<PAGE>
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) May 12, 1997
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)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
-------------------------------------
Eastern Waste of New York, Inc., Eastern Waste of Long Island, Inc. and
Eastern Container Corporation (collectively referred to as "Eastern") are
wholly-owned subsidiaries of Eastern Environmental Services, Inc. (The
"Registrant"). On May 12, 1997, Eastern acquired (the "Acquisition")
substantially all of the assets related to the operations of KC Waste Services,
Inc., Curbside Leasing, Inc. Waste Services, Inc., New York Waste Services,
Inc., and Long Island Waste Services, Inc. (collectively referred to as the
"Waste Services, Inc. and affiliates," or "WSI"). The acquisition of WSI was
made pursuant to the terms of an Agreement and Plan of Reorganization (the
"Agreement") dated October 23, 1996, as amended on April 14, 1997 and May 12,
1997, by Eastern and WSI. The Agreement and Amendments are incorporated as
Exhibit 10.1. The description of the acquired assets and the Acquisition
transaction set forth herein is qualified in its entirety by reference to the
Agreement and related amendments. WSI and the Individuals are collectively
referred to as the "Sellers." The Sellers are not affiliated with the Registrant
nor with any of the Registrant's subsidiaries.
Additionally, Eastern closed into Escrow on May 12, 1997 the acquisition of
Golden Gate Carting Co., Inc. ("Golden Gate") and Coney Island Rubbish Removal,
Inc. ("Coney Island") (collectively referred to as "the Companies"), two
companies under common management control with WSI. The closings, which are
pending upon satisfaction of certain normal conditions which the Registrant
believes will be resolved, were made pursuant to two separate Agreements and
Plans of Reorganization incorporated as respectively as Exhibits 10.2 ("Golden
Gate"), and 10.3 ("Coney Island"), as both were amended on May 12, 1997.
Simultaneous with the escrow closing of Golden Gate and Coney Island, Eastern
entered into Management Agreements (enclosed as Exhibits 10.4 and 10.5) with
both companies until final closing of the acquisition. The Management Agreements
provide that the Eastern will manage the businesses of Golden Gate and Coney
Island, retain the revenue of the businesses and pay all associated expenses.
The description of the management agreements are qualified in their entirety by
reference to Exhibits 10.4 and 10.5.
Pursuant to the WSI Agreement and Plan of Reorganization, property and
equipment and intangible assets were acquired for consideration consisting of
1,159,980 unregistered shares of the Registrant's common stock (valued at $11.70
per share) and the assumption of approximately $6.2 million of debt. Eastern
has also accrued an obligation of $6.2 million as additional purchase price
which is contingent upon the resolution of certain events and is payable in
either cash or a future maximum issuance of 357,849 shares of the Registrant's
common stock. As part of this contingency, the Registrant also posted a Letter
of Credit in the amount of approximately $2.6 million and agreed to pay up to
$630,000 relating to a debt WSI owed to one of its creditors. Such future
payment is contingent upon authorization from the New York City Trade Waste
Commission or a court having jurisdiction. Estimated consideration for the
pending acquisitions of Golden Gate and Coney Island consists of 288,820
unregistered shares of the Registrant's stock (valued at $11.70 per share) and
the assumption of approximately $3.0 million of debt.
The acquired assets include vehicles, containers, recycling equipment,
office furniture, equipment and supplies used in the operations of the
Companies; customer contract rights, all rights, title and interest of the
Companies in leases for real property, trade secrets, property rights, symbols,
trademarks, trade names, logos, telephone directory listings used by the
Companies; all permits, licenses, franchises, consents and other approvals for
governmental agreements used in the operations of the business; and all goodwill
of the business conducted by the Companies. The acquired assets were used
<PAGE>
by the Sellers in the solid waste collection business. Eastern intends to
continue to use the acquired assets for this purpose.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS
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(a) Financial statements of businesses acquired. It is impracticable to
provide the required financial statements of Waste Services, Inc. and
affiliates, Golden Gate Carting Co., Inc. and Coney Island Rubbish Removal,
Inc. at the time of the filing of this report. The required financial
statements of Waste Services, Inc. and affiliates, Golden Gate Carting Co.,
Inc. and Coney Island Rubbish Removal, Inc. 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 and Plan of Reorganization made on October 23, 1996 by and among
"Shareholders" ("Shareholder"), Waste Services, Inc. ("Waste"), New York
Waste, Inc. ("NY Waste"), Long Island Waste Services, Inc. ("L.I. Waste"),
KC Waste Services, Inc. ("KC Waste") and Curbside Leasing, Inc.
("Curbside"), Eastern Environmental Services, Inc. ("EESI"), Eastern Waste
of New York, Inc. ("EESI New York"), Eastern Waste of Long Island, Inc.
("EESI L.I.") and Eastern Container Corporation ("EESI Container"). For the
purposes of this Agreement, EESI, EESI New York, EESI L.I. and EESI
Container are collectively referred to as "Purchasers," Waste, NY Waste,
L.I. Waste, KC Waste and Curbside are collectively referred to as the
"Companies" and individually known as a "Company" and the Companies and the
Shareholders are collectively referred to as the "Sellers." Amendment No.
1, dated April 14, 1997 to the Agreement and Plan of Reorganization made on
October 23, 1996. Amendment No. 2 dated May 12, 1997, to the Agreement and
Plan of Reorganization made on October 23, 1996.
10.2 The Agreement and Plan of Reorganization ("Agreement") is made on April 7,
1997 by and among Christopher Pittas, Nicholas Pittas, Jr.
("Shareholders"), Golden Gate Carting Co., Inc. ("Golden Gate"), Eastern
Environmental Services, Inc. ("EESI"), and Eastern Waste of New York, Inc.
("EESI NY".) For purposes of this Agreement, EESI and EESI NY are
collectively referred to as "Purchasers," Golden Gate may also be referred
to as "Company," and the Company and the Shareholders are collectively
referred to as "Sellers." Amendment No. 1 dated May 12, 1997 to Agreement
and Plan of Reorganization made on April 7, 1997.
10.3 The Agreement and Plan of Reorganization (the "Agreement") is made as of
April 7, 1997, by and among Vincent Morea ("Shareholder"), Coney Island
Rubbish Removal, Inc. ("Coney Island"), Eastern Environmental Services,
Inc. ("EESI"), and Eastern Waste of New York, Inc. ("EESI NY"). For
purposes of this Agreement, EESI and EESI NY are collectively referred to
as "Purchasers", Coney Island may also be referred to as "Company" and the
Company and the Shareholder are collectively referred to as the "Sellers".
Amendment No. 1 dated as of May 12, 1997 to Agreement and Plan of
Reorganization made as of April 7, 1997.
<PAGE>
10.4 The Agreement "Management Agreement" is made on May 12, 1997, by and
between Golden Gate Carting Co., Inc. and New York Corporation (the
"Company") and Eastern Waste of New York, Inc., a Delaware corporation (the
"Manager")
10.5 The Agreement ("Management Agreement") is made as of May 12, 1997, by and
between Coney Island Rubbish Removal, Inc., a New York corporation (the
"Company") and Easten Waste of New York, Inc., a New York corporation (the
"Manager".)
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SIGNATURE
---------
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: May 21, 1997 By: /s/ Louis D. Paolino, Jr.
-------------------------------------
Louis D. Paolino, Jr.
President
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EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.1 Agreement and Plan of Reorganization made on October 23, 1996 by and among
"Shareholders" ("Shareholder"), Waste Services, Inc. ("Waste"), New York
Waste, Inc. ("NY Waste"), Long Island Waste Services, Inc. ("L.I. Waste"),
KC Waste Services, Inc. ("KC Waste") and Curbside Leasing, Inc.
("Curbside"), Eastern Environmental Services, Inc. ("EESI"), Eastern Waste
of New York, Inc. ("EESI New York"), Eastern Waste of Long Island, Inc.
("EESI L.I.") and Eastern Container Corporation ("EESI Container"). For the
purposes of this Agreement, EESI, EESI New York, EESI L.I. and EESI
Container are collectively referred to as "Purchasers," Waste, NY Waste,
L.I. Waste, KC Waste and Curbside are collectively referred to as the
"Companies" and individually known as a "Company" and the Companies and the
Shareholders are collectively referred to as the "Sellers." Amendment No.
1, dated April 14, 1997 to the Agreement and Plan of Reorganization made on
October 23, 1996. Amendment No. 2 dated May 12, 1997, to the Agreement and
Plan of Reorganization made on October 23, 1996.
10.2 The Agreement and Plan of Reorganization ("Agreement") is made on April 7,
1997 by and among Christopher Pittas, Nicholas Pittas, Jr.
("Shareholders"), Golden Gate Carting Co., Inc. ("Golden Gate"), Eastern
Environmental Services, Inc. ("EESI"), and Eastern Waste of New York, Inc.
("EESI NY".) For purposes of this Agreement, EESI and EESI NY are
collectively referred to as "Purchasers," Golden Gate may also be referred
to as "Company," and the Company and the Shareholders are collectively
referred to as "Sellers." Amendment No. 1 dated May 12, 1997 to Agreement
and Plan of Reorganization made on April 7, 1997.
10.3 The Agreement and Plan of Reorganization (the "Agreement") is made as of
April 7, 1997, by and among Vincent Morea ("Shareholder"), Coney Island
Rubbish Removal, Inc. ("Coney Island"), Eastern Environmental Services,
Inc. ("EESI"), and Eastern Waste of New York, Inc. ("EESI NY"). For
purposes of this Agreement, EESI and EESI NY are collectively referred to
as "Purchasers", Coney Island may also be referred to as "Company" and the
Company and the Shareholder are collectively referred to as the "Sellers".
Amendment No. 1 dated as of May 12, 1997 to Agreement and Plan of
Reorganization made as of April 7, 1997.
10.4 The Agreement "Management Agreement" is made on May 12, 1997, by and
between Golden Gate Carting Co., Inc. and New York Corporation (the
"Company") and Eastern Waste of New York, Inc., a Delaware corporation (the
"Manager")
10.5 The Agreement ("Management Agreement") is made on May 12, 1997, by and
between Coney Island Rubbish Removal, Inc., a New York corporation (the
"Company") and Easten Waste of New York, Inc., a New York corporation (the
"Manager".)
<PAGE>
EXHIBIT 10.1
------------
AGREEMENT AND PLAN OF REORGANIZATION OF
KC WASTE SERVICES, INC.
CURBSIDE LEASING, INC.
WASTE SERVICES, INC.
N.Y. WASTE SERVICES, INC.
L.I. WASTE SERVICES, INC.
EASTERN WASTE OF NEW YORK, INC.
EASTERN WASTE OF L.I., INC.
EASTERN CONTAINER CORPORATION
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS .......................................................... 1
ARTICLE I Reorganization; Closing.................................. 1
ARTICLE II Representations and Warranties of the Sellers........... 11
ARTICLE III Representations and Warranties of Purchasers........... 21
ARTICLE IV Additional Agreements of Sellers........................ 23
ARTICLE VI Conditions of Purchasers................................ 28
ARTICLE VII Conditions of Sellers.................................. 29
ARTICLE VIII Indemnification....................................... 31
ARTICLE IX Other Provisions........................................ 36
</TABLE>
<PAGE>
SCHEDULES
EXHIBIT "A" ALLOCATION OF EESI STOCK
1.4 COMPANY DEBT
1.5(B) VEHICLES
1.10(C) OPINION OF PURCHASERS' COUNSEL
1.10(D) EMPLOYMENT AGREEMENTS
1.10(F) ASSIGNMENT AND ASSUMPTION AGREEMENT
1.11(A) BILL OF SALE
1.11(C) NON-COMPETE AGREEMENT
1.11(E) OPINION OF SELLERS' COUNSEL
1.12(B) ALLOCATION OF PURCHASE PRICE TO ASSETS
2.1 SUBSIDIARIES
2.2 CAPITAL STOCK
2.3 CONTRACTS, PERMITS, MORTGAGES AND MATERIAL DOCUMENTS
2.4(A)(II) CONTAINERS
2.4(B) PERSONAL PROPERTY EXCEPTIONS
2.5 CUSTOMERS
2.7 ADVERSE CHANGES
2.8(B) ACCOUNTS RECEIVABLE
2.8(C) ACCOUNTS PAYABLE
2.9(F) COMPENSATION INCREASES
2.10 TAX STATUS OF COMPANIES
<PAGE>
2.11 INSURANCE POLICIES, PERFORMANCE BONDS AND LETTERS OF CREDIT
2.12(A) CONTRACTS WITH EMPLOYEES
2.12(B) EMPLOYEES
2.12(C) BENEFIT PLANS
2.13(A) VIOLATIONS OF FEDERAL, STATE OR LOCAL LAW
2.13(B) ENVIRONMENTAL VIOLATIONS
2.13(C) LANDFILLS AND DISPOSAL FACILITIES
2.13(F) LIST AND SYNOPSIS OF ALL LITIGATION
2.15 REQUIRED CONSENTS
2.18 RELATED PARTY TRANSACTIONS
7.3 GUARANTEES
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Agreement and Plan of Reorganization ("Agreement") is made as of
October 23, 1996, by and among the individuals and entities set forth on the
signature page under the heading "Shareholders"("Shareholders"), Waste Services,
Inc. ("Waste"), N.Y. Waste, Inc. ("NY Waste"), L.I. Waste Services, Inc. ("LI
Waste"), KC Waste Services, Inc. ("KC Waste") and Curbside Leasing, Inc.
("Curbside"), Eastern Environmental Services, Inc. ("EESI"), Eastern Waste of
New York, Inc. ("EESI New York"), Eastern Waste of L.I., Inc. ("EESI LI") and
Eastern Container Corporation ("EESI Container"). For purposes of this
Agreement, EESI, EESI New York, EESI LI and EESI Container are collectively
referred to as "Purchasers;" Waste, NY Waste, LI Waste, KC Waste, and Curbside
are collectively referred to as the "Companies" and individually as a "Company;"
and the Companies and the Shareholders are collectively referred to as the
"Sellers."
RECITALS
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Each of the individual Shareholders is the owner of the outstanding stock
of KC Waste, and Curbside, as set forth on Exhibit "A" attached. WSI Holding
Corporation is the owner of all the outstanding stock of Waste, NY Waste and LI
Waste. The Companies are all New York corporations. The Companies are in the
business of collecting, transporting, recycling and disposing of non-hazardous,
commercial, industrial, and municipal solid waste ("Business").
The parties hereto desire that substantially all of the assets of the
Companies be acquired by EESI New York, EESI LI and EESI Container in exchange
solely for the voting stock of EESI, the parent and sole shareholder of EESI New
York, EESI LI and EESI Container, on the terms contained herein. The parties
intend that the transactions contemplated hereby qualify as a reorganization
within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended.
ARTICLE I.
REORGANIZATION; 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. Place for Closing. Subject to Section 1.9 hereof, closing
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under this Agreement shall take place at the offices of Rivkin, Radler & Kremer,
EAB Plaza, Uniondale, New York 11556-0111, 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."
<PAGE>
Section 1.3. Agreement to Exchange Stock for Assets; Consideration.
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(a) At the Closing, each of the Companies, as set forth in Section 1.5
below, shall transfer and deliver to each of the Purchasers, as set forth in
Section 1.5 below, the assets owned by each of the Companies other than the
Excluded Assets, defined in Section 1.6, and EESI agrees to issue and deliver,
in exchange for the assets, as consideration therefor shares of EESI's common
stock ("EESI Stock"), calculated as set forth in Section 1.4 below, and the
assumption by Purchasers of the Assumed Liabilities, as defined in Section 1.7.
The EESI Stock shall be allocated and paid to each of the Companies as set forth
on Exhibit "A" attached hereto.
(b) In accordance with Section 1.4(a)(iii) of this Agreement, the dollar
value of the EESI Stock to be delivered at Closing is being increased by the
amount by which the accounts receivable of the Companies conveyed to the
Purchasers at Closing, less the historic bad accounts receivable reserve of the
Companies exceeds the accounts payable of the Companies, assumed by the
Purchasers in accordance with this Agreement ("Accounts Receivable Payment").
The EESI Stock issued in the amount of the Accounts Receivable Payment shall be
hereafter referred to as the "Additional Stock". One half of the Additional
Stock shall be delivered to Robert M. Kramer & Associates P.C. in escrow
("Escrow Agent") to be held under the provisions of this Section 1.3(b) ("Escrow
Stock"). On or before one hundred ninety five (195) days from the Closing Date,
Purchasers will supply Companies and the Escrow Agent with an accounting of the
accounts receivable of the Companies collected by the Purchasers within 180 days
after the Closing and the accounts payable of the Companies paid by Purchasers
within 180 days after Closing ("Receivable and Payable Statement"). Within ten
days of Escrow Agent's receipt of the Receivable and Payable Statement, Escrow
Agent, based on the Receivables and Payable Statement shall deliver to the
Companies out of the Escrow Stock, an amount of EESI's common stock equal in
value to the amount by which (i) the accounts receivable of the Companies
collected by the Purchasers within 180 days after Closing plus $350,000 exceeded
the accounts payable of the Companies paid by the Purchaser within 180 days
after Closing, less (ii) 50% of the Accounts Receivable Payment. The EESI
common stock delivered to Purchaser by Escrow Agent under this Section 1.3(b)
shall be valued at a per-share value equal to the closing price of EESI's common
stock as reported on the NASDAQ National Market on the day which is five (5)
trading days prior to the Closing Date. The EESI Stock delivered by Escrow
Agent shall be allocated and paid to each of the Companies as set forth on
Exhibit "A" attached hereto. The Escrow Agent shall deliver to Purchaser for
cancellation the Escrow Stock not required to be delivered to the Companies.
Section 1.4. Calculation of EESI Stock. The dollar amount of the EESI
-------------------------
Stock to be delivered at Closing shall be calculated as set forth in this
Section 1.4(a) and paid in EESI Stock having the per-share value set forth in
Section 1.4(b) .
(a) The EESI Stock to be delivered at Closing shall equal, in dollar value
(based on the per share values set forth in Section 1.4(b) below), $26,859,615,
increased and decreased as follows ("Dollar Value of the Purchase Price"):
2
<PAGE>
(i) decreased, by the principal owed, as of the Closing Date, by
the Companies with respect to the debt, set forth on Schedule 1.4
("Company Debt") (after the date of this Agreement, the Company Debt
may increase, due to additional indebtedness incurred as allowed by
Section 4.4 of this Agreement, or decrease, due to scheduled payments
or pre-payments, as allowed by Section 4.4);
(ii) increased, by an amount equal to one-half of any discount of
the Company Debt which the holders of the Company Debt have agreed to
accept in writing after the Closing Date in exchange for an
accelerated payment of such Company Debt where EESI agrees to fund the
accelerated payment (EESI agrees to pay accelerated payments which are
payable in EESI's common stock valued at the market value of EESI's
common stock at the time of issuance, as listed on the NASDAQ National
Market and provided the accelerated payment will achieve a ten percent
or more discount of the Company Debt being prepaid); and
(iii) increased, by the amount by which the accounts receivable of
the Companies conveyed to the Purchasers at Closing, less the historic
bad accounts receivable reserve of the Companies, exceeds the accounts
payable of the Companies, assumed by the Purchasers in accordance with
this Agreement.
(b) The per-share values used to calculate the amount of the EESI Stock to
be paid to the Companies shall be as follows:
(i) Seven Dollars and Fifty Cents per Share ($7.50) for an amount
of the Dollar Value of the Purchase Price equal to Twelve Million
Eight Hundred Fifty-Nine Thousand Six Hundred Fifteen ($12,859,615)
Dollars, plus the lesser of (a) the amount that the principal of the
Company Debt at Closing is less than the principal of the Company
Debt, as of the date of this Agreement, as set forth on Schedule 1.4,
due to normally scheduled principal amortization paid by the Companies
and identified as a monthly payment on Schedule 1.4; or (b) Four
Hundred Thousand ($400,000) Dollars; and
(ii) the closing price for EESI's common stock on the NASDAQ
National Market for the trading day which is five trading days prior
to the Closing Date, shall be used to calculate the remaining balance
of Dollar Value of the Purchase Price.
For purposes of this Agreement, the shares of EESI common stock delivered based
on the $7.50 value as set forth in subsection (i) above is hereafter referred to
as the "Restricted Stock" and the shares of EESI common stock delivered based on
the closing price of EESI common stock five trading days prior to Closing as set
forth in subsection (ii) above is referred to as the "Unrestricted Stock". The
Restricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement on the earlier of eighteen (18) months after the
Closing Date or July 12, 1998.
3
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The Unrestricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement commencing on the Closing Date.
Section 1.5. Description of Assets. Upon the terms and subject to the
---------------------
conditions set forth in this Agreement, on the Closing Date each of the
Companies shall grant, convey, sell, transfer and assign to EESI New York, EESI
LI and EESI Container assets, properties and contractual rights of the
Companies, wherever located, all as set forth in this Section 1.5.
(a) All of the containers and carts ("Containers") owned or leased by
Curbside shall be conveyed and assigned to EESI Container.
(b) All of the motor vehicles and all attachments, accessories and
materials handling equipment owned or leased by KC Waste, NY Waste, and Waste,
as set forth on Schedule 1.5(b) attached, shall be conveyed and assigned to EESI
New York and all of the motor vehicles and all attachments, accessories and
materials handling equipment owned or leased by LI Waste, as set forth on
Schedule 1.5(b) shall be conveyed and assigned to EESI LI.
(c) All of the compactors and recycling equipment owned or leased by KC
Waste, NY Waste, and Waste shall be conveyed and assigned to EESI New York and
all of the compactors and recycling equipment owned or leased by LI Waste shall
be conveyed and assigned to EESI LI.
(d) All radios located in the rolling stock, the radio base station, and
all manual and automated routing and billing systems and components thereof,
including, without limitation, all computer hardware, software and programs
("Radios") owned or leased by KC Waste, NY Waste, and Waste shall be conveyed
and assigned to EESI New York and all Radios owned or leased by LI Waste shall
be conveyed and assigned to EESI LI.
(e) All of the inventory of parts, tires and accessories owned by KC
Waste, NY Waste and Waste shall be conveyed to EESI New York and all of the
inventory of parts, tires and accessories owned by LI Waste shall be conveyed to
EESI LI.
(f) All right, title and interest of KC Waste, NY Waste and Waste in and
to all trade secrets, proprietary rights, symbols, trademarks, service marks,
logos and trade names used and owned by KC Waste, NY Waste and Waste shall be
conveyed to EESI New York and all right, title and interest of LI Waste in and
to all trade secrets, proprietary rights, symbols, trademarks, service marks,
logos and trade names used and owned by LI Waste shall be conveyed to EESI LI.
(g) All contractual rights of Waste, NY Waste, and KC Waste with their
customers (whether oral or in writing) relating to the conduct of the Business
shall be conveyed to EESI New York and all contractual rights of LI Waste with
its customers (whether oral or in writing) relating to the conduct of the
Business shall be conveyed to EESI LI.
4
<PAGE>
(h) All contractual rights of Curbside with its customers (whether oral or
in writing) relating to the conduct of the Business shall be conveyed to EESI
Container.
(i) All accounts receivable of Waste, NY Waste, and KC Waste arising out
of the Business shall be conveyed to EESI New York and all accounts receivable
of LI Waste arising out of the Business shall be conveyed to EESI LI.
(j) All accounts receivable of Curbside arising out of the Business shall
be conveyed to EESI Container.
(k) All leases and agreements to which Waste, NY Waste, and KC Waste are
parties in connection with the Business shall be assigned to EESI New York; all
leases and agreements to which LI Waste is a party in connection with the
Business shall be assigned to EESI LI; and all leases and agreements to which
Curbside is a party shall be assigned to EESI Container.
(l) All permits, licenses, franchises, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals") held by Waste, NY Waste, and KC Waste
relating to, used in or required for the operation of the Business which are
transferable shall be transferred to EESI New York; all Consents and Approval
held by LI Waste relating to, used in or required for the operation of the
Business which are transferable shall be transferred to EESI LI; and all
Consents and Approval held by Curbside relating to, used in or required for the
operation of the Business which are transferable shall be transferred to EESI
Container.
(m) The exclusive right to use the names Waste Services, New York Waste,
and KC Waste shall be conveyed to EESI NY; the exclusive right to use the name
Curbside shall be conveyed to EESI Container; and the exclusive right to use the
name L.I. Waste Services shall be conveyed to EESI LI.
(n) All right, title, and interest of Waste Services, New York Waste, and
KC Waste in and to the telephone numbers used in the conduct of the Business
shall be conveyed to EESI New York; all right, title, and interest of LI Waste
in and to the telephone numbers used in the conduct of the Business shall be
conveyed to EESI LI; and all right, title, and interest of Curbside in and to
the telephone numbers used in the conduct of the Business shall be conveyed to
EESI Container.
(o) All of the shop tools owned by Waste Services, New York Waste, and KC
Waste relating to the Business shall be conveyed to EESI New York; all of the
shop tools owned by LI Waste relating to the Business shall be conveyed to EESI
LI; and all of the shop tools owned by Curbside relating to the Business shall
be conveyed to EESI Container.
5
<PAGE>
(p) All of the furniture and office or other equipment owned by Waste
Services, New York Waste, and KC Waste shall be conveyed to EESI New York; all
of the furniture and office or other equipment owned by LI Waste shall be
conveyed to EESI LI; and all of the furniture and office or other equipment
owned by Curbside shall be conveyed to EESI Container.
(q) All of the interest of Waste Services, New York Waste and KC Waste in
all tangible and intangible property, including, without limitation, pre-paid
expenses shall be conveyed to EESI New York; all of the interest of LI Waste in
all tangible and intangible property, including, without limitation, pre-paid
expenses shall be conveyed to EESI LI; and all of the interest of Curbside in
all tangible and intangible property, including, without limitation, pre-paid
expenses shall be conveyed to EESI Container.
(r) All of the goodwill of the Business owned by each Company shall be
conveyed to the Purchaser acquiring the assets of such Company.
(s) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (r) above shall be
conveyed to EESI New York, EESI LI and EESI Container, as applicable.
All of the foregoing assets, properties and contractual rights described in (a)
through (s) above are hereinafter sometimes collectively called the "Assets."
At Closing, good and marketable title to the Assets will be conveyed to Buyer by
the Companies free and clear of all liens, encumbrances, security interests and
claims, except for liens securing the Assumed Liabilities, as defined in Section
1.7.
Section 1.6. Excluded Assets. The parties agree that the only tangible
---------------
and intangible property owned by the Companies and not being sold to the
Purchasers is the cash on hand of the Companies and the corporate records of the
Companies other than the records set forth in Section 1.5(s) above. ("Excluded
Assets").
Section 1.7. Assumption of Obligations. From and after the Closing the
-------------------------
Purchasers agree to assume and perform all of the Companies' obligations under
(i) the Company Debt; (ii) the customer contracts of the Companies, to the
extent, and only to the extent, such obligations first mature and are required
to be performed subsequent to the close of business on the Closing Date; (iii)
the accounts payable of the Companies; (iv) all documents evidencing the Company
Debt, as identified on Schedule 1.4, to the extent, and only to the extent, such
obligations first mature and are required to be performed subsequent to the
close of business on the Closing Date; (v) all documents, identified in Schedule
2.3 except for any collective bargaining agreements with Labor Unions, to the
extent, and only to the extent, obligations under such documents first mature
and are required to be performed subsequent to the close of business on the
Closing Date (union contracts are not being assumed by the Purchasers) and (vi)
contracts or agreements arising in the ordinary course, only to the extent, such
obligations first mature and are required to be performed subsequent to the
close of business on the Closing Date and which in the aggregate require the
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payment of $25,000 or less a year ("Assumed Liabilities"). Purchasers agree to
defend and indemnify Sellers and hold Sellers harmless from all losses, claims,
causes of action, damages, liabilities, expenses and costs of any kind or amount
whatsoever (including, without limitation, reasonable attorneys' fees) with
respect to the Assumed Liabilities.
Section 1.8. Non-Assumption of Liabilities. Except as explicitly set
-----------------------------
forth in Section 1.7 above, Purchasers shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for, or
incur any liability or obligation of any nature of the Companies, whether legal
or equitable, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, including, without limiting
the generality of the foregoing, any liability or obligation arising out of or
relating to: (a) any occurrence or circumstance (whether known or unknown) which
occurs or exists on or prior to the Closing Date and constitutes, or which by
the lapse of time or giving notice (or both) would constitute, a breach or
default under any lease, contract, or other instrument or agreement or
obligation (whether written or oral); (b) injury to or death of any person or
damage to or destruction of any property, whether based on negligence, breach of
warranty, or any other theory; (c) violation of the requirements of any
governmental authority or of the rights of any third person, including, without
limitation, any requirements relating to the reporting and payment of federal,
state, local or other income, sales, use, franchise, excise or property tax
liabilities of Sellers; (d) the generation, collection, transportation, storage
or disposal by the Companies of any materials, including, without limitation,
hazardous materials; (f) any severance pay obligation of the Companies,
compensation owed employees of the Companies for periods prior to the Closing
Date, or any obligations under any employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended)
or any other fringe benefit program maintained or sponsored by Companies or to
which any of the Companies contributes or any contributions, benefits or
liabilities therefor or any liability for the withdrawal or partial withdrawal
from or termination of any such plan or program by the Companies; (g) the debts
and obligations of the Companies, except for the Assumed Liabilities; (h) any
violation by the Companies of any law, including, without limitation, any
federal, state or local antitrust, racketeering or trade practice law; and (i)
liabilities or obligations of the Sellers for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder.
Section 1.9. Term And Time For Closing. Following execution of this
-------------------------
Agreement, the Purchasers and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms on the last business day of
the month that the conditions of Closing set forth in Article VI and Article VII
have been satisfied or waived. If the failure to conclude this transaction is
due to the refusal and failure of Sellers to perform their obligations to close
under this Agreement, Purchasers may seek to enforce this Agreement with an
action of specific performance, in addition to, and not in limitation of, any
other rights and remedies available to the Purchasers, under this Agreement, or
at law or in equity, including, without limitation, an action to recover their
actual damages resulting from the default of the Sellers. If the failure to
conclude this transaction is due to the refusal and failure of Purchasers to
perform their obligations to close under this Agreement,
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the Sellers, or any of them, under this Agreement, or at law or in equity, bring
legal action to recover their actual damages resulting from the default of the
Purchasers.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and William Leone, on behalf of the
Sellers;
(b) by EESI by November 8, 1996, if EESI is not satisfied with the due
diligence it has conducted on the Companies;
(c) by EESI or William Leone, on behalf of the Sellers, by providing the
other with written notice thereof, if the Closing shall not have occurred by
December 31, 1996, or such other date as may be agreed to by the parties hereto
in writing, if such notifying party is ready, willing and able to consummate the
transactions contemplated by this Agreement and all of the conditions to the
other party's obligation to close as set forth in Article VI or VII, as
applicable, shall have been satisfied and the other party fails to consummate
the transactions contemplated by this Agreement for any reason whatsoever;
(d) by William Leone, on behalf of the Sellers, or by EESI, on or prior to
December 31, 1996, or such other date as may be agreed to by the parties in
writing, in the event Purchasers or the Sellers, as applicable, makes a material
misrepresentation under this Agreement or breaches a material covenant or
agreement under this Agreement, and fails to cure such misrepresentation or
breach within ten (10) days from the date of written notice of the existence of
such misrepresentation or breach; or
(e) by William Leone, on behalf of the Sellers or EESI, if the Closing
shall not have occurred by December 31, 1996, or such other date as may be
agreed to by the parties hereto in writing, due to the non-fulfillment of a
condition precedent to such party's obligation to close as set forth at Article
VI or VII hereof, as applicable (through no fault or breach by the terminating
party). However, if the only condition to Closing which has not been satisfied
is the condition set forth in Section 6.7 or Section 6.8, the date of December
31, 1996, shall be extended to February 28, 1997, at the option of EESI or
Sellers, to be exercised through written notice to Sellers or EESI, as
applicable.
(f) by the Purchasers and Sellers as provided in Section 9.14.
All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that Section 1.9, Section 5.1, Section 5.2, Section 6.10, Section
7.10, Article VIII, Section 9.1, Section 9.2 and Section 9.15 shall survive and
continue in
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full force and effect, notwithstanding termination. The termination of this
Agreement shall not limit, waive or prejudice the remedies available to the
parties, at law or in equity, for a breach of this Agreement. In the event of
termination by William Leone, on behalf of the Sellers, pursuant to the above
Sections (c) or (d) hereof, William Leone, on behalf of the Sellers, shall be
entitled to recover Sellers costs and expenses, including reasonable attorneys
fees, in connection with the preparation, negotiation and execution of this
Agreement.
Section 1.10. Deliveries by Purchasers. At the Closing, Purchasers
-------------------------
shall deliver, all duly and properly executed, authorized and issued (where
applicable):
(a) The EESI Stock, as provided in Sections 1.3 and 1.4 above, to be
delivered to the Companies;
(b) A certified copy of resolutions of the directors and shareholder of
EESI New York, EESI LI and EESI Container and the directors of EESI authorizing
the execution and delivery of this Agreement and each other agreement to be
executed in connection herewith, including, but not limited to the Employment
Agreements (collectively, the "Collateral Documents") and the consummation of
the transactions contemplated herein and therein;
(c) A favorable opinion from counsel for Purchasers, dated the day of the
Closing in the form attached as Schedule 1.10(c);
(d) Employment Agreements with William Leone, John Leone, Richard Leone,
and Joseph Leone, in the form and content of the Employment Agreements attached
hereto as composite Schedule 1.10(d) (the "Employment Agreements");
(e) The Certificate described at Section 7.1;
(f) An Assignment and Assumption Agreement in the form attached as Schedule
1.10(f) attached hereto;
(g) Other documents and instruments required by this Agreement, if any.
