilitate the public sale or other disposition
of the securities to be sold by the Sellers; and (ii) before filing the
registration statement, prospectus or amendments or supplements thereto, furnish
to counsel for Sellers copies of all such documents proposed to be filed.
(c) Upon any registration under the Act of any of the Unregistered
Stock, Purchaser shall indemnify Seller in accordance with the provisions of
Article IX hereof from and against any and all losses, claims, damages and
liabilities (collectively a "Security Liability") to which Sellers may become
subject under the Act, any state securities or "blue sky" law, any other statute
or at common law, insofar as such Security Liability (or action in respect
thereof) arises out of or is based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto or (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in
25
<PAGE>
order to make the statements therein not misleading. Notwithstanding the above,
Purchaser shall not be liable to Sellers if and to the extent that any Security
Liability arises out of or is based upon any untrue statement or omission made
in such registration statement, preliminary or final prospectus or amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to Purchaser by Sellers which is stated in writing to be specifically
intended for such use; and provided further, that Purchaser shall not be
required to indemnify Sellers against (i) any Security Liability which arises
out of the failure of Sellers to deliver, or cause to be delivered, a prospectus
as required by the Act or (ii) any Security Liability arising from any untrue or
misleading statement contained in or omission from any preliminary prospectus,
if such deficiency is corrected in the final prospectus.
(d) All expenses incurred in effecting the registrations provided for
in this Section 6.2 shall be paid by Purchaser, including, without limitation,
all registration and filing fees, reasonable printing expenses, fees and
disbursements of counsel for Purchaser, fees and disbursement of counsel for
Sellers (up to $2,000 per year), underwriting expenses (other than commissions
or discounts which shall be shared by the parties registering shares of
Purchaser's common stock in proportion to the number of shares registered in
each particular offering), expenses of any audits incident to or required by any
such registration and expenses of complying with the securities or "blue sky"
laws of any jurisdictions.
Section 6.3 Closing Costs on Sale of Property. Closing costs relating
---------------------------------
to the sale of the Property shall be apportioned between Purchaser and Sellers
in accordance with Schedule 5.6 attached hereto. Purchaser shall pay all sums
required under such Schedule at Closing.
Section 6.4 Condition of Property and Company Assets. Purchaser agrees
-----------------------------------------
that, except as expressly otherwise provided herein, the tangible Company Assets
and the Property are being sold to Purchaser in an "as is" condition without
warranty or representation as to their condition.
Section 6.5 Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchaser shall allow the Sellers and their professional
advisers access to all business records and files of the Company pertaining to
the operation of the Company prior to the Closing Date which were delivered to
the Purchaser in accordance with Section 1.9(h) of this Agreement ("Records")
where the Shareholders or Sellers require access to the Records for the purpose
of preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchaser's business. For a period of six years after the Closing Date, the
Purchaser shall not dispose of or destroy any material Records without first
providing written notice to the Sellers at least 30 days prior to the proposed
date of such disposition or destruction.
26
<PAGE>
ARTICLE VII
Conditions of Purchaser
-----------------------
The Obligations of Purchaser to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the time of Closing
of each of the following items which are conditions to the Closing:
Section 7.1 Compliance by Sellers. The Sellers and the Company shall
---------------------
have performed and complied with all of the obligations and conditions required
by this Agreement to be performed or complied with by the Sellers and Company at
or prior to the Closing Date. All representations and warranties of Sellers
contained in this Agreement shall be true and correct at and as of the Date of
Closing, with the same force and effect as though made at and as of the Date of
Closing, except for changes expressly permitted by this Agreement.
Section 7.2 Due Diligence Investigation. As a condition of Closing, the
---------------------------
Purchaser shall be satisfied with the results of the due diligence investigation
it has made concerning the Company and the transactions, as set forth in this
Agreement.
Section 7.3 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Property, the Company or the business the Company operates or which,
as a result of the transaction contemplated by this Agreement, might affect such
right as to Purchaser or any affiliate thereof subsequent to the Date of Closing
and which, in the judgment of the Board of Directors of Purchaser, made in good
faith and based upon advice of its counsel, makes it inadvisable to proceed with
the transaction contemplated by this Agreement.
Section 7.4 This section has intentionally been left blank.
Section 7.5 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Company, and the Company shall have not suffered any material
loss or damage or any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.
Section 7.6 Governmental Approvals. Purchaser and the Company will have
----------------------
advised the DEP of the Purchaser becoming the sole shareholder of the Company
and the DEP shall not have objected to the change of control and shall have
substituted the Company's compliance history with the compliance history of the
Purchaser. While both the Sellers and the Purchaser shall cooperate with each
other in this process, the Purchaser shall pay the cost thereof.
27
<PAGE>
Section 7.7 Accounts Receivable To Equal or Exceed Accounts Payable. On
-------------------------------------------------------
the Closing Date, the dollar amount of the Company's accounts receivable shall
equal or exceed the dollar amount of the Company's accounts payable.
ARTICLE VIII
Conditions of Sellers
---------------------
The obligations of the Sellers to transfer the Company Shares and to convey
the Property in accordance with this Agreement shall be subject to the
fulfillment at or prior to the time of Closing of each of the following
conditions:
Section 8.1 Compliance by Purchaser. The Purchaser shall have performed
-----------------------
and complied with all of the obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to or at the
Closing Date. All representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Date of Closing, with the
same force and effect as though made at and as of the Date of Closing, except
for changes expressly permitted by this Agreement.
Section 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Company or the business the Company operates which, as a result of
the transaction contemplated by this Agreement, might affect such right as to
Purchaser or any affiliate thereof subsequent to the Date of Closing and which,
in the judgment of the Sellers, made in good faith and based upon advice of
their counsel, makes it inadvisable to proceed with the transaction contemplated
by this Agreement.
ARTICLE IX
Indemnification
---------------
Section 9.1. Scope of Mutual Indemnification.