Section 1.11. Deliveries by Sellers. At the Closing, each of the Sellers,
---------------------
as applicable, shall deliver to Purchasers, all duly executed, the following:
(a) The Companies shall deliver to EESI New York, EESI LI and EESI
Container, duly executed Bills of Sale for the Assets to be conveyed and
assigned to each of EESI New York, EESI LI and EESI Container, in the form
attached as Schedule 1.11(a);
(b) Each of the Sellers who are parties to the Employment Agreements with
EESI, in the form attached as Schedule 1.10(d) to this Agreement, shall execute
such agreements, as applicable;
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(c) Each of the Shareholders shall execute the Covenant Not to Compete
Agreement attached to this Agreement as Schedule 1.11(c);
(d) The Companies shall have delivered to EESI a current certificate of
good standing for each of the Companies from the New York Secretary of State;
(e) A favorable opinion from counsel for the Companies, dated the date of
the Closing, in form attached as Schedule 1.11(e);
(f) Each of the Sellers shall execute and deliver the Certificate described
at Section 6.1;
(g) An Assignment and Assumption Agreement in the form attached as Schedule
1.10(f) attached hereto;
(h) The books and records of each of the Companies to be delivered as set
forth in Section 1.5(s);
(i) Physical possession of all Assets; and
(j) Other documents and instruments required by this Agreement, if any.
Section 1.12. Transfer Tax, Allocation of Purchase Price and Bulk Sales
---------------------------------------------------------
(a) Purchasers shall pay all sales, transfer taxes and fees imposed on the
conveyance of the Assets by all governments, state, local and federal.
(b) The parties agree that the consideration for the sale of the Assets
shall be allocated among the Assets as set forth on Schedule 1.12(b) attached
hereto. The Sellers and the Purchasers acknowledge that the allocation has been
arrived at based upon their negotiations and shall be used by them for all
purposes, including, but not limited to, federal, state, and local tax and
financial reporting purposes, and they shall not take any position inconsistent
to the allocation. On the Closing Date, the Purchasers and the Sellers shall
execute Internal Revenue Form 8594 which form shall be binding on the Purchasers
and the Sellers and shall be filed with the income tax returns of the Purchasers
and the Sellers.
(c) The Purchasers hereby waive compliance by the Companies with the
provisions of the New York State Bulk Sales Law and the Sellers, jointly and
severally, covenant and agree to pay and discharge, when due, or contest in good
faith by appropriate proceedings, all claims of creditors which could be
asserted against the Purchasers or the Assets by reason of such noncompliance.
Simultaneously with the execution of this Agreement (and in any event, not less
than ten (10) days prior to Closing), the parties shall complete New York State
Department of Taxation and Finance Form AU-196.10 (Notification of Sale,
Transfer or Assignment in Bulk) and the Purchasers shall promptly file it in the
appropriate office.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Whenever the phrase "to Sellers' knowledge", "to Shareholders' knowledge"
or a similar phrase is used in this Agreement, the phrase means the actual
knowledge of any of the Shareholders and (with respect to Shareholders who are
officers or employees of the Companies) the knowledge such Shareholders would or
should have had, if such Shareholders who are employees or officers of the
Companies exercised reasonable diligence in the conduct of such Shareholders'
duties to the Companies. With knowledge that Purchasers are relying upon the
representations, warranties and covenants herein contained, all of the Sellers
jointly and severally represent and warrant to Purchasers and make the following
covenants for the Purchasers' benefit:
Section 2.1. Organization and Standing. Each of the Companies is a
-------------------------
corporation duly organized, legally existing and in good standing under the laws
of the state of its incorporation, with full power and authority to own its
properties and conduct its business as now being conducted. The Companies do
not own any stock or interest in any other corporation, partnership, or other
business organization, except as set forth on Schedule 2.1.
Section 2.2. Company Stock. Each of the Companies has the authorized and
-------------
kind of capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets
forth the number of shares of the capital stock of each of the Companies issued
and outstanding. Except as set forth in Schedule 2.2, the stock ("Company
Shares") each Shareholder owns in each Company are legally and validly
authorized and issued, fully paid and nonassessable. There are no outstanding
rights of any kind to acquire additional shares of any class of stock from any
Company.
Section 2.3. Contracts, Permits and Material Documents. The items
-----------------------------------------
listed in Schedule 2.3 attached, are all of the following with respect to each
of the Companies ("Material Documents"): (i) leases for real and personal
property excepting office equipment, (ii) licenses, (iii) franchises, (iv)
promissory notes, guarantees, bonds, mortgages, liens, pledges, and security
agreements under which any of the Companies is bound or under which any of the
Companies is the beneficiary, (v) collective bargaining agreements, (vi)
patents, trademarks, trade names, copyrights, trade secrets, proprietary rights,
symbols, service marks, and logos, (vii) all permits, licenses, consents and
other approvals from governments, governmental agencies (federal, state and
local) and/or third parties relating to, used in or required for the operation
of each Company's businesses, and (viii) other contracts, agreements and
instruments not listed on another Schedule attached to this Agreement (such as
the customer contracts listed on Schedule 2.5) which are binding on any Company
or any of its property and pursuant to which any Company derives any material
benefit or has imposed upon it any material detriment. For purposes of this
Section 2.3 a material benefit or material detriment shall be anything which
provides a benefit or imposes a detriment having a value of $25,000 or more.
The Material Documents listed on Schedule 2.3 are organized under separate
headings for each of the Companies and under subheadings for each of the
different type of documents listed. Except as set forth on Schedule 2.3, no
Company nor, to
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the knowledge of the Sellers, any person or party to any of the Material
Documents or bound thereby is in material or knowing default under any of the
Material Documents, and, to the knowledge of the Sellers, no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default. No Company is a party to, and no Company's property is bound by any
agreement or instrument which is material to the continued conduct of business
operations of the Companies, taken as a whole, as now being conducted, except as
listed in Schedule 2.3.
Section 2.4. Personal Property. All items of personal property owned or
------------------
leased by the Companies, or used in the business operations of the Companies,
will be transferred to Purchasers at closing, in the condition set forth in
subparagraphs (a) and (b) below:
(a) Attached hereto, made a part hereof and marked Schedule 2.4(a) is a
listing of all those items described in subparagraphs "i" and "ii," organized by
Company and by subparagraph.
(i) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors used in each Company's business operations
together with information as to the make, description of body and chassis, model
number, serial number and year of each such vehicle, all of which are owned or
leased by each Company, as listed on Schedule 1.5(b) and, to the knowledge of
the Sellers, all of the vehicles are, in all material respects, in good
condition, normal wear and tear excepted, except as noted on Schedule 1.5(b);
(ii) All containers used in each Company's business operations are
in good condition, in all material respects, normal wear and tear excepted,
except as noted on Schedule 2.4(a)(ii);all containers used in each Company's
business operations having a size of 10 yards or greater together with
information as to container size are listed on Schedule 2.4(a)(ii);
(b) All other items of personal property owned, leased or used by the
Companies, including, without limitation, all radios, compactors, recycling
equipment, furniture, office equipment and other equipment used in each
Company's business operations, the inventory of parts, tires and accessories
maintained by each Company, and the shop tools used by each Company are in good
condition, in all material respects, normal wear and tear excepted, except as
noted on Schedule 2.4(b);
Section 2.5. Customers. Each customer each Company serves (listed by
---------
account number and not by name) together with information as to the services
rendered to each such customer, frequency of service and rates charged, is
listed on Schedule 2.5 attached hereto. All customers are obligated under the
Companies' standard form of contract, except for variations agreed to by the
Companies which are not material in nature. The name and address of each
customer shall be provided by the Companies to Purchasers at Closing. To the
knowledge of Sellers, each customer is creditworthy and no customer represents
more than 3% of the total annual billings of all of the Companies taken as a
whole. No Company nor, to the knowledge of the Sellers, any person or party to
any of the customer contracts is in material or knowing default under any of the
customer
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<PAGE>
contracts, and, to the knowledge of the Sellers, no act or event has occurred
which with notice or lapse of time, or both, would constitute such a default.
Section 2.6. Title. Each Company has good and marketable title to, or a
-----
valid leasehold interest in all of its assets both real property and personal
property, each free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement ("Liens"), except the items set forth in subparagraphs "a" through
"d", and the items listed on Schedule 2.3 ("Permitted Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or materialmen
and the like;
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation;
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment;
(d) Liens incurred in the ordinary course of business for the purchase or
lease of any single asset having a purchase price or lease payments totaling no
more than $150,000.
Section 2.7. Financial Statements. Sellers have delivered to Purchaser
--------------------
true and correct copies of the following financial statements of the Companies
reviewed by Serra & McGrath, L.L.P. (the "Financial Statements") a consolidated
balance sheet for WSI Holding Corporation and a balance sheet for KC Waste and
Curbside as of December 31, 1995, and a statement of income, cash flow and
retained earnings for WSI Holdings and for KC Waste and Curbside for the period
ended December 31, 1995, both prepared on an accrual basis. The Financial
Statements have been prepared by the regular accountants of the Companies, in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis in accordance with past custom and practice of the Companies.
The balance sheets comprising the Financial Statements present fairly, in all
material respects, the financial condition of the Companies as of the dates
indicated thereon and the statements of income present fairly, in all material
respects, on an accrual basis the results of the operations of the Companies for
the periods indicated thereon. In accordance with Section 4.7, the Companies
are to produce audited statements at or prior to Closing. The parties
acknowledge that the audited statements for the Companies for 1995 may vary from
the Financial Statements due to acquisitions of the Companies being treated
differently in the audited statements from the Financial Statements. The
Sellers represent and warrant that there shall be no material adverse difference
between the 1995 audited statements of the Companies and the Financial
Statements, except for an increase in earnings due to acquisition expenses being
capitalized instead of expended in current periods. Since the date of the
Financial Statements, the Companies have not (i) made any material change in
their accounting policies or (ii) effected any prior period adjustment to, or
other restatement of, its financial statements for any period. The Financial
Statements are consistent with the books and records of Companies (which books
and records are
13
<PAGE>
correct and complete in all material respects). Since the date of the Financial
Statements, except as set forth on Schedule 2.7, there has not been any material
adverse change in the income, expenses or assets of the Companies, taken as a
whole.
Section 2.8. Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Companies do not have any liabilities, fixed or contingent, other
than:
(i) the Company Debt;
(ii) liabilities fully reflected in the Financial Statement, except
for liabilities not required to be disclosed therein in accordance with GAAP, as
applied on a basis consistent with past custom and practice;
(iii) liabilities disclosed in the Schedules attached to this
Agreement or not required to be disclosed therein by reason of amount or other
qualifications contained in the representations and warranties of this
Agreement; and
(iv) liabilities arising since the date of the Financial Statement
arising during the normal course of business consistent with past custom and
practice as allowed in accordance with Section 4.4 of this Agreement.
(b) Substantially all accounts receivable of the Companies as of the date
hereof are set forth by account number on Schedule 2.8(b), and all of such
accounts and all accounts arising since such date, are, or will be, valid
accounts receivable. The accounts receivable less the bad accounts reserve
conveyed to Purchaser at Closing will be fully collected by Purchaser within 180
days after Closing. Schedule 2.8(b) gives the aging of each of the accounts
receivable and is organized by Company. All accounts receivable have been
generated in the ordinary course of each Company's business consistent with past
practice. To Sellers' knowledge, there are no defenses or set offs to any of
the accounts receivable. On the Closing Date, the accounts receivable plus
$350,000, less the bad accounts reserve on Schedule 2.8(b), plus the pre-paid
expenses of the Companies (which are assigned to the Purchasers or which benefit
the Purchasers) shall equal or exceed the accounts payable, plus the accrued
expenses of the Companies plus accrued and unpaid interest on the Company Debt.
It is agreed that any accounts receivable acquired by KC Waste in connection
with the acquisition of the assets of Rosedale Carting Corp. may be deleted, at
the Companies option from the accounts receivable delivered to Purchaser at
Closing.
(c) Each Company's accounts payable as of the date of this Agreement, is
attached hereto, made a part hereof and marked Schedule 2.8(c). Schedule 2.8(c)
gives the aging of each of the accounts payables and is organized by Company.
Schedule 2.8(c) accurately reflects in all material respects the books and
records of the Companies as of the date of Schedule 2.8(c).
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<PAGE>
(d) Except as set forth in Schedule 1.4, the Company Debt is not in
default, the Company Debt all requires the current monthly payment of accrued
interest, and there is no accrued interest owed on any of the Company Debt in
excess of the amount of accrued interest not yet payable for the current month.
Section 2.9. Fiscal Condition of Each Company. Since the date of the
--------------------------------
Financial Statements, there has not (except as otherwise specifically permitted
by this Agreement or as set forth in the Schedules to this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of any Company or in the relationships of any Company with
suppliers, customers or others;
(b) Any disposition by any 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 any Company of any of its capital stock or any declaration or
payment of any stock dividend or other distribution of its capital stock;
(c) Any sale or other disposition of any asset owned by any Company at the
close of business on the date of the Financial Statements, or acquired by it
since that date, other than in the ordinary course of business consistent with
past practice;
(d) Any expenditure or commitment by any Company for the acquisition of any
single asset, except in the ordinary course of business consistent with past
practices;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of any of the Companies, except
damage, destruction or loss which does not exceed $100,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by any Company to any officer or key employee, except as required by law
or pursuant to a contract which is listed on Schedule 2.9(f) and except as
otherwise set forth in Schedule 2.9(f);
(g) Any loans or advances to any Company other than (i) renewals or
extensions of existing indebtedness, (ii) loans and advances between the
Companies and its affiliates, or (iii) loans extended under existing lines of
credit of the Companies which loans will not exceed $400,000; or
(h) Any change in accounting method or practice, except for increases in
earning due to acquisition expenses being capitalized instead of expensed in
current periods.
Section 2.10. Tax Returns. Each 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. Except
15
<PAGE>
as set forth on Schedule 2.10, the Companies are Subchapter "C" corporations
under the Internal Revenue Service Code. The reserves for all taxes reflected in
the Financial Statements plus the reserves on Schedule 2.10 for all taxes from
the date of this agreement through the Closing Date, if any, are adequate to
cover all taxes, interest and penalties in connection therewith that may be
assessed with respect to the property and business operations for the period(s)
ending on the Closing Date and for all prior periods. The Companies have filed,
and will file (if due), in a timely manner all requisite federal, state, local
and other tax returns due for all fiscal periods ended on or before the Closing
Date. The Companies are currently being audited by the New York State
Commissioner of Taxes and Finance regarding payment of sales tax.
Section 2.11. Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Companies or which the Companies have
had issued and which have not expired are listed on Schedule 2.11 attached
hereto. Schedule 2.11 includes the names and addresses of the insurers and
sureties, policy and bond numbers, types of coverage or bond, time periods or
projects covered and the names and addresses of all known agents or agencies
with respect to each listed insurance policy, performance bond and letter of
credit. Each Company's current insurance policies, performance bonds and
letters of credits are in force and effect and the premiums thereon are not
delinquent. No Company has 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.
Except as set forth on Schedule 2.11, no Company has a claim against any of its
insurance carriers under any of policies insuring it pending or anticipated and
there has been no occurrence of any kind which would give rise to any such
claim.
Section 2.12. Employees, Pensions and, ERISA.
------------------------------
(a) The Companies do not have any contract of employment with an officer or
other employee, except as listed on Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), no employee of the Company is
represented by any union. The name, address and social security number and
current rate of compensation of each of the Company's employees and capacity to
which each person is employed is listed on Schedule 2.12(b) attached. There is
no pending or, to the knowledge of the Sellers, threatened dispute between any
Company and any of its employees which might materially and adversely affect the
continuance of any Company's business operations. The Companies are not
deficient or in arrears in contributing to any trust funds the Companies are
required to contribute to in accordance with any contracts with unions,
including, without limitation, scholarship funds, legal aid funds, pension funds
and health, welfare or benefit funds ("Trust Funds"). There is no matter,
action, audit, suit or claim pending or, to the best knowledge of Sellers,
threatened relating to contributions of the Companies to any Trust Fund, before
any court, tribunal or government agency.
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(c) Attached hereto, made a part hereof and marked Schedule 2.12(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which are currently maintained
and/or were established or sponsored by any Company (whether or not they are now
terminated) or to which any Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Companies.
(d) The Company has delivered to the Purchaser (i) true and complete copies
of all Plan documents and other instruments relating thereto, (ii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iii) true and complete copies of all annual reports for any Plan
prepared within the past 5 years, and (iv) all material filings submitted to and
any correspondence received from any government agency relating to any Plan
within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, threatened relating to any Plan, fiduciary of any
Plan or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual report,
certified by the Plan's actuaries and auditors, as the case may be, fairly
presents the actuarial status and the
17
<PAGE>
financial condition of the Plan as at the date thereof and the results of
operations of the Plan for the plan year reflected therein and, subject to
changes in amounts attributable to investment performance and normal employee
turnover, there has been no adverse change in the condition of the Plan since
the date of the most recent Form 5500, audited annual financial statement or
actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any
liability under the Plans because of an acceleration of any rights or benefits
to which any employee may be entitled thereunder.
Section 2.13. Legality of Operation. In regard to each Company:
---------------------
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and except
as to Environmental Laws, as hereafter defined, each Company is in material
compliance with all Federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use laws; payroll,
employment, labor, or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not limited to the
Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act ("Law"). Except as disclosed
in Schedule 2.13(a), each Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to the Companies' property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
2.13(a), with respect to any Law there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting any Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which would result in an material change in
the financial condition or business of the Companies or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), since January 1, 1990 no Company has received
notification of any past or present failure by the Company to comply with any
Law applicable to it or its assets. As used in this Section 2.13(a), "material"
shall mean any single event or number of events causing a loss to the Companies
of $15,000 for an individual event or $50,000 for all events in the aggregate.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, each Company
is in material compliance with all Federal, state and local laws, rules and
regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.13(b), with
respect to any Environmental Law each Company is in material compliance
with all permits, licenses, and orders related thereto or issued thereunder with
respect to Environmental Laws, as are or may be applicable to the Companies'
property and operations,
18
<PAGE>
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located. Except as set forth on
Schedule 2.13(b) there are no Environmental Law related claims, actions, suits
or proceedings pending, or, to the knowledge of the Sellers, threatened against
or affecting any Company, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, wherever located, which would result in an adverse
change in the financial condition or business of the Companies of $15,000 or
more or which would invalidate this Agreement or any action taken in connection
with this Agreement. To the knowledge of the Sellers, except as set forth on
Schedule 2.13(b), since January 1, 1986 no Company has transported, stored,
treated or disposed, nor has any Company allowed any third persons, on its
behalf, to transport, store, treat or dispose waste to or at (i) any location
other than a site lawfully permitted to receive such waste for such purpose or,
(ii) any location currently designated for remedial action pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar federal or state statute; nor has any of the Companies performed,
arranged for or allowed by any method or procedure such transportation or
disposal in contravention of state or federal laws and regulations or in any
other manner which may result in liability for contamination of the environment;
and no Company has disposed, nor has any Company knowingly allowed third parties
to dispose of waste upon property owned or leased by any of the Companies other
than as permitted by, and in conformity with, applicable Environmental Law.
Except as disclosed in Schedule 2.13(b), since January 1, 1986, no Company has
received notification of any past or present failure by the Company to comply
with any Environmental Law applicable to it or its operations or its assets.
Without limiting the generality of the foregoing since January 1, 1986, no
Company has received any notification (including requests for information
directed to the Company or, to the knowledge of the Sellers, an owner thereof)
from any governmental agency asserting that the business is or may be a
"potentially responsible person" for a remedial action at a waste storage,
treatment or disposal facility, pursuant to the provisions of CERCLA, or any
similar federal or state statute assigning responsibility for the costs of
investigating or remediating releases of contaminants into the environment.
Since January 1, 1986, no Company has received hazardous waste as defined in the
Resource Conservation and Recovery Act, 42 USCA Section 6901 et seq., or in any
-- ---
similar federal or state statute. As used in this Section 2.13(b), "material"
shall mean any single event or number of events causing a loss to the Companies
of $15,000.
(c) Except as set forth on Schedule 2.13 (c), since January 1, 1986 the
Companies have never owned, operated, had an interest in, engaged in and/or
leased a waste transfer, recycling, treatment, storage, landfill or other
disposal facility. To the knowledge of Sellers, the Companies have obtained and
maintained, when required to do so under applicable Environmental Laws, trip
tickets, signed by the applicable waste generators demonstrating the nature of
all waste deposited and or transported by the Companies. To the Sellers'
knowledge, no employee, contractor or agent of the Companies have, in the course
and scope of employment with the Companies, been harmed by exposure to hazardous
materials, as defined under the Laws. No liens with respect to environmental
liability have been imposed against the Companies under CERCLA, any
19
<PAGE>
comparable New York State statute or other applicable Environmental Law, and to
Sellers' knowledge no facts or circumstances exist which would give rise to the
same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past three years and all outstanding
unremedied notice of violations issued to any of the Companies by any federal,
state or local regulatory agency.
(e) To the knowledge of Sellers, none of the Sellers are under
investigation by the District Attorney of any of the boroughs of New York City,
New York for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, or unfair competition Laws.
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Companies, or their assets
or liabilities, and a description of all such proceedings is set forth on
Schedule 2.13(f) attached.
Section 2.14. Corrupt Practices. The Companies have not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Companies for the purpose of attracting business to the Companies or any
foreign or domestic governmental official, political party or candidate for
government office or any of their respective employees or representatives in any
manner which would result in the Companies being in material violation of any
Law, nor have the Companies otherwise taken any action which would cause them to
be in material violation of the Foreign Corrupt Practices Act of 1977, as
amended. As used in this Section 2.14, "material" shall mean any single event or
number of events causing a loss to the Companies of $15,000 individually or in
the aggregate.
Section 2.15. Legal Compliance. The Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and, except as set forth in Schedule 2.15, no approvals or
consents of any other persons or entities are necessary in connection with the
transactions contemplated by this Agreement. Except as disclosed in Schedule
2.15 to this Agreement, the execution and performance of this Agreement will not
result in a material breach of or constitute a material default or result in the
loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which any Company
or any Seller is a party or by which such Company, Seller or any of their
property is bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on any Company or on any property of any Company.
20
<PAGE>
Section 2.16. Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Seller is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
Section 2.17. Intellectual Property. To the knowledge of the Sellers, no
---------------------
Company has infringed and is not now infringing, on any trade name, trademark,
service mark or copyright belonging to any person, firm or corporation
("Intellectual Property") and to the knowledge of the Sellers no one has or is
infringing any Intellectual Property right of any Company.
Section 2.18. Competition. Except as set forth on Schedule 2.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of any Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of such Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company is doing business which interest adversely or materially affects the
business of any Company.
Section 2.19. Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II or in any Exhibit or Schedule or other
document delivered by the Sellers or the Companies pursuant hereto, do not
contain any untrue statement of a material fact, or omit any statement of a
material fact necessary to make the statements contained not misleading. If
prior to Closing the Sellers become aware of any inaccuracy, or
misrepresentation or omission in any of the Schedules, they shall immediately
advise Purchasers in writing of the inaccuracy, misrepresentation or omission.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
The Purchasers each, jointly and severally, represent and warrant to the
Sellers that:
Section 3.1. Structure. The Purchasers are corporations duly organized
---------
and legally existing in good standing under the laws of Delaware and EESI New
York and EESI Container are qualified to do business in New York and the
Purchasers are qualified in all other jurisdiction in which they are required to
be qualified.
Section 3.2. Authorization to Proceed with this Agreement. Purchasers
--------------------------------------------
have by proper corporate proceedings duly authorized the execution, delivery and
performance of this Agreement and each other agreement contemplated to be
entered into and no other corporate action is required by law or the Certificate
of Incorporation or by-laws of Purchasers.
21
<PAGE>
Section 3.3. Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Purchasers' authority will be entitled to make any
claim against the Sellers for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
Section 3.4. Public Reports. EESI has delivered to Sellers true,
--------------
accurate, complete and current for the years ended June 30, 1995, and June 30,
1996, historical filings made by EESI on Form 10-K and all amendments thereto,
current reports on Form 8-K dated July 2, 1996, and dated September 27, 1996,
and EESI's Proxy Statement for a Special Meeting of Stockholders called for
August 8, 1996, timely filed with the Securities and Exchange Commission. Since
June 30, 1996, there has not been any material adverse change in the income,
expenses, assets, results of operation or financial condition of EESI. Such
filings accurately and completely described, in all material respects, EESI's
financial status, business operations and prospects as of the date of such
filings and do not omit any material fact(s) necessary to make the information
contained in the filings not misleading. All of such information provided to
Sellers is correct, complete and does not omit any material information that a
prudent investor would like to know.
Section 3.5. Authorized Stock. The total authorized capital stock of
----------------
EESI consists of 50,000,000 shares of Common Stock, par value $.01 per share,
and 10,000,000 shares of Class A Common Stock, par value $.01 per share, none of
which is outstanding. As of October 15, 1996, the outstanding shares of capital
stock of EESI consisted solely of 11,572,900 shares of Common Stock, par value
$.01. EESI New York has 10,000 shares of common stock, par value $.01 per share,
authorized and 100 shares issued, all of which are owned by EESI. EESI Container
and EESI LI have 1,000 shares of no-par-value common stock authorized and 100
shares issued, all of which are owned by EESI. All of such issued and
outstanding shares of Purchasers have been duly authorized and validly issued,
are fully-paid and non-assessable and were issued in compliance with all federal
and state securities laws. Until Closing EESI agrees it shall not redeem in
excess of five hundred thousand (500,000) of its shares of common stock.
Section 3.6. EESI Stock. All of the shares of EESI stock to be issued to
----------
the Companies as contemplated by this Agreement and the Collateral Documents
will, upon delivery, be duly authorized and validly issued, fully paid and non-
assessable and issued in compliance with federal and state securities laws, free
and clear of all liens, charges, restrictions, mortgages, security interests or
claims of any kind.
Section 3.7. Authorization. The Purchasers have the power and authority
-------------
to enter into this Agreement and each of the Collateral Documents and to carry
out the transactions contemplated hereby and thereby and this Agreement and each
of the Collateral Documents to which the Purchasers are parties, as applicable,
constitutes the legal, valid and binding obligation of the Purchasers,
enforceable in accordance with its terms. The Purchasers have the power and
authority to own and lease their respective properties and to carry on their
respective businesses as now conducted.
22
<PAGE>
Section 3.8. Contravention; Consents and Approvals. No filing, action,
-------------------------------------
consent or approval of any person, entity or governmental body is required by
the Purchasers for the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for the New York
Trade Waste Commission. The execution and delivery of this Agreement by the
Purchasers and the consummation of the transactions contemplated hereby by the
Purchasers will not result in a breach of the terms or conditions of, or
constitute a default under, or violate, (a) any provision of any law, regulation
or ordinance, (b) any agreement, lease, mortgage or other instrument or
undertaking, oral or written, to which any of the Purchasers are a party or by
which any of their properties or assets is or may be bound or affected, or (c)
any judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body.
Section 3.9. Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchasers in this Agreement do not contain any untrue
statement of a material fact, or omit any statement of a material fact necessary
to make the statements contained therein not misleading.
Section 3.10. Hart-Scott-Rodino Filing. Purchasers, jointly and
------------------------
severally, represent and warrant that this transaction does not require a Hart-
Scott-Rodino anti-trust notification filing.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
Section 4.1. Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------
Stock delivered to Companies at Closing is not registered under the Securities
Act of 1933 ("Act"), the Companies understand and agree that the following
restrictions and limitations are applicable to the Companies' purchase and
resale or other transfer of the EESI Stock, pursuant to the Act.
(a) Companies agree that the EESI Stock shall not be sold or otherwise
transferred, unless the EESI Stock is registered under the Act and state
securities laws or is exempt therefrom.
(b) Until the EESI Stock is registered under the Act, a legend in
substantially the following form will be placed on the certificates evidencing
the EESI Stock to be issued to the Companies:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Eastern Environmental Services, Inc. shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Eastern
Environmental Services, Inc. that registration is not required under any
such acts.
23
<PAGE>
(c) Stop transfer instructions will be imposed with respect to the EESI
Stock issued to Companies pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 4.2. Plan of Reorganization. This Agreement contemplates the
----------------------
exchange of substantially all of the assets of the Companies solely in exchange
for the voting stock of EESI in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to
take no action inconsistent with the treatment of such exchange as a
reorganization under Code (S)368(a)(1)(C) and to comply with all IRS filing and
other requirements for such exchange.
Section 4.3. Access to Records. The Shareholders will cause the
-----------------
Companies to give and the Companies shall give Purchasers and their
representatives, from the date hereof until six years after the Closing Date,
full access during normal business hours upon reasonable notice to all of the
properties, books, contracts, documents and records of the Companies pertaining
to the Business, and to make available to Purchasers and their representatives
all additional financial statements of and all information with respect to the
business and affairs of the Companies that Purchasers may reasonably request.
Section 4.4. Continuation of Business. The Companies will operate until
------------------------
the time of Closing, in the ordinary course of business, consistent with past
practice, so as to preserve their business organization intact, to assure, to
the extent possible, the availability to Purchasers of the present key employees
of the Companies, and to preserve for Purchasers the relationships of the
Companies with suppliers, customers, and others, except if it is determined in
the judgment of the Companies to be in the best interest of the Companies.
(a) Purchasers acknowledge that increases in Company Debt due to the
financing of single assets having a purchase price of no more than $150,000 are
in the ordinary course of Companies' business. Prior to Closing, the Companies
may decrease the Company Debt due to pre-payments outside of regularly scheduled
payments in an amount not exceeding $2,000,000 in the aggregate. Any reduction
of the Company Debt in excess of $2,000,000 shall not occur without the written
approval of EESI. EESI will not withhold its consent to a reduction of Company
Debt in excess of $2,000,000, if such reduction will not reduce the net income
of the Companies.
(b) Purchasers acknowledge that management bonuses may be paid or accrued
prior to Closing; provided that any accrued and not paid management bonuses
shall be treated as an accounts payable for purposes of determining whether the
warranty and representation set forth in the last sentence of Section 2.8(b) was
true.
Section 4.5. Continuation of Insurances. The Shareholders will cause the
--------------------------
Companies to and the Companies shall keep in existence all policies of insurance
insuring the Companies against
24
<PAGE>
liability and property damage, fire and other casualty through the time of
Closing, consistent with the policies currently in effect.
Section 4.6. Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the
Shareholders and the Companies will not directly or indirectly solicit offers
for the Company Shares or the Assets or for a merger or consolidation involving
the Companies, or respond to inquiries from, share information with, negotiate
with or in any way facilitate inquiries or offers from, third parties who
express or who have heretofore expressed an interest in acquiring the Companies
by merger, consolidation or other combination or acquiring any of Companies'
assets; nor will the Shareholders permit the Companies to do any of the
foregoing.
Section 4.7. Audited Financial Statements. Sellers agree to cause the
----------------------------
Companies to prepare and the Companies shall prepare an audited balance sheet
for the Companies as of December 31, 1993, December 31, 1994 and December 31,
1995 and a statement of income, cash flow and retained earnings for the
Companies for the twelve month periods ended December 31, 1993, December 31,
1994 and December 31, 1995 (if Closing occurs after December 31, 1996, a 1993
audit shall not be required, but an audit for year ended December 31, 1996,
shall be required) ("Historical Financial Statements") as rapidly as possible,
but no later than the Closing Date. Sellers shall also cause the Companies to
prepare an unaudited balance sheet of the Companies as of the end of the
calendar quarter completed immediately prior to the Closing Date and an
unaudited statement of income, cash flow and retained earnings for the period
ending with the completion of the calendar quarter ended prior to the Closing
Date ("Interim Financial Statements"). The Interim Financial Statements are to
be delivered by the Companies on or before forty five (45) days after the
Closing Date. Companies may select the accounting firm used to prepare such
statements as required above, but said firm must be reasonably acceptable to
EESI. Purchasers shall pay the fee of the accounting firm hired to prepare the
statements required by this Section 4.7, whether or not Closing occurs.
ARTICLE V.
ADDITIONAL AGREEMENTS OF PURCHASERS
-----------------------------------
Section 5.1. Payment of Expenses. EESI will pay all expenses incurred by
-------------------
Purchasers in connection with the negotiation, execution and performance of this
Agreement. At the Closing, EESI will also pay up to $130,000 of the
professional expenses incurred by Sellers in connection with the negotiation,
execution and performance of this Agreement and the accounting fees for the
audits to be delivered by the Companies as set forth in Section 4.7. The
Companies, before the Closing Date, will pay all reasonable legal and accounting
expenses incurred by the Shareholders and the Companies (except for the
accounting fees set forth in Section 4.7 which shall be paid by EESI and the
$130,000 of professional fees EESI has agreed to pay in the prior sentence) in
connection with the negotiation, execution and performance of this Agreement and
the Collateral Documents.
25
<PAGE>
Section 5.2. Registration Rights.
-------------------
(a) This Section 5.2 shall apply to the EESI Stock, delivered under this
Agreement, as follows: (i) the Restricted Stock, as defined in Section 1.4,
shall be entitled to the registration rights set forth in this Section 5.2 on
the earlier of eighteen (18) months after the Closing Date or July 12, 1998; and
(ii) the Unrestricted Stock, as defined in Section 1.4, shall be entitled to the
registration rights set forth in this Section 5.2 commencing on the Closing
Date. For purposes of this Agreement the term "Unregistered Stock" shall mean
the EESI common stock consisting of the Restricted Stock and the Unrestricted
Stock as of the time that such stock is entitled to the registration rights set
forth in this Section 5.2. As soon as practical following the date that any
Unregistered Stock first becomes Unregistered Stock, as defined in this Section
5.2, but in any event within one hundred twenty (120) days after the date that
the Unregistered Stock first became Unregistered Stock, EESI shall file a
registration statement to register the Unregistered Stock under the Act for sale
to the public pursuant to a "shelf registration" on Form S-3 or other
appropriate form, if Form S-3 is not available under Rule 415 of the Act to
qualify such securities under the Act or if required any state "blue sky" laws.