-------------------------------
Purchaser hereby agrees to hold harmless and indemnify Sellers and Sellers
hereby agree (jointly and severally) to hold harmless and indemnify Purchaser
(and its successors and assigns) from and against any debt, claim, demand,
action, loss, liability, damage, judgment or cost and expense, including without
limitation, reasonable attorneys' fees and expenses (hereinafter collectively
referred to as "Losses"), resulting from or arising out of:
28
<PAGE>
(i) Any breach or inaccuracy of any representation or warranty,
nonperformance of any agreement, covenant, promise or obligation, on the part of
the indemnifying party contained in this Agreement.
(ii) All actions, judgments, awards, claims, demands, causes of
action, losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and expenses) incident to any of the foregoing.
Section 9.2. Scope of Purchaser Indemnification.
----------------------------------
Purchaser hereby holds harmless and indemnifies Sellers, their heirs,
executors, personal representatives, successors and assigns, from and against
any Losses incurred by Sellers or any of them in connection therewith, by reason
of, based upon, arising out of, or caused by any of the following, except to the
extent same result from, arise out of, are caused by or relate to any breach or
inaccuracy of any representation, warrant, non-performance of any agreement,
covenant, promise or obligation of the Sellers, or any one of them, contained in
this Agreement:
(i) Any obligation of Company incurred before, on or after the
Closing Date;
(ii) Any obligation or liability of Sellers incurred by reason of,
based upon, arising out of or caused by the ownership or condition of the
Property (including, without limitation, any condition that constitutes a
violation or alleged violation of any Environmental Law);
(iii) Any act, omission or other thing relating to the operation of
Company occurring before, on or after the Closing Date (including, without
limitation, any such act, omission or other thing that constitutes a violation
or alleged violation of any Law).
Section 9.3. Limitation on Sellers' Indemnification
--------------------------------------
Except for Sellers obligation to pay adjustments to the Purchase Price and
the Accounts Receivable Adjustment, as set forth in Section 1.7(c) which
obligations shall not be limited, all of Sellers' other obligations under
Section 9.1, notwithstanding anything to the contrary in this Agreement, shall
apply only to the extent the amount Sellers would otherwise have to pay
Purchaser under Section 9.1 exceeds $200,000. Additionally, in no event shall
the amount which Sellers are obligated to pay the Purchaser under Section 9.1 in
the aggregate exceed seventy-five percent (75%) of the Purchase Price, as
adjusted pursuant to Section 1.7(c) hereof, except that such limitation shall
not apply to any loss, damage or claim, otherwise covered under Sellers'
indemnification contained in Section 9.1 and caused by Sellers' proven fraud or
wilful misrepresentation.
Section 9.4. Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims
- ------
29
<PAGE>
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article IX, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within ten days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any adverse
consequences (which will include, without limitation, all losses, claims, liens,
and attorneys' fees and related expenses) the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim, (ii) the Indemnifying Party provides the Indemnified Party
with evidence acceptable to the Indemnified Party that the Indemnifying Party
will have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only monetary damages and does not seek an injunction or equitable
relief, (iv) settlement of, or adverse judgment with respect to the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice adverse to the continuing business
interests of the Indemnified Party, and (v) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.3(b) above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (which will not be unreasonably withheld) and (iii) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (which will not be unreasonably withheld).
(d) If the conditions set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
IX.
30
<PAGE>
Section 9.5. Procedure for Non-Third Party Claims. If Purchaser or
----------- ------------------------------------
Sellers wish to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 9.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification in accordance with the notice provisions of Section 10.6 hereof
("Indemnification Demand"). The Indemnification Demand shall state: (a) the
amount of losses, damages or expenses to which the Indemnified Party has
incurred or has suffered or is expected to incur or suffer to which the
Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
thirty (30) days after the Indemnification Demand is deemed to have been given
and effective pursuant to Section 10.6 hereof, the Indemnifying Party shall be
deemed to have acknowledged the correctness of the claim or claims specified in
the Indemnification Demand and shall pay the full amount claimed in the
Indemnification Demand within thirty days of the day the Indemnification Demand
is dated. If for any reason the Indemnifying Party does not pay the amounts
claimed in the Indemnification Demand, within thirty days of the Indemnification
Demand's date, the Indemnified Party may institute legal proceedings to enforce
payment of the indemnification claim contained in the Indemnification Demand and
any other claim for indemnification that the Indemnified Party may have. If the
Indemnified Party is the Purchaser, Purchaser may offset the amount of the
Indemnification Demand against the Purchase Price, to the extent any of it
remains unpaid.
Section 9.6. Survival of Claim. Notwithstanding the provisions of
----------- -----------------
Section 10.1, if, within the period specified in Section 10.1, notice of a claim
for indemnification or Indemnification Demand is given, or a suit or action
based upon representation or warranty is commenced, the Indemnified Party shall
not be precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.
ARTICLE X
Other Provisions
----------------
Section 10.1 Survival of Warranties. All of the respective
----------------------
representations and warranties of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement for a period of
eighteen (18) months from the Closing Date, except for the warranties and
representations of Sellers contained in Section 3.11 which shall survive for the
applicable statute of limitations.
31
<PAGE>
Section 10.2 Nondisclosure. The existing non-disclosure letter among the
-------------
parties, a copy of which is attached hereto as Schedule 10.2, shall remain in
full force and effect.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, personal representatives and assigns.
This Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
Section 10.4 Entire Agreement. This Agreement, is the final, complete
----------------
and exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 10.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchaser, addressed to it at:
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 101
Mount Laurel, New Jersey 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
(b) If to Sellers, addressed to
Sellers' Representative as set forth on
Schedule 10.6(b) attached.
32
<PAGE>
with a copy to:
Richard W. Stevenson, Esquire
McNees, Wallace & Nurick
P.O. Box 1166
100 Pine Street
Harrisburg, PA 17108-1166
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Pennsylvania.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
Section 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
33
<PAGE>
Section 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"Including" means included, without limitation.