Purchasers agree to include the Unregistered Stock in any registration statement
on Form S-3 that registers the 2,500,000 shares of common stock issued by EESI
in a private placement on July 12, 1996. EESI will give written notice to the
Sellers of the "shelf registration" at least 15 days before the registration
statement is filed. After receiving the notice of the "shelf" registration, each
Seller will advise EESI in writing of the intended method of disposition of the
Unregistered Stock to be registered, as required for EESI to prepare the
registration statement. Sellers recognize that the occurrence of certain
corporate developments, including significant acquisitions, may result in the
failure of the registration statement in which the Unregistered Stock is
registered to contain all information required in accordance with applicable law
until an amendment or supplement is filed and made available to the holders of
all such Unregistered Stock. Sellers recognize that in such event, sales under
the registration statement will be suspended until EESI files the amendments or
supplements required by the next sentence. EESI agrees, as promptly as
reasonably practicable, to prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period required pursuant to the terms of this Agreement and comply with the
provisions of the Act with respect to the disposition of all Unregistered Stock
covered by such registration statement during such period in accordance with the
intended methods of disposition by the holders thereof set forth in such
registration statement. EESI shall keep such registration statement current and
effective, until such time as all of the Unregistered Stock may be sold by the
Sellers at any time without restriction or pursuant to the provisions of Rule
144 without volume restrictions or until such earlier date as all of the shares
registered pursuant to such registration statement shall have been sold or
otherwise transferred to a third party.
(b) With respect to the registration of the Unregistered Stock, EESI will,
as expeditiously as possible: (i) furnish to the Sellers such number of
prospectuses, including copies of preliminary prospectuses, prepared in
conformity with the requirements of the Act, and such other documents, as the
Sellers may reasonably request in order to facilitate the public sale or
26
<PAGE>
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,
EESI shall indemnify Sellers in accordance with the provisions of Article VIII
from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing) or necessary in order to make the statements therein not misleading or
(iii) any violation or alleged violation by EESI to which such Sellers may
become subject under the Act, or other Federal or state laws or regulations, at
common law or otherwise. Notwithstanding the above, EESI shall not be liable to
Sellers if and to the extent that any Security Liability arises out of or is
based upon any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to EESI by Sellers
which is stated in writing to be specifically intended for such use; and
provided further, that EESI shall not be required to indemnify Sellers against
any Security Liability which arises out of the failure of Sellers to deliver a
final prospectus made available to Sellers by EESI.
(d) All expenses incurred in effecting the registrations provided for in
this Section 5.2 shall be paid by EESI, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for EESI, fees and disbursement of counsel for Sellers (up to $2,500 per
year), underwriting expenses (other than commissions or discounts which shall be
shared by the parties registering shares of EESI's common stock in proportion to
the number of shares registered in each particular offering), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or "blue sky" laws of any jurisdictions.
Section 5.3. Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchasers shall allow the Sellers and their agents access
to all business records and files of the Companies pertaining to the operation
of the Companies prior to the Closing Date which were delivered to the
Purchasers in accordance with Section 1.5(s) of this Agreement ("Records") where
the Shareholders or Companies require access to the Records for the purpose of
preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided,
27
<PAGE>
however, that any such access or copying shall be had or done in such a manner
so as not to interfere unreasonably with the normal conduct of the Purchasers'
business. For a period of six years after the Closing Date, the Purchasers
shall not dispose of or destroy any material Records without first providing
written notice to the Shareholders at least 30 days prior to the proposed date
of such disposition or destruction.
Section 5.4. Shareholder Approval. The parties acknowledge that the
--------------------
rules of the NASDAQ National Market will require EESI to obtain the approval of
its stockholders to the transaction set forth in this Agreement, if (i) the
average closing price for EESI's common stock for the five trading days which
end five days prior to the Closing Date is greater than $7.50, and (ii) the
Restricted Stock to be issued under Section 1.3, as calculated under Section 1.4
is twenty percent (20%) or more of EESI's then-outstanding common stock. EESI
agrees to call a stockholders meeting as soon as practicable and recommend the
approval of this transaction to its stockholders, if the rules of the NASDAQ
National Market requires that EESI's stockholders approve of the issuance of the
Restricted Stock.
ARTICLE VI.
CONDITIONS OF PURCHASERS
------------------------
The obligations of Purchasers to effect the transaction contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing.
Section 6.1. Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers prior to or at the Closing Date. All
representations and warranties of Sellers contained in this Agreement shall be
true and correct at and as of the Closing Date, with the same force and effect
as though made at and as of the Closing Date, except for changes expressly
permitted by this Agreement and the Purchasers shall have received a Certificate
duly executed by each of the Sellers as to the foregoing.
Section 6.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control the Assets
which, in the judgment of the Boards of Directors of Purchasers, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 6.3. Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Companies, taken as a whole, and the Companies taken as a whole
shall have not suffered any material loss or damage to any of the Assets,
whether or not covered by insurance, since the date of the Financial Statements
28
<PAGE>
Section 6.4. Opinion of Counsel. The Sellers shall have delivered to the
------------------
Purchasers the opinion of counsel, dated the Closing Date, in the form annexed
hereto as Schedule 1.11(e).
Section 6.5. Employment Agreements. William Leone, John Leone, Richard
---------------------
Leone, and Joseph Leone shall have executed and delivered to Purchasers the
Employment Agreements.
Section 6.6. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Purchasers shall have
been furnished with appropriate evidence, reasonably satisfactory to Purchasers
and their counsel, of the granting of such approvals, authorizations and
consents, including, without limitation, EESI of New York being granted a trade
waste license by the New York City Trade Waste Commission.
Section 6.7. Department of Justice. The Department of Justice shall have
---------------------
agreed in writing that the Purchasers' acquisition of the Assets shall not cause
an acceleration or a default of the promissory note dated December 27, 1994.
Section 6.8. Financial Statements. The Companies shall have delivered to
---------------------
Purchasers the Historical Financial Statements, as set forth in Section 4.7.
Section 6.9. Other Transactions. Closing under each of the Agreements
------------------
between New York Waste and each of Utica Rubbish Corp., Domenick Colucci, Inc.,
John Bivona Carting Corp. and Three J.J.J. Carting Corp., each dated February 1,
1992, which agreements are to be assigned to EESI of New York at Closing shall
have closed simultaneously with Closing under this Agreement.
Section 6.10. EESI Shareholder Approval. The Closing shall be conditioned
-------------------------
upon the approval by the shareholders of EESI of the issuance to the Companies
of the EESI Stock, if and only if (i) the average closing price for EESI's
common stock for the five trading days which end five days prior to the Closing
Date is greater than $7.50, and (ii) the EESI Stock to be issued under Section
1.3 is twenty percent (20%) or more of EESI's then-outstanding common stock. If
the shareholders of EESI do not approve of the issuance of the EESI Stock at the
Per Share Value, Purchasers may terminate this Agreement upon paying a break-up
fee of (i) $100,000 in cash less the accounting fees paid by EESI in accordance
with Section 4.7, plus (ii) EESI common stock having a market value of $100,000
based on the average of the closing prices of EESI common stock as reported on
the NASDAQ National Market System for the five trading days ending five days
prior to the date that this Agreement is terminated by EESI under the provisions
of this Section 6.10. The EESI common stock delivered under this Section 6.10
shall be registered by EESI under the provisions of Section 5.2 of this
Agreement.
ARTICLE VII.
CONDITIONS OF SELLERS
---------------------
29
<PAGE>
The obligations of the Sellers to transfer the Assets in accordance with
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 7.1. Compliance by Purchasers. The Purchasers shall have
------------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by them at or prior to or at the
Closing Date. All representations and warranties of Purchasers contained in
this Agreement shall be true and correct at and as of the Closing Date, with the
same force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement and the Sellers shall have
received a Certificate duly executed by an officer of each of the Purchasers as
to the foregoing.
Section 7.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control any of the
Assets and which, in the judgment of the Sellers, made in good faith and based
upon advice of their counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.3. Guarantees. The Sellers shall be released from any
----------
liability they have under guarantees they have made with respect to the
Companies' debts or obligations, as set forth on Schedule 7.3 ("Guarantees").
If, after a good faith attempt, Purchasers cannot obtain the release of the
Shareholders from the Guarantees, this condition shall be waived and Purchasers
will indemnify Sellers under the provisions of Section 8.2 from any and all
liability, expense and claims made against Sellers with respect to the
Guarantees. If on or before the Closing Date, the Shareholders are not released
from their Guaranty of a Note dated December 27, 1994 held by the Department of
Justice ("DOJ Guaranty") , Purchasers agree to pay for an indemnity bond in the
favor of and for the benefit of Sellers with respect to the DOJ Guaranty, if the
bond can be obtained for a cost of no more than $.33 cents per thousand dollars
of coverage per calendar year ("Bond").
Section 7.4. Payment. The Purchasers shall have delivered to each of the
-------
Companies, as applicable, the EESI Stock in accordance with Sections 1.3 and
1.4.
Section 7.5. Employment Agreements. EESI New York shall have executed
---------------------
and delivered the Employment Agreements for William Leone, John Leone, Richard
Leone, and Joseph Leone.
Section 7.6. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Sellers shall have
been furnished with appropriate evidence, reasonably satisfactory to them and
their counsel, of the granting of such approvals, authorizations and consents.
30
<PAGE>
Section 7.7. Opinion of Counsel. The Purchasers shall have delivered to
------------------
the Companies the opinion of counsel to the Purchasers, dated the Closing Date,
in the form annexed hereto as Schedule 1.10(c).
Section 7.8. Material Adverse Change. There shall not have been, and on
-----------------------
the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be expected to result in, any material adverse
change in the condition (financial or otherwise), assets, real property,
personal property, results of operations, business or prospects of EESI and its
subsidiaries taken as a whole and, in any event, and without limiting the
generality of the foregoing, the closing price of EESI's stock on the Closing
Date shall not be less than $5.00 per share.
Section 7.9. Department of Justice. The Department of Justice shall have
---------------------
agreed in writing that the Purchasers' acquisition of the Assets shall not cause
an acceleration of the promissory note dated December 27, 1994.
Section 7.10. EESI Shareholder Approval. The Closing shall be conditioned
-------------------------
upon the approval by the shareholders of EESI of the issuance to Companies of
the EESI Stock, if and only if (i) the Per Share Value as calculated under
Section 1.3 is less than the average closing price for EESI's common stock for
the five trading days which end five days prior to the Closing Date, and (ii)
the EESI Stock to be issued under Section 1.3 is twenty percent (20%) or more of
EESI's then-outstanding common stock. If the condition set forth in this
Section 7.10 is applicable and is not satisfied, Sellers may terminate this
Agreement as provided in Section 1.9(e), and in such case Purchasers shall pay
the Companies the breakup fee set forth in Section 6.10. The breakup fee in
Section 6.10 shall only be paid once, notwithstanding that the same condition of
Closing appears in Section 6.10 and this Section 7.10.
ARTICLE VIII.
INDEMNIFICATION
---------------
Section 8.1. Indemnification by Sellers. The Sellers each agree that
--------------------------
they will each, jointly and severally, indemnify, defend, protect and hold
harmless the Purchasers and their officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, successors
and assigns from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, from (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the
31
<PAGE>
part of Sellers made in this Agreement or in the Collateral Documents and to be
performed by Sellers before or after the Closing Date; (c) the imposition upon,
claim against, or payment by the Purchasers of any liability or obligation of
the Companies other than the Assumed Liabilities (d) any claim by a third party
that, if true, would mean that a condition for indemnification set forth in
subsections (a), (b) or (c) of this Section 8.1 of this Agreement has occurred.
The indemnification in this Section 8.1 is subject to the limitations set forth
in Section 8.5 and 8.6.
Section 8.2. Indemnification by Purchasers. The Purchasers each agree
-----------------------------
that they will each, jointly and severally, indemnify, defend, protect and hold
harmless each Seller, and each of their respective officers, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, heirs, legal
representatives, successors and assigns, as applicable, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) whether
equitable or legal, matured or contingent, known or unknown to the Purchasers,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, whether
arising out of occurrences prior to, at, or after the date of this Agreement,
incurred by them, or any of them, as a result of or incident to: (a) any breach
of, misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Purchasers set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment of
any agreement, covenant or condition on the part of Purchasers made in this
Agreement or in the Collateral Documents and to be performed by Purchasers
before or after the Closing Date; (c) any Security Liability; (d) any of the
Guarantees; (e) the imposition upon, claim against, or payment by the Sellers of
any of the Assumed Liabilities; and (e) any claim by a third party that, if
true, would mean that a condition for indemnification set forth in subsections
(a), (b), (c), (d) or (e) of this Section 8.2 has occurred. The indemnification
in this Section 8.2 is subject to the limitations set forth in Sections 8.5 and
8.6.
Section 8.3. Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article VIII, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party (it being agreed that Rivkin, Radler & Kremer is
satisfactory) so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within fifteen days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party
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<PAGE>
pursuant to the provisions of Article VIII, as applicable, from and against the
entirety of any adverse consequences (which will include, without limitation,
all losses, claims, liens, and attorneys' fees and related expenses) the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim, (ii) the Indemnifying Party
provides the Indemnified Party with evidence reasonably acceptable to the
Indemnified Party that the Indemnifying Party will have the financial resources
to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (iii) the Third Party Claim involves only monetary
damages and does not seek an injunction or equitable relief, (iv) settlement of,
or adverse judgment with respect to the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a precedential
custom or practice adverse to the continuing business interests of the
Indemnified Party, and (v) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If the conditions set forth in Section 8.3(b) above are or become
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
VIII.
Section 8.4. Procedure for Non-Third Party Claims. If Purchasers or
------------------------------------
Sellers wish to make a claim for indemnity under Section 8.1 or Section 8.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 8.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section
33
<PAGE>
8.1 or Section 8.2, as applicable; (b) the nature of the event or occurrence
which entitles the Indemnified Party to receive payment under Section 8.1 or
Section 8.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
forty-five (45) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within sixty (60) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 8.5. Survival of Claims.
------------------
(a) All of the respective representations and warranties of the Sellers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Sellers pertaining to anti-
trust Laws, unfair competition Laws and racketeering Laws set forth in Section
2.13 shall survive for thirty months after the Closing Date, (ii) the
representations and warranties of Sellers made in the first two sentences of
Section 2.13(b) as to matters of which they had no knowledge shall survive for
eighteen months after the Closing Date, and all other representations and
warranties pertaining to Environmental Laws set forth in Section 2.13,
including, without, limitation the representations and warranties of the Sellers
made in the first two sentences of Section 2.13(b) as to matters of which
Sellers had knowledge shall survive for thirty months after the Closing Date,
(iii) all representations and warranties of Sellers pertaining to federal, state
and local taxes, including, without limitation, the representations and
warranties set forth in Section 2.10 shall survive until the expiration of the
applicable statute of limitations on any claim which can be brought against the
Sellers by tax authorities or governmental agencies or governmental units and
(iv) all representations and warranties other than set forth in (i), (ii) and
(iii) above shall survive until eighteen months from the Closing Date.
(b) All of the respective representations and warranties of Purchasers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Purchasers set forth in
Section 3.14 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought with respect to the sale of a
security and (ii) all representations and warranties other than set forth in (i)
above shall survive until eighteen months from the Closing Date.
(c) Notwithstanding the provisions of Section 8.5(a) and 8.5(b) above,
which provides that representations, warranties and obligations expire after
certain stated periods of time, if within the stated period of time, an
Indemnification Demand is given, or a suit or action based
34
<PAGE>
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.
Section 8.6. Limitation of Liability. Notwithstanding anything else to
-----------------------
the contrary contained herein, neither the Purchasers nor any other party
entitled to indemnification pursuant to Section 8.1 hereof, shall be entitled to
assert any claim for indemnification contained in Section 8.1 unless and until
such time as claims of indemnification thereunder, exceed ("Basket") (i) Five
Hundred Fifty Thousand ($550,000) Dollars, in the aggregate, for claims made
regarding the falsity of the representations and warranties of Sellers made in
the first two sentences of Section 2.13(b), where Sellers had no knowledge of
the falsity of the representation or warranty, (ii) Five Hundred Fifty Thousand
($550,000) Dollars in the aggregate for claims made regarding the falsity of the
representations and warranties of Sellers made in Section 2.14, where Sellers
had no knowledge of the falsity of the representation or warranty, (iii) Five
Hundred Fifty Thousand ($550,000) Dollars, in the aggregate, for claims made
against Purchasers due to Environmental Law violations of the Companies asserted
against Purchasers where Sellers had no knowledge of the Environmental Law
violation and where the violation occurred prior to the Closing Date, (iv) Three
Hundred Fifty Thousand ($350,000) Dollars in the aggregate, for claims made
regarding the falsity of any representation or warranty of Sellers made under
Section 2.8(b), and (v) Three Hundred Thousand ($300,000) Dollars in the
aggregate, for all other claims, including, without limitation, claims made
under the first two sentences of Section 2.13(b) and Section 2.14 where Sellers
had knowledge of the falsity of the representation or warranty and for
Environmental Law violations of the Companies asserted against Purchasers where
Sellers had knowledge of the violation. Purchasers shall only be entitled to
assert claims for indemnification that exceed the applicable Basket; it being
understood and agreed that the applicable Basket amount shall be excluded from
the indemnification contained in Section 8.1 and shall be borne 100% by the
Purchasers and the parties entitled to be indemnified thereunder so that the
Sellers, as applicable, shall have no liability with respect thereto. In
addition, notwithstanding anything else contained herein to the contrary, the
obligations of the Sellers pursuant to the indemnification contained in Section
8.1 shall be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Companies, as valued under Section 1.3 at
closing, as adjusted under Section 1.4.
Section 8.7. Insurance Proceeds. In determining the amount of loss for
------------------
which Purchasers, or any party entitled to be indemnified pursuant to Section
8.1 of this Agreement is entitled, the loss shall be reduced by any proceeds
(under insurance policies maintained by Purchasers ) which are paid to any of
the Purchasers with respect to the loss for which indemnification is sought. If
Sellers pay Purchasers a payment which satisfies Sellers obligations under this
Article VIII, in full, with regard to a loss for which Purchasers were entitled
to indemnification in accordance with Section 8.1 and after such payment by
Sellers, any of the Purchasers receives insurance proceeds (under insurance
policies maintained by any of the Purchasers) in payment of the same loss,
Purchasers will reimburse the Sellers for the amount the
35
<PAGE>
Sellers have paid up to, but not exceeding, the insurance proceeds received.
Notwithstanding the prior two sentences, a loss or losses incurred by
Purchasers shall not be reduced and Sellers shall not be reimbursed by or with
the amount of insurance proceeds paid to Purchasers equaling, in the aggregate,
the applicable Basket for which Purchasers were not indemnified. The initial
amounts of insurance proceeds received by Purchasers up to the amount of the
applicable Basket with respect to any loss or losses for which indemnification
under Section 8.1 applies, shall compensate Purchaser and EESI for not being
able to initiate an indemnification claim until an aggregate loss equal to the
applicable Basket is suffered by the Purchasers as set forth in Section 8.6.
Purchaser and/or EESI shall use their reasonable efforts to assert the claim
giving rise to any loss for which they are entitled to be indemnified under
Section 8.1, with the issuer of the applicable insurance policy.
ARTICLE IX.
OTHER PROVISIONS
----------------
Section 9.1. Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Companies such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Companies. Sellers agree that for a period of five (5)
years from the Closing Date and as to any Records received by them under Section
5.3 of this Agreement, five (5) years from their receipt of the Records, they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except to authorized representatives of the Sellers, unless (i) such information
becomes known to the public generally through no fault of Sellers, (ii) the
Sellers are compelled to disclose such information by a governmental entity or
pursuant to a court proceeding, or (iii) the Closing does not take place. In
the event of a breach or threatened breach by Sellers of the provisions of this
Section, Purchasers shall be entitled to an injunction restraining Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchasers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2. Nondisclosure by Purchasers. Purchasers recognize and
---------------------------
acknowledge that they have in the past, currently have, and prior to the Closing
Date, will have access to certain confidential information of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of the Companies. Purchasers,
jointly and severally, agree that none of them will utilize such information in
the business or operation of Purchasers, or any of their affiliates or disclose
such confidential information to any person, firm, corporation, association, or
other entity for any purpose or reason whatsoever, unless (i) such information
becomes known to the public generally through no fault of Purchasers or any of
their affiliates (ii) Purchasers are compelled to disclose such information by a
governmental entity or pursuant to a court proceeding or (iii) Closing takes
place. In the event of a breach or threatened breach by Purchasers of the
provisions of this Section, the Sellers shall be entitled to an injunction
restraining Purchasers from utilizing or disclosing, in whole or
36
<PAGE>
in part, such confidential information. Nothing contained herein shall be
construed as prohibiting Sellers from pursuing any other available remedy for
such breach or threatened breach, including, without limitation, the recovery of
damages.
Section 9.3. Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of Purchasers) and shall be binding upon and
shall inure to the benefit of the parties hereto, the successors of Purchasers,
and the Sellers. This Agreement, upon execution and delivery, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by all parties hereto.
Section 9.4. Entire Agreement. This Agreement, is the final, complete
----------------
and exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 9.5. Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 9.6. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchasers, addressed to them at:
President
1000 Crawford Place
Mt. Laurel, NJ 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
37
<PAGE>
(b) If to Sellers, addressed to
each Seller as set forth on
Exhibit "A" attached.
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, NY 11556-0111
Attn: Barry R. Shapiro, Esq.
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 9.6.
Section 9.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 9.8. No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 9.9. Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 9.10. Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 9.11. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden
38
<PAGE>
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute shall be deemed to refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
The word "including" means included, without limitation.
Section 9.12. Extension or Waiver of Performance. Either William Leone on
-----------------------------------
behalf of the Sellers, or Purchasers may extend the time for or waive the
performance of any of the obligations of the other, waive any inaccuracies in
the representations or warranties by the other, or waive compliance by the other
with any of the covenants or conditions contained in this Agreement, provided
that any such extension or waiver shall be in writing and signed by William
Leone on behalf of the Sellers and the Purchasers.
Section 9.13. Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 9.14. Disclosure on Schedules. The parties acknowledge that
-----------------------
notwithstanding the provisions of the Agreement stating all Schedules and
Exhibits to this Agreement are attached to the Agreement, none of the Schedules
have been attached and certain of the Exhibits have not been attached. Sellers
will deliver to Purchasers all Schedules to be attached to this Agreement as
soon as reasonably possible but no later than thirty (30) days from the date of
this Agreement. Purchasers will have fourteen (14) days from the date of
delivery of the Schedules, to review the Schedules and terminate the Agreement
by sending written notice to Companies, if Purchasers are not satisfied with any
material matter revealed by any Schedule. The parties hereto shall use their
best efforts to agree upon and attach to this Agreement all Exhibits not
attached to this Agreement on the date of this Agreement's execution. If the
parties can not agree upon any Exhibits not attached to this Agreement, by
November 15, 1996, any of the parties may terminate this Agreement by sending
written notice of termination to the other parties. Once the Schedules are
produced and the Exhibits agreed upon the parties hereto shall execute a
signature page which states that attached to the signature page are the
Schedules and Exhibits to this Agreement. For purposes of this Agreement, a
disclosure by any party hereto of any fact on any Schedule shall be deemed a
disclosure on every Schedule of any party hereto to the extent such disclosure
properly could have been made thereon but was not made. The parties to this
Agreement shall have the obligation to supplement or amend the Schedules being
delivered concurrently with the execution of this Agreement and annexed hereto
with respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules. The obligations of the parties to amend or
supplement the Schedules shall terminate on the Closing Date. Notwithstanding
any such amendment or supplementation, the condition to Closing set forth in
Section 6.1 shall not be satisfied, if the amendment or supplementation of any
Schedule by Sellers results in any of Sellers' representations
39
<PAGE>
and warranties changing in a manner which the Purchaser in good faith believes
is materially adverse to the Purchasers, the Assets or the Business.
Section 9.15. Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the commercial
rules (the "Rules") of the American Arbitration Association then obtaining, in
New York, New York and judgment upon the award rendered in such arbitration
shall be final and binding upon the parties and may be confirmed in any court
having jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
arbitrate shall not bar any party from seeking temporary or provisional remedies
in any Court having jurisdiction if such party can establish irreparable harm.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement, which such demand shall set forth in the same degree of
particularity as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration. Additionally, the demand
for arbitration shall be stated with reasonable particularity with respect to
such demand with documents attached as appropriate. In no event shall the
demand for arbitration be made after the date when institution of legal or
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchasers and the Sellers in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). The
Purchasers and the Sellers, respectively, waive the right and agree they shall
not seek to disqualify any such counsel in any such Proceedings for any reason,
40
<PAGE>
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
41
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Louis D. Paolino, Jr.
------------------------------------
Name: Louis D. Paolino, Jr.
Title: President
EASTERN WASTE OF L.I., INC.
By: /s/ Louis D. Paolino, Jr.
------------------------------------
Name: Louis D. Paolino, Jr.
Title: President
EASTERN WASTE OF
NEW YORK, INC.
By: /s/ Louis D. Paolino, Jr.
------------------------------------
Name: Louis D. Paolino, Jr.
Title: President
EASTERN CONTAINER CORPORATION
By: /s/ Louis D. Paolino, Jr.
------------------------------------
Name: Louis D. Paolino, Jr.
Title: President
42
<PAGE>
COMPANIES
KC WASTE SERVICES, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
CURBSIDE LEASING, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
WASTE SERVICES, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
N.Y. WASTE SERVICES, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
L.I. WASTE SERVICES, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
43
<PAGE>
SHAREHOLDERS
WSI HOLDING CORPORATION
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
WSI REALTY, INC.
By: /s/ William F. Leone
-----------------------------------
Name: William F. Leone
Title: President
/s/ William F. Leone
--------------------------------------
William F. Leone
/s/ John D. Leone
--------------------------------------
John D. Leone
/s/ Joseph G. Leone
--------------------------------------
Joseph G. Leone
/s/ Richard A. Leone
--------------------------------------
Richard A. Leone
/s/ Janet A. Ruddy
--------------------------------------
Janet A. Ruddy
/s/ Paul M. Leone
--------------------------------------
Paul M. Leone
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert Kramer
-----------------------------------
Robert M. Kramer
44
<PAGE>
EXHIBIT 10.1
------------
Amendment No. 1 dated as of April 14, 1997, to Agreement and Plan of
Reorganization made as of October 23, 1996 by and among Waste Services, Inc.,
N.Y. Waste, Inc., L.I. Waste Services, Inc., KC Waste Services Inc., Curbside
Leasing Inc., the individuals and entities who are shareholders of the
foregoing, Eastern Environmental Services, Inc., Eastern Waste of N.Y. Inc.,
Eastern Waste of L.I., Inc., and Eastern Container Corporation (the
"Agreement"). All capitalized terms used but not defined herein shall have the
meanings described to them in the Agreement.
RECITALS
--------
The parties have entered into the Agreement which provides that the
Closing thereunder shall occur on or prior to December 31, 1996. The parties
hereto wish to extend the termination date and to make certain other
modifications to the Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, received to the
full satisfaction of each of them, the parties hereto agree to amend the
Agreement as follows:
ARTICLE I. AMENDMENTS.
1.1 The first sentence of Section 1.3(b) of the Agreement is hereby
amended by deleting the phrase "less the historic bad accounts receivable
reserve of the Companies exceeds the accounts payable of the Companies, assumed
by the Purchasers in accordance with this Agreement ("Accounts Receivable
Payment")" and the following new phrase is substituted therefor: "less the bad
accounts receivable reserve of the Companies agreed upon by Sellers and
Purchasers at Closing, exceeds the accrued expenses, accrued interest, accrued
unpaid vacation and accounts payable of the Companies, assumed by the Purchasers
in accordance with this Agreement ("Accounts Receivable Payment"). The fifth
sentence of Section 1.3(b) is amended by deleting from clause (i) the phrase
"plus $350,000".
1.2 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(a) of the Agreement is hereby amended by deleting the
number "$26,859,615" therefrom and substituting the number "$26,000,000"
therefor.
(b) Section 1.4(b) is hereby amended by deleting the phrase "Twelve
Million Eight Hundred Fifty-Nine Thousand
<PAGE>
Six Hundred Fifteen ($12,859,615) Dollars" therefrom and substituting the new
phrase "Twelve Million ($12,000,000) Dollars" therefor.
1.3 Section 1.4(a)(iii) is hereby amended and restated in its
entirety to read as follows:
"(iii) increased, by the amount by which the accounts
receivable of the Companies conveyed to the Purchasers at Closing, less the bad
accounts receivable reserve of the Companies agreed upon by Sellers and
Purchasers at Closing, exceeds the accrued expenses, accrued interest, accrued
unpaid vacation and accounts payable of the Companies, assumed by the Purchasers
in accordance with this Agreement."
1.4 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(b) of the Agreement is hereby amended by
deleting the phrase "($7.50)" therefrom and substituting the phrase
"($9.00)" therefor and the last paragraph of Section 1.4 of the
Agreement is hereby amended by deleting the phrase "$7.50" therefrom
and substituting the phrase "$9.00" therefor.
(b) Section 1.4(b) of the Agreement is hereby further amended
by deleting the phrase "Twelve Million Eight Hundred Fifty-Nine
Thousand Six Hundred Fifteen ($12,859,615) Dollars" therefrom and
substituting the phrase "Twelve Million ($12,000,000) Dollars"
therefor.
(c) The following new clause (iv) shall be added to Section
1.4(a) of the Agreement:
"(iv) decreased by a dollar amount equal to the product
of (A) eighteen (18) and (B) the dollar amount by which
the annualized revenues of the Companies on the Closing
Date is less than $17,011,000, provided however there
shall be no purchase price adjustment pursuant to this
clause (iv) if the decrease in revenues is five percent
(5%) or less. When determining the dollar amount of the
annualized revenue of the Business on the Closing Date,
the dollar amount by which revenues are reasonably likely
to decrease if there shall have been enacted or
promulgated or adopted, on or prior to the Closing Date,
any rule, statute, law or regulation or any modification
or interpretation of any of the foregoing, (including
without limitation, any of the foregoing which reduces
the rates charged to customers for any services) which
2
<PAGE>
is reasonably likely to decrease revenues of the
Companies by 5% or more, taken as a whole, from the date
of this Agreement, shall be taken into consideration. The
5% or more change in revenues referred to in this clause
(iv) shall not be deemed to be a material adverse change
under Section 6.3 of this Agreement."
(d) Section 1.4 of the Agreement is hereby further amended by
adding the following new subsection (c) thereto before the last
paragraph of Section 1.4:
"(c) After giving effect to the calculation of the
Dollar Value of the Purchase Price and the determination
of the amount of EESI Stock to be paid to the Companies
in accordance with subsections (a) and (b) above, the
amount of EESI Stock to be paid to be Companies shall be
reduced by the number of shares of EESI Stock which is
determined on the basis of the following calculation:
$100,000 divided by the closing price for EESI's common
stock on the NASDAQ National Market for the trading day
which is five trading days prior to the Closing Date."
1.5 Section 1.7(b) of the Agreement is hereby amended by deleting
the word "and" before clause (vi) and inserting the following new phrase after
such clause (vi): "and (vii) accrued expenses, accrued interest and accrued
unpaid vacation"
1.6 Section 1.9 of the Agreement is hereby amended as follows:
(a) Section 1.9(b) is hereby amended and restated in its
entirety to read as follows:
"(b) by EESI by that date which is fourteen days after
the Approval Date (or if such date is not a business day,
then the next business day) if (i) EESI is not satisfied
in its sole discretion with the due diligence it has
conducted on the Companies or (ii) without limiting the
generality of the foregoing clause (i), if EESI in its
sole discretion determines that there are any matters of
which it otherwise becomes aware during the course of its
due diligence which are materially adverse to the
Purchasers, the Assets, or the Business. For purposes
hereof, the "Approval Date" shall mean that date on which
the Purchasers have received written approval from
3
<PAGE>
the Trade Waste Commission for the Purchasers to close
the transactions contemplated by this Agreement."
(b) Subsections 1.9(c), (d) and (e) of the Agreement are
hereby amended by deleting the phrase, "December 31, 1996" therefrom
and substituting the phrase "April 30, 1997" therefor and the last
sentence of Section 1.9(e) is deleted therefrom.
1.7 Section 1.10 of the Agreement is hereby amended as follows:
(a) The phrase ", including but not limited to the Employment
Agreement" is hereby deleted from Section 1.10(b).
(b) Section 1.10(d) is hereby deleted in its entirety.
1.8 Section 1.11 of the Agreement is hereby amended by deleting
Subsection (b) therefrom.
1.9 Section 2.8(b) of the Agreement is hereby amended by deleting
the phrase "less $350,000", from the fifth sentence of such Section 2.8(b).
1.10 Section 3.4 of the Agreement is hereby amended as follows:
"Section 3.4 Public Reports. EESI has made all filings with
--------------
Securities and Exchange Commission that it is required to make under
the Securities Act of 1933 (the "Act") and the Securities Exchange Act
of 1934 (the "Exchange Act"), as amended (collectively, the "Public
Reports"). EESI has delivered to Sellers all such Public Reports filed
by EESI through March 31, 1997. The Public Reports accurately and
completely describe, in all material respects, EESI's financial
status, business operations and prospects as of the date of such
filings, and do not contain any untrue statement of a material fact or
omit any material fact(s) necessary to make the information contained
in the filings not misleading."
1.11 Section 3.5 of the Agreement is hereby amended as follows:
"Section 3.5 Authorized Stock. The total authorized capital
----------------
stock of EESI consists of 50,000,000 shares of Common Stock, par value
$.01 per share, and 10,000,000 shares of Class A Common Stock, par
value $.01 per share, none of which is outstanding. As of February
4
<PAGE>
21, 1997, the outstanding shares of capital stock of EESI consisted
solely of 13,244,807 shares of Common Stock, par value $.01. EESI New
York, EESI Container and EESI LI have 1,000 shares of no-par-value
common stock authorized and 100 shares issued, all of which are owned
by EESI. All of such issued and outstanding shares of Purchasers have
been duly authorized and validly issued, are fully-paid and non-
assessable and were issued in compliance with all federal and state
securities laws."
1.12 Section 3.10 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 3.10 Hart-Scott-Rodino Filing. Purchasers, jointly
------------------------
and severally, represent and warrant that they shall make a Hart-Scott
-Rodino anti-trust notification filing, if such a filing is required
by applicable law, at Purchasers' expense."
1.13 Section 4.7 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 4.7 Audited Financial Statements.
----------------------------
(a) Sellers agree to cause the Companies to prepare and the
Companies shall prepare an audited balance sheet for the Companies as of
December 31, 1996 and a statement of income, cash flow and retained earnings for
the Companies for the twelve month period ended December 31, 1996 ("Historical
Financial Statements") as rapidly as possible, but no later than 30 days after
the Closing Date (the "Post Closing Date"). Sellers shall also cause the
Companies to prepare an unaudited balance sheet of the Companies as of the end
of the calendar quarter completed immediately prior to the Closing Date and an
unaudited statement of income, cash flow and retained earnings for the period
ending with the completion of the calendar quarter ended prior to the Closing
Date ("Interim Financial Statements"). The Interim Financial Statements are to
be delivered by the Companies on or before the Post Closing Date. Companies may
select the accounting firm used to prepare such statements as required above,
but said firm must be reasonably acceptable to EESI. Purchasers shall pay the
fee of the accounting firm hired to prepare the statements required by this
Section 4.7, whether or not Closing occurs. If the Purchasers fail to pay the
invoice of the accounting firm hired to prepare the statements referred to in
this Section 4.7, then the Sellers may, on behalf of the Purchasers, pay such
fees in which case the Purchasers shall, promptly upon receiving from Sellers
evidence of such payment by Sellers to the accounting firm, reimburse the
Sellers for such amount together with interest computed at an annual interest
rate equal to the higher of 25% per annum or the maximum rate permitted by
applicable law on any amounts so advanced by Sellers from the
5
<PAGE>
date of such advancement to the date of reimbursement by Purchasers.
(b) The Sellers acknowledge that the delivery of the
Historical Financial Statements to EESI on or prior to the Post Closing Date is
of paramount importance to EESI and its shareholders and that time is of the
essence because EESI will need the Historical Financial Statements in order to
file a Form 8-K as required by the Securities and Exchange Commission in a
timely manner. If the Sellers fail to deliver the Historical Financial
Statements to EESI on or prior to the Post Closing Date then EESI is hereby
irrevocably instructed to cancel all the outstanding shares of EESI Stock which
the Sellers received at Closing or any other shares of EESI Stock issued or to
be issued after the Closing in connection therewith, without any liability to
the Sellers, provided, however, that EESI or the Purchasers and the Sellers
-------- -------
promptly execute an Assignment and Assumption Agreement whereby the Purchasers
shall reassign all of the assets to be assigned to the Purchasers hereunder to
the Seller and the Sellers shall reassume the liabilities to be assumed by the
Purchasers hereunder. After such cancellation by EESI and the execution of the
Assignment and Assumption Agreement referred to in the preceding sentence, this
Agreement shall be deemed terminated and neither party hereto shall have any
obligation to any other party."
1.14 Section 5.1 of the Agreement is hereby amended and restated in
its entirety as follows:
"Section 5.1 Payment of Expenses. EESI will pay all expenses
-------------------
incurred by Purchasers in connection with the negotiation, execution
and performance of this Agreement. At the Closing, EESI will also pay
the accounting fees for the audits to be delivered by the Companies as
set forth in Section 4.7 and any accounting fees incurred in
connection with the preparation of audited financial statements for
the twelve month period ended December 31, 1994 and December 31, 1995,
respectively. The Companies, before the Closing Date, shall either pay
all reasonable legal and accounting expenses incurred by the
Shareholders and the Companies (except for the accounting fees set
forth in Section 4.7 and the accounting fees EESI has agreed to pay in
the prior sentence) in connection with the negotiation, execution and
performance of this Agreement and the Collateral Documents or present
invoices for such accounting and legal fees so that the Dollar Value
of the Purchase Price may be adjusted on the Closing Date to take into
consideration the accounts payable evidenced by such invoices."
6
<PAGE>
1.15 Section 5.2 of the Agreement is hereby amended by adding the
following new subsection (e) thereto:
"(e) Sellers agree that, with respect to the first underwritten
public offering for the sale of EESI Stock pursuant to an effective
registration statement which occurs after the Closing Date, they will
enter into a "lock-up" agreement which would prohibit them from
selling any Restricted Stock or Unrestricted Stock for a period of 90
days commencing on the date such registration statement becomes
effective, if such a "lock-up" agreement is requested by the
underwriter of such public offering."
1.16 Section 5.4 of the Agreement is hereby amended by deleting
therefrom the phrase "$7.50" and substituting therefor the phrase "$9.00".
1.17 Article V of the Agreement is hereby amended by adding the
following new Section 5.5 thereto:
"Section 5.5. Reassignment of Receivables. If the Purchasers
---------------------------
make a claim for indemnification under Article VIII hereof for
reimbursement for an uncollected account receivable, then after the
Purchasers have received payment in full from the Shareholders of the
requested indemnity, the Purchasers shall reassign such uncollected
account receivable to the Sellers and the Sellers shall have the right
to collect such account receivable."
1.18 Section 6.3 of Agreement is hereby amended and restated in its
entirety to read as follows:
"Section 6.3. Fiscal Condition of Business. There shall have
----------------------------
been no material adverse change in the results of operations, financial
condition or business of the Companies, taken as a whole, and the Companies
taken as a whole shall have not suffered any material loss or damage to any of
the Assets, whether or not covered by insurance, since the date of the Financial
Statements; there shall not have been any cancellation or modification of any
Material Documents except for such cancellation or modification set forth in
Schedule 6.3 to this Agreement or for such cancellation or modification of any
Material Documents which, singly or in the aggregate, is not reasonably likely
to have a material adverse effect on the operations, financial condition or
business of the Companies, taken as a whole, their Business or Assets (it being
understood that all cancellations and modifications of Material Documents which
affect revenue shall be computed in the purchase price adjustment provided for
in Section 1.4(a)(iv)); there shall be a sufficient number of rolling stock,
vehicles and other equipment in good working condition to provide service to the
customers of the Companies on the Closing Date and
7
<PAGE>
to otherwise conduct the business of the Companies in their customary and usual
manner."
1.19 Article VI of the Agreement is hereby amended by deleting Section
6.5. therefrom and substituting the following new Section 6.5 therefor:
"Section 6.5 Employment Agreements. The Purchasers shall have
---------------------
received evidence satisfactory to them that the contracts of employment with
John J. Sindone, Jr. and William Leone have been cancelled and are no longer in
full force and effect."
1.20 Article VI of the Agreement is hereby amended by deleting Section
6.7 therefrom and inserting in lieu thereof "Intentionally Omitted".
1.21 Section 6.10 of the Agreement is hereby amended by deleting the
phrase "$7.50" therefrom and substituting the phrase "$9.00" therefor.
1.22 Article VI of the Agreement is hereby amended by adding the
following new Section 6.11 thereto:
"Section 6.11 Payment of Company Debt. Sellers shall have made
-----------------------
arrangements to arrange for payment of the Company Debt (other than
bank or finance company debt or the indebtedness to the Department of
Justice evidenced by a promissory note dated December 27, 1994) in a
proportion of cash and EESI common stock valued at the market value of
EESI's common stock at the time of issuance, as listed on the NASDAQ
National Market, which proportionate amounts of stock and cash shall
be satisfactory to the Purchasers in their sole discretion."
1.23 Article VII of the Agreement is hereby amended by deleting
Section 7.5 therefrom and inserting in lieu thereof "Intentionally Omitted".
1.24 Article VII of the Agreement is hereby amended by deleting
Section 7.9 therefrom and inserting in lieu thereof "Intentionally Omitted".
1.25 Section 8.1 of the Agreement is hereby amended by adding the
following new clauses "(e)", "(f)" and "(g)" to the end of the first sentence
thereof:
"(e) any obligation of any Seller to pay any amounts owed to the
Town of Hempstead, New York, for landfill, dumping, or any other fees related to
any of the foregoing which are not disclosed in the Schedules to this Agreement
(the indemnification in this clause (e) being the "Landfill Indemnity"), (f) any
8
<PAGE>
liability, environmental or otherwise, arising in connection with the Kin-Buc
Landfill Superfund Site in Edison, New Jersey, notwithstanding the disclosure of
such liability or potential liability on Schedules 2.13(b) and (c) to the
Agreement (the indemnification in this clause (f) being the "Kin-Buc Indemnity")
and (g) any imposition upon, claim against or payment by the Purchasers of any
liability or obligation of the Companies (other than the obligations to Vulpis
set forth on Schedule 1.4 which pursuant to Section 1.7 are defined as "Assumed
Liabilities"), relating to, arising in connection with or from, or as a result
of, the Stock Purchase Agreement dated September 11, 1995 between WSI Realty
Inc. and Dominick Vulpis (the indemnification in this clause (g) being the
"Vulpis Indemnity")."
1.26 Section 8.1 of the Agreement is hereby further amended by
inserting in the last sentence thereof after the phrase "Section 8.1" the
following new phrase "(other than the Landfill Indemnity, the Kin-Buc Indemnity
or the Vulpis Indemnity)".
1.27 Section 8.5(b) of the Agreement is hereby amended by deleting
therefrom the phrase "Section 3.14" and substituting therefor the phrase
"Section 3.4".
1.28 Section 8.6 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 8.6 Limitation of Liability. Notwithstanding anything
-----------------------
else to the contrary contained herein, neither the Purchasers nor any
other party entitled to indemnification pursuant to Section 8.1
hereof, shall be entitled to assert any claim for indemnification
contained in Section 8.1 (other than the Landfill Indemnity, the Kin-
Buc Indemnity or the Vulpis Indemnity) unless and until such time as
claims of indemnification thereunder, exceed ("Basket") (i) One
Hundred ($100) Dollars in the aggregate, for claims made regarding the
falsity of any representation or warranty of Sellers made under
Section 2.8(b); (ii) Two Hundred Thousand ($200,000) Dollars, in the
aggregate, for all other claims, provided however, that neither the
Landfill Indemnity, the Kin-Buc Indemnity or the Vulpis Indemnity
shall be subject to the Basket and shall in each case be reimbursable
from the first dollar of monies expended by or loss incurred by, the
Purchasers. Except in the case of the Landfill Indemnity, Kin-Buc
Indemnity and the Vulpis Indemnity, Purchasers shall only be entitled
to assert claims for indemnification that exceed the applicable
Basket; it being understood and agreed that the applicable Basket
amount shall be excluded from the indemnification contained in Section
8.1 and shall be borne 100% by the Purchasers and the parties entitled
to
9
<PAGE>
be indemnified thereunder so that the Sellers, as applicable, shall
have no liability with respect thereto. In addition, notwithstanding
anything else contained herein to the contrary, the obligations of the
Sellers pursuant to the indemnification contained in Section 8.1 shall
be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Companies, as valued under Section 1.3
at closing, as adjusted under Section 1.4."
1.29 Section 9.14 of the Agreement is hereby amended as follows:
(a) the third sentence of Section 9.14 is hereby amended and
restated to read in its entirety as follows: "Purchasers will have
fourteen (14) days from the Approval Date (as defined in Section
1.9(b)) to review any new or revised Schedule delivered to Purchasers
on or prior to the Approval Date and terminate the Agreement by
sending written notice to the Company if Purchasers are not satisfied
with any material matter revealed by any such new or revised
Schedule."
(b) the fifth sentence of Section 9.14 is hereby amended and
restated to read in its entirety as follows: "If the parties cannot
agree upon any Exhibits or Schedules on or prior to the Closing Date
not attached to this Agreement, or if the parties are unable to agree
upon the allocation of EESI Stock to be set forth in a revised and
final Exhibit A on or prior to the Closing Date, or if the items
referred to in paragraphs 1 and 5 of the letter dated February 13,
1997 to Jill Rosen Nikoloff, Esq. from Sandra J. DuBoff, Esq. (the
"Schedule Letter") are explained, clarified, or reconciled on or prior
to the Closing Date in a manner which the Purchasers in good faith
believe to be materially adverse to the Purchasers, the Assets or the
Business, then in each instance any of the parties may terminate this
Agreement by sending written notice of termination to the other
Parties."
1.30 The Agreement is hereby amended by adding thereto the new
"Schedule 6.3", "Schedule 1.10(c)", "Schedule 1.10(f)", "Schedule 1.11(a)" and
"Schedule 1.11(e)", which are attached to this Amendment.
ARTICLE II. MISCELLANEOUS.
2.1 All references in the Agreement to "this Agreement" or like terms
shall mean and be a reference to the Agreement as amended by this Amendment and
all references to "the Agreement" or
10
<PAGE>
a like term in any agreement executed in connection with the Agreement shall
mean and be a reference to the Agreement as amended by this Amendment.
2.2 The Purchasers and Sellers hereby acknowledge that, pursuant to
Section 9.14 of the Agreement, they have agreed upon the Exhibits and Schedules
to be attached to the Agreement except for Exhibit A which sets forth the
allocation of EESI Stock and except for the clarification, reconciliation and
explanation of item 5 in the Schedule Letter. All other terms and conditions of
Section 9.14 remain in full force and effect, including without limitation the
obligation of the Sellers to amend and update the Schedules and Exhibits.
Nothing in this paragraph 2.2 shall be deemed to modify the last sentence of
Section 9.14 of the Agreement or to waive any of the Purchasers' rights not to
close under the Agreement as provided in Section 9.14 thereof.
2.3 Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect.
2.4 This Amendment hereby incorporates, includes and is subject to
Article IX of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/Robert Kramer
-----------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN WASTE OF L.I., INC.
By: /s/Robert Kramer
----------------------------
Name: Robert M. Kramer
Title: Vice President
11
<PAGE>
EASTERN WASTE OF
NEW YORK, INC.
By: /s/Robert Kramer
------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN CONTAINER CORPORATION
By: /s/Robert Kramer
--------------------------------
Name: Robert M. Kramer
Title: Vice President
COMPANIES
KC WASTE SERVICES, INC.
By: /s/William F. Leone
-------------------------------
Name: William F. Leone
Title: President
CURBSIDE LEASING, INC.
By: /s/William F. Leone
------------------------------
Name: William F. Leone
Title: President
WASTE SERVICES, INC.
By: /s/William F. Leone
------------------------------
Name: William F. Leone
Title: President
N.Y. WASTE SERVICES, INC.
By: /s/William F. Leone
--------------------------------
Name: William F. Leone
Title: President
12
<PAGE>
L.I. WASTE SERVICES, INC.
By: /s/William F. Leone
------------------------------
Name: William F. Leone
Title: President
SHAREHOLDERS
WSI HOLDING CORPORATION
By: /s/William F. Leone
--------------------------------
Name: William F. Leone
Title: President
WSI REALTY, INC.
By: /s/William F. Leone
-----------------------------
Name: William F. Leone
Title: President
/s/ William F. Leone
---------------------------------
William F. Leone
/s/ John D. Leone
--------------------------------
John D. Leone
/s/ Joseph G. Leone
----------------------------------
Joseph G. Leone
/s/ Richard A. Leone
---------------------------------
Richard A. Leone
/s/ Janet A. Ruddy
----------------------------------
Janet A. Ruddy
/s/ Paul M. Leone
----------------------------------
Paul M. Leone
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) OF THE AGREEMENT
ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert Kramer
-----------------------------------
Robert M. Kramer
13
<PAGE>
EXHIBIT 10.1
------------
Amendment No. 2 dated as of May 12, 1997, to Agreement and Plan of
Reorganization made as of October 23, 1996 by and among Waste Services, Inc.,
N.Y. Waste Services, Inc., L.I. Waste Services, Inc., KC Waste Services Inc.,
Curbside Leasing Inc., the individuals and entities who are shareholders of the
foregoing, Eastern Environmental Services, Inc., Eastern Waste of New York,
Inc., Eastern Waste of L.I., Inc., and Eastern Container Corporation, as amended
by that certain Amendment No. 1 dated as of April 14, 1997 (the "Agreement").
All capitalized terms used but not defined) herein shall have the meanings
ascribed to them in the Agreement.
RECITALS
--------
The parties have entered into the Agreement which provides that the Closing
thereunder shall occur on or prior to April 30, 1997. The parties hereto wish
to extend the termination date and to make certain other modifications to the
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, received to the
full satisfaction of each of them, the parties hereto agree to amend the
Agreement as follows:
ARTICLE I. AMENDMENTS.
1.1 Section 1.3(b) of the Agreement is hereby amended and restated in its
entirety to read as follows:
"(b)(i) Sellers represent and warrant that the parties to
the Bivona Agreements (hereinafter defined) claim they are owed
$3,500,000 by Sellers under the Bivona Agreements. To secure the
indefeasible payment in full of the Bivona Indemnity (hereinafter
defined), EESI shall not issue 215,000 shares of EESI Stock (the
"Withheld Stock") allocated to KC Waste it would otherwise issue
pursuant to Section 1.4(b)(i) below, until the Settlement Date. For
purposes hereof, the Settlement Date shall mean that date which is the
earlier of (A) that date by which a court of competent jurisdiction
has issued a final, unappealable decision with respect to the amount
of money owed in respect of each of the Asset Purchase Agreements
dated February, 1992 in respect of Dominick Colucci, Inc., John Bivona
Carting Corp., J.J.J. Carting Corp., and Utica Rubbish Corp.,
respectively, and any related non-competition, consulting,
subcontracting or other agreements related thereto (the "Bivona
Agreements") , (B) that date by which a binding settlement agreement
has been entered
<PAGE>
into between the Sellers (consented to by TWC, hereinafter defined,
the Purchasers and the parties to the Bivona Agreements (other than
the Sellers) and a release of the Purchasers and Sellers from any
liability to any parties to the Bivona Agreements (other than the
Sellers) has been executed, or (C) that date which is five years after
the Closing Date under this Agreement. If the Sellers fail to make
prompt payment to Purchasers for any claim by Purchasers for payment
under the Bivona Indemnity, then the Purchasers' obligation to deliver
the Withheld Stock shall be reduced by the number of shares of EESI
Stock equal to the dollar amount of the Bivona Indemnity which was not
paid by Sellers, based upon the then closing price of the EESI common
stock on the NASDAQ national market or the national exchange on which
EESI Stock is then listed on the date EESI applies the Withheld Stock
to pay for any part of the Bivona Indemnity which Sellers did not pay.
Five business days after the Settlement Date, EESI shall deliver to KC
Waste the Withheld Stock, after giving effect to any deductions, if
applicable. EESI agrees that EESI will deliver to KC Waste the
Withheld Stock prior to the Settlement Date on that date on which KC
Waste delivers immediately available funds to EESI, to be held in
escrow by Robert M. Kramer Associates, P.C. (the "Escrow Agent"), in
an amount equal to the greater of $3,225,000 or the then number of
shares of Withheld Stock based upon the closing price for EESI Stock
on the NASDAQ national market or any national exchange on which EESI
Stock is listed on the day prior to the delivery of such funds to the
Escrow Agent."
"(b)(ii) In consideration of EESI posting on behalf of
Waste all bonds and depositing the funds in an escrow account pursuant
to the Conditional Permission to Proceed with Sale Transaction
Pursuant 17 RCNY (S)5-05b(ii) (the "Conditional Permission") issued by
the New York City Trade Waste Commission ("TWC") on May 9, 1997, EESI
shall not issue 6,170 shares of EESI Stock (the "TWC Withheld Stock")
it would otherwise issue pursuant to Section 1.4(b)(ii) below, based
upon a per share price of $12.15 until the TWC Settlement Date. Five
business days after the TWC Settlement Date, EESI shall deliver to KC
Waste the TWC Withheld Stock, after giving effect to any deductions,
if applicable. For purposes hereof, the TWC Settlement Date shall mean
that date which is the date on which TWC determines the dollar amount
of any administrative fines which are to be paid by Waste and whether
or not any monies are owed in respect of business arrangements of
Waste with Coney Island Rubbish Removal Co., Inc. and Golden Gate
Carting Co., Inc., or such later date as is permitted by the TWC to
contest any
2
<PAGE>
fines which are to be paid by Waste (the date on which the amounts to
be paid to TWC are finally determined is the "TWC Settlement Date").
To the extent that any monies provided by the Purchasers pursuant to
this Section 1.3(b)(ii) to TWC are paid to by TWC, then the
Purchasers' obligation to deliver the TWC Withheld Stock shall be
reduced by that dollar amount of EESI Stock, based upon a per share
price equal to $12.15, which is equal to the amount of funds paid to
TWC. EESI agrees that EESI will deliver to the Sellers the TWC
Withheld Stock prior to the TWC Settlement Date on that date on which
Sellers deliver immediately available funds to EESI, to be held in
escrow by the Escrow Agent, in an amount equal to $75,000, the then
number of shares of TWC Withheld Stock based upon the closing price
for EESI Stock on the NASDAQ national market or any national exchange
on which EESI Stock is listed on the day prior to the delivery of such
funds to the Escrow Agent."
"(b)(iii) Purchasers and Sellers shall each pay one half of
the fees required to be paid to TWC pursuant to the Conditional
Permission for TWC's review of this Agreement and the documents
executed in connection herewith. The Escrow Agent shall hold in
escrow the funds required to be held in escrow pursuant to the
Conditional Permission, and shall pay such funds to TWC as required by
TWC."
1.2 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(a) of the Agreement is hereby amended by
deleting the number "$26,000,000" therefrom and substituting the
number "$23,040,000" therefor.
(b) Section 1.4(a)(iii) of the Agreement is hereby amended
and restated in its entirety to read as follows:
"(iii) decreased by a dollar amount of $3,321,310."
(c) Section 1.4(a)(iv) is hereby deleted in its entirety and
the phrase "Intentionally Omitted" is substituted therefor:
(d) Section 1.4 is hereby amended by adding the new
subsection (d) thereto:
"(d) "(i) Sellers hereby represent and warrant that
Dominick Vulpis ("Vulpis") claims he is owed $730,000 under the
Vulpis Consulting
3
<PAGE>
Agreement (hereinafter defined). If the Sellers are required to
pay to Vulpis any monies pursuant to the certain Consulting and
Noncompetition Agreement dated as of September 11, 1995 between
KC Waste and Vulpis (the "Vulpis Consulting Agreement"), and
Sellers present evidence of such payment to Vulpis which is
reasonably satisfactory to Purchasers and TWC has approved
payment to Vulpis, the Purchasers shall pay to Sellers additional
EESI Stock equal to the amount paid to Vulpis in respect of any
amounts owed to him under the Vulpis Consulting Agreement, but
not to exceed $630,000, pursuant to the Consulting Agreement,
based upon the closing price of the EESI common stock on the
NASDAQ national market or the national exchange on which EESI
Stock is then listed on that date which is five days prior to the
Sellers making any payments to Vulpis pursuant to the Vulpis
Consulting Agreement.
(ii) Sellers hereby represent and warrant Vulpis and
affiliated entities claim they are owed $2,641,310 under the
Vulpis Agreements (hereinafter defined). If Sellers make
payments to Vulpis or any affiliated entities (other than a draw
under the Letter of Credit, hereinafter defined) in satisfaction
of the amounts owed to Vulpis or any affiliated entities under
any of the Vulpis Agreements, hereinafter defined, and if by that
date on which Vulpis acknowledges in writing that Vulpis and
affiliated entities have been paid an amount which is in full
satisfaction of the amounts owed to them under the Vulpis
Agreements and the Letter of Credit has either expired by its
terms or been canceled with the consent of Vulpis, Purchasers
shall pay to Sellers that dollar amount of EESI Stock equal to
the amount paid by Sellers to Vulpis based upon the closing price
of the EESI common stock on the NASDAQ national market or the
national exchange on which EESI Stock is then listed on that date
which is five days prior to the date on which all the conditions
set forth in this Section 1.4(d)(ii) have been satisfied,
provided, however, that the aggregate amount of EESI Stock paid
to Sellers as additional purchase price under this Section
1.4(d)(ii) and the amount drawn under the Letter of Credit shall
not exceed $2,641,310."
(iii) If and when Vulpis and/or his affiliated
entities have been paid any amounts to satisfy in full the
amounts owed to Vulpis and/or his affiliated entities pursuant to
the Stock
4
<PAGE>
Purchase Agreement dated September 11, 1995 between WSI Realty
Inc. and Vulpis, Guarantee Fee Agreement between Vulpis and KC
Waste, Escrow Agreements dated as November 4, 1995 by and among
WSI Realty, Inc., WSI Holding Corp., Curbside, KC Waste, Vulpis
and Salvatore Marinello, the Consulting and Noncompetition
Agreements executed by Vulpis with each of Curbside Leasing, Inc.
and WSI Holding Corp. and any other agreements related thereto
(collectively, the "Vulpis Agreements") the Purchasers shall pay
to Sellers that dollar amount of EESI Stock equal to 50% of the
dollar amount paid to Vulpis and/or his affiliated entities,
which is less than $3,321,310, based upon a per share value of
$12.15. Payments made to Vulpis shall include the proceeds of any
amounts drawn under the letter of credit in the amount of
$2,641,310 obtained by Purchasers to provide for payment to
Vulpis under the Vulpis Agreements in accordance with the
Conditional Permission (the "Letter of Credit"). By way of
illustration, if Vulpis and/or his affiliated entities is paid
$2,000,000 in full settlement of his claim, Seller shall be paid
54,374 shares of ESSI common stock."
(d) (i) Section 1.4(b)(i) is hereby amended by deleting the
phrase "Twelve Million ($12,000,000) Dollars" therefrom and
substituting the new phrase "Nine Million Five Hundred Forty Thousand
($9,540,000) Dollars" therefor.
(d) (ii) Section 1.4(b)(ii) is hereby amended and restated
in its entirety to read as follows:
"(ii) The closing price for EESI common stock used to
calculated the remaining balance of Dollar Value of the Purchase
Price shall be $12.15."
1.3 Section 1.5 of the Agreement is hereby amended as follows:
(a) Section 1.5(i) of the Agreement is hereby amended and
restated in its entirety to read as follows: "(i) All accounts
receivable of Waste, NY Waste, and KC Waste arising out of the
Business on or after May 1, 1997 (including, without limitation, all
receivables billed for services which were not rendered as of May 1,
1997) shall be conveyed to EESI New York and accounts receivable of LI
Waste arising out of the Business on or after May 1, 1997 shall be
conveyed to EESI LI
5
<PAGE>
(including, without limitation, all receivables billed for services
which were not rendered as of May 1, 1997)."
(b) Section 1.5(j) of the Agreement is hereby amended and
restated in its entirety to read as follows: "All accounts receivable
of Curbside arising out of the Business on or after May 1, 1997
(including, without limitation, all receivables billed for services
which were not rendered as of May 1, 1997) shall be conveyed to EESI
Container."
(c) Section 1.5(q) of the Agreement is hereby amended and
restated in its entirety to read as follows: "(q) All of the interest
of Waste Services, NY Waste and KC Waste in all tangible and
intangible property, including without limitation, prepaid expenses
and all cash generated by Waste Services, New York Waste and KC Waste
on or after May 1, 1997 shall be conveyed to EESI New York; all of the
interest of LI Waste in all tangible and intangible property,
including without limitation, prepaid expenses and all cash generated
by LI Waste on or after May 1, 1997 shall be conveyed to EESI LI; and
all of the interest of Curbside in all tangible and intangible
property, including without limitation, prepaid expenses and all cash
generated by Curbside on or after May 1, 1997 shall be conveyed to
EESI Container."
1.4 Section 1.6 is hereby amended and restated in its entirety to
read as follows:
Section 1.6 Excluded Assets. "The parties agree that the only
---------------
tangible and intangible property owned by the Companies and not being
sold to Purchasers are accounts receivable created prior to May 1,
1997, the cash on hand of the Companies generated prior to May 1,
1997, and the corporate records of the Companies other than the
records set forth in Section 1.5(s) above and in Schedule 1.6
("Excluded Assets")."
1.5 Section 1.7 of the Agreement is hereby amended as follows:
(a) "Clause (iii) of Section 1.7 is hereby amended and restated
in its entirety to read as follows: 'the accounts payable of the
Companies on and after May 1, 1997 which were in incurred in the
ordinary course of business as historically operated;".
(b) Clause (vii) of Section 1.7 is hereby amended and restated
in its entirety to read as follows: "and (vii) accrued expenses, accrued
interest and accrued unpaid vacation
6
<PAGE>
accrued on or after May 1, 1997 which were in incurred in the ordinary
course of business as historically operated"
7
<PAGE>
1.6 Section 1.8 of the Agreement is hereby amended by adding the
following new clause (j) thereto: "and (j) expenses, accounts payable, interest
and unpaid salary and/or vacation accrued after May 1, 1997 and before the date
of the Closing under this Agreement".
1.7 Section 1.9 of the Agreement is hereby amended as follows:
(a) Subsection 1.9(b) is deleted therefrom and the phrase
"Intentionally Omitted" is substituted therefor.
(b) Subsections 1.9(c), (d) and (e) of the Agreement are
hereby amended by deleting the phrase, "April 30, 1997" therefrom and
substituting the phrase "June 30, 1997" therefor.
1.8 Article II of the Agreement is hereby amended as follows:
(a) Section 2.8 is hereby amended by deleting subsections (b) and
(c) therefrom and substituting in each case the phrase "Intentionally
Omitted".
(b) Article II is hereby further amended by adding the following
new Section 2.20 thereto:
"2.20 Notices and Customer Register. Sellers have sent the
-----------------------------
"Notice of Reduction and Carting Rates" to all its customers as
required by the Trade Waste Commission. Sellers have prepared a
computerized customer register which conforms to the Trade Waste
Commission requirements."
1.9 Article IV is hereby as amended as follows:
(c) Section 4.1 is hereby amended by adding the following new
subsections (d) and (e) thereto:
"(d) Sellers agree that prior to July 12, 1998, they shall
not sell, trade, or otherwise dispose of Restricted EESI Stock in an
open market or brokered sales transaction, whether or not they would
otherwise be able to legally enter into such a transaction, provided
however, that Sellers may enter into a private placement transaction
with respect to the Restricted Stock at any time."
"(e) Sellers agree that, with respect to an underwritten public
offering for the sale of EESI Stock pursuant to an effective
registration statement which occurs after the Closing Date, they will
enter into a "lock-up" agreement which would prohibit them from
selling any Restricted Stock for a period of 90 days commencing on the
date such registration statement
8
<PAGE>
becomes effective, if such a "lock-up" agreement is requested by the
underwriter of such public offering."
(e) Article IV is hereby further amended by adding the following
new subsections 4.8 and 4.9 thereto:
"4.8 Trade Waste Regulations. Sellers shall deliver to the
-----------------------
Trade Waste Commission by May 8, 1997, if the Closing has not
occurred prior to such date, a letter certifying that it has sent
to customers the notice referred to in Section 2.20."
"4.9 Cash. Sellers shall not distribute any cash of the
----
Company resulting from receivables generated on or after May 1,
1997 by the Company on or after May 1, 1997 for any purpose
whatsoever without the prior written consent of the Purchaser."
1.10 Article V is hereby amended as follows:
(a) Section 5.1 of the Agreement is hereby amended and restated
in its entirety to read as follows:
"Section 5.1 Payment of Expenses. EESI will pay all expenses
-------------------
incurred by Purchasers in connection with the negotiation,
execution and performance of this Agreement. At the Closing, EESI
will also pay the accounting fees for the audits to be delivered
by the Companies as set forth in Section 4.7, any accounting fees
incurred in connection with the preparation of audited financial
statements for the twelve month period ended December 31, 1994
and December 31, 1995, respectively, and will also pay up to
$62,500 of the legal fees incurred by Sellers in connection with
the negotiation, execution and performance of this Agreement."
(b) Section 5.2 of the Agreement is hereby amended as follows:
(i) The following new sentence is hereby added to
Section 5.2(a): "Notwithstanding anything in this Agreement to
the contrary, EESI shall not be obligated to file a registration
statement with respect to the Restricted Stock if at such time it
would otherwise be obligated to file a registration statement
hereunder, the Sellers may sell the Restricted Stock without
volume limitations under Rule 144."
(ii) Section 5.2(e) of the Agreement is hereby deleted
in its entirety from Article V.
9
<PAGE>
1.11 Section 5.5 of the Agreement is hereby amended and restated in
its entirety to read as follows:
(c) "5.5 Union Contracts. After the Closing Date Purchaser
---------------
shall enter into a union contract which is substantially similar to
the union contracts listed on Schedule 2.3."
(d) The following new Section 5.6 is hereby added to Article V:
"5.6 Accounts Receivable. Purchaser shall for a period of
-------------------
ninety (90) days after the Closing Date (the "Collection Period")
collect on behalf of Sellers any accounts receivable generated by the
Business prior to May 1, 1997, it being understood that the Purchaser
shall have no liability with any such account receivable which is not
collected. Any payments in respect of such accounts receivables which
the Purchaser collects during the Collection Period and which are not
identified or reconciled to a specific account receivable generated by
the Business after May 1, 1997 shall be remitted to William Leone, as
agent for the Sellers, on a weekly basis for the first month and
thereafter on a bi-monthly basis together with a payment application
statement generated in the ordinary course of business. After the
expiration of the Collection Period, Sellers shall collect the
accounts receivable generated by the Business prior to May 1, 1997 and
Purchaser shall have no further obligation to collect such account
receivables."