Section 10.13 Extension or Waiver of Performance. Either the Seller or
-----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
Section 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective successors, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 10.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
Section 10.16 Stockholders' Representative. Each Seller hereby
----------------------------
irrevocably constitutes and appoints Karen L. Bender (together with her
permitted successor hereunder, the "Sellers' Representative"), as such Seller's
true and lawful agent and attorney-in-fact to enter into any agreement in
connection with the transactions contemplated hereunder, to exercise all or any
of the powers, authority and discretion conferred on such Seller hereunder, to
receive payment of such Seller's allocable portion of the cash consideration on
behalf of such Seller, to give and receive notices on such Seller's behalf and
to represent such Seller with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by this
Agreement, including the defense, appeal or settlement of any claim, action or
proceeding for which such Seller may be obligated to indemnify any person
pursuant to this Agreement or which may be brought by the Purchaser against such
Seller to enforce such indemnity, and the Sellers' Representative hereby agrees
to act as, and to undertake the duties and responsibilities of, such agent and
attorney-in-fact. Each Seller hereby ratifies and confirms, and hereby agrees to
ratify and confirm, any action taken by the Sellers' Representative in the
exercise of the power of attorney granted to the Sellers' Representative
pursuant to this Section, which power of attorney, being coupled with an
interest, is irrevocable and shall survive the death, incapacity or incompetence
of such Seller. If the Sellers' Representative shall be unable to serve in such
capacity, each Seller hereby agrees that her successor shall be Jeffrey L.
Bender.
34
<PAGE>
Notwithstanding the appointment of the Sellers' Representative as the
Sellers' attorney-in-fact, as aforesaid, it is expressly understood and agreed
that the Purchaser shall be entitled to delivery at Closing of the following
documents, pursuant to Section 1.9 hereof, executed by the appropriate one or
ones of the Sellers and not Sellers' Representative:
a) The Endorsed Certificates or Stock Powers; and
b) The Deed.
It is also understood and agreed that all of the Sellers will execute this
Agreement themselves and not through the Sellers' Representative.
35
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
STOCKHOLDERS
WITNESS:
/s/ Richard W. Stevenson /s/ Richard G. Bender, Sr.
- --------------------------------- ----------------------------
RICHARD G. BENDER, SR.
WITNESS:
/s/ Richard W. Stevenson /s/ Alice L. Fields Bender
- --------------------------------- ----------------------------
ALICE L. FIELDS BENDER
WITNESS:
/s/ Richard W. Stevenson /s/ Richard G. Bender, Jr.
- --------------------------------- ----------------------------
RICHARD G. BENDER, JR.
WITNESS:
/s/ Richard W. Stevenson /s/ Karen L. Bender
- --------------------------------- ----------------------------
KAREN L. BENDER
WITNESS:
/s/ Richard W. Stevenson /s/ Teresa A. Bender Miller
- --------------------------------- ----------------------------
TERESA A. BENDER MILLER
WITNESS:
/s/ Richard W. Stevenson /s/ Lynetta K. Bender Mowery
- --------------------------------- ----------------------------
LYNETTA K. BENDER MOWERY
WITNESS:
/s/ Richard W. Stevenson /s/ Stephen R. Bender
- --------------------------------- ----------------------------
STEPHEN R. BENDER
WITNESS:
/s/ Richard W. Stevenson /s/ Jeffrey L. Bender
- --------------------------------- ----------------------------
JEFFREY L. BENDER
WITNESS:
/s/ Richard W. Stevenson /s/ Douglas R. Bender
- --------------------------------- ----------------------------
DOUGLAS R. BENDER
36
<PAGE>
[Signatures Continued Next Page]
37
<PAGE>
PARTNERSHIP
R&A BENDER PROPERTY, LTD.,
a Pennsylvania Limited Partnership,
by its General Partner
ATTEST: CORPORATE SEAL R&A Bender Sanitary Landfill, Inc.
/s/ Karen L. Bender, Secretary By: /s/ Richard G. Bender, President
- ------------------------------- --------------------------------------
PURCHASER
ATTEST: CORPORATE SEAL EASTERN ENVIRONMENTAL SERVICES, INC.
/s/ Robert Kramer, Vice Pres. By: /s/ Louis D. Paolino, Jr., President
- -------------------------------- --------------------------------------
38
<PAGE>
EXHIBIT 10.2
ESCROW AGREEMENT
This Escrow Agreement ("Agreement") is made as of the 2nd day of December,
1996, by and between Richard G. Bender, Sr., Alice L. Fields Bender, Richard G.
Bender, Jr., Karen L. Bender, Teresa A. Bender Miller, Lynetta K. Bender Mowery,
Stephen R. Bender, Jeffrey L. Bender, Douglas R. Bender, (collectively the
"Stockholders"), R & A Bender Property, Ltd. ("Partnership"), Eastern
Environmental Services, Inc. ("Purchaser"), Robert M. Kramer & Associates, P.C.
("RMK") and McNees, Wallace & Nurick ("MWN").
RECITALS
The Stockholders, Partnership and Purchaser are parties to an Agreement for
the Sale and Purchase of Stock and Real Estate dated even date with this Escrow
Agreement ("Purchase Agreement"). The parties, wishing to facilitate Closing
under the Purchase Agreement, have entered into this Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Definitions. For purposes of this Agreement, all capitalized terms
-----------
which are not defined in this Agreement shall have the meanings given such terms
in the Purchase Agreement. Any capitalized term given a definition in this
Agreement shall have the meaning given such term in this Agreement.
2. Calculation of Purchase Price. The first sentence of Section 1.7(c) of
-----------------------------
the Purchase Agreement provides that the Purchase Price will be calculated, as
provided in Section 1.7(b), on the close of business on Saturday immediately
preceding Closing. The parties hereto agree that, notwithstanding the first
sentence of Section 1.7(c), the calculation of the Purchase Price under Section
1.7(b) of the Agreement shall be made initially as of the close of business on
the Saturday immediately preceding the execution of this Escrow Agreement
("Purchase Price Calculation Date"). The parties hereto further agree that the
date of Closing and the Closing as used throughout the Purchase Agreement shall
mean in all respects the date that (i) Purchaser pays the cash Purchase Price
less the Escrow Funds to Sellers and (ii) the Escrow Agents, as hereinafter
defined, disburse the Escrow Funds to the Sellers and the Closing Documents, as
hereinafter defined, to the parties, in accordance with the terms of this
Agreement, upon the satisfaction of the Closing Conditions, as hereinafter
defined. As of the date of this Escrow Agreement, all closing conditions to the
Purchase Agreement, other than as identified in Paragraph 5, have been
satisfied. The parties further agree that the market value of the Consideration
Stock, as defined in the Purchase Agreement, shall be determined by using the
closing price of Purchaser's Common Stock on the NASDAQ National Market on the
day this Agreement is executed ("Per Share Price"), notwithstanding the
provisions of Section 1.7(a)(ii) of the Purchase Agreement regarding valuation
of the Consideration Stock. The parties also agree that the exercise price of
the Warrants, as defined in the Purchase Agreement, shall be the Per Share
Price. The parties acknowledge that as of the date hereof R & A Bender, Inc.
("Company") has among its liabilities certain accounts payables its owes its
Stockholders in the approximate amount of Seven Hundred and Fifty Thousand
($750,000) Dollars and an unfunded
<PAGE>
pension and profit plan liability of approximately Three Hundred Thirty Thousand
($330,000) Dollars. The actual accounts payables to the Stockholders and the
unfunded pension and profit plan liabilities of the Company on the Closing Date
shall be funded to the Company by the Purchaser and paid by the Company on the
Closing Date and such amounts owed prior to payment are liabilities of the
Company and shall reduce the Purchase Price, as set forth in Section 1.7(b)(i)
of the Purchase Agreement.
3. Escrow of Purchase Price. Simultaneously with the execution of this
------------------------
Agreement, RMK and MWN ("Escrow Agents") have opened an interest-bearing bank
account at CoreStates Bank entitled "Escrow Account Regarding the Bender
Transaction" ("Escrow Account"). Interest on the Escrow Account shall be
reported to the Purchaser's taxpayer I.D. number and Escrow Agents shall remit
all interest earned in the Escrow Account to Purchaser promptly within five days
of the Escrow Agents receiving the bank statement for the Escrow Account.
Simultaneously upon the execution of this Agreement, the Purchaser shall fund to
the Escrow Account by wire transfer an amount equal to Two Million Two Hundred
Thousand ($2,200,000) Dollars ("Escrow Funds"). On and after the date of this
Agreement's execution, Purchaser and Sellers shall cooperate with each other in
calculating the amount of the Purchase Price due under Section 1.7(a) of the
Purchase Agreement as adjusted under Section 1.7(b) of the Purchase Agreement.
Upon the date that the Closing Conditions are satisfied, as defined in Paragraph
5 below, the Purchaser shall pay the cash portion of the Purchase Price to the
Collective Account, as defined in the Purchase Agreement, less the Escrow Funds.
The Escrow Funds shall be distributed by the Escrow Agents as set forth in
Paragraph 5 below.
4. Closing Documents. Within five days of the execution of this
-----------------
Agreement, the Purchaser shall deliver to RMK, to be held in escrow, the
executed Warrants and the Consideration Stock described in Paragraph 2 of this
Agreement and in Section 1.7(a) of the Purchase Agreement. Additionally,
Purchaser shall deliver to RMK the originally executed documents described in
Section 1.8(b), (d) and (e) of the Purchase Agreement. Simultaneously with the
execution of this Agreement the Sellers shall deliver to MWN to be held in
escrow the documents described and set forth in Section 1.9(a), (b), (c), (d),
(e), (f), (i) (k) and (l) of the Purchase Agreement. For purposes of this
Agreement, the documents delivered to RMK and MWN in accordance with the
previous two sentences are hereinafter referred to as the "Closing Documents."
5. Conditions of Escrow. The parties hereto acknowledge that as of the
--------------------
date of this Agreement, the only remaining conditions to Closing under the
Purchase Agreement to be satisfied are the deliveries to be made by Purchaser as
set forth in Section 1.8(f) of the Purchase Agreement and the condition set
forth in Section 7.6 of the Purchase Agreement ("Closing Conditions"). The
parties hereto agree that they shall diligently cooperate with each other to
satisfy and obtain the items to be provided under Section 1.8(f) of the Purchase
Agreement and the Pennsylvania Department of Environmental Protection's ("DEP")
approval of the change of control of R & A Bender, Inc. ("Corporation") as set
forth in Section 7.6 of the Purchase Agreement (which approval does not have to
be in writing). Upon the date that the Closing Conditions are satisfied, the
Escrow Agents shall tender to the Purchaser and Sellers, as applicable, the
Closing Documents in their possession which are to be delivered to Purchaser or
Seller, as applicable, in accordance with Section 1.8 and 1.9 of the Purchase
Agreement and the Escrow Agents shall remit to the Collective Account, as
defined
<PAGE>
in the Purchase Agreement, $2,100,000 out of the Escrow Account; $100,000 shall
remain in the Escrow Account under the provisions of Section 1.7(c) of the
Purchase Agreement, until final reconciliation of the Purchase Price is
computed, in accordance with Section 1.7(c) of the Purchase Agreement and this
Agreement. If, for any reason, the Closing Conditions are not satisfied on or
before thirty (30) days from the date of this Agreement, RMK shall return the
Closing Documents in RMK's possession to the Purchaser, MWN shall return the
Closing Documents in MWN's possession to the Seller, and the Escrow Agents shall
remit the balance of the Escrow Account to the Purchaser, less the Termination
Fee, as defined in the next sentence, if the Termination Fee is due in
accordance with the provisions of the next sentence. If the DEP objects to
Purchaser controlling the Corporation due to and only due to the compliance
history of the Purchaser with the DEP or any other state or federal governmental
agency, then Escrow Agents shall pay out of the Escrow Account to Sellers the
sum of $150,000 ("Termination Fee").