(e) The following new Section 5.7 is hereby added to Article
V:
"5.7 Closing Adjustments.
-------------------
(a) On the Closing Date, the Sellers and Purchasers
will account to each other with respect to the expenses of the
Business which accrued and the revenues of the Business which
were generated on and after May 1, 1997 through the Closing Date.
To the extent Seller paid any expenses related to the Business
generated in the ordinary course of business on a historical
basis on or after May 1, 1997 from funds which were not generated
by the Business through the rendering of services on or after May
1, 1997 (such expenses being "Sellers' Expense"), Purchasers
shall pay in cash to Sellers at Closing a dollar amount equal to
the Sellers' Expense.
(b) As of May 1, 1997, based upon the Company Debt set
forth in Schedule 1.4 hereto and assuming a Closing Date on or
prior to May 15, 1997, the holders of Company Debt shall receive
an amount of
10
<PAGE>
$6,176,690 in cash and EESI Stock. For purposes of Section
1.4(b)(ii), the Closing Price for EESI common stock shall be
$12.15, notwithstanding anything in the Agreement to the
contrary. Therefore, according to Section 1.4(b), Sellers shall
receive 1,159,982 shares of EESI Stock on the Closing Date based
on 1,060,000 of EESI Stock issued under Section 1.4(b)(i),
321,152 of EESI Stock issued under Section 1.4(b)(ii) less the
Withheld Stock and the TWC Withheld Stock. If the dollar amount
of Company Debt on the Closing Date is less than the amount of
Company Debt set forth in Schedule 1.4 due to amortization of
principal due to payments made during April, 1997, Purchasers
shall deliver to the Sellers on the Closing Date additional
shares of EESI Stock equal to the dollar amount of the difference
between the Company Debt listed in Schedule 1.4 and the Company
Debt on April 30, 1997. The EESI common stock delivered to the
Sellers under this Section 5.7(b) shall be valued at a per share
value equal to $12.15."
(a) The following new Section 5.8 is hereby added to Article V:
"5.8 Delivery of EESI Stock. Five business days after (i)
----------------------
Sellers have delivered to Purchasers termination and release
agreements for the parties listed below, and UCC-3 termination
statements in respect of all UCC-1 financing statements which
have been filed in respect of the Assets and (ii) all items
(other than items 4, 7 and 12) in the Conditional Permission have
been satisfied, Purchasers shall deliver to the Companies, as
applicable, the EESI Stock in accordance with Section 1.3 and
1.4.
(a) Dawn Carting Corp., Margaret Sindone, Gerard T.
Sindone, John J. Sindone, Rita Franco, Thomas Sindone, John J.
Sindone, Jr.
(b) U.S. Marshall
(c) Midlantic Bank
(d) ComQuip
(e) GE Capital
(f) Bank of New York
(g) J. Maggio Pension
(h) Grandi Carting Corp.
11
<PAGE>
(j) D&R Carting Corp."
1.12 The following new Section 5.9 is hereby added to Article V:
"5.9 Letter of Credit - Posting of Bond.
----------------------------------
(a) Purchasers agree that they will obtain a standby letter of
credit in the amount of $2,641,310 from a recognized financial
institution which shall provide for payment to Vulpis pursuant to the
Vulpis Agreements if such payment is to be made pursuant to a final,
unappealable order of a court of competent jurisdiction or pursuant to
a settlement agreement among the parties to the Vulpis Agreements.
(b) Purchasers agree to pay for the cost of the bond in the
amount of $75,000 on behalf of Waste as required in the Conditional
Permission referred to in Section 5.8 above.
1.13 The following Section 5.10 is hereby added to Article V:
"5.10 Post-Closing Cooperation. The parties hereto agree that
------------------------
pursuant to the Conditional Permission, EESI Stock in an amount equal to
the Dollar Value of the Purchase Price shall not be paid to the Sellers
until the satisfaction of the conditions set forth in the Conditional
Permission. The Purchasers acknowledge and agree that the Assets, and all
benefits thereunder, on the Closing Date, shall be transferred and assigned
to the Purchasers, but the EESI Stock in the amount of the Dollar Value of
the Purchase Price shall not be delivered to the Sellers on the Closing
Date solely due to the regulatory restrictions required by TWC. The
------
parties agree that the Sellers are entitled to receive EESI Stock in he
amount of the Dollar Value of the Purchase Price. Accordingly, the
Purchasers and the Sellers agree to fully cooperate and to use all
commercially reasonable efforts to satisfy the conditions set forth in the
Conditional Permission or to have such conditions waived by TWC.
1.14 Section 7.4 of the Agreement is hereby deleted in its entirety
and the phrase "Intentionally Omitted"is substituted therefor.
1.15 Section 8.1 of the Agreement is hereby amended by adding the
following new clauses "(e)", "(f)", "(g)" and "(h)" to the end of the first
sentence thereof:
"(e) any obligation of any Seller to pay any amounts owed to the
Town of Hempstead, New York, for landfill, dumping, or any other fees
related to any of the foregoing which are not disclosed in the
Schedules to
12
<PAGE>
this Agreement (the indemnification in this clause (e) being the
"Landfill Indemnity"), (f) any liability, environmental or otherwise,
arising in connection with the Kin-Buc Landfill Superfund Site in
Edison, New Jersey, notwithstanding the disclosure of such liability
or potential liability on Schedules 2.13(b) and (c) to the Agreement
(the indemnification in this clause (f) being the "Kin-Buc
Indemnity"), (g) any misrepresentation with respect to, any imposition
upon, claim against or payment by the Purchasers of any liability or
obligation of the Companies relating to, arising in connection with or
from, or as a result of, the Vulpis Agreements and Consulting
Agreement (the indemnification in this clause (g) being the "Vulpis
Indemnity"), and (h) any misrepresentation with respect to, any
imposition upon, claim against or payment by the Purchasers of any
liability or obligation of the Companies relating to, or arising in
connection with or from, the Bivona Agreements (the indemnification in
this clause (h) being the "Bivona Indemnity"))."
1.16 Section 8.1 of the Agreement is hereby further amended by
inserting in the last sentence thereof after the phrase "Section 8.1" the
following new phrase "(other than the Landfill Indemnity, the Kin-Buc Indemnity,
the Vulpis Indemnity or the Bivona Indemnity)".
1.17 Section 8.6 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"Section 8.6 Limitation of Liability. Notwithstanding anything
-----------------------
else to the contrary contained herein, neither the Purchasers nor any
other party entitled to indemnification pursuant to Section 8.1
hereof, shall be entitled to assert any claim for indemnification
contained in Section 8.1 (other than the Landfill Indemnity, the Kin-
Buc Indemnity, the Vulpis Indemnity or the Bivona Indemnity) unless
and until such time as claims of indemnification thereunder, exceed
("Basket") (i) One Hundred ($100) Dollars in the aggregate, for claims
made regarding the falsity of any representation or warranty of
Sellers made under Section 2.8(b); (ii) Two Hundred Thousand
($200,000) Dollars, in the aggregate, for all other claims, provided
however, that neither the Landfill Indemnity, the Kin-Buc Indemnity,
the Vulpis Indemnity or the Bivona Indemnity shall be subject to the
Basket and shall in each case be reimbursable from the first dollar of
monies expended by or loss incurred by, the Purchasers. Except in the
case of the Landfill Indemnity, Kin-Buc Indemnity, the Vulpis
Indemnity and the Bivona Indemnity, Purchasers shall only be entitled
to assert claims for indemnification that exceed the applicable
Basket; it being understood and agreed that the applicable Basket
amount shall be
13
<PAGE>
excluded from the indemnification contained in Section 8.1 and shall
be borne 100% by the Purchasers and the parties entitled to be
indemnified thereunder so that the Sellers, as applicable, shall have
no liability with respect thereto. In addition, notwithstanding
anything else contained herein to the contrary, the obligations of the
Sellers pursuant to the indemnification contained in Section 8.1 shall
be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Companies, as valued under Section 1.3
at closing, as adjusted under Section 1.4."
1.18 The third sentence of Section 9.14 of the Agreement is hereby
amended and restated in its entirety to read as follows:
(a) "Purchasers will have fourteen (14) days from that date
on which the Purchasers have received written approval from the
Trade Waste Commission for the Purchasers to close the
transactions contemplated by this Agreement (the "Approval Date")
to review any new or revised Schedule delivered to Purchasers on
or prior to the Approval Date and terminate the Agreement by
sending written notice to the Company if Purchasers are not
satisfied with any material matter revealed by any such new or
revised Schedule."
1.19 The following new Exhibit A, Schedules 1.4, 1.6, 2.7, 2.13(c),
1.12(b) and 7.3 attached hereto are hereby substituted for Exhibit A, Schedules
1.4, 1.6, 1.12(b), 2.7, 2.13(c) and 7.3 to the Agreement.
ARTICLE II. MISCELLANEOUS.
2.1 All references in the Agreement to "this Agreement" or like terms
shall mean and be a reference to the Agreement as amended by this Amendment and
all references to "the Agreement" or a like term in any agreement executed in
connection with the Agreement shall mean and be a reference to the Agreement as
amended by this Amendment.
2.2 Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect.
2.3 This Amendment hereby incorporates, includes and is subject to
Article IX of the Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Robert Kramer
--------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN WASTE OF L.I., INC.
By: /s/ Robert Kramer
---------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN WASTE OF
NEW YORK, INC.
By: /s/ Robert Kramer
----------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN CONTAINER CORPORATION
By: /s/ Robert Kramer
------------------------------------
Name: Robert M. Kramer
Title: Vice President
COMPANIES
KC WASTE SERVICES, INC.
By: /s/ William F. Leone
------------------------------------
Name: William F. Leone
Title: President
15
<PAGE>
CURBSIDE LEASING, INC.
By: /s/ William F. Leone
------------------------------------
Name: William F. Leone
Title: President
WASTE SERVICES, INC.
By: /s/William F. Leone
------------------------------------
Name: William F. Leone
Title: President
N.Y. WASTE SERVICES, INC.
By: William F. Leone
------------------------------------
Name: William F. Leone
Title: President
L.I. WASTE SERVICES, INC.
By: William F. Leone
------------------------------------
Name: William F. Leone
Title: President
SHAREHOLDERS
WSI HOLDING CORPORATION
By: /s/ William F. Leone
------------------------------------
Name: William F. Leone
Title: President
WSI REALTY, INC.
By: /s/ William F. Leone
------------------------------------
Name: William F. Leone
Title: President
/s/ William F. Leone
---------------------------------------
William F. Leone
/s/ John D. Leone
---------------------------------------
John D. Leone
16
<PAGE>
/s/ Joseph G. Leone
-------------------------------------
Joseph G. Leone
/s/ Richard A. Leone
-------------------------------------
Richard A. Leone
/s/ Janet A. Ruddy
-------------------------------------
Janet A. Ruddy
/s/ Paul M. Leone
-------------------------------------
Paul M. Leone
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) OF THE AGREEMENT
ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert Kramer
---------------------------------
Robert M. Kramer
17
<PAGE>
EXHIBIT 10.2
------------
AGREEMENT AND PLAN OF REORGANIZATION OF
GOLDEN GATE CARTING, CO, INC.
CHRISTOPHER PITTAS
NICHOLAS PITTAS, JR.
EASTERN WASTE OF NEW YORK, INC.
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS................................................................... 1
ARTICLE I. Reorganization; Closing......................................... 1
-----------------------
ARTICLE II. Representations and Warranties of the Sellers.................. 11
---------------------------------------------
ARTICLE III. Representations and Warranties of Purchasers.................. 21
--------------------------------------------
ARTICLE IV. Additional Agreements of Sellers............................... 23
--------------------------------
ARTICLE V. Additional Agreements of Purchasers............................. 26
-----------------------------------
ARTICLE VI. Conditions of Purchasers....................................... 28
------------------------
ARTICLE VII. Conditions of Sellers......................................... 30
---------------------
ARTICLE VIII. Indemnification.............................................. 31
---------------
ARTICLE IX. Other Provisions............................................... 35
----------------
</TABLE>
<PAGE>
SCHEDULES
1.4 COMPANY DEBT
1.6 EXCLUDED ASSETS
1.10(C) OPINION OF PURCHASERS' COUNSEL
1.10(E) ASSIGNMENT AND ASSUMPTION AGREEMENT
1.11(A) BILL OF SALE
1.11(B) NON-COMPETE AGREEMENT
1.11(D) OPINION OF SELLERS' COUNSEL
1.12(B) ALLOCATION OF PURCHASE PRICE TO ASSETS
2.1 SUBSIDIARIES
2.2 CAPITAL STOCK
2.3 CONTRACTS, PERMITS, MORTGAGES AND MATERIAL DOCUMENTS
2.4(A)(I) ROLLING STOCK
2.4(A)(II) CONTAINERS
2.4(B) PERSONAL PROPERTY EXCEPTIONS
2.5 CUSTOMERS
2.7 ADVERSE CHANGES
2.8(B) ACCOUNTS RECEIVABLE
2.8(C) ACCOUNTS PAYABLE
2.9(F) COMPENSATION INCREASES
2.10 TAX STATUS OF COMPANY
<PAGE>
2.11 INSURANCE POLICIES, PERFORMANCE BONDS AND LETTERS OF CREDIT
2.12(A) CONTRACTS WITH EMPLOYEES
2.12(B) EMPLOYEES; UNION REPRESENTATION
2.12(C) BENEFIT PLANS
2.13(A) VIOLATIONS OF FEDERAL, STATE OR LOCAL LAW
2.13(B) ENVIRONMENTAL VIOLATIONS
2.13(C) LANDFILLS AND DISPOSAL FACILITIES
2.13(F) LIST AND SYNOPSIS OF ALL LITIGATION
2.15 REQUIRED CONSENTS
2.18 RELATED PARTY TRANSACTIONS
6.3 CANCELLED OR MODIFIED MATERIAL DOCUMENTS
7.3 GUARANTEES
EXHIBIT A GEBBIA DEBT (ACCORDING TO THE GEBBIA PARTIES)
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Agreement and Plan of Reorganization ("Agreement") is made as of April
7, 1997, by and among Christopher Pittas, Nicholas Pittas, Jr. ("Shareholders"),
Golden Gate Carting, Co, Inc. ("Golden Gate"), Eastern Environmental Services,
Inc. ("EESI"), and Eastern Waste of New York, Inc. ("EESI NY"). For purposes of
this Agreement, EESI and EESI NY are collectively referred to as "Purchasers;"
Golden Gate may also be referred to as "Company;" and the Company and the
Shareholders are collectively referred to as the "Sellers."
RECITALS
--------
The Shareholders are the owners of the outstanding stock of Golden Gate, as
set forth on Schedule 2.2 attached. The Company is a New York corporation. The
Company is in the business of collecting, transporting, recycling and disposing
of non-hazardous, commercial, industrial, and municipal solid waste
("Business").
The parties hereto desire that substantially all of the assets of the
Company be acquired by EESI NY in exchange solely for the voting stock of EESI,
the parent and sole shareholder of EESI NY, on the terms contained herein. The
parties intend that the transactions contemplated hereby qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended.
ARTICLE I
REORGANIZATION; CLOSING
-----------------------
Section l.l. Incorporation of Recitals. The recitals set forth above
-------------------------
are incorporated herein by reference and are a part of this Agreement.
Section l.2. Place for Closing. Subject to Section 1.9 hereof, closing
-----------------
under this Agreement shall take place at the offices of Rivkin, Radler & Kremer,
EAB Plaza, Uniondale, NY 11556, 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 l.3. Agreement to Exchange Stock for Assets; Consideration.
-----------------------------------------------------
(a) At the Closing, the Company, as set forth in Section 1.5 below, shall
transfer and deliver to EESI NY, as set forth in Section 1.5 below, the assets
owned by the Company other than the Excluded Assets, defined in Section 1.6, and
EESI agrees to issue and deliver, in exchange for the assets, as consideration
therefor, shares of EESI's common stock ("EESI Stock"), calculated as set forth
in Section 1.4 below, and the assumption by Purchasers of the
<PAGE>
Assumed Liabilities, as defined in Section 1.7. The EESI Stock shall be issued
and paid to the Company on the Closing Date.
(b) In accordance with Section 1.4(a)(iii) of this Agreement, the dollar
value of the EESI Stock to be delivered at Closing is being increased by the
amount by which the accounts receivable of the Company conveyed to the
Purchasers at Closing, less the bad accounts receivable reserve of the Company
agreed upon by Sellers and Purchasers at Closing, exceeds the accrued expenses,
accrued interest, accrued unpaid vacation and accounts payable of the Company,
assumed by the Purchasers in accordance with this Agreement ("Accounts
Receivable Payment"). The EESI Stock issued in the amount of the Accounts
Receivable Payment shall be hereafter referred to as the "Additional Stock". One
half of the Additional Stock shall be delivered to Robert M. Kramer &
Associates, P.C. ("Escrow Agent") in escrow to be held under the provisions of
this Section 1.3(b) ("Escrow Stock"). On or before one hundred ninety-five (195)
days from the Closing Date, Purchasers will supply Company and the Escrow Agent
with an accounting of the accounts receivable of the Company collected by the
Purchasers within 180 days after the Closing and the accounts payable of the
Company paid by Purchasers within 180 days after Closing ("Receivable and
Payable Statement"). Within ten days of Escrow Agent's receipt of the Receivable
and Payable Statement, Escrow Agent, based on the Receivables and Payable
Statement shall deliver to the Company out of the Escrow Stock, an amount of
EESI's common stock equal in value to the amount by which (i) the accounts
receivable of the Company collected by the Purchasers within 180 days after
Closing exceeded the accounts payable of the Company paid by the Purchaser
within 180 days after Closing, less (ii) 50% of the Accounts Receivable Payment.
The EESI common stock delivered to Company by Escrow Agent under this Section
1.3(b) shall be valued at a per-share value equal to the closing price of EESI's
common stock as reported on the NASDAQ National Market on the day which is five
(5) trading days prior to the Closing Date. The EESI Stock delivered by Escrow
Agent shall be issued and paid to the Company. The Escrow Agent shall deliver to
Purchaser for cancellation the Escrow Stock not required to be delivered to the
Company.
Section 1.4. Calculation of EESI Stock. The dollar amount of the EESI
-------------------------
Stock to be delivered at Closing shall be calculated as set forth in this
Section 1.4(a) and paid in EESI Stock having the per-share value set forth in
Section 1.4(b).
(a) The EESI Stock to be delivered at Closing shall equal, in dollar value
(based on the per share values set forth in Section 1.4(b) below), Four Million
Nine Hundred and Five Thousand Dollars ($4,905,000) increased and decreased as
follows ("Dollar Value of the Purchase Price"):
(i) decreased, by the principal owed, as of the Closing Date, by
the Company with respect to the debt, set forth on Schedule 1.4
("Company Debt"), subject to paragraph (c) below (after the date of
this Agreement, the Company Debt may increase, due to additional
indebtedness incurred as allowed by Section 4.4 of this Agreement, or
decrease, due to scheduled payments or pre-payments, as allowed by
Section 4.4);
2
<PAGE>
(ii) increased, by an amount equal to one-half of any discount of
the Company Debt which the holders of the Company Debt have agreed to
accept in writing after the Closing Date in exchange for an
accelerated payment of such Company Debt where EESI agrees to fund the
accelerated payment (EESI agrees to pay accelerated payments which are
payable in EESI's common stock valued at the market value of EESI's
common stock at the time of issuance, as listed on the NASDAQ National
Market and provided the accelerated payment will achieve a ten percent
or more discount of the Company Debt being prepaid); and
(iii) increased, by the amount by which the accounts receivable of
the Company conveyed to the Purchasers at Closing, less the bad
accounts receivable reserve of the Company agreed upon by Sellers and
Purchasers at Closing, exceeds the accrued expenses, accrued interest,
accrued unpaid vacation and accounts payable of the Company, assumed
by the Purchasers in accordance with this Agreement.
(iv) decreased by a dollar amount equal to the product of (A)
fifteen (15) and (B) the dollar amount by which the annualized
revenues of the Company on the Closing Date is less than $327,000,
provided however there shall be no purchase price adjustment pursuant
to this clause (iv) if the decrease in revenues is five percent (5%)
or less. When determining the dollar amount of the annualized revenue
of the Business on the Closing Date, the dollar amount by which
revenues are reasonably likely to decrease if there shall have been
enacted or promulgated or adopted, on or prior to the Closing Date,
any rule, statute, law or regulation or any modification or
interpretation of any of the foregoing, (including without limitation,
any of the foregoing which reduces the rates charged to customers for
any services) which is reasonably likely to decrease revenues of the
Company by 5% or more from the date of this Agreement, shall be taken
into consideration. The 5% or more change in revenues referred to in
this clause (iv) shall not be deemed to be a material adverse change
under Section 6.3 of this Agreement.
(b) The per-share values used to calculate the amount of the EESI Stock to
be paid to the Company shall be as follows:
(i) Nine Dollars ($9.00) per Share for an amount of the Dollar
Value of the Purchase Price equal to One Million Nine Hundred Five
Thousand Dollars ($1,905,000), plus the amount that the principal of
the Company Debt at Closing is less than the principal of the Company
Debt, as of the date of this Agreement, as set forth on Schedule 1.4,
due to normally scheduled principal amortization paid by the Company
and identified as a monthly payment on Schedule 1.4; and
(ii) the closing price for EESI's common stock on the NASDAQ
National Market for the trading day which is five trading days prior
to the Closing Date,
3
<PAGE>
shall be used to calculate the remaining balance of Dollar Value of
the Purchase Price.
(c) The Sellers have advised the Purchasers that the amount of
indebtedness set forth on Schedule 1.4 as being the principal amount (the
"Schedule 1.4 Gebbia Debt") owed by Golden Gate to Gebbia Inc. and A. Gralto
Carting Corp. (individually and collectively the "Gebbia Parties") pursuant to
an Agreement of Sale dated as of April 1, 1990 among Golden Gate and the Gebbia
Parties (the "Sale Agreement") and the notes issued thereunder is the subject of
a dispute between Golden Gate and the Gebbia Parties. The principal amount the
Gebbia Parties allege that Golden Gate owes them ($3,500,000) is set forth in
the Order to Show Cause Index No. 97-006387 and Affidavit from Vincent Gebbia
attached hereto as Exhibit A (the "Gebbia Debt"). Although for purposes of
calculating the Dollar Value of the Purchase Price and the Assumed Liabilities
Purchasers are using the principal amounts set forth in Schedule 1.4 to this
Agreement, in view of the dispute between Golden Gate and the Gebbia Parties,
unless on or prior to the Closing Date the Sellers deliver to Purchasers a
binding enforceable written agreement between the Gebbia Parties and Golden Gate
as to the amounts owed to the Gebbia Parties by Golden Gate under the Sale
Agreement and the notes issued thereunder (and shall make any correction, if
necessary, to Schedule 1.4), a release from the Gebbia Parties of the
Purchasers, Sellers and the Assets and a stipulation by the Gebbia Parties to
the discontinuance of the litigation pending by Golden Gate against the
Purchasers, the Sellers and the Assets, EESI shall not issue on the Closing Date
an amount of EESI Stock having a dollar value (based upon a $9.00 per share
value) equal to the sum of (i) the dollar amount by which the Gebbia Debt
exceeds the Schedule 1.4 Gebbia Debt and (ii) an amount of $350,000 (it being
understood that this amount is an estimate, and not a cap on costs) to cover
possible litigation costs or defect in title to the Assets as a result of the
dispute over the Gebbia Debt, (the "Contingent EESI Stock"). Within ten business
days after the "Gebbia Determination Date" (hereinafter defined) EESI shall
issue and deliver to the Sellers an amount of EESI Stock (based upon a $9.00 per
share value) equal to the Contingent EESI Stock decreased by the "Final Gebbia
Adjustment" (hereinafter defined), if such amount exceeds the Schedule 1.4
Gebbia Debt. For purposes of this Section 1.4(c) "Gebbia Determination Date"
shall mean the earlier of (i) the date on which there is a binding enforceable
written agreement between Golden Gate and the Gebbia Parties as to the Company
Debt owed to the Gebbia Parties, (ii) the date on which a court of competent
jurisdiction in a final unappealable decision determines the dollar amount of
the Company Debt owed to the Gebbia Parties and (iii) that date, which is no
later than five years after the Closing Date (the "Final Gebbia Settlement
Date"), on which the Purchasers and the Gebbia Parties enter into a binding
enforceable written agreement as to the Company Debt owed to the Gebbia Parties.
The Sellers hereby grant the Purchasers a present power of attorney, and appoint
each of them with power of substitution, to settle the dispute with the Gebbia
Parties as to the amount of Company Debt owed to them, on such terms as the
Purchasers determine in their sole discretion are reasonable. This power of
attorney shall be effective (i) on that date which is six months prior to the
Final Gebbia Settlement Date if, on or prior to such date, Golden Gate has not
entered into a binding enforceable written agreement with the Gebbia Parties
with respect to, or there has not been a final adjudication of, the amount of
Company Debt owed to the Gebbia Parties or (ii) if the Purchasers make a claim
for
4
<PAGE>
reimbursement under the Gebbia Indemnity and the Shareholders fail to pay such
reimbursement to the Purchasers in immediately available funds within five
business days after Purchasers have sent written notice of such claim for
reimbursement to the Shareholders. Purchasers agree that if they exercise the
foregoing
5
<PAGE>
power of attorney to settle with the Gebbia Parties they will obtain a release
from the Gebbia Parties for the Sellers. This power of attorney is irrevocable
and is coupled with an interest. For purposes hereof, "Final Gebbia Adjustment"
means a dollar amount equal to the dollar amount by which, if any, the amount of
the Gebbia Debt determined on the Gebbia Determination Date, either pursuant to
a written agreement or final adjudication as referred to in clauses (i), (ii) or
(iii) in the preceding sentence, is greater than the Schedule 1.4 Gebbia Debt
and any costs and expenses incurred by the Purchasers, including without
limitation, fees and disbursements of counsel, related thereto. For purposes of
computing the amount of Contingent EESI Stock to be issued to the Sellers, the
"Final Gebbia Adjustment" shall not include any dollar amounts paid by Sellers
directly to the Gebbia Parties and in respect of which amounts the Purchasers
have no liability. If the Final Gebbia Adjustment is equal to or greater than
the dollar value of the Contingent EESI Stock (based upon a $9.00 per share
value), then EESI shall have no obligation to issue all or part of the
Contingent EESI Stock.
The Sellers hereby confirm and agree that, notwithstanding any reference in this
Agreement or any Schedule to the dispute by the Gebbia Parties or any lien of
the Gebbia Parties with respect to indebtedness owed by Sellers to the Gebbia
Parties, the indemnification by the Sellers set forth in Article VIII hereof
shall cover any claims, damages, suits, actions, proceedings (including without
limitation, any settlement proceedings or negotiations or settlement costs),
demands, assessments, adjustments, loss or forfeiture of the Assets, defect in
title to the Assets, encumbrances or liens on the Assets, penalties, costs and
expenses arising, directly or indirectly, in connection with a dispute between
the Gebbia Parties and Golden Gate as to the Company Debt owed to the Gebbia
Parties, provided, however, that the indemnity provided for in this Section
1.4(c) shall not be subject to the Basket. Without limiting the generality of
the foregoing, the Sellers hereby also confirm and agree that they shall
indemnify the Purchasers for the dollar amount (without regard to the Basket,
notwithstanding anything in this Agreement to the contrary) equal to the amount
by which the Final Gebbia Adjustment (whether determined pursuant to a written
agreement between either Golden Gate or the Purchasers, acting with power of
attorney, and the Gebbia Parties or by final adjudication) exceeds the dollar
value of the Contingent EESI Stock (based on a $9.00 per share value). The
indemnity provided for in this Section 1.4(c) and 8.1(e) is hereinafter referred
to as the "Gebbia Indemnity".
For purposes of this Agreement, the shares of EESI common stock delivered based
on the $9.00 value as set forth in subsection (i) above is hereafter referred to
as the "Restricted Stock" and the shares of EESI common stock delivered based on
the closing price of EESI common stock five trading days prior to Closing, as
set forth in subsection (ii) above, is referred to as the "Unrestricted Stock."
The Restricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement on the earlier of eighteen (18) months after the
Closing Date or July 12, 1998. The Unrestricted Stock shall be entitled to the
registration rights set forth in Section 5.2 of this Agreement commencing on the
Closing Date.
Section 1.5. Description of Assets. Upon the terms and subject to the
---------------------
conditions set forth in this Agreement, on the Closing Date the Company shall
grant, convey, sell, transfer and assign to EESI NY the following assets,
properties and contractual rights of the Company, wherever located, all as set
forth in this Section 1.5.
6
<PAGE>
(a) All of the containers and carts ("Containers") owned or leased by
Golden Gate;
(b) All of the motor vehicles and all attachments, accessories and
materials handling equipment owned or leased by Golden Gate;
(c) All of the compactors and recycling equipment owned or leased by
Golden Gate;
(d) All radios located in the rolling stock, the radio base station, and
all manual and automated routing and billing systems and components thereof,
including, without limitation, all computer hardware, software and programs
("Radios") owned or leased by Golden Gate;
(e) All of the inventory of parts, tires and accessories owned by Golden
Gate;
(f) All right, title and interest of Golden Gate in and to all trade
secrets, proprietary rights, symbols, trademarks, service marks, logos and trade
names used and owned by Golden Gate;
(g) All contractual rights of Golden Gate with its customers (whether oral
or in writing) relating to the conduct of the Business;
(h) All accounts receivable of Golden Gate arising out of the Business;
(i) All leases and agreements to which Golden Gate is a party;
(j) All permits, licenses, franchises, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals") held by Golden Gate relating to, used in or
required for the operation of the Business which are transferable;
(k) The exclusive right to use the name Golden Gate;
(l) All right, title, and interest of Golden Gate in and to the telephone
numbers used in the conduct of the Business;
(m) All of the shop tools owned by Golden Gate relating to the Business;
(n) All of the furniture and office or of her equipment owned by Golden
Gate;
(o) All of the interest of Golden Gate in all tangible and intangible
property, including, without limitation, pre-paid expenses;
(p) All of the goodwill of the Business owned by Golden Gate;
7
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(q) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (p) above.
All of the foregoing assets, properties and contractual rights described in (a)
through (q) above are hereinafter sometimes collectively called the "Assets." At
Closing, good and marketable title to the Assets will be conveyed to Purchasers
by the Company free and clear of all liens, encumbrances, security interests and
claims, except for liens securing the Assumed Liabilities, as defined in Section
1.7.
Section 1.6. Excluded Assets. The parties agree that the only tangible
---------------
and intangible property owned by the Company and not being sold to the
Purchasers are the cash on hand of the Company, the corporate records of the
Company other than the records set forth in Section 1.5(q) above, and the other
assets listed on Schedule 1.6. ("Excluded Assets").
Section 1.7. Assumption of Obligations. From and after the Closing the
-------------------------
Purchasers agree to assume and perform all of the Company's obligations under
(i) the Company Debt and all documents evidencing the Company Debt, as
identified on Schedule 1.4, to the extent, and only to the extent, such
obligations first mature and are required to be performed subsequent to the
close of business on the Closing Date; (ii) the customer contracts of the
Company, to the extent, and only to the extent, such obligations first mature
and are required to be performed subsequent to the close of business on the
Closing Date; (iii) the accounts payable of the Company; (iv) all documents,
identified in Schedule 2.3, except for any collective bargaining agreements with
Labor Unions, to the extent, and only to the extent, obligations under such
documents first mature and are required to be performed subsequent to the close
of business on the Closing Date (union contracts are not being assumed by the
Purchasers) and (v) contracts or agreements arising in the ordinary course of
the Company's Business, only to the extent such obligations first mature and are
required to be performed subsequent to the close of business on the Closing Date
and which in the aggregate require the payment of $25,000 or less a year
("Assumed Liabilities"). Purchasers agree to defend and indemnify Sellers and
hold Sellers harmless from all losses, claims, causes of action, damages,
liabilities, expenses and costs of any kind or amount whatsoever (including,
without limitation, reasonable attorneys' fees) with respect to the Assumed
Liabilities.
Section 1.8. Non-Assumption of Liabilities. Except as explicitly set
-----------------------------
forth in Section 1.7 above, Purchasers shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for, or
incur any liability or obligation of any nature of the Company, whether legal or
equitable, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, including, without limiting
the generality of the foregoing, any liability or obligation arising out of or
relating to: (a) any occurrence or circumstance (whether known or unknown) which
occurs or exists on or prior to the Closing Date and constitutes, or which by
the lapse of time or giving notice (or both) would constitute, a breach or
default under any lease,
8
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contract, or other instrument or agreement or obligation (whether written or
oral); (b) injury to or death of any person or damage to or destruction of any
9
<PAGE>
property, whether based on negligence, breach of warranty, or any other theory;
(c) violation of the requirements of any governmental authority or of the rights
of any third person, including, without limitation, any requirements relating to
the reporting and payment of federal, state, local or other income, sales, use,
franchise, excise or property tax liabilities of Sellers; (d) the generation,
collection, transportation, storage or disposal by the Company of any materials,
including, without limitation, hazardous materials; (f) any severance pay
obligation of the Company, compensation owed employees of the Company for
periods prior to the Closing Date, or any obligations under any employee benefit
plan (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended) or any other fringe benefit program maintained
or sponsored by Company or to which any of the Company contributes or any
contributions, benefits or liabilities therefor or any liability for the
withdrawal or partial withdrawal from or termination of any such plan or program
by the Company; (g) the debts and obligations of the Company, except for the
Assumed Liabilities; (h) any violation by the Company of any law, including,
without limitation, any federal, state or local antitrust, racketeering or trade
practice law; and (i) liabilities or obligations of the Sellers for brokerage or
other commissions relative to this Agreement or the transactions contemplated
hereunder.