6. Reconciliation of Purchase Price. In accordance with Section 1.7(c) of
--------------------------------
the Purchase Agreement, $100,000 is to remain in the Escrow Account until
Purchaser and Sellers agree concerning the final reconciliation of the Purchase
Price. On or before 60 days after the date of Closing, Purchaser shall send to
Sellers, Purchaser's computation of the adjustments to be made to the Purchase
Price in accordance with Section 1.7(b) and 1.7(c) of the Purchase Agreement
("Reconciliation Statement"). The Reconciliation Statement shall contain
sufficient backup documentation so that Seller may understand Purchaser's
calculations set forth in the Reconciliation Statement. A copy of the
Reconciliation Statement will be provided to the Escrow Agents and the
Reconciliation Statement shall clearly set forth what, if any, amount of money
is due to Purchaser from the Escrow Account. If the Sellers object to the
Reconciliation Statement, the Sellers shall send to the Purchaser and the Escrow
Agents their written objection within 15 days of their receipt of the
Reconciliation Statement ("Objection Statement"). The Objection Statement shall
detail specifically the items or items in the Reconciliation Statement with
which Sellers do not agree. If Sellers do not object to the Reconciliation
Statement in writing within 15 days of receiving it, Escrow Agents shall
disburse from the Escrow Account the amount due to Purchaser, as set forth in
the Reconciliation Statement and the balance of the Escrow Account, less Twenty
Five Thousand ($25,000) Dollars, to be held by Escrow Agents under Section 7
below, shall be disbursed to the Collective Account. If the balance of the
Escrow Account after disbursement to the Purchaser is less than Twenty Five
Thousand ($25,000), the balance of the Escrow Account and not Twenty Five
($25,000) Dollars shall be held by Escrow Agents under Section 7 below. If
Seller disputes the amount claimed by Purchaser in the Reconciliation Statement,
Purchaser and Seller shall attempt in good faith attempt to resolve their
dispute in accordance with Section 9 below.
7. Reconciliation of Bad Accounts Reserve. In accordance with Section
--------------------------------------
1.7(c) of the Purchase Agreement, $25,000 is to remain in the Escrow Account,
until it is determined whether Purchaser owes a payment to Sellers or if Sellers
owe a payment to Purchaser, due to the amount not collected on Company accounts
receivable in existence on the Closing Date ("Accounts Receivable") being in
excess of or less than the Bad Accounts Reserve, as defined in Section
1.7(b)(ii) of the Purchase Agreement ("Accounts Receivable Adjustment"). On or
before 195 days after the date of Closing, Purchaser shall send to Sellers,
Purchaser's computation of the amount
3
<PAGE>
collected on the Accounts Receivable ("Receivables Statement"). The Receivables
Statement shall state whether the amount of uncollected Accounts Receivable as
of 180 days after the Closing Date, exceeded or was less than the Bad Accounts
Reserve and shall contain sufficient backup documentation so that Sellers may
understand Purchaser's calculations set forth in the Receivables Statement. A
copy of the Receivables Statement will be provided to the Escrow Agents and the
Receivables Statement shall clearly set forth what, if any, amount of money is
due to Purchaser or due to Sellers in accordance with the Accounts Receivable
adjustment payment contained in Section 1.7(c) of the Purchase Agreement. If the
Sellers object to the Receivables Statement, the Sellers shall send to the
Purchaser and the Escrow Agents their written objection within 15 days of their
receipt of the Receivables Statement ("Receivables Objection Statement"). The
Receivables Objection Statement shall detail specifically the items or items in
the Receivables Statement with which Sellers do not agree. If Sellers do not
object to the Receivables Statement in writing within 15 days of receiving it,
Escrow Agents shall disburse from the Escrow Account the amount due to
Purchaser, as set forth in the Receivables Statement and the balance of the
Escrow Account shall be disbursed to the Collective Account. If the Purchaser
owes any money to Sellers due to the amount of uncollected Accounts Receivable
being less than the Bad Accounts Reserve, Purchaser shall pay the amount owed to
Sellers in accordance with Section 1.7(c) of the Purchase Agreement. If the
amount in the Escrow Account is not sufficient to pay the amount Sellers owe
Purchaser due to the uncollected Accounts Receivables exceeding the amount of
the Bad Accounts Reserve, Sellers shall pay the amount owed to Purchaser in
accordance with Section 1.7(c) of the Purchase Agreement. If Sellers dispute the
amount claimed by Purchaser in the Receivables Statement, Purchaser and Sellers
shall attempt in good faith attempt to resolve their dispute in accordance with
Section 9 below.
8. Working Capital Loan. During the term of this Agreement, the Purchaser
--------------------
agrees to make working capital loans to the Company up to a maximum amount of
Eight Hundred Thousand ($800,000) Dollars ("Loans"). The Loans shall accrue
interest at the rate of eight percent per annum and shall be evidenced by a
promissory note satisfactory to Purchaser having a provision allowing the entry
of a confession of judgment upon default. The Loans plus any accrued interest
shall be a liability of the Company and shall reduce the cash Purchase Price
payable by Purchaser under the provisions of Section 1.7(b)(i) of the Purchase
Agreement. If Closing does not occur due to the Closing Conditions not being
satisfied within thirty (30) days from the date of this Agreement's date, the
Loans and all accrued interest earned on the Loans shall be due and payable
within ninety (90) days after written demand. The funds representing the Loans
shall be lent by the Purchaser to the Company upon five days written notice. If
Purchaser fails to consummate the Purchase Agreement, when required to do so,
the damages incurred by the Sellers due to Purchaser's default may be offset
against the Loans.
9. Disputes. Escrow Agents shall not disburse the Escrow Funds or Closing
--------
Documents, if there is a dispute between the parties as to who is entitled to
the Escrow Funds or Closing Documents. In the event of a dispute as to who
should receive any Escrow Funds or Closing Documents, the parties shall have 30
days to resolve the dispute among themselves. If the parties have not resolved
the dispute within the 30-day period, then upon request of any party to this
4
<PAGE>
Agreement, such dispute or disagreement shall be settled by binding arbitration
to be held under the rules of the American Arbitration Association in
Philadelphia, Pennsylvania, pertaining to commercial disputes. A decision in
any such arbitration shall be binding and conclusive upon all parties and may be
entered of record with any court for enforcement. The award of the arbitrators
shall not be appealable for any reason. It is hereby agreed that the parties in
the arbitration proceeding shall be permitted to request by discovery those
documents which have a bearing on the matter under arbitration and which are
discoverable in accordance with the Judicial Rules then pertaining in the
Federal court for the Eastern District of Pennsylvania. In any arbitration
taking place under this Section 9, the arbitrator shall be:
(i) any person selected by all parties to the dispute, if they all agree
to the same arbitrator within ten (10) days after any party requests
arbitration;
(ii) if the parties do not agree to the same arbitrator, then a three-
member arbitration board consisting of one person selected by Purchaser and one
by Seller and a third person selected by the two arbitrators so selected, who
shall act as chairman of the arbitration board.