Section 1.9. Term And Time For Closing. Following execution of this
-------------------------
Agreement, the Purchasers and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms on the last business day of
the month that the conditions of Closing set forth in Article VI and Article VII
have been satisfied or waived. If the failure to conclude this transaction is
due to the refusal and failure of Sellers to perform their obligations to close
under this Agreement, Purchasers may seek to enforce this Agreement with an
action of specific performance, in addition to, and not in limitation of, any
other rights and remedies available to the Purchasers, under this Agreement, or
at law or in equity, including, without limitation, an action to recover their
actual damages resulting from the default of the Sellers. If the failure to
conclude this transaction is due to the refusal and failure of Purchasers to
perform their obligations to close under this Agreement, the Sellers, or any of
them, may, in addition to and not in limitation of any other rights and remedies
available to the Sellers, or any of them, under this Agreement, or at law or in
equity, bring legal action to recover their actual damages resulting from the
default of the Purchasers.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and Nicholas Pittas, Jr., on
behalf of the Sellers;
(b) by EESI by that date which is fourteen days after the Approval Date
(or if such date is not a business day, then the next business day) if (i) EESI
is not satisfied in its sole discretion with the due diligence it has conducted
on the Company, including without limitation its due diligence with respect to
the matters described on the Schedules hereto, which Schedules the Purchasers
have not yet reviewed or (ii) without limiting the generality of the foregoing
clause (i), if EESI in its sole discretion determines that the matters disclosed
in the Schedules or any other matters of which it otherwise becomes aware of
during the course of its due diligence, are materially adverse to the
Purchasers, the Assets, or the Business. For purposes hereof, the
10
<PAGE>
"Approval Date" shall mean that date on which the Purchasers have received
written approval from the Trade Waste Commission for the Purchasers to close the
transactions contemplated by this Agreement;
(c) by EESI or Nicholas Pittas, Jr., on behalf of the Sellers, by
providing the other with written notice thereof, if the Closing shall not have
occurred by April 30, 1997, or such other date as may be agreed to by the
parties hereto in writing, if such notifying party is ready, willing and able to
consummate the transactions contemplated by this Agreement and all of the
conditions to the other party's obligation to close as set forth in Article VI
or VII, as applicable, shall have been satisfied and the other party fails to
consummate the transactions contemplated by this Agreement for any reason
whatsoever;
(d) by Nicholas Pittas, Jr., on behalf of the Sellers, or by EESI, on or
prior to April 30, 1997, or such other date as may be agreed to by the parties
in writing, in the event Purchasers or the Sellers, as applicable, makes a
material misrepresentation under this Agreement or breaches a material covenant
or agreement under this Agreement, and fails to cure such misrepresentation or
breach within ten (10) days from the date of written notice of the existence of
such misrepresentation or breach;
(e) by Nicholas Pittas, Jr., on behalf of the Sellers or EESI, if the
Closing shall not have occurred by April 30, 1997, or such other date as may be
agreed to by the parties hereto in writing, due to the non-fulfillment of a
condition precedent to such party's obligation to close as set forth at Article
VI or VII hereof, as applicable (through no fault or breach by the terminating
party); or
(f) by the Purchasers and Sellers as provided in Section 9.14.
All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that Section 1.9, Section 5.1, Article VIII, Section 9.1, Section
9.2 and Section 9.15 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement. In the event of termination by Nicholas Pittas,
Jr., on behalf of the Sellers, pursuant to the above Sections (c) or (d) hereof,
Nicholas Pittas, Jr., on behalf of the Sellers, shall be entitled to recover
Sellers' costs and expenses, including reasonable attorneys fees, in connection
with the preparation, negotiation and execution of this Agreement.
Section 1.10. Deliveries by Purchasers. At the Closing, Purchasers shall
------------------------
deliver, all duly and properly executed, authorized and issued (where
applicable):
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(a) The EESI Stock, as provided in Sections 1.3 and 1.4 above, to be
delivered to the Company;
(b) A certified copy of resolutions of the directors and shareholder of
EESI NY and the directors of EESI authorizing the execution and delivery of this
Agreement and each other agreement to be executed in connection herewith
(collectively, the "Collateral Documents") and the consummation of the
transactions contemplated herein and therein;
(c) A favorable opinion from counsel for Purchasers, dated the day of the
Closing in the form attached as Schedule 1.10(c);
(d) The Certificate described at Section 7.1;
(e) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(f) Other documents and instruments required by this Agreement, if any.
Section 1.11. Deliveries by Sellers. At the Closing, each of the Sellers,
---------------------
as applicable, shall deliver to Purchasers, all duly executed, the following:
(a) The Company shall deliver to EESI NY a duly executed Bill of Sale for
the Assets to be conveyed and assigned, in the form attached as Schedule
1.11(a);
(b) Each of the Shareholders shall execute the Covenant Not to Compete
Agreement attached to this Agreement as Schedule 1.11(b);
(c) The Company shall have delivered to EESI a current certificate of good
standing for the Company from the New York Secretary of State;
(d) A favorable opinion from counsel for the Company, dated the date of
the Closing, in form attached as Schedule 1.11(d);
(e) Each of the Sellers shall execute and deliver the Certificate
described at Section 6.1;
(f) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(g) The books and records of the Company to be delivered as set forth in
Section 1.5(q);
(h) Physical possession of all Assets; and
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(i) Other documents and instruments required by this Agreement, if any.
Section 1.12. Transfer Tax, Allocation of Purchase Price and Bulk Sales
---------------------------------------------------------
(a) Purchasers shall pay all sales, transfer taxes and fees imposed on the
conveyance of the Assets by all governments, state, local and federal.
(b) The parties agree that the consideration for the sale of the Assets
shall be allocated among the Assets as set forth on Schedule 1.12(b) attached
hereto. The Sellers and the Purchasers acknowledge that the allocation has been
arrived at based upon their negotiations and shall be used by them for all
purposes, including, but not limited to, federal, state, and local tax and
financial reporting purposes, and they shall not take any position inconsistent
to the allocation. On the Closing Date, the Purchasers and the Sellers shall
execute Internal Revenue Form 8594 which form shall be binding on the Purchasers
and the Sellers and shall be filed with the income tax returns of the Purchasers
and the Sellers.
(c) The Purchasers hereby waive compliance by the Company with the
provisions of the New York Bulk Sales Law and the Sellers, jointly and
severally, covenant and agree to pay and discharge, when due, or contest in good
faith by appropriate proceedings, all claims of creditors which could be
asserted against the Purchasers or the Assets by reason of such noncompliance.
Simultaneously with the execution of this Agreement (and in any event, not less
than ten days prior to Closing), the parties shall complete New York State
Department of Taxation and Finance Form AU-196.10 (Notification of Sale,
Transfer or Assignment in Bulk) and the Purchasers shall promptly file it in the
appropriate office.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Whenever the phrase "to Sellers' knowledge", "to Shareholders' knowledge"
or a similar phrase is used in this Agreement, the phrase means the actual
knowledge of any of the Shareholders and (with respect to Shareholders who are
officers or employees of the Company) the knowledge such Shareholders would or
should have had, if such Shareholders who are employees or officers of the
Company exercised reasonable diligence in the conduct of such Shareholders'
duties to the Company. With knowledge that Purchasers are relying upon the
representations, warranties and covenants herein contained, all of the Sellers
jointly and severally represent and warrant to Purchasers and make the following
covenants for the Purchasers' benefit:
Section 2.1. Organization and Standing. The Company is a corporation
-------------------------
duly organized, legally existing and in good standing under the laws of the
state of its incorporation, with full power and authority to own its properties
and conduct its business as now being conducted. The Company does not own any
stock or interest in any other corporation, partnership, or other business
organization, except as set forth on Schedule 2.1.
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<PAGE>
Section 2.2. Company Stock. The Company has the authorized and kind of
-------------
capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets forth the
number of shares of the capital stock of the Company issued and outstanding.
Except as set forth in Schedule 2.2, the stock ("Company Shares") each
Shareholder owns in the Company is legally and validly authorized and issued,
fully paid and nonassessable. There are no outstanding rights of any kind to
acquire additional shares of any class of stock from the Company.
Section 2.3. Contracts, Permits and Material Documents. The items
-----------------------------------------
listed in Schedule 2.3 attached, are all of the following with respect to the
Company ("Material Documents"): (i) leases for real and personal property
excepting office equipment, (ii) licenses, (iii) franchises, (iv) promissory
notes, guarantees, bonds, mortgages, liens, pledges, and security agreements
under which the Company is bound or under which the Company is the beneficiary,
except for the obligations evidencing Company Debt which are listed on Schedule
1.4, (v) collective bargaining agreements, (vi) patents, trademarks, trade
names, copyrights, trade secrets, proprietary rights, symbols, service marks,
and logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of the Company's
businesses, and (viii) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 2.5) which are binding on the Company or any of its property
and pursuant to which the Company derives any material benefit or has imposed
upon it any material detriment. For purposes of this Section 2.3 a material
benefit or material detriment shall be anything which provides a benefit or
imposes a detriment having a value of $25,000 or more. The Material Documents
listed on Schedule 2.3 are organized under separate headings for each of the
different type of documents listed. Except as set forth on Schedule 2.3 or
Schedule 1.4, neither the Company nor, to the knowledge of the Sellers, any
person or party to any of the Material Documents or the Company Debt, or bound
thereby is in material or knowing default under any of the Material Documents or
the Company Debt, and, to the knowledge of the Sellers, no act or event has
occurred which with notice or lapse of time, or both, would constitute such a
default. The Company is not a party to, and no Company property is bound by, any
agreement or instrument which is material to the continued conduct of business
operations of the Company, as now being conducted, except as listed in Schedule
2.3 or Schedule 1.4.
Section 2.4. Personal Property. All items of personal property owned or
------------------
leased by the Company except as set forth in Schedule 1.6), or used in the
business operations of the Company, will be transferred to Purchasers at
closing, in the condition set forth in subparagraphs (a) and (b) below:
(a) Attached hereto, made a part hereof and marked Schedule 2.4(a) is a
listing of all those items described in subparagraphs "i" and "ii," organized by
subparagraph.
(i) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors used in the Company's business operations
together with information as to the make, description of body and chassis, model
number, serial number and year of each such
14
<PAGE>
vehicle, all of which are owned or leased by the Company, as listed on Schedule
2.4(a)(i) and, to the knowledge of the Sellers, all of the vehicles are, in all
material respects, in good condition, normal wear and tear excepted, except as
noted on Schedule 2.4(a)(i);
(ii) All containers used in the Company's business operations are in
good condition, in all material respects, normal wear and tear excepted, except
as noted on Schedule 2.4(a)(ii), and all containers used in the Company's
business operations having a size of 10 yards or greater together with
information as to container size are listed on Schedule 2.4(a)(ii);
(b) All other items of personal property owned, leased or used by the
Company, including, without limitation, all radios, compactors, recycling
equipment, furniture, office equipment and other equipment used in the Company's
business operations, the inventory of parts, tires and accessories maintained by
the Company, and the shop tools used by the Company are in good condition, in
all material respects, normal wear and tear excepted, except as noted on
Schedule 2.4(b);
Section 2.5. Customers. Each customer the Company serves (listed by
---------
account number and not by name) together with information as to the services
rendered to each such customer, frequency of service and rates charged, is
listed on Schedule 2.5 attached hereto. All customers are obligated under the
Company's standard form of contract, except for variations agreed to by the
Company which are not material in nature. The name and address of each customer
shall be provided by the Company to Purchasers at Closing. To the knowledge of
Sellers, each customer is creditworthy and no customer represents more than 3%
of the total annual billings of the Company. Neither the Company nor, to the
knowledge of the Sellers, any person or party to any of the customer contracts
is in material or knowing default under any of the customer contracts, and, to
the knowledge of the Sellers, no act or event has occurred which with notice or
lapse of time, or both, would constitute such a default.
Section 2.6. Title. The Company has good and marketable title to, or a
-----
valid leasehold interest in all of its assets both real property and personal
property, each free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement ("Liens"), except the items set forth in subparagraphs "a" through
"c", and the items listed on Schedule 2.3 or Schedule 1.4 ("Permitted
Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or materialmen
and the like; and
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation;
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment;
15
<PAGE>
Section 2.7. Financial Statements. Sellers have delivered to Purchaser
--------------------
true and correct copies of the following restated financial statements of the
Company reviewed by Tepedino and Company, L.L.P. (the "Financial Statements"): a
restated balance sheet as of November 30, 1995, and a statement of income, cash
flow and retained earnings for the period ended November 30, 1995, both prepared
on an accrual basis. The Financial Statements have been prepared by the regular
accountants of the Company, in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis in accordance with past custom
and practice of the Company. The balance sheets comprising the Financial
Statements present fairly, in all material respects, the financial condition of
the Company as of the dates indicated thereon and the statements of income
present fairly, in all material respects, on an accrual basis the results of the
operations of the Company for the periods indicated thereon. Except as set forth
on Schedule 2.7, since the date of the Financial Statements, the Company has not
(i) made any material change in its accounting policies or (ii) effected any
prior period adjustment to, or other restatement of, its financial statements
for any period. Except as set forth on Schedule 2.7, the Financial Statements
are consistent with the books and records of the Company (which books and
records are correct and complete in all material respects). Since the date of
the Financial Statements, except as set forth on Schedule 2.7, there has not
been any material adverse change in the income, expenses or assets of the
Company.
Section 2.8. Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) the Company Debt;
(ii) liabilities fully reflected in the Financial Statement, except
for liabilities not required to be disclosed therein in accordance with GAAP, as
applied on a basis consistent with past custom and practice;
(iii) liabilities disclosed in the Schedules attached to this
Agreement or not required to be disclosed therein by reason of amount or other
qualifications contained in the representations and warranties of this
Agreement; and
(iv) liabilities arising since the date of the Financial Statement
arising during the normal course of business consistent with past custom and
practice as allowed in accordance with Section 4.4 of this Agreement.
(b) Substantially all accounts receivable of the Company as of the date
hereof are set forth by account number on Schedule 2.8(b), and all of such
accounts and all accounts arising since such date are, or will be, valid
accounts receivable. The accounts receivable less the bad accounts reserve
conveyed to Purchaser at Closing will be fully collected by Purchaser within 180
days after Closing. Schedule 2.8(b) gives the aging of each of the accounts
receivable of the Company. All accounts receivable have been generated in the
ordinary course of the Company's
16
<PAGE>
business consistent with past practice. To Sellers' knowledge, there are no
defenses or set-offs to any of the accounts receivable. On the Closing Date, the
accounts receivable, less the bad accounts reserve on Schedule 2.8(b), plus the
pre-paid expenses of the Company (which are assigned to the Purchasers or which
benefit the Purchasers) shall equal or exceed the accounts payable, plus the
accrued expenses of the Company plus accrued and unpaid interest on the Company
Debt.
(c) The Company's accounts payable as of the date of this Agreement are
attached hereto, made a part hereof and marked Schedule 2.8(c). Schedule 2.8(c)
gives the aging of each of the accounts payable of the Company. Schedule 2.8(c)
accurately reflects in all material respects the books and records of the
Company as of the date of Schedule 2.8(c).
(d) Except as set forth in Schedule 1.4, the Company Debt is not in
default, the Company Debt all requires the current monthly payment of accrued
interest, and there is no accrued interest owed on any of the Company Debt in
excess of the amount of accrued interest not yet payable for the current month.
Section 2.9. Fiscal Condition of The Company. Since the date of the
-------------------------------
Financial Statements, there has not (except as otherwise specifically permitted
by this Agreement or as set forth in the Schedules to this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others;
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any stock dividend or other distribution of its
capital stock;
(c) Any sale or other disposition of any asset owned by the Company at the
close of business on the date of the Financial Statements, or acquired by it
since that date, other than in the ordinary course of business consistent with
past practice;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset, except in the ordinary course of business consistent with past
practices;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $100,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee, except as required by law
or pursuant to a contract which is listed on Schedule 2.9(f) and except as
otherwise set forth in Schedule 2.9(f);
17
<PAGE>
(g) Any loans or advances to the Company other than (i) renewals or
extensions of existing indebtedness, or (ii) loans and advances between the
Company and its affiliates, or (iii) loans extended under existing lines of
credit of the Company which loans will not exceed $50,000; or
(h) Any change in accounting method or practice, except for increases in
earning due to acquisition expenses being capitalized instead of expensed in
current periods.
Section 2.10. Tax Returns. The Company has filed all Federal and other
-----------
tax returns for all periods on or before the due date of such return (as may
have been extended by any valid extension of time) and has paid all taxes due
for the periods covered by the said returns. The Company is a Subchapter "S"
corporation under the Internal Revenue Service Code. The reserves for all taxes
reflected in the Financial Statements plus the reserves on Schedule 2.10 for all
taxes from the date of this agreement through the Closing Date, if any, are
adequate to cover all taxes, interest and penalties in connection therewith that
may be assessed with respect to the property and business operations for the
period(s) ending on the Closing Date and for all prior periods. The Company has
filed, and will file (if due), in a timely manner all requisite federal, state,
local and other tax returns due for all fiscal periods ended on or before the
Closing Date.
Section 2.11. Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company or which the Company has had
issued and which have not expired are listed on Schedule 2.11 attached hereto.
Schedule 2.11 includes the names and addresses of the insurers and sureties,
policy and bond numbers, types of coverage or bond, time periods or projects
covered and the names and addresses of all known agents or agencies with respect
to each listed insurance policy, performance bond and letter of credit. The
Company's current insurance policies, performance bonds and letters of credits
are in force and effect and the premiums thereon are not delinquent. The
Company has not received any notification from any insurance carrier denying or
disputing any claim made by the Company or denying or disputing any coverage for
any such claim or denying or disputing the amount of any claim. Except as set
forth on Schedule 2.11, the Company has no claims against any of its insurance
carriers under any of policies insuring it pending or anticipated and there has
been no occurrence of any kind which would give rise to any such claim.
Section 2.12. Employees, Pensions and, ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee, except as listed on Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), no employee of the Company is
represented by any union. The name, address and social security number and
current rate of compensation of the Company's employees and capacity to which
each person is employed is listed on Schedule 2.12(b) attached. There is no
pending or, to the knowledge of the Sellers, threatened dispute between the
Company and any of its employees which might materially and adversely
18
<PAGE>
affect the continuance of the Company's business operations. The Company is not
deficient or in arrears in contributing to any trust funds the Company are
required to contribute to in accordance with any contracts with unions,
including, without limitation, scholarship funds, legal aid funds, pension funds
and health, welfare or benefit funds ("Trust Funds"). There is no matter,
action, audit, suit or claim pending or, to the best knowledge of Sellers,
threatened relating to contributions of the Company to any Trust Fund, before
any court, tribunal or government agency.
(c) Attached hereto, made a part hereof and marked Schedule 2.12(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which are currently maintained
and/or were established or sponsored by the Company (whether or not they are now
terminated) or to which the Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Company.
(d) The Company has delivered to the Purchasers (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii) true
and complete copies of the most recent financial statements with respect to the
Plans, (iii) true and complete copies of all annual reports for any Plan
prepared within the past 5 years, and (iv) all material filings submitted to and
any correspondence received from any government agency relating to any Plan
within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered,
19
<PAGE>
operated and managed in substantial accordance with the governing documents of
the Plan and the requirements of ERISA.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, threatened relating to any Plan, fiduciary of any
Plan or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
Section 2.13. Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in material
compliance with all Federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use laws; payroll,
employment, labor, or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not limited to the
Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act ("Law"). Except as disclosed
in Schedule 2.13(a), the Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to the Company's property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
2.13(a), with respect to any Law there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting the Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which would result in an material change in
the financial condition or business of the Company or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), since January 1, 1990, no Company has received
notification of any past or present failure by the Company to comply with any
Law applicable to it or its assets. As used in this Section 2.13(a), "material"
shall mean any single event or number of events
20
<PAGE>
causing a loss to the Company of $15,000 for an individual event or $50,000 for
all events in the aggregate.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, the Company
is in material compliance with all Federal, state and local laws, rules and
regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.13(b), with
respect to any Environmental Law the Company is in material compliance with all
permits, licenses, and orders related thereto or issued thereunder with respect
to Environmental Laws, as are or may be applicable to the Company' property and
operations, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located. Except as
set forth on Schedule 2.13(b) there are no Environmental Law related claims,
actions, suits or proceedings pending, or, to the knowledge of the Sellers,
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which would result
in an adverse change in the financial condition or business of the Company of
$15,000 or more or which would invalidate this Agreement or any action taken in
connection with this Agreement. To the knowledge of the Sellers, except as set
forth on Schedule 2.13(b), since January 1, 1986 the Company has not
transported, stored, treated or disposed, nor has the Company allowed any third
persons, on its behalf, to transport, store, treat or dispose waste to or at (i)
any location other than a site lawfully permitted to receive such waste for such
purpose or, (ii) any location currently designated for remedial action pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or any similar federal or state statute; nor has the Company
performed, arranged for or allowed by any method or procedure such
transportation or disposal in contravention of state or federal laws and
regulations or in any other manner which may result in liability for
contamination of the environment; and the Company has not disposed, nor has the
Company knowingly allowed third parties to dispose of waste upon property owned
or leased by the Company other than as permitted by, and in conformity with,
applicable Environmental Law. Except as disclosed in Schedule 2.13(b), since
January 1, 1986, the Company has not received notification of any past or
present failure by the Company to comply with any Environmental Law applicable
to it or its operations or its assets. Without limiting the generality of the
foregoing since January 1, 1986, the Company has not received any notification
(including requests for information directed to the Company or, to the knowledge
of the Sellers, an owner thereof) from any governmental agency asserting that
the business is or may be a "potentially responsible person" for a remedial
action at a waste storage, treatment or disposal facility, pursuant to the
provisions of CERCLA, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment. Since January 1, 1986, the Company has not
received hazardous waste as defined in the Resource Conservation and Recovery
Act, 42 USCA Section 6901 et seq., or in any similar federal or state statute.
-- ---
As used in this Section 2.13(b), "material" shall mean any single event or
number of events causing a loss to the Company of $15,000.
21
<PAGE>
(c) Except as set forth on Schedule 2.13 (c), since January 1, 1986 the
Company has never owned, operated, had an interest in, engaged in and/or leased
a waste transfer, recycling, treatment, storage, landfill or other disposal
facility. To the knowledge of Sellers, the Company has obtained and maintained,
when required to do so under applicable Environmental Laws, trip tickets, signed
by the applicable waste generators demonstrating the nature of all waste
deposited and or transported by the Company. To the Sellers' knowledge, no
employee, contractor or agent of the Company has, in the course and scope of
employment with the Company, been harmed by exposure to hazardous materials, as
defined under the Laws. No liens with respect to environmental liability have
been imposed against the Company under CERCLA, any comparable New York State
statute or other applicable Environmental Law, and to Sellers' knowledge no
facts or circumstances exist which would give rise to the same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past three years and all outstanding
unremedied notice of violations issued to the Company by any federal, state or
local regulatory agency.
(e) To the knowledge of Sellers, none of the Sellers are under
investigation by the District Attorney of any of the boroughs of New York City,
New York, for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, or unfair competition Laws.
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Company, or its assets or
liabilities, and a description of all such proceedings is set forth on Schedule
2.13(f) attached.
Section 2.14. Corrupt Practices. The Company has not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company for the purpose of attracting business to the Company or any foreign or
domestic governmental official, political party or candidate for government
office or any of their respective employees or representatives in any manner
which would result in the Company being in material violation of any Law, nor
has the Company otherwise taken any action which would cause it to be in
material violation of the Foreign Corrupt Practices Act of 1977, as amended. As
used in this Section 2.14, "material" shall mean any single event or number of
events causing a loss to the Company of $15,000 individually or in the
aggregate.
Section 2.15. Legal Compliance. The Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and, except as set forth in Schedule 2.15, no approvals or
consents of any other persons or entities are necessary in connection with the
transactions contemplated by this Agreement. Except as disclosed in Schedule
2.15 to this Agreement, the execution and performance of this Agreement will not
result in a material breach of or constitute a material default or result in the
loss of any material right or benefit under:
22
<PAGE>
(a) Any charter, by-law, agreement or other document to which the Company
or any Seller is a party or by which such Company, Seller or any of their
property is bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Company or on any property of the Company.
Section 2.16. Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Seller is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
Section 2.17. Intellectual Property. To the knowledge of the Sellers, the
---------------------
Company has not infringed and is not now infringing, on any trade name,
trademark, service mark or copyright belonging to any person, firm or
corporation ("Intellectual Property") and to the knowledge of the Sellers no one
has or is infringing any Intellectual Property right of the Company.
Section 2.18. Competition. Except as set forth on Schedule 2.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of the Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of the Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company is doing business which interest adversely or materially affects the
business of the Company.
Section 2.19 Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II or in any Exhibit or Schedule or other
document delivered by the Sellers or the Company pursuant hereto, do not contain
any untrue statement of a material fact, or omit any statement of a material
fact necessary to make the statements contained not misleading. If prior to
Closing the Sellers become aware of any inaccuracy, or misrepresentation or
omission in any of the Schedules, they shall immediately advise Purchasers in
writing of the inaccuracy, misrepresentation or omission.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
The Purchasers each, jointly and severally, represent and warrant to the
Sellers that:
Section 3.1. Structure. The Purchasers are corporations duly organized
---------
and legally existing in good standing under the laws of Delaware and EESI NY is
qualified to do business in New York and the Purchasers are qualified in all
other jurisdiction in which they are required to be qualified.
Section 3.2. Authorization to Proceed with this Agreement. Purchasers
--------------------------------------------
have by proper corporate proceedings duly authorized the execution, delivery and
performance of this Agreement
23
<PAGE>
and each other agreement contemplated to be entered into and no other corporate
action is required by law or the Certificate of Incorporation or by-laws of
Purchasers.
Section 3.3. Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Purchasers' authority will be entitled to make any
claim against the Sellers for any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
Section 3.4. Public Reports. EESI has made all filings with Securities
--------------
and Exchange Commission that it is required to make under the Securities Act of
1933 (the "Act") and the Securities Exchange Act of 1934 (the "Exchange Act"),
as amended (collectively, the "Public Reports"). EESI has delivered to Sellers
all such Public Reports filed by EESI through March 31, 1997. The Public Reports
accurately and completely describe, in all material respects, EESI's financial
status, business operations and prospects as of the date of such filings, and do
not contain any untrue statement of a material fact or omit any material fact(s)
necessary to make the information contained in the filings not misleading.
Section 3.5. Authorized Stock. The total authorized capital stock of
----------------
EESI consists of 50,000,000 shares of Common Stock, par value $.01 per share,
and 10,000,000 shares of Class A Common Stock, par value $.01 per share, none of
which is outstanding. As of February 21, 1997, the outstanding shares of capital
stock of EESI consisted solely of 13,244,807 shares of Common Stock, par value
$.01. EESI NY has 1,000 shares of no-par-value common stock authorized and 100
shares issued, all of which are owned by EESI. All of such issued and
outstanding shares of Purchasers have been duly authorized and validly issued,
are fully-paid and non-assessable and were issued in compliance with all federal
and state securities laws. Until Closing, EESI agrees it shall not redeem in
excess of five hundred thousand (500,000) of its shares of common stock.
Section 3.6. EESI Stock. All of the shares of EESI stock to be issued to
----------
the Company as contemplated by this Agreement and the Collateral Documents will,
upon delivery, be duly authorized and validly issued, fully paid and non-
assessable and issued in compliance with federal and state securities laws, free
and clear of all liens, charges, restrictions, mortgages, security interests or
claims of any kind.
Section 3.7. Authorization. The Purchasers have the power and authority
-------------
to enter into this Agreement and each of the Collateral Documents and to carry
out the transactions contemplated hereby and thereby and this Agreement and each
of the Collateral Documents to which the Purchasers are parties, as applicable,
constitutes the legal, valid and binding obligation of the Purchasers,
enforceable in accordance with its terms. The Purchasers have the power and
authority to own and lease their respective properties and to carry on their
respective businesses as now conducted.
Section 3.8. Contravention; Consents and Approvals. No filing, action,
-------------------------------------
consent or approval of any person, entity or governmental body is required by
the Purchasers for the
24
<PAGE>
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for the New York Trade Waste Commission. The
execution and delivery of this Agreement by the Purchasers and the consummation
of the transactions contemplated hereby by the Purchasers will not result in a
breach of the terms or conditions of, or constitute a default under, or violate,
(a) any provision of any law, regulation or ordinance, (b) any agreement, lease,
mortgage or other instrument or undertaking, oral or written, to which any of
the Purchasers are a party or by which any of their properties or assets is or
may be bound or affected, or (c) any judgment, order, writ, injunction or decree
of any court, administrative agency or governmental body.
Section 3.9. Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchasers in this Agreement do not contain any untrue
statement of a material fact, or omit any statement of a material fact necessary
to make the statements contained therein not misleading.
Section 3.10. Hart-Scott-Rodino Filing. Purchasers, jointly and
------------------------
severally, represent and warrant that they shall make a Hart-Scott-Rodino anti-
trust notification filing, if such a filing is required by applicable law, at
Purchasers' expense.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
Section 4.1. Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------
Stock delivered to Company at Closing is not registered under the Securities Act
of 1933 ("Act"), the Company understands and agrees that the following
restrictions and limitations are applicable to the Company's purchase and resale
or other transfer of the EESI Stock, pursuant to the Act.
(a) Company agrees that the EESI Stock shall not be sold or otherwise
transferred, unless the EESI Stock is registered under the Act and state
securities laws or is exempt therefrom.
(b) Until the EESI Stock is registered under the Act, a legend in
substantially the following form will be placed on the certificates evidencing
the EESI Stock to be issued to the Company:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Eastern Environmental Services, Inc. shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Eastern
Environmental Services, Inc. that registration is not required under any
such acts."
25
<PAGE>
(c) Stop transfer instructions will be imposed with respect to the EESI
Stock issued to Company pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 4.2. Plan of Reorganization. This Agreement contemplates the
----------------------
exchange of substantially all of the assets of the Company solely in exchange
for the voting stock of EESI in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to take
no action inconsistent with the treatment of such exchange as a reorganization
under Code (S)368(a)(1)(C) and to comply with all IRS filing and other
requirements for such exchange.
Section 4.3. Access to Records. The Shareholders will cause the Company
-----------------
to give and the Company shall give Purchasers and their representatives, from
the date hereof until six years after the Closing Date, full access during
normal business hours upon reasonable notice to all of the properties, books,
contracts, documents and records of the Company pertaining to the Business, and
to make available to Purchasers and their representatives all additional
financial statements of and all information with respect to the business and
affairs of the Company that Purchasers may reasonably request.
Section 4.4. Continuation of Business. The Company will operate until
------------------------
the time of Closing, in the ordinary course of business, consistent with past
practice, so as to preserve its business organization intact, to assure, to the
extent possible, the availability to Purchasers of the present key employees of
the Company, and to preserve for Purchasers the relationships of the Company
with suppliers, customers, and others, except if it is determined in the
judgment of the Company to be in the best interest of the Company.
(a) Purchasers acknowledge that increases in Company Debt due to the
financing of single assets having a purchase price of no more than $150,000 are
in the ordinary course of Company's business. Prior to Closing, the Company may
decrease the Company Debt due to pre-payments outside of regularly scheduled
payments in an amount not exceeding $400,000 in the aggregate. Any reduction of
the Company Debt in excess of $400,000 shall not occur without the written
approval of EESI. EESI will not withhold its consent to a reduction of Company
Debt in excess of $400,000, if such reduction will not reduce the net income of
the Company.
(b) Purchasers acknowledge that management bonuses may be paid or accrued
prior to Closing; provided that any accrued and not paid management bonuses
shall be treated as an accounts payable for purposes of determining whether the
warranty and representation set forth in the last sentence of Section 2.8(b) was
true.
Section 4.5. Continuation of Insurances. The Shareholders will cause the
--------------------------
Company to and the Company shall keep in existence all policies of insurance
insuring the Company against
26
<PAGE>
liability and property damage, fire and other casualty through the time of
Closing, consistent with the policies currently in effect.
Section 4.6. Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the
Shareholders and the Company will not directly or indirectly solicit offers for
the Company or the Assets or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company's assets; nor
will the Shareholders permit the Company to do any of the foregoing.
Section 4.7 Audited Financial Statements.
----------------------------
(a) Sellers agree to cause the Company to prepare and the
Company shall prepare an audited balance sheet for the Company as of December
31, 1996 and a statement of income, cash flow and retained earnings for the
Company for the twelve month period ended December 31, 1996 ("Historical
Financial Statements") as rapidly as possible, but no later than 30 days after
the Closing Date (the "Post Closing Date"). Sellers shall also cause the Company
to prepare an unaudited balance sheet of the Company as of the end of the
calendar quarter completed immediately prior to the Closing Date and an
unaudited statement of income, cash flow and retained earnings for the period
ending with the completion of the calendar quarter ended prior to the Closing
Date ("Interim Financial Statements"). The Interim Financial Statements are to
be delivered by the Company on or before the Post Closing Date. Company may
select the accounting firm used to prepare such statements as required above,
but said firm must be reasonably acceptable to EESI. Purchasers shall pay the
fee of the accounting firm hired to prepare the statements required by this
Section 4.7, whether or not Closing occurs. If the Purchasers fail to pay the
invoice of the accounting firm hired to prepare the statements referred to in
this Section 4.7, then the Sellers may, on behalf of the Purchasers, pay such
fees in which case the Purchasers shall, promptly upon receiving from Sellers
evidence of such payment by Sellers to the accounting firm, reimburse the
Sellers for such amount together with interest computed at an annual interest
rate equal to the higher of 25% per annum or the maximum rate permitted by
applicable law on any amounts so advanced by Sellers from the date of such
advancement to the date of reimbursement by Purchasers.
(b) The Sellers acknowledge that the delivery of the
Historical Financial Statements to EESI on or prior to the Post Closing Date is
of paramount importance to EESI and its shareholders and that time is of the
essence because EESI will need the Historical Financial Statements in order to
file a Form 8-K as required by the Securities and Exchange Commission in a
timely manner. If the Sellers fail to deliver the Historical Financial
Statements to EESI on or prior to the Post Closing Date then EESI is hereby
irrevocably instructed to cancel all the outstanding shares of EESI Stock which
the Sellers received at Closing or any other shares of EESI Stock issued or to
be issued after the Closing in connection therewith, without any liability
27
<PAGE>
to the Sellers, provided, however, that EESI or the Purchasers and the Sellers
-------- -------
promptly execute an Assignment and Assumption Agreement whereby the Purchasers
shall reassign all of the assets to be assigned to the Purchasers hereunder to
the Seller and the Sellers shall reassume the liabilities to be assumed by the
Purchasers hereunder. After such cancellation by EESI and the execution of the
Assignment and Assumption Agreement referred to in the preceding sentence, this
Agreement shall be deemed terminated and neither party hereto shall have any
obligation to any other party.
ARTICLE V.
ADDITIONAL AGREEMENTS OF PURCHASERS
-----------------------------------
Section 5.1. Payment of Expenses. EESI will pay all expenses incurred by
-------------------
Purchasers in connection with the negotiation, execution and performance of this
Agreement. EESI will also pay the accounting fees for the audits to be
delivered by the Company as set forth in Section 4.7 and any accounting fees
incurred in connection with the preparation of audited financial statements for
the twelve month period ended December 31, 1994 and 1995, respectively. The
Company, before the Closing Date, will pay all reasonable legal and accounting
expenses incurred by the Shareholders and the Company (except for the accounting
fees set forth in Section 4.7 and the accounting fees EESI has agreed to pay in
the prior sentence) in connection with the negotiation, execution and
performance of this Agreement and the Collateral Documents.
Section 5.2. Registration Rights.
-------------------
(a) This Section 5.2 shall apply to the EESI Stock, delivered under this
Agreement, as follows: (i) the Restricted Stock, as defined in Section 1.4,
shall be entitled to the registration rights set forth in this Section 5.2 on
the earlier of eighteen (18) months after the Closing Date or July 12, 1998; and
(ii) the Unrestricted Stock, as defined in Section 1.4, shall be entitled to the
registration rights set forth in this Section 5.2 commencing on the Closing
Date. For purposes of this Agreement the term "Unregistered Stock" shall mean
the EESI common stock consisting of the Restricted Stock and the Unrestricted
Stock as of the time that such stock is entitled to the registration rights set
forth in this Section 5.2. As soon as practical following the date that any
Unregistered Stock first becomes Unregistered Stock, as defined in this Section
5.2, but in any event within one hundred twenty (120) days after the date that
the Unregistered Stock first became Unregistered Stock, EESI shall file a
registration statement to register the Unregistered Stock under the Act for sale
to the public pursuant to a "shelf registration" on Form S-3 or other
appropriate form, if Form S-3 is not available under Rule 415 of the Act to
qualify such securities under the Act or if required any state "blue sky" laws.
Purchasers agree to include the Unregistered Stock in any registration statement
on Form S-3 that registers the 2,500,000 shares of common stock issued by EESI
in a private placement on July 12, 1996. EESI will give written notice to the
Sellers of the "shelf registration" at least 15 days before the registration
statement is filed. After receiving the notice of the "shelf" registration,
each Seller will advise EESI in writing of the intended method of disposition of
the Unregistered Stock to be registered, as
28
<PAGE>
required for EESI to prepare the registration statement. Sellers recognize that
the occurrence of certain corporate developments, including significant
acquisitions, may result in the failure of the registration statement in which
the Unregistered Stock is registered to contain all information required in
accordance with applicable law until an amendment or supplement is filed and
made available to the holders of all such Unregistered Stock. Sellers recognize
that in such event, sales under the registration statement will be suspended
until EESI files the amendments or supplements required by the next sentence.
EESI agrees, as promptly as reasonably practicable, to prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for the period required pursuant to the terms
of this Agreement and comply with the provisions of the Act with respect to the
disposition of all Unregistered Stock covered by such registration statement
during such period in accordance with the intended methods of disposition by the
holders thereof set forth in such registration statement. EESI shall keep such
registration statement current and effective, until such time as all of the
Unregistered Stock may be sold by the Sellers at any time without restriction or
pursuant to the provisions of Rule 144 without volume restrictions or until such
earlier date as all of the shares registered pursuant to such registration
statement shall have been sold or otherwise transferred to a third party.
(b) With respect to the registration of the Unregistered Stock, EESI will,
as expeditiously as possible: (i) furnish to the Sellers such number of
prospectuses, including copies of preliminary prospectuses, prepared in
conformity with the requirements of the Act, and such other documents, as the
Sellers may reasonably request in order to facilitate the public sale or other
disposition of the securities to be sold by the Sellers; and (ii) before filing
the registration statement, prospectus or amendments or supplements thereto,
furnish to counsel for Sellers copies of all such documents proposed to be
filed.
(c) Upon any registration under the Act of any of the Unregistered Stock,
EESI shall indemnify Sellers in accordance with the provisions of Article VIII
from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing) or necessary in order to make the statements therein not misleading or
(iii) any violation or alleged violation by EESI to which such Sellers may
become subject under the Act, or other Federal or state laws or regulations, at
common law or otherwise. Notwithstanding the above, EESI shall not be liable to
Sellers if and to the extent that any Security Liability arises out of or is
based upon any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to EESI
29
<PAGE>
by Sellers which is stated in writing to be specifically intended for such use;
and provided further, that EESI shall not be required to indemnify Sellers
against any Security Liability which arises out of the failure of Sellers to
deliver a final prospectus made available to Sellers by EESI.
(d) All expenses incurred in effecting the registrations provided for in
this Section 5.2 shall be paid by EESI, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for EESI, fees and disbursement of counsel for Sellers (up to $2,500 per
year), underwriting expenses (other than commissions or discounts which shall be
shared by the parties registering shares of EESI's common stock in proportion to
the number of shares registered in each particular offering), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or "blue sky" laws of any jurisdictions.
(e) Sellers agree that, with respect to the first underwritten public
offering for the sale of EESI Stock pursuant to an effective registration
statement which occurs after the Closing Date, they will enter into a "lock-up"
agreement which would prohibit them from selling any Restricted Stock or
Unrestricted Stock for a period of 90 days commencing on the date such
registration statement becomes effective, if such a "lock-up" agreement is
requested by the underwriter of such public offering.
Section 5.3. Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchasers shall allow the Sellers and their agents access
to all business records and files of the Company pertaining to the operation of
the Company prior to the Closing Date which were delivered to the Purchasers in
accordance with Section 1.5(q) of this Agreement ("Records") where the
Shareholders or Company require access to the Records for the purpose of
preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchasers' business. For a period of six years after the Closing Date, the
Purchasers shall not dispose of or destroy any material Records without first
providing written notice to the Shareholders at least 30 days prior to the
proposed date of such disposition or destruction.
ARTICLE VI.
CONDITIONS OF PURCHASERS
------------------------
The obligations of Purchasers to effect the transaction contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing.
30
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Section 6.1. Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers prior to or at the Closing Date.
All representations and warranties of Sellers contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement and the Purchasers shall have received a
Certificate duly executed by each of the Sellers as to the foregoing.
Section 6.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control the Assets
which, in the judgment of the Boards of Directors of Purchasers, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 6.3. Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Company and the Company shall have not suffered any material
loss or damage to any of the Assets, whether or not covered by insurance, since
the date of the Financial Statements; there shall not have been any cancellation
or modification of any Material Documents except for such cancellation or
modification set forth in Schedule 6.3 to this Agreement or for such
cancellation or modification of any Material Documents which, singly or in the
aggregate, is not reasonably likely to have a material adverse effect on the
operations, financial condition or business of the Company its Business or
Assets (it being understood that all cancellations and modifications of Material
Documents which affect revenue shall be computed in the purchase price
adjustment provided for in Section 1.4(a)(iv)).
Section 6.4. Opinion of Counsel. The Sellers shall have delivered to the
------------------
Purchasers the opinion of counsel, dated the Closing Date, in the form annexed
hereto as Schedule 1.11(d).
Section 6.5. Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, and the Purchasers shall have been
furnished with appropriate evidence, reasonably satisfactory to Purchasers and
their counsel, of the granting of such approvals, authorizations and consents,
including, without limitation, EESI NY being granted a trade waste license by
the New York City Trade Waste Commission.
Section 6.6. Payment of Company Debt. Sellers shall have made arrangements
-----------------------
to arrange for payment of the Company Debt (other than the Schedule 1.4 Gebbia
Debt if on the Closing Date there is no binding agreement between the Sellers
and the Gebbia Parties settling the dispute as to the amount of indebtedness
owed by Sellers to the Gebbia Parties and other than any bank or finance company
debt) in a proportion of cash and EESI common stock valued at the market value
of EESI's common stock at the time of issuance, as listed on the NASDAQ National
31
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Market, which proportionate amounts of stock and cash shall be satisfactory to
the Purchasers in their sole discretion.
ARTICLE VII.
CONDITIONS OF SELLERS
---------------------
The obligations of the Sellers to transfer the Assets in accordance with
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 7.1. Compliance by Purchasers. The Purchasers shall have performed
------------------------
and complied with all material obligations and conditions required by this
Agreement to be performed or complied with by them at or prior to or at the
Closing Date. All representations and warranties of Purchasers contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement and the Sellers shall have
received a Certificate duly executed by an officer of the Purchasers as to the
foregoing.
Section 7.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control any of the
Assets and which, in the judgment of the Sellers, made in good faith and based
upon advice of their counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.3. Guarantees. The Sellers shall be released from any liability
----------
they have under guarantees they have made with respect to the Company's debts or
obligations, as set forth on Schedule 7.3 ("Guarantees"). If, after a good
faith attempt, Purchasers cannot obtain the release of the Shareholders from
the Guarantees, this condition shall be waived and Purchasers will indemnify
Sellers under the provisions of Section 8.2 from any and all liability, expense
and claims made against Sellers with respect to the Guarantees.
Section 7.4. Payment. The Purchasers shall have delivered to the Company,
-------
as applicable, the EESI Stock in accordance with Sections 1.3 and 1.4.
Section 7.5. Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, and the Sellers shall have been
furnished with appropriate evidence, reasonably satisfactory to them and their
counsel, of the granting of such approvals, authorizations and consents.
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Section 7.6. Opinion of Counsel. The Purchasers shall have delivered to
------------------
the Company the opinion of counsel to the Purchasers, dated the Closing Date, in
the form annexed hereto as Schedule 1.10(c).
Section 7.7. Material Adverse Change. There shall not have been, and on
-----------------------
the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be
33
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expected to result in, any material adverse change in the condition (financial
or otherwise), assets, real property, personal property, results of operations,
business or prospects of EESI and its subsidiaries taken as a whole and, in any
event, and without limiting the generality of the foregoing, the closing price
of EESI's stock on the Closing Date shall not be less than $5.00 per share.
ARTICLE VIII.
INDEMNIFICATION
---------------
Section 8.1. Indemnification by Sellers. The Sellers each agree that they
--------------------------
will each, jointly and severally, indemnify, defend, protect and hold harmless
the Purchasers and their officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, successors
and assigns from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, from (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Sellers
made in this Agreement or in the Collateral Documents and to be performed by
Sellers before or after the Closing Date; (c) the imposition upon, claim
against, or payment by the Purchasers of any liability or obligation of the
Company other than the Assumed Liabilities; (d) any claim by a third party that,
if true, would mean that a condition for indemnification set forth in
subsections (a), (b) or (c) of this Section 8.1 of this Agreement has occurred;
or (e) the dispute between the Gebbia Parties and the Sellers as to the amount
of indebtedness owed to the Gebbia Parties by the Sellers pursuant to the Sale
Agreement (as defined in Section 1.4(c), any liens on the Assets in connection
therewith or any litigation arising therefrom and any other matters covered by
the Gebbia Indemnity. The indemnification in this Section 8.1 (other than the
Gebbia Indemnity) is subject to the limitations set forth in Section 8.5 and
8.6.
Section 8.2. Indemnification by Purchasers. The Purchasers each agree that
-----------------------------
they will each, jointly and severally, indemnify, defend, protect and hold
harmless each Seller, and each of their respective officers, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, heirs, legal
representatives, successors and assigns, as applicable, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) whether
equitable or legal, matured or contingent, known or unknown to the Purchasers,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, whether
arising out of occurrences prior to, at, or after the date of this Agreement,
incurred by them, or any of them, as a result of or incident to: (a) any breach
of, misrepresentation in, untruth in or inaccuracy in the representations and
warranties of Purchasers set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment of
any
34
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agreement, covenant or condition on the part of Purchasers made in this
Agreement or in the Collateral Documents and to be performed by Purchasers
before or after
35
<PAGE>
the Closing Date; (c) any Security Liability; (d) any of the Guarantees; (e) the
imposition upon, claim against, or payment by the Sellers of any of the Assumed
Liabilities; and (f) any claim by a third party that, if true, would mean that a
condition for indemnification set forth in subsections (a), (b), (c), (d) or (e)
of this Section 8.2 has occurred. The indemnification in this Section 8.2 is
subject to the limitations set forth in Sections 8.5 and 8.6.
Section 8.3. Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
- ------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article VIII, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party (it being agreed that Rivkin, Radler & Kremer is
satisfactory) so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within fifteen days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party pursuant to the provisions of Article VIII, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be
36
<PAGE>
unreasonably withheld). In the case of (c)(ii) or (c)(iii) above, any such
consent to judgment or settlement shall include, as an unconditional term
thereof, the release of the Indemnifying Party from all liability in connection
therewith.
(d) If the conditions set forth in Section 8.3(b) above are or become
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
VIII.
Section 8.4. Procedure for Non-Third Party Claims. If Purchasers or
------------------------------------
Sellers wish to make a claim for indemnity under Section 8.1 or Section 8.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 8.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 8.1 or
Section 8.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 8.1 or Section
8.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
forty-five (45) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within sixty (60) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 8.5. Survival of Claims.
------------------
(a) All of the respective representations and warranties of the Sellers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Sellers pertaining to anti-
trust Laws, unfair competition Laws and racketeering Laws set forth in Section
2.13 shall survive for thirty months after the Closing
37
<PAGE>
Date, (ii) the representations and warranties of Sellers made in the first two
sentences of Section 2.13(b) as to matters of which they had no knowledge shall
survive for eighteen months after the Closing Date, and all other
representations and warranties pertaining to Environmental Laws set forth in
Section 2.13, including, without, limitation the representations and warranties
of the Sellers made in the first two sentences of Section 2.13(b) as to matters
of which Sellers had knowledge shall survive for thirty months after the Closing
Date, (iii) all representations and warranties of Sellers pertaining to federal,
state and local taxes, including, without limitation, the representations and
warranties set forth in Section 2.10 shall survive until the expiration of the
applicable statute of limitations on any claim which can be brought against the
Sellers by tax authorities or governmental agencies or governmental units and
(iv) all representations and warranties other than set forth in (i), (ii) and
(iii) above shall survive until eighteen months from the Closing Date.
(b) All of the respective representations and warranties of Purchasers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Purchasers set forth in
Section 3.4 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought with respect to the sale of a
security and (ii) all representations and warranties other than set forth in (i)
above shall survive until eighteen months from the Closing Date.
(c) Notwithstanding the provisions of Section 8.5(a) and 8.5(b) above,
which provides that representations, warranties and obligations expire after
certain stated periods of time, if within the stated period of time, an
Indemnification Demand is given, or a suit or action based upon representation
or warranty is commenced, the Indemnified Party shall not be precluded from
pursuing such claim or action, or from recovering from the Indemnifying Party
(whether through the courts or otherwise) on the claim or action, by reason of
the expiration of the representation or warranty.
Section 8.6. Limitation of Liability. Notwithstanding anything else to the
-----------------------
contrary contained herein, neither the Purchasers nor any other party entitled
to indemnification pursuant to Section 8.1 hereof, shall be entitled to assert
any claim for indemnification contained in Section 8.1 (other than the Gebbia
Indemnity) unless and until such time as claims of indemnification thereunder,
exceed ("Basket") (i) Eighty-Eight Thousand Dollars ($88,000), in the aggregate,
for claims made regarding the falsity of the representations and warranties of
Sellers made in the first two sentences of Section 2.13(b), where Sellers had no
knowledge of the falsity of the representation or warranty, (ii) Eighty-Eight
Thousand Dollars ($88,000) in the aggregate for claims made regarding the
falsity of the representations and warranties of Sellers made in Section 2.14,
where Sellers had no knowledge of the falsity of the representation or warranty,
(iii) Eighty-Eight Thousand Dollars ($88,000), in the aggregate, for claims made
against Purchasers due to Environmental Law violations of the Company asserted
against Purchasers where Sellers had no knowledge of the Environmental Law
violation and where the violation occurred prior to the Closing Date, (iv) One
Hundred Dollars ($100.00) in the aggregate, for claims made regarding the
falsity of any representation or warranty of Sellers made under Section 2.8(b),
and (v) Fifty
38
<PAGE>
Thousand Dollars ($50,000) in the aggregate, for all other claims, including,
without limitation, claims made under the first two sentences of Section 2.13(b)
and Section 2.14 where Sellers had knowledge of the falsity of the
representation or warranty and for Environmental Law violations of the Company
asserted against Purchasers where Sellers had knowledge of the violation,
provided, however, that the Gebbia Indemnity shall not be subject to the Basket
and shall be reimbursable from the first dollar of monies expended by, or loss
incurred by, the Purchasers. Purchasers shall only be entitled to assert claims
for indemnification that exceed the applicable Basket; it being understood and
agreed that the applicable Basket amount shall be excluded from the
indemnification contained in Section 8.1 and shall be borne 100% by the
Purchasers and the parties entitled to be indemnified thereunder so that the
Sellers, as applicable, shall have no liability with respect thereto. In
addition, notwithstanding anything else contained herein to the contrary, the
obligations of the Sellers pursuant to the indemnification contained in Section
8.1 shall be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Company, as valued under Section 1.3 at closing,
as adjusted under Section 1.4.
Section 8.7. Insurance Proceeds. In determining the amount of loss for
------------------
which Purchasers, or any party entitled to be indemnified pursuant to Section
8.1 of this Agreement is entitled, the loss shall be reduced by any proceeds
(under insurance policies maintained by Purchasers ) which are paid to any of
the Purchasers with respect to the loss for which indemnification is sought. If
Sellers pay Purchasers a payment which satisfies Sellers obligations under this
Article VIII, in full, with regard to a loss for which Purchasers were entitled
to indemnification in accordance with Section 8.1 and after such payment by
Sellers, any of the Purchasers receives insurance proceeds (under insurance
policies maintained by any of the Purchasers) in payment of the same loss,
Purchasers will reimburse the Sellers for the amount the Sellers have paid up
to, but not exceeding, the insurance proceeds received. Notwithstanding the
prior two sentences, a loss or losses incurred by Purchasers shall not be
reduced and Sellers shall not be reimbursed by or with the amount of insurance
proceeds paid to Purchasers equaling, in the aggregate, the applicable Basket
for which Purchasers were not indemnified. The initial amounts of insurance
proceeds received by Purchasers up to the amount of the applicable Basket with
respect to any loss or losses for which indemnification under Section 8.1
applies, shall compensate Purchasers for not being able to initiate an
indemnification claim until an aggregate loss equal to the applicable Basket is
suffered by the Purchasers as set forth in Section 8.6. Purchasers shall use
their reasonable efforts to assert the claim giving rise to any loss for which
they are entitled to be indemnified under Section 8.1, with the issuer of the
applicable insurance policy.
ARTICLE IX.
OTHER PROVISIONS
----------------
Section 9.1. Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Company such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company. Sellers agree that for a period of five (5)
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<PAGE>
years from the Closing Date and as to any Records received by them under Section
5.3 of this Agreement, five (5) years from their receipt of the Records, they
will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except to authorized representatives of the Sellers, unless (i) such information
becomes known to the public generally through no fault of Sellers, (ii) the
Sellers are compelled to disclose such information by a governmental entity or
pursuant to a court proceeding, or (iii) the Closing does not take place. In the
event of a breach or threatened breach by Sellers of the provisions of this
Section, Purchasers shall be entitled to an injunction restraining Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchasers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2. Nondisclosure by Purchasers. Purchasers recognize and
---------------------------
acknowledge that they have in the past, currently have, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchasers, jointly and
severally, agree that none of them will utilize such information in the business
or operation of Purchasers, or any of their affiliates or disclose such
confidential information to any person, firm, corporation, association, or other
entity for any purpose or reason whatsoever, unless (i) such information becomes
known to the public generally through no fault of Purchasers or any of their
affiliates (ii) Purchasers are compelled to disclose such information by a
governmental entity or pursuant to a court proceeding or (iii) Closing takes
place. In the event of a breach or threatened breach by Purchasers of the
provisions of this Section, the Sellers shall be entitled to an injunction
restraining Purchasers from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
Section 9.3. Assignment; Binding Effect; Amendment. This Agreement and the
-------------------------------------
rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of Purchasers) and shall be binding upon and
shall inure to the benefit of the parties hereto, the successors of Purchasers,
and the Sellers. This Agreement, upon execution and delivery, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance with
its terms and may be modified or amended only by a written instrument executed
by all parties hereto.
Section 9.4. Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
40
<PAGE>
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 9.5. Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 9.6. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchasers, addressed to them at:
President
1000 Crawford Place
Mt. Laurel, NJ 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
Nicholas Pittas, Jr.
5 Birch Court
Oyster Bay, NY 11771
Christopher Pittas
4 Hemlock Court
Oyster Bay, NY 11771
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, NY 11556-0111
Attn: Barry R. Shapiro, Esq.
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing
41
<PAGE>
addressed as above and sent first class mail, certified, return receipt
requested, or when actually received, if earlier. Any party may change the
address for notice by notifying the other parties of such change in accordance
with this Section 9.6.
Section 9.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 9.8. No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 9.9. Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 9.10. Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 9.11. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
Section 9.12. Extension or Waiver of Performance. Either Nicholas Pittas,
----------------------------------
Jr., on behalf of the Sellers, or Purchasers may extend the time for or waive
the performance of any of the obligations of the other, waive any inaccuracies
in the representations or warranties by the other, or waive compliance by the
other with any of the covenants or conditions contained in this Agreement,
provided that any such extension or waiver shall be in writing and signed by
Nicholas Pittas, Jr., on behalf of the Sellers and the Purchasers.
42
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Section 9.13. Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 9.14. Disclosure on Schedules. The parties acknowledge that
-----------------------
notwithstanding the provisions of the Agreement stating all Schedules and
Exhibits to this Agreement are attached to the Agreement, none of the Schedules
have been attached and certain of the Exhibits have not been attached. Sellers
will deliver to Purchasers all Schedules to be attached to this Agreement as
soon as reasonably possible but no later than seven (7) days from the date of
this Agreement. Purchasers will have fourteen (14) days from the Approval Date
(as defined in Section 1.9(b)), to review the Schedules and terminate the
Agreement by sending written notice to Company, if Purchasers are not satisfied
with any material matter revealed by any Schedule. The parties hereto shall use
their best efforts to agree upon and attach to this Agreement all Exhibits not
attached to this Agreement on the date of this Agreement's execution. If the
parties can not agree upon any Exhibits not attached to this Agreement, within
thirty (30) days after the date of this Agreement, any of the parties may
terminate this Agreement by sending written notice of termination to the other
parties. Once the Schedules are produced and the Exhibits agreed upon the
parties hereto shall execute a signature page which states that attached to the
signature page are the Schedules and Exhibits to this Agreement. For purposes
of this Agreement, a disclosure by any party hereto of any fact on any Schedule
shall be deemed a disclosure on every Schedule of any party hereto to the extent
such disclosure properly could have been made thereon but was not made. The
parties to this Agreement shall have the obligation to supplement or amend the
Schedules being delivered concurrently with the execution of this Agreement and
annexed hereto with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or described in the Schedules. The obligations of the parties to
amend or supplement the Schedules shall terminate on the Closing Date.
Notwithstanding any such amendment or supplementation, the condition to Closing
set forth in Section 6.1 shall not be satisfied, if the amendment or
supplementation of any Schedule by Sellers results in any of Sellers'
representations and warranties changing in a manner which the Purchaser in good
faith believes is materially adverse to the Purchasers, the Assets or the
Business.
Section 9.15 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the commercial
rules (the "Rules") of the American Arbitration Association then obtaining, in
New York, New York and judgment upon the award rendered in such arbitration
shall be final and binding upon the parties and may be confirmed in any court
having jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
arbitrate shall not bar any party from seeking temporary or provisional remedies
in any Court
43
<PAGE>
having jurisdiction if such party can establish irreparable harm. Notice of the
demand for arbitration shall be filed in writing with the other party to this
Agreement, which such demand shall set forth in the same degree of particularity
as required for complaints under the Federal Rules of Civil Procedure the claims
to be submitted to arbitration. Additionally, the demand for arbitration shall
be stated with reasonable particularity with respect to such demand with
documents attached as appropriate. In no event shall the demand for arbitration
be made after the date when institution of legal or equitable proceedings based
on such claim, dispute or other matter in question would be barred by the
applicable statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchasers and the Sellers in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). The
Purchasers and the Sellers, respectively, waive the right and agree they shall
not seek to disqualify any such counsel in any such Proceedings for any reason,
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
44
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Robert Kramer
----------------------
Name:
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
----------------------
Name:
Title: Vice President
COMPANY
GOLDEN GATE CARTING, CO, INC.
By: /s/ Nick Pittas
----------------------
Name: Nicholas Pittas, Jr.
Title: President
SHAREHOLDERS
/s/ Nick Pittas
----------------------
Nicholas Pittas, Jr.
/s/ Christopher Pittas
----------------------
Christopher Pittas
45
<PAGE>
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert M. Kramer
---------------------
Robert M. Kramer
46
<PAGE>
EXHIBIT 10.2
------------
Amendment No. 1 dated as of May 12, 1997, to Agreement and Plan of
Reorganization made as of April 7, 1997 by and among Golden Gate Carting Co.,
Inc., the individuals who are shareholders of the foregoing, Eastern
Environmental Services, Inc., and Eastern Waste of New York Inc. (the
"Agreement"). All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
RECITALS
--------
The parties have entered into the Agreement which provides that the Closing
thereunder shall occur on or prior to April 30, 1997. The parties hereto wish
to extend the termination date and to make certain other modifications to the
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, received to the
full satisfaction of each of them, the parties hereto agree to amend the
Agreement as follows:
ARTICLE I. AMENDMENTS.
1.1 Section 1.3(b) of the Agreement is hereby deleted in its entirety.
1.2 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(a) of the Agreement is hereby amended by deleting the
phrase "Four Million Nine Hundred and Five Thousand Dollars ($4,905,000)"
therefrom and substituting the phrase "Four Million Four Hundred Seventeen
Thousand Five Hundred Dollars ($4,417,500)" therefor.
(b) Section 1.4(a)(iii) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted thereof.
<PAGE>
(c) Section 1.4(a)(iv) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted therefor.
(d) Section 1.4(b)(i) is hereby amended by deleting the phrase "One
Million Nine Hundred and Five Thousand ($1,905,000) Dollars" therefrom and
substituting the new phrase "One Million Four Hundred Seventeen Thousand Five
Hundred ($1,417,500) Dollars" therefor.
(e) Section 1.4(c) of the Agreement is hereby amended and restated in its
entirety to read as follows:
"(c) The Sellers have advised the Purchasers that the amount of
indebtedness set forth on Schedule 1.4 as being the principal amount (the
"Schedule 1.4 Gebbia Debt") owed by Golden Gate to Gebbia Inc. and A.
Gralto Carting Corp. (individually and collectively the "Gebbia Parties")
pursuant to an Agreement of Sale dated as of April 1, 1990 among Golden
Gate and the Gebbia Parties (the "Sale Agreement") and the notes issued
thereunder is the subject of a dispute between Golden Gate and the Gebbia
Parties. The Gebbia Parties allege that Golden Gate owes them the principal
amount ($3,500,000) together with interest and attorneys' fees all as set
forth in the Order to Show Cause Index No. 97-006387 and Affidavit from
Vincent Gebbia attached hereto as Exhibit A (such principal amount,
together with interest and attorneys' fees, is hereinafter referred to as
the "Gebbia Debt"). In view of the dispute between Golden Gate and the
Gebbia Parties, the Sellers are unable to deliver a release from the Gebbia
Parties of the Assets, in exchange for payment of the Schedule 1.4 Gebbia
Debt. On the day that is ten days after the "Gebbia Determination Date", as
hereinafter defined (the "Issuance Date"), the Sellers shall pay the dollar
amount of any difference between the Final Gebbia Debt, as hereinafter
defined, and the amount of Schedule 1.4 Gebbia Debt. EESI agrees that, if
and when, the Closing occurs under this Agreement, EESI shall pay the
Company Debt in cash up to the amount of the Company Debt set forth in
Schedule 1.4. For purposes of this Section 1.4(c) "Gebbia Determination
Date" shall mean the earlier of (i) the date on which there is a
2
<PAGE>
binding enforceable written agreement between Golden Gate and the Gebbia
Parties as to the Company Debt owed to the Gebbia Parties, (ii) the date on
which a court of competent jurisdiction in a final unappealable decision
determines the dollar amount of the Company Debt owed to the Gebbia Parties
and (iii) that date, which is no later than five years after the Closing
Date (the "Final Gebbia Settlement Date"), on which the Purchasers and the
Gebbia Parties enter into a binding enforceable written agreement as to the
Company Debt owed to the Gebbia Parties. For purposes hereof, "Final Gebbia
Debt" means the dollar amount determined to be owed to the Gebbia Parties,
including without limitation, principal, interest and attorneys costs, on
the Gebbia Determination Date, either pursuant to a written agreement or
final adjudication as referred to in clauses (i), (ii) or (iii) in the
preceding sentence, and any costs and expenses incurred by the Purchasers,
including without limitation, fees and disbursements of counsel, related
thereto or related to Purchasers being sued by the Gebbia Parties for any
reason whatsoever, including without limitation, EESI NY entering into or
performing under or realizing any benefits from the management agreement to
be entered into between the Company and EESI NY (the "Management
Agreement").
The Sellers hereby grant the Purchasers a present power of attorney,
and appoint each of them with power of substitution, to settle the dispute
with the Gebbia Parties as to the amount of Company Debt owed to them, on
such terms as the Purchasers determine in their sole discretion are
reasonable. This power of attorney shall be effective (i) on that date
which is six months prior to the Final Gebbia Settlement Date if, on or
prior to such date, Golden Gate has not entered into a binding enforceable
written agreement with the Gebbia Parties with respect to, or there has not
been a final adjudication of, the amount of Company Debt owed to the Gebbia
Parties or (ii) if the Purchasers make a claim for reimbursement under the
Gebbia Indemnity and the Shareholders fail to pay such reimbursement to the
Purchasers in immediately available funds within five business days after
Purchasers have sent written notice
3
<PAGE>
of such claim for reimbursement to the Sellers. Purchasers agree that if
they exercise the foregoing power of attorney to settle with the Gebbia
Parties they will obtain a release from the Gebbia Parties for the Sellers.
This power of attorney is irrevocable and is coupled with an interest.
The Sellers hereby represent and warrant that the Sellers have prepaid
a principal amount of the Schedule 1.4 Gebbia Debt in the amount of
$1,342,771, and that no additional principal payments are owed to the
Gebbia Parties until December, 1999. EESI NY is relying upon the
representations and indemnities set forth in this Section 1.4(c) in
entering into the Management Agreement. EESI NY agrees that so long as the
Management Agreement is in effect, it shall pay out of, and to the extent
of, the revenues of the Business, all expenses and liabilities incurred and
accrued by the Business in the ordinary course, (it being understood that
the management fee provided for in the Management Agreement is an ordinary
operating expense but that the professional fees related to the dispute
with the Gebbia Parties is not an ordinary operating expense) on and after
the date the Management Agreement becomes effective, including, without
limitation, all normal monthly installments of Company Debt. In reliance
upon the representation of the Sellers set forth in this paragraph, the
Purchasers shall not pay any installment of the Schedule 1.4 Gebbia Debt
and interest thereon until the Sellers advise the Purchasers in writing
that such amount of indebtedness is due. EESI NY shall have no obligation
under the Management
4
<PAGE>
Agreement to pay any installments of Schedule 1.4 Gebbia Debt or interest
thereon unless the revenues generated from the Business in the ordinary
course less operating expenses and less the 10% management fee to be paid
to EESI NY as provided in the Management Agreement is equal to or exceeds
such installment of the Schedule 1.4 Gebbia Debt or interest thereon and
any professional fees to be paid at the direction of the Sellers in
connection with the dispute with the Gebbia Parties.