All fees of the arbitrators and other costs of the arbitration shall be
borne equally by Sellers and Purchaser, except that the fees of each of the two
members of the arbitration board who are selected individually by the parties to
the dispute shall be borne separately by them, respectively. The arbitration
award shall include all costs of the arbitration, including legal fees and costs
of the party who prevails in the dispute.
10. Limitation of Liability. The Escrow Agents' duties and
-----------------------
responsibilities shall be limited to those expressly set forth in this
Agreement. The Escrow Agents are not principals, participants or beneficiaries
of any transaction underlying this Agreement and shall have no duty to inquire
beyond the terms and provisions of this Agreement. Escrow Agents shall not be
liable to anyone for damages, losses, costs, expenses or attorneys fees which
Escrow Agents may incur as a result of any act or omission of Escrow Agents,
except for Escrow Agents' own willful misconduct or gross negligence. Escrow
Agents are acting as an accommodation for the parties to this Agreement. Except
for damages, losses, costs, expenses or attorneys fees resulting from Escrow
Agents' gross negligence or willful misconduct, Escrow Agents may rely upon and
shall not be liable for acting or refraining from acting upon any written
notice, instruction or request or other paper furnished to Escrow Agents
hereunder and reasonably believed by Escrow Agents to be genuine, to have been
signed or presented by the proper party or parties and to conform to the
provisions of this Agreement.
11. Information. Escrow Agents shall provide any party to this Agreement
-----------
with all information concerning the Escrow Funds, interest earned thereon, and
notices received by Escrow Agents as are requested by a party.
12. Notices. All notices or other communications required or permitted
-------
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to
5
<PAGE>
be notified, postage prepaid and registered or certified with return receipt
requested, by overnight commercial delivery service or by delivering the same in
person to such party.
(a) If to Purchaser or Sellers, as set forth in the Purchase Agreement.
(b) If to RMK, addressed as follows:
Robert M. Kramer, Esq.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
(c) If to MWN, addressed as follows:
Richard Stevenson, Esq.
100 Pine Street
P.O. Box 166
Harrisburg, PA 17108-1166
Notice shall be deemed given and effective the day personally delivered, the day
received by overnight commercial delivery service and deposited in the U.S. mail
addressed as above and sent first class mail, certified, return receipt
requested, when actually received. Any party may change the address for notice
by notifying the other parties of such change in accordance with this Section
12.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the Commonwealth of Pennsylvania, without
giving effect to any choice or conflict of law provision or rule (whether of the
Commonwealth of Pennsylvania or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Commonwealth of
Pennsylvania.
14. No Waiver. No delay of or omission in the exercise of any right,
---------
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of or in any similar breach or default occurring later;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach of default occurring before or after that waiver.
15. Captions. The headings of this Agreement are inserted for convenience
--------
only, shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
16. Severability. In case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal and enforceable but so as most nearly to
retain the intent of the parties. If such modification is not
6
<PAGE>
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
17. Announcement. Purchaser agrees not to make an announcement concerning
------------
this transaction until the earlier of being legally required to do so or the
Closing Conditions being satisfied. Purchaser shall inform Sellers if it
becomes legally required to make an announcement.
18. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SELLERS:
/s/ Richard G. Bender, Sr
------------------------------------
Richard G. Bender, Sr.
/s/ Alice L. Fields Bender
------------------------------------
Alice L. Fields Bender
/s/ Richard G. Bender, Jr.
------------------------------------
Richard G. Bender, Jr.
/s/ Karen L. Bender
------------------------------------
Karen L. Bender
/s/ Teresa A. Bender Miller
------------------------------------
Teresa A. Bender Miller
/s/ Lynetta K. Bender Mowery
------------------------------------
Lynetta K. Bender Mowery
/s/ Steven R. Bender
------------------------------------
Steven R. Bender
s/ Jeffrey L. Bender/
------------------------------------
Jeffrey L. Bender
/s/ Douglas R. Bender
------------------------------------
Douglas R. Bender
8
<PAGE>
R & A Bender Property, Ltd.
By: /s/ Richard G. Bender
-----------------------------------
PURCHASER
Eastern Environmental Services, Inc.
By: /s/ Louis D. Paolino, Jr.
----------------------------------
ESCROW AGENTS
Robert M. Kramer & Associates, P.C.
By: /s/ Robert M. Kramer
-----------------------------------
Robert M. Kramer
McNees, Wallace & Nurick
By: /s/ Richard W. Stevenson
----------------------------------
9
<PAGE>
Exhibit 10.3
Warrant Number 96-18
--------------------
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND THIS WARRANT CANNOT BE
EXERCISED, SOLD OR TRANSFERRED, AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT CANNOT BE SOLD OR TRANSFERRED, UNLESS AND UNTIL THEY
ARE SO REGISTERED OR UNLESS AN EXEMPTION IS THEN AVAILABLE.
Date: December 2, 1996 Warrant to Subscribe
for 8,970 Shares
EASTERN ENVIRONMENTAL SERVICES, INC.
Warrant
To Subscribe for and Purchase
Common Stock of
EASTERN ENVIRONMENTAL SERVICES, INC.
THIS CERTIFIES that, for value received, Karen L. Bender, or her registered
assigns ("Holder"), is entitled to subscribe for and purchase from EASTERN
ENVIRONMENTAL SERVICES, INC., a Delaware corporation ("Company"), at an exercise
price per share of $9.375 (initially and as adjusted, if at all, pursuant to the
terms and conditions of this Warrant, the "Exercise Price"), 8,970 fully paid
--------------
and nonassessable shares of Company's common stock, par value $.01 per share
(the "Common Stock"). This Warrant may be exercised, in whole or in part, by
------------
Holder at any time commencing immediately after delivery of this Warrant by the
Escrow Agent to Holder, pursuant to the terms and conditions of the Escrow
Agreement, and prior to and including 5:00 p.m. Eastern time on the fifth
anniversary of the date hereof.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Payment. The rights represented by this Warrant may be
-----------------
exercised by Holder, in whole or in part, by the surrender of this Warrant at
the principal office of Company properly endorsed and accompanied by payment to
Company of the Exercise Price for that number of shares of Common Stock sought
to be purchased (the "Exercised Shares"), in the manner provided below. Company
----------------
agrees that (a) shares purchased upon exercise of this
<PAGE>
Warrant shall be and are deemed to be issued to Holder as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares as provided herein, and
(b) certificates for the shares of stock so purchased shall be delivered to
Holder as promptly as reasonably practicable following any exercise of this
Warrant, and unless this Warrant shall have been exercised in full, or shall
have expired, a new Warrant representing the number of shares with respect to
which this Warrant shall not yet have been exercised, shall also be delivered to
Holder.
Holder may pay the Exercise Price for any Exercised shares in one or a
combination of the following methods:
(a) By delivering cash, check, money order or wire transfer of funds to the
Company in the amount of the Exercise Price of the Exercised Shares; or
(b) By surrendering to the Company shares of Common Stock having a Fair
Market Value (as measured on the date of exercise of the Exercised Shares) equal
to the Exercise Price of the Exercised Shares.
2. Shares to be Fully Paid; Reservation. Company covenants and agrees
------------------------------------
that all shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance and payment therefor in accordance with
Section 1 above, be fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, Company covenants and agrees that it will from time
to time take all such action as may be required to assure that the par value per
share of the Common Stock is at all times equal to or less than the then
effective Exercise Price per share of Common Stock issuable pursuant to this
Warrant. Company further covenants and agrees that when the rights represented
by this Warrant may be exercised, Company will at all times thereafter have
authorized, and reserved for the purpose of issue or transfer upon exercise of
the subscription rights evidenced by this Warrant, a sufficient number of shares
of its Common Stock to provide for the exercise of the rights represented by
this Warrant.
3. Protection Against Dilution.
---------------------------
(a) In the event at any time or from time to time, all holders of
Common Stock (or any other shares of stock or other securities at that time
receivable upon exercise of this Warrant) shall have received, other or
additional or less Common Stock without payment therefor (whether through a
dividend in stock or any class of stock of Company or any other corporation, or
through stock split, spinoff, split-off, reclassification, combination of
<PAGE>
shares or otherwise) (a "Distribution"), then, and in each such case, Holder
upon the exercise of this Warrant and payment of the Exercise Price provided
above, shall be entitled to receive, in addition to the shares called for under
this Warrant, the shares or other securities to which Holder would have been
entitled in the Distribution if Holder had exercised this Warrant immediately
prior thereto. In case of the partial exercise of this Warrant under such
circumstances, the number of shares of stock or other securities which would
have been receivable upon the full exercise of this Warrant, and the Exercise
Price payable therefor computed as provided above, shall be proportionately
reduced.
(b) In case of any reorganization of Company, or any other corporation
the stock or securities of which are at the time deliverable on the exercise of
this Warrant, or in case Company or such other corporation shall consolidate
with or merge into another corporation, or convey all or substantially all of
its assets to another corporation, or liquidate, Holder, upon the exercise
hereof and upon the payment of the Exercise Price provided above, shall be
entitled to receive, in lieu of the shares called for under this Warrant, the
stock or other securities to which Holder would have been entitled upon the
consummation of such reorganization, consolidation, merger, conveyance, or
liquidation if Holder had purchased the shares called for hereby immediately
prior thereto; and in such case, the provisions of this Warrant shall be
applicable to the shares of stock or other securities thereafter deliverable
upon the exercise of this Warrant. In the case of the partial exercise of this
Warrant under such circumstances, the number of shares of stock or other
securities which would have been receivable upon the full exercise of this
Warrant, and the Exercise Price payable therefor, shall be proportionately
reduced.
4. No Rights as Shareholder. Until the valid exercise of this Warrant,
------------------------
the holder hereof shall not be entitled to any voting right or other rights as a
shareholder of Company with respect to this Warrant.
5. Transfer of Warrants. Subject to Section 7 hereof, this Warrant and
--------------------
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, at the office or agency of Company referred to in Section 1 by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that this Warrant, when endorsed in blank, shall
be deemed negotiable, and that the holder hereof, when this Warrant shall have
been so endorsed, may be treated by Company and all other persons dealing with
this Warrant as the absolute owner hereof for any purpose and as the person
entitled to exercise the rights represented by this Warrant, or to the transfer
hereof on the books of Company, any notice to the
<PAGE>
contrary notwithstanding; but until such transfer on such books, Company may
treat the registered holder hereof as the owner for all purposes.
6. Fractional Interests. Company shall not be required to issue
--------------------
fractional shares of Common Stock upon the exercise of this Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 6, be issuable upon the exercise of this Warrant (or specified portion
thereof), Company shall pay an amount in cash equal to the Fair Market Value (as
defined below) of such fraction of a Common Share on the business day prior to
the date of such exercise. As used in this Agreement, the "Fair Market
-----------
Value" of the Common Stock shall be the closing price of the Common Stock on the
- -----
date of determination on the principal stock market or quotation system on which
the Common Stock is then traded; provided, however, if the Common Stock is not,
-------- -------
as of the date of determination of the Fair Market Value, traded on a recognized
public trading market or quoted on a recognized quotation system, then the Fair
Market Value shall be determined by Company on the basis of such valuation as
it considers appropriate.
7. Compliance With Securities Laws. By acquiring this Warrant from
-------------------------------
Company on the date hereof, the Holder hereby agrees, acknowledges, covenants,
represents and warrants as follows:
(a) This Warrant and the shares of Common Stock issuable upon exercise
hereof have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or qualified or registered under any state securities
laws which may be applicable. Holder understands that this Warrant and such
shares of Common Stock have been and will be issued and sold hereunder in
transactions exempt from the registration or qualification requirements of the
Securities Act and applicable state securities laws and Holder acknowledges that
reliance on and the availability of said exemptions is predicated in part on the
accuracy of Holder's representations and warranties herein.
(b) Holder represents and warrants that it is acquiring this Warrant
for its own account, for purposes of investment, and not with a view to, or for
sale in connection with, any distribution thereof within the meaning of the
Securities Act and the rules and regulations promulgated thereunder. Holder
represents, warrants and agrees that it will not sell, exercise, transfer or
otherwise dispose of this Warrant (or any interest therein) or any of the Common
Stock purchasable upon exercise hereof, except pursuant to (i) an effective
registration statement under the Securities Act and applicable state securities
laws or (ii) an opinion of counsel, satisfactory to Company, that an exemption
from registration under the Securities Act and such laws is available. Holder
further acknowledges and agrees that Company
<PAGE>
is not required, legally or contractually, so to register or qualify the Warrant
or such Common Stock or to take any action to make such an exemption available.
Holder understands that Company will be relying upon the truth and accuracy of
the representations and warranties contained in this Section 7 in issuing this
Warrant and such Common Stock without first registering the issuance thereof
under the Securities Act or qualifying or registering the issuance thereof under
any state securities laws that may be applicable.
(c) Holder acknowledges that (i) there is not now, and there will not
be in the future, any public market for the Warrant, (ii) although there
currently is a public trading market for the Common Stock, there can be no
assurance that any such market will be sustained, and (iii) there can be no
assurance that Holder will be able to liquidate its investment in Company.
Holder represents and warrants that it is familiar with and understands the
terms and conditions of Rule 144 promulgated under the Securities Act.
(d) Holder represents and warrants to Company that (i) it has such
knowledge and experience in financial and business matters as is necessary to
enable it to evaluate the merits and risks of any investments in Company and is
not utilizing any other person to be a purchaser representative in connection
with evaluation of such merits and risks; and (ii) it has no need for liquidity
in an investment in Company and is able to bear the risk of that investment for
an indefinite period and to afford a complete loss thereof.
(e) Holder represents and warrants that it has had access to, and has
been furnished with, all of the information it has requested from Company and
has had an opportunity to review the books and records of Company and to discuss
with management and members of the board of directors of Company the business
and financial affairs of Company.
(f) Holder agrees that at the time of each exercise of this Warrant,
unless the issuance of shares of Common Stock issuable thereupon is pursuant to
an effective registration statement under the Securities Act, Holder will
provide Company with a letter embodying the representations and warranties set
forth in subsections (b) through (e), in form and substance satisfactory to
Company, and agrees that the certificate(s) representing any shares issued to it
upon any exercise of this Warrant may bear such restrictive legend as Company
may deem necessary to reflect the restricted status of such shares under the
Securities Act unless Company shall have received from Holder an opinion of
counsel to Holder, reasonably satisfactory in form and substance to Company,
that such restrictive legend is not required. If such legend is placed on such
certificate(s), before consenting
<PAGE>
to the removal of such legend and the transfer of such shares, unless the
request to remove such legend is made in connection with a sale or transfer of
the shares represented by such certificate in a transaction registered under
Section 5 of the Securities Act, Company may insist upon the delivery to it of
an opinion from counsel to Holder, reasonably satisfactory in form and substance
to Company, that the contemplated transfer does not constitute a violation of
the Securities Act.
8. Notice. Company covenants and agrees to give notice in writing to
------
Holder at least 10 days prior to (or, if later, then as soon as reasonably
practicable prior to) any action contemplated which would affect the per share
Exercise Price, or number of shares purchasable upon exercise of this Warrant;
provided, however, any failure of Company to provide such notice shall not
- -------- -------
affect the validity of any action by Company. Any notice, request or other
communication provided for under this Warrant shall be given in writing,
delivered by hand, by overnight United States Mail, return receipt requested,
postage prepaid, or through a reputable courier service (such as Federal
Express) and shall be addressed to Company or to the Holder at the address shown
below, unless notice of a change in address is furnished in accordance with this
paragraph:
If to Company:
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 101
Mount Laurel, New Jersey 08054
Attn: Chief Financial Officer
If to Holder:
Karen L. Bender
8614 Rice Road
Shippensburg, PA 17257
9. Descriptive Headings and Governing Law. The descriptive headings of
--------------------------------------
the several paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant. This Warrant is being delivered and is
intended to be performed in the State of New Jersey and shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of such state.
IN WITNESS WHEREOF, Eastern Environmental Services, Inc. has caused this
Warrant to be signed by its duly authorized officers under its corporate seal,
this 2 day of December 1996.
<PAGE>
EASTERN ENVIRONMENTAL SERVICES, INC.
By: \s\Robert M. Kramer
----------------------------------
Title: Secretary
-------------------------------
Print Name: Robert M. Kramer
--------------------------
<PAGE>
ELECTION TO PURCHASE
--------------------
The undersigned Holder hereby irrevocable elects to exercise the within
Warrant to purchase (___________)* Shares of Common Stock issuable upon exercise
thereof to and requests that certificates for such Shares be issued in
his/her/its name and delivered to him/her/it at the following
address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
.
- -------------------------------------------------------------------------------
Date:
-----------------
- -------------------------------------------------------------------------------
Signature(s)**
- ----------------------------
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
<PAGE>
ASSIGNMENT
----------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers the
within Warrant to the extent of (________)* Shares purchasable upon exercise
thereof to ____________________________, whose address is
_________________________________________________ and hereby irrevocably
constitute and appoint ____________________ his/her/its Attorney to transfer
said Warrant on the book of the Company, with full power of substitution.
Date:
-----------------------
- --------------------------------------------------------------------------------
Signature(s)**
- --------------------------
* If the Warrant is to be exercised or transferred in its entirety, insert the
word "All" before "Shares"; otherwise insert the number of shares then
purchasable on the exercise thereof as to which transferred or exercised. If
such Warrants shall not be transferred or exercised to purchase all shares
purchasable upon exercise thereof, that a new Warrant to purchase the balance of
such shares be issued in the name of, and delivered to, the Holder at the
address stated below.
** Signature(s) must conform exactly to the name(s) of the Holder as set forth
on the first page of this Warrant.