The Sellers hereby confirm and agree that, notwithstanding any
reference in this Agreement or any Schedule to the dispute by the Gebbia
Parties or any lien of the Gebbia Parties with respect to indebtedness owed
by Sellers to the Gebbia Parties, the indemnification by the Sellers set
forth in Article VIII hereof shall cover any amount of indebtedness which
the Purchasers may be required to pay to the Gebbia Parties which is in
excess of the Schedule 1.4 Debt, any claims, damages, suits, actions,
proceedings (including without limitation, any settlement proceedings or
negotiations or settlement costs), demands, assessments, adjustments, loss
or forfeiture of the Assets, defect in title to the Assets, encumbrances or
liens on the Assets, penalties, costs and expenses arising, directly or
indirectly, in connection with a dispute between the Gebbia Parties and
Golden Gate as to the Company Debt owed to the Gebbia Parties and in
connection with any lawsuit by the Gebbia Parties against the Purchasers
for any reason whatsoever, including without limitation EESI NY entering
into, performing under, or enjoying the benefits of the Management
Agreement, provided, however, that the indemnity provided for in this
Section 1.4(c) shall not be subject to the Basket. The indemnity provided
for in this Section 1.4(c) and 8.1(e) is hereinafter referred to as the
"Gebbia Indemnity". The Gebbia Indemnity shall survive the Closing or
termination of this Agreement. The Gebbia Indemnity is secured by a pledge
agreement and a security agreement each dated May 12, 1997 executed by the
Sellers in favor of the Purchasers (the "Pledge Agreement" and "Security
Agreement" respectively). Purchasers agree that at such time Sellers
request the Purchasers to release the collateral pledged under the Pledge
Agreement
5
<PAGE>
and Security Agreement and to accept substitute collateral, Purchasers
shall consider such request and if in their sole discretion (it being
understood that Purchasers have no obligation to consent) such
substitute collateral is acceptable, the Purchasers shall consent to
the substitution of collateral. Purchasers also agree that at such
time Sellers request the Purchasers to waive Section 6.8 and to Close
under this Agreement and to accept collateral (which may be in
addition to the collateral under the Pledge Agreement and Security
Agreement) as consideration for waiving Section 6.8, Purchasers shall
consider such request and if in their sole discretion (it being
understood that Purchasers have no obligation to consent) such
additional collateral is acceptable, the Purchasers shall consent to
the waiving of Section 6.8 hereof.
For purposes of this Agreement, the shares of EESI common stock delivered based
on the $9.00 value as set forth in subsection (i) above is hereafter referred to
as the "Restricted Stock" and the shares of EESI common stock delivered based on
the closing price of EESI common stock five trading days prior to Closing, as
set forth in subsection (ii) above, is referred to as the "Unrestricted Stock."
The Restricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement on the earlier of eighteen (18) months after the
Closing Date or July 12, 1998. The Unrestricted Stock shall be entitled to the
registration rights set forth in Section 5.2 of this Agreement commencing on the
Closing Date."
1.3 Section 1.5 of the Agreement is hereby amended as follows:
(a) Section 1.5(h) of the Agreement is hereby amended and
restated in its entirety to read as follows: "all accounts receivable
(including, without limitation, all receivables billed for which
services were not rendered as of May 1, 1997) of Golden Gate arising
out of the Business on and after May 1, 1997".
(b) Section 1.5(o) of the Agreement is hereby amended and
restated in its entirety to read as follows: "(o) All of the interest
of Golden Gate in all tangible
6
<PAGE>
and intangible property, including without limitation, prepaid
expenses and all cash generated by the Company on or after May 1,
1997;".
1.4 Section 1.6 is hereby amended and restated in its entirety to
read as follows:
Section 1.6 Excluded Assets. "The parties agree that the only
---------------
tangible and intangible property owned by the Company and not being
sold to Purchasers are accounts receivable created prior to May 1,
1997, the cash on hand of the Company generated prior to May 1, 1997,
the corporate records of the Company other than the records set forth
in Section 1.5(q) above, and the other assets listed on Schedule 1.6
("Excluded Assets")."
1.5 Section 1.7 of the Agreement is hereby amended as follows:
(a) Clause (iii) of Section 1.7 is hereby amended and restated in
its entirety to read as follows: "the accounts payable of the Company
on and after May 1, 1997 which were incurred in the ordinary course of
business as historically operated;"
(b) The following new clause (vii) is hereby added to Section
1.7: "and (vii) accrued expenses, accrued interest and accrued unpaid
vacation accrued on or after May 1, 1997 which were incurred in the
ordinary course of business as historically operated"
1.6 Section 1.8 of the Agreement is hereby amended by adding the
following new clause (j) thereto: "and (j) expenses, accounts payable, interest
and unpaid salary and/or vacation accrued after May 1, 1997 and before the
effective date of the management agreement to be entered into between the
Company and EESI NY not incurred in the ordinary course of business."
1.7 Section 1.9 of the Agreement is hereby amended as follows:
7
<PAGE>
(a) Subsection 1.9(b) is hereby deleted therefrom and the phrase
"Intentionally Omitted" is substituted therefor.
(b) Subsections 1.9(c), (d) and (e) of the Agreement are
hereby amended by deleting the phrase, "April 30, 1997" therefrom and
substituting the phrase therefor "July 31, 1997 which date shall be
extended by the Purchasers until five years after the date on which
the closing under the Leone Agreement occurs if Sections 6.8 and 6.9
have not been satisfied by, or if the transactions contemplated by
this Agreement have not been approved by the New York City Trade Waste
Commission, by July 31, 1997".
(c) The following new subsection (g) is added thereto: "(g) by
Nicholas Pittas, Jr. on behalf of the Sellers, or EESI, if the
transactions contemplated by the Leone Agreement (as defined in
Section 6.7) do not close for any reason whatsoever."
(d) The following new subsection (h) is added thereto: "(h) by
the Purchasers if the Management Agreement ceases to be of any force
or effect or if there is any litigation, injunction, or restraining
order which enjoins, restrains, or in any way prevents EESI NY from
performing its obligations under the Management Agreement or realizing
any benefits under the Management Agreement."
(e) The following new subsection (i) is added thereto: "(i) by
the Purchasers if a "Bankruptcy Event", occurs. For purposes hereof a
"Bankruptcy Event" shall mean the occurrence of any of the following
events:
1. Involuntary Bankruptcy; Appointment of Receiver. An
-----------------------------------------------
involuntary proceeding shall be commenced against the Company
under any applicable bankruptcy, insolvency, reorganization,
receivership, arrangement or readjustment of debt or other
similar law now or hereinafter in effect; or a decree or order of
a court having jurisdiction in the Premises for the appointment
of a receiver,
8
<PAGE>
liquidator, administrator, trustee, custodian or other officer
having similar powers over the Company over all or a substantial
part of the property of the Company shall have been entered; or
an interim receiver, trustee or other custodian of the Company or
of all or a substantial part of the property of the Company shall
have been appointed or a warrant of attachment, execution or
similar process against any substantial part of the property of
the Company shall have been issued.
2. Voluntary Bankruptcy; Appointment of Receiver. The Company
---------------------------------------------
shall permit, or acquiesce in, an order for relief entered with
respect to it under, or shall commence a voluntary case or
proceeding under, any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or shall consent to the
entry of an order for relief in an involuntary proceeding or to
the conversion of an involuntary proceeding to a voluntary
proceeding, under any such law; or shall consent to the
appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; or
the Company shall make any assignment for the benefit of
creditors or shall be unable or fail, or admit in writing its
inability, to pay its debts as such debts become due; or the
Company or its Board of Directors takes any corporate action to
authorize any of the foregoing."
(f) The following new subsection (j) is added thereto: "(j)
Nicholas Pittas, Jr. on behalf of the Sellers if the Management
Agreement is terminated by the Company pursuant to Section 10(b) of
the Management Agreement."
(g) The following new subsection (k) is added thereto: "(k) by
Purchasers if the Management Agreement is terminated by EESI NY
pursuant to Section 10(c) of the Management Agreement for any reason
whatsoever."
9
<PAGE>
1.8 Section 2.8 is hereby amended by deleting subsections (b) and (c)
therefrom and substituting in each case the phrase "Intentionally Omitted".
1.9 Article II is hereby amended by adding the following new Section
2.20 thereto:
"2.20 Notices and Customer Register. Sellers have sent the
-----------------------------
"Notice of Reduction and Carting Rates" to all its customers as
required by the Trade Waste Commission. Sellers have prepared a
computerized customer register which conforms to the Trade Waste
Commission requirements."
1.10 Article IV is hereby as amended as follows:
(a) Section 4.1 is hereby amended by adding the following new
subsections (d) and (e) thereto:
"(d) Sellers agree that prior to July 12, 1998, they shall not
sell, trade, or otherwise dispose of Restricted Stock in an open
market or brokered sales transaction, whether or not they would
otherwise be able to legally enter into such a transaction, provided
however, that Sellers may enter into a private placement transaction
with respect to the Restricted Stock at any time."
"(e) Sellers agree that, with respect to an underwritten public
offering for the sale of EESI Stock pursuant to an effective
registration statement which occurs after the Closing Date, they will
enter into a "lock-up" agreement which would prohibit them from
selling any Restricted Stock for a period of 90 days commencing on the
date such registration statement becomes effective, if such a "lock-
up" agreement is requested by the underwriter of such public
offering."
(b) Article IV is hereby further amended by adding the following
new subsections 4.8 and 4.9 thereto:
"4.8 Trade Waste Regulations. Sellers shall deliver
-----------------------
to the Trade Waste Commission by May 8, 1997, if the Closing has
not occurred prior to such
10
<PAGE>
date, a letter certifying that it has sent to customers the
notice referred to in Section 2.20."
"4.9 Cash. Sellers shall not distribute any cash of the
----
Company resulting from receivables generated on or after May 1,
1997 by the Company on or after May 1, 1997 for any purpose
whatsoever without the prior written consent of the Purchaser."
1.11 Article V is hereby as follows:
(a) (i) The following new sentence is hereby added to Section
5.2(a): "Notwithstanding anything in this Agreement to the contrary,
EESI shall not be obligated to file a registration statement with
respect to the Restricted Stock if at such time it would otherwise be
obligated to file a registration statement hereunder if the Sellers
are able to sell the Restricted Stock without volume limitations under
Rule 144."
(ii) Section 5.2(e) of the Agreement is hereby deleted in
its entirety from Article V and is replaced by Section 4.1(e).
(b) Article V is amended by adding the following new Sections 5.4, 5.5
and 5.6 thereto:
"5.4 Union Contracts. After the Closing Date Purchaser
---------------
shall enter into a union contract which is substantially similar
to the union contracts listed on Schedule 2.3."
"5.5 Accounts Receivable. Purchaser shall for a period of
-------------------
ninety (90) days after the Closing Date (the "Collection Period")
collect on behalf of Sellers any accounts receivable generated by
the Business prior to May 1, 1997, it being understood that the
Purchaser shall have no liability with any such account
receivable which is not collected. Any payments in respect of
such accounts receivables which the Purchaser collects during the
Collection Period and which are not identified or
11
<PAGE>
reconciled to a specific account receivable generated by the
Business after May 1, 1997, shall be remitted to William Leone,
as agent for the Sellers, on a weekly basis for the first month
and thereafter on a bi-monthly basis together with a payment
application statement generated in the ordinary course of
business. After the expiration of the Collection Period, Sellers
shall collect the accounts receivable generated by the Business
prior to May 1, 1997, and Purchaser shall have no further
obligation to collect such account receivables."
"5.6 Closing Adjustments.
-------------------
(a) If the Management Agreement is entered into on or prior to
May 15, 1997, the Sellers and Purchasers will account to each other
with respect to the expenses of the Business generated in the ordinary
course on a historical basis which accrued and the revenues of the
Business which were generated on and after May 1, 1997 through the
Closing Date. To the extent Sellers paid any expenses related to the
Business on or after May 1, 1997 from funds which were not generated
by the Business through the rendering of services on or after May 1,
1997 (such expenses being "Sellers' Expense"), Purchasers shall pay in
cash to Sellers at Closing a dollar amount equal to the Sellers'
Expense. If the Closing occurs after May 15, 1997, the accounting
referred to in this Section 5.6(a) shall not be applicable.
(b) If the Management Agreement is entered into after May 15,
1997, then all references in this Agreement to the allocation of
accounts receivable, accounts payable, accrued interest, unpaid
vacation and accrued expenses to the Sellers for the period prior to
May 1, 1997 and to the Purchasers from and after May 1, 1997 shall be
deemed to be of no force and effect and the Sellers and Purchasers
hereby agree that the new date for allocating all accounts receivable,
accounts payable, accrued interest, unpaid vacation and accrued
expenses to the Sellers and Purchasers shall be the date on which the
Company and EESI NY enter into the Management Agreement, it being
understood that if the Management Agreement is
12
<PAGE>
entered into after May 15, 1997, the Sellers shall be responsible for
all accounts payable, accrued interest, accrued unpaid vacation and
salary, and accrued unpaid expenses prior to the Management Date and
shall be entitled to receive collections from all accounts receivable
generated by the Business prior to the Management Date, in addition to
all cash on hand in the Company on the Management Date. If the
Management Agreement is executed after May 15, 1997, the Purchasers
and Sellers shall re-execute the Assignment and Assumption Agreement,
Bills of Sale, and such other documents as are necessary to give
effect to the allocation described in the preceding two sentences."
(c) If the Management Agreement is executed on or prior to May
15, 1997, then the amount of EESI Stock to be delivered to the Sellers
pursuant to Section 1.4(b)(i) shall be calculated based upon the
Company Debt set forth in Schedule 1.4 as of May 1, 1997 and the
amount of EESI Stock to be delivered to the Sellers pursuant to
Section 1.4(b)(ii) shall be calculated based upon a per share value of
$13.50. If the Management Agreement is executed after May 15, 1997,
then the amount of EESI Stock to be delivered to the Sellers pursuant
to Section 1.4(b)(i) shall be calculated based upon the Company Debt
set forth in Schedule 1.4 as of the Closing Date (provided, however,
the Gebbia Debt shall be as set forth in Schedule 1.4 as delivered to
Purchasers on May 12, 1997) and the amount of EESI Stock to be
delivered to the Sellers pursuant to Section 1.4(b)(ii) shall be
calculated based upon a per share value based upon the closing price
for EESI's Common Stock on the NASDAQ National Market for the trading
day which is five trading days prior to the Closing Date."
1.12 Article VI of the Agreement is hereby amended by adding the
following new Sections 6.7, 6.8 and 6.9 thereto:
"Section 6.7. Other Transactions. Closing shall have taken
------------------
place under the Reorganization Agreement ("Leone Agreement") dated
October 23, 1996 by and between Purchasers, Eastern Container
Corporation, Eastern Waste of L.I., Inc., Curbside Leasing, Inc., WSI
Holdings,
13
<PAGE>
Inc., Waste Services, Inc., N.Y. Waste, Inc., L.I. Waste Services,
Inc., and KC Waste Services, Inc., and certain named individuals, as
amended."
b) The following new Section 6.8 is added thereto:
"Section 6.8. Gebbia Debt. The Gebbia Parties shall have
-----------
executed a UCC-3 Filing with respect to the Assets and shall have
entered into a general release of the Purchasers and the Assets from
any claims arising in connection with the Gebbia Debt in form and
substance satisfactory to the Purchasers in their sole discretion."
c) The following new Section 6.9 is added thereto:
"Section 6.9. Caputo Debt. Caputo Carting Co., Inc. shall have
-----------
executed a UCC-3 Filing with respect to the Assets and shall have
entered into a general release of the Purchasers and the Assets from
any claims arising in connection with the indebtedness owed to Caputo
Carting Co., Inc. in form and substance satisfactory to the Purchasers
in their sole discretion."
1.13 The third sentence of Section 9.14 of the Agreement is hereby
amended and restated in its entirety to read as follows:
(a) "Purchasers will have fourteen (14) days from that date on
which the Purchasers have received written approval from the Trade
Waste Commission for the Purchasers to close the transactions
contemplated by this Agreement (the "Approval Date") to review any new
or revised Schedule delivered to Purchasers on or prior to the
Approval Date and terminate the Agreement by sending written notice to
the Company if Purchasers are not satisfied with any material matter
revealed by any such new or revised Schedule."
1.14 The following new Schedules 1.4, 1.6, 1.12(b), 2.7, 2.13(c) and
2.13(f) attached hereto are hereby substituted for Schedules 1.4, 1.6, 1.12(b),
2.7, 2.13(c) and 2.13(f) to the Agreement.
14
<PAGE>
1.15 Notwithstanding anything in the Agreement to the contrary, all
references in the Agreement to the phrase "Escrow Stock", "Escrow Agent",
"Accounts Receivable Payment" and "Receivable Payment Statement" are hereby
deleted.
ARTICLE II. MISCELLANEOUS.
2.1 All references in the Agreement to "this Agreement" or like terms
shall mean and be a reference to the Agreement as amended by this Amendment and
all references to "the Agreement" or a like term in any agreement executed in
connection with the Agreement shall mean and be a reference to the Agreement as
amended by this Amendment.
2.2 Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect.
15
<PAGE>
2.3 This Amendment hereby incorporates, includes and is subject to
Article IX of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Robert Kramer
---------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
---------------------------------
Name: Robert M. Kramer
Title: Vice President
COMPANY
GOLDEN GATE CARTING, CO, INC.
By: /s/ Nicholas Pittas
-----------------------------------
Name: Nicholas Pittas, Jr.
Title: President
SHAREHOLDERS
/s/ Nicholas Pittas
-----------------------------------
Nicholas Pittas, Jr.
/s/ Christopher Pittas
--------------------------------------
Christopher Pittas
16
<PAGE>
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert Kramer
-------------------------------------
Robert M. Kramer
17
<PAGE>
EXHIBIT 10.3
------------
AGREEMENT AND PLAN OF REORGANIZATION OF
CONEY ISLAND RUBBISH REMOVAL, INC.
VINCENT MOREA
EASTERN WASTE OF NEW YORK, INC.
AND
EASTERN ENVIRONMENTAL SERVICES, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS..................................................................... 1
ARTICLE I. Reorganization; Closing........................................... 1
-----------------------
ARTICLE II. Representations and Warranties of the Sellers.................... 9
---------------------------------------------
ARTICLE III. Representations and Warranties of Purchasers.................... 20
--------------------------------------------
ARTICLE IV. Additional Agreements of Sellers................................. 21
--------------------------------
ARTICLE V. Additional Agreements of Purchasers............................... 24
-----------------------------------
ARTICLE VI. Conditions of Purchasers......................................... 27
------------------------
ARTICLE VII. Conditions of Sellers........................................... 28
---------------------
ARTICLE VIII. Indemnification................................................ 29
---------------
ARTICLE IX. Other Provisions................................................. 33
----------------
</TABLE>
<PAGE>
SCHEDULES
1.4 COMPANY DEBT
1.6 EXCLUDED ASSETS
1.10(C) OPINION OF PURCHASERS' COUNSEL
1.10(E) ASSIGNMENT AND ASSUMPTION AGREEMENT
1.11(A) BILL OF SALE
1.11(B) NON-COMPETE AGREEMENT
1.11(D) OPINION OF SELLERS' COUNSEL
1.12(B) ALLOCATION OF PURCHASE PRICE TO ASSETS
2.1 SUBSIDIARIES
2.2 CAPITAL STOCK
2.3 CONTRACTS, PERMITS, MORTGAGES AND MATERIAL DOCUMENTS
2.4(A)(I) ROLLING STOCK
2.4(A)(II) CONTAINERS
2.4(B) PERSONAL PROPERTY EXCEPTIONS
2.5 CUSTOMERS
2.7 ADVERSE CHANGES
2.8(B) ACCOUNTS RECEIVABLE
2.8(C) ACCOUNTS PAYABLE
2.9(F) COMPENSATION INCREASES
2.10 TAX STATUS OF COMPANY
<PAGE>
2.11 INSURANCE POLICIES, PERFORMANCE BONDS AND LETTERS OF CREDIT
2.12(A) CONTRACTS WITH EMPLOYEES
2.12(B) EMPLOYEES
2.12(C) BENEFIT PLANS
2.13(A) VIOLATIONS OF FEDERAL, STATE OR LOCAL LAW
2.13(B) ENVIRONMENTAL VIOLATIONS
2.13(C) LANDFILLS AND DISPOSAL FACILITIES
2.13(F) LIST AND SYNOPSIS OF ALL LITIGATION
2.15 REQUIRED CONSENTS
2.18 RELATED PARTY TRANSACTIONS
6.3 CANCELLED OR MODIFIED MATERIAL DOCUMENTS
7.3 GUARANTEES
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Agreement and Plan of Reorganization ("Agreement") is made as of April
7, 1997, by and among Vincent Morea ("Shareholder"), Coney Island Rubbish
Removal, Inc. ("Coney Island"), Eastern Environmental Services, Inc. ("EESI"),
and Eastern Waste of New York, Inc. ("EESI NY"). For purposes of this
Agreement, EESI and EESI NY are collectively referred to as "Purchasers;" Coney
Island may also be referred to as "Company;" and the Company and the Shareholder
are collectively referred to as the "Sellers."
RECITALS
--------
Shareholder is the sole owner of the outstanding stock of Coney Island.
The Company is a New York corporation. The Company is in the business of
collecting, transporting, recycling and disposing of non-hazardous, commercial,
industrial, and municipal solid waste ("Business").
The parties hereto desire that substantially all of the assets of the
Company be acquired by EESI NY in exchange solely for the voting stock of EESI,
the parent and sole shareholder of EESI NY, on the terms contained herein. The
parties intend that the transactions contemplated hereby qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended.
ARTICLE
REORGANIZATION; CLOSING
-----------------------
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. Place for Closing. Subject to Section 1.9 hereof, closing
-----------------
under this Agreement shall take place at the offices of Rivkin, Radler & Kremer,
EAB Plaza, Uniondale, NY 11556, or such other place as the parties hereto may
agree upon. The date that Closing occurs is referred to hereinafter as the
"Closing Date" and the act of closing as "Closing."
Section 1.3. Agreement to Exchange Stock for Assets; Consideration.
-----------------------------------------------------
(a) At the Closing, the Company, as set forth in Section 1.5 below, shall
transfer and deliver to EESI NY, as set forth in Section 1.5 below, the assets
owned by the Company other than the Excluded Assets, defined in Section 1.6, and
EESI agrees to issue and deliver, in exchange for the assets, as consideration
therefor, shares of EESI's common stock ("EESI Stock"), calculated as set forth
in Section 1.4 below, and the assumption by Purchasers of the Assumed
Liabilities, as defined in Section 1.7. The EESI Stock shall be issued and paid
to the Company on the Closing Date.
<PAGE>
(b) In accordance with Section 1.4(a)(iii) of this Agreement, the dollar
value of the EESI Stock to be delivered at Closing is being increased by the
amount by which the accounts receivable of the Company conveyed to the
Purchasers at Closing, less the bad accounts receivable reserve of the Company
agreed upon by Sellers and Purchasers at Closing, exceeds the accrued expenses,
accrued interest, accrued unpaid vacation and accounts payable of the Company,
assumed by the Purchasers in accordance with this Agreement ("Accounts
Receivable Payment"). The EESI Stock issued in the amount of the Accounts
Receivable Payment shall be hereafter referred to as the "Additional Stock". One
half of the Additional Stock shall be delivered to Robert M. Kramer &
Associates, P.C. ("Escrow Agent") in escrow to be held under the provisions of
this Section 1.3(b) ("Escrow Stock"). On or before one hundred ninety-five (195)
days from the Closing Date, Purchasers will supply Company and the Escrow Agent
with an accounting of the accounts receivable of the Company collected by the
Purchasers within 180 days after the Closing and the accounts payable of the
Company paid by Purchasers within 180 days after Closing ("Receivable and
Payable Statement"). Within ten days of Escrow Agent's receipt of the Receivable
and Payable Statement, Escrow Agent, based on the Receivables and Payable
Statement shall deliver to the Company out of the Escrow Stock, an amount of
EESI's common stock equal in value to the amount by which (i) the accounts
receivable of the Company collected by the Purchasers within 180 days after
Closing exceeded the accounts payable of the Company paid by the Purchaser
within 180 days after Closing, less (ii) 50% of the Accounts Receivable Payment.
The EESI common stock delivered to Company by Escrow Agent under this Section
1.3(b) shall be valued at a per-share value equal to the closing price of EESI's
common stock as reported on the NASDAQ National Market on the day which is five
(5) trading days prior to the Closing Date. The EESI Stock delivered by Escrow
Agent shall be issued and paid to the Company. The Escrow Agent shall deliver to
Purchaser for cancellation the Escrow Stock not required to be delivered to the
Company.
Section 1.4. Calculation of EESI Stock. The dollar amount of the EESI
-------------------------
Stock to be delivered at Closing shall be calculated as set forth in this
Section 1.4(a) and paid in EESI Stock having the per-share value set forth in
Section 1.4(b).
(a) The EESI Stock to be delivered at Closing shall equal, in dollar value
(based on the per share values set forth in Section 1.4(b) below), One Million
Seven Hundred Ten Thousand Dollars ($1,710,000) increased and decreased as
follows ("Dollar Value of the Purchase Price"):
(i) decreased, by the principal owed, as of the Closing Date, by the
Company with respect to the debt, set forth on Schedule 1.4 ("Company
Debt") (after the date of this Agreement, the Company Debt may
increase, due to additional indebtedness incurred as allowed by
Section 4.4 of this Agreement, or decrease, due to scheduled payments
or pre-payments, as allowed by Section 4.4);
(ii) increased, by an amount equal to one-half of any discount of the
Company Debt which the holders of the Company Debt have agreed to
accept in writing after
2
<PAGE>
the Closing Date in exchange for an accelerated payment of such
Company Debt where EESI agrees to fund the accelerated payment (EESI
agrees to pay accelerated payments which are payable in EESI's common
stock valued at the market value of EESI's common stock at the time of
issuance, as listed on the NASDAQ National Market and provided the
accelerated payment will achieve a ten percent or more discount of the
Company Debt being prepaid); and
(iii) increased, by the amount by which the accounts receivable of
the Company conveyed to the Purchasers at Closing, less the bad
accounts receivable reserve of the Company agreed upon by Sellers and
Purchasers at Closing, exceeds the accrued expenses, accrued interest,
accrued unpaid vacation and accounts payable of the Company, assumed
by the Purchasers in accordance with this Agreement.
(iv) decreased by a dollar amount equal to the product of (A)
fifteen (15) and (B) the dollar amount by which the annualized
revenues of the Company on the Closing Date is less than $114,000,
provided however there shall be no purchase price adjustment pursuant
to this clause (iv) if the decrease in revenues is five percent (5%)
or less. When determining the dollar amount of the annualized revenue
of the Business on the Closing Date, the dollar amount by which
revenues are reasonably likely to decrease if there shall have been
enacted or promulgated or adopted, on or prior to the Closing Date,
any rule, statute, law or regulation or any modification or
interpretation of any of the foregoing, (including without limitation,
any of the foregoing which reduces the rates charged to customers for
any services) which is reasonably likely to decrease revenues of the
Company by 5% or more from the date of this Agreement, shall be taken
into consideration. The 5% or more change in revenues referred to in
this clause (iv) shall not be deemed to be a material adverse change
under Section 6.3 of this Agreement.
(b) The per-share values used to calculate the amount of the EESI Stock to
be paid to the Company shall be as follows:
(i) Nine Dollars ($9.00) per Share for an amount of the Dollar Value
of the Purchase Price equal to One Million Six Hundred Seventy
Thousand Dollars ($1,670,000), plus the amount that the principal of
the Company Debt at Closing is less than the principal of the Company
Debt, as of the date of this Agreement, as set forth on Schedule 1.4,
due to normally scheduled principal amortization paid by the Company
and identified as a monthly payment on Schedule 1.4; and
(ii) the closing price for EESI's common stock on the NASDAQ National
Market for the trading day which is five trading days prior to the
Closing Date, shall be used to calculate the remaining balance of
Dollar Value of the Purchase Price.
3
<PAGE>
For purposes of this Agreement, the shares of EESI common stock delivered based
on the $9.00 value as set forth in subsection (i) above is hereafter referred to
as the "Restricted Stock" and the shares of EESI common stock delivered based on
the closing price of EESI common stock five trading days prior to Closing, as
set forth in subsection (ii) above, is referred to as the "Unrestricted Stock."
The Restricted Stock shall be entitled to the registration rights set forth in
Section 5.2 of this Agreement on the earlier of eighteen (18) months after the
Closing Date or July 12, 1998. The Unrestricted Stock shall be entitled to the
registration rights set forth in Section 5.2 of this Agreement commencing on the
Closing Date.
Section 1.5. Description of Assets. Upon the terms and subject to the
---------------------
conditions set forth in this Agreement, on the Closing Date the Company shall
grant, convey, sell, transfer and assign to EESI NY the following assets,
properties and contractual rights of the Company, wherever located, all as set
forth in this Section 1.5.
(a) All of the containers and carts ("Containers") owned or leased by
Coney Island;
(b) All of the motor vehicles and all attachments, accessories and
materials handling equipment owned or leased by Coney Island;
(c) All of the compactors and recycling equipment owned or leased by Coney
Island;
(d) All radios located in the rolling stock, the radio base station, and
all manual and automated routing and billing systems and components thereof,
including, without limitation, all computer hardware, software and programs
("Radios") owned or leased by Coney Island;
(e) All of the inventory of parts, tires and accessories owned by Coney
Island;
(f) All right, title and interest of Coney Island in and to all trade
secrets, proprietary rights, symbols, trademarks, service marks, logos and trade
names used and owned by Coney Island;
(g) All contractual rights of Coney Island with its customers (whether
oral or in writing) relating to the conduct of the Business;
(h) All accounts receivable of Coney Island arising out of the Business;
(i) All leases and agreements to which Coney Island is a party;
(j) All permits, licenses, franchises, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties ("Consents and Approvals") held by Coney Island relating to, used in or
required for the operation of the Business which are transferable;
4
<PAGE>
(k) The exclusive right to use the name Coney Island;
(l) All right, title, and interest of Coney Island in and to the telephone
numbers used in the conduct of the Business;
(m) All of the shop tools owned by Coney Island relating to the Business;
(n) All of the furniture and office or other equipment owned by Coney
Island;
(o) All of the interest of Coney Island in all tangible and intangible
property, including, without limitation, pre-paid expenses;
(p) All of the goodwill of the Business owned by Coney Island;
(q) All books, records, original agreements and contracts and title
documents relating to the items set forth in (a) through (p) above.
All of the foregoing assets, properties and contractual rights described in (a)
through (q) above are hereinafter sometimes collectively called the "Assets." At
Closing, good and marketable title to the Assets will be conveyed to Purchasers
by the Company free and clear of all liens, encumbrances, security interests and
claims, except for liens securing the Assumed Liabilities, as defined in Section
1.7.
Section 1.6. Excluded Assets. The parties agree that the only tangible
---------------
and intangible property owned by the Company and not being sold to the
Purchasers are the cash on hand of the Company, the corporate records of the
Company other than the records set forth in Section 1.5(q) above, and the other
assets listed on Schedule 1.6 ("Excluded Assets").
Section 1.7. Assumption of Obligations. From and after the Closing the
-------------------------
Purchasers agree to assume and perform all of the Company's obligations under
(i) the Company Debt and all documents evidencing the Company Debt, as
identified on Schedule 1.4, to the extent, and only to the extent, such
obligations first mature and are required to be performed subsequent to the
close of business on the Closing Date; (ii) the customer contracts of the
Company, to the extent, and only to the extent, such obligations first mature
and are required to be performed subsequent to the close of business on the
Closing Date; (iii) the accounts payable of the Company; (iv) all documents,
identified in Schedule 2.3, except for any collective bargaining agreements with
Labor Unions, to the extent, and only to the extent, obligations under such
documents first mature and are required to be performed subsequent to the close
of business on the Closing Date (union contracts are not being assumed by the
Purchasers) and (v) contracts or agreements arising in the ordinary course of
the Company's Business, only to the extent such obligations first mature and are
required to be performed subsequent to the close of business on the Closing Date
and which in the aggregate require the payment of $25,000 or less a year
("Assumed Liabilities"). Purchasers agree to defend and indemnify Sellers and
hold Sellers harmless from all losses,
5
<PAGE>
claims, causes of action, damages, liabilities, expenses and costs of any kind
or amount whatsoever (including, without limitation, reasonable attorneys' fees)
with respect to the Assumed Liabilities.
Section 1.8. Non-Assumption of Liabilities. Except as explicitly set
-----------------------------
forth in Section 1.7 above, Purchasers shall not, by the execution and
performance of this Agreement or otherwise, assume, become responsible for, or
incur any liability or obligation of any nature of the Company, whether legal or
equitable, matured or contingent, known or unknown, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, including, without limiting
the generality of the foregoing, any liability or obligation arising out of or
relating to: (a) any occurrence or circumstance (whether known or unknown) which
occurs or exists on or prior to the Closing Date and constitutes, or which by
the lapse of time or giving notice (or both) would constitute, a breach or
default under any lease, contract, or other instrument or agreement or
obligation (whether written or oral); (b) injury to or death of any person or
damage to or destruction of any property, whether based on negligence, breach of
warranty, or any other theory; (c) violation of the requirements of any
governmental authority or of the rights of any third person, including, without
limitation, any requirements relating to the reporting and payment of federal,
state, local or other income, sales, use, franchise, excise or property tax
liabilities of Sellers; (d) the generation, collection, transportation, storage
or disposal by the Company of any materials, including, without limitation,
hazardous materials; (f) any severance pay obligation of the Company,
compensation owed employees of the Company for periods prior to the Closing
Date, or any obligations under any employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended)
or any other fringe benefit program maintained or sponsored by Company or to
which any of the Company contributes or any contributions, benefits or
liabilities therefor or any liability for the withdrawal or partial withdrawal
from or termination of any such plan or program by the Company; (g) the debts
and obligations of the Company, except for the Assumed Liabilities; (h) any
violation by the Company of any law, including, without limitation, any federal,
state or local antitrust, racketeering or trade practice law; and (i)
liabilities or obligations of the Sellers for brokerage or other commissions
relative to this Agreement or the transactions contemplated hereunder.
Section 1.9. Term And Time For Closing. Following execution of this
-------------------------
Agreement, the Purchasers and Sellers shall be obligated to conclude the
transaction strictly in accordance with its terms on the last business day of
the month that the conditions of Closing set forth in Article VI and Article VII
have been satisfied or waived. If the failure to conclude this transaction is
due to the refusal and failure of Sellers to perform their obligations to close
under this Agreement, Purchasers may seek to enforce this Agreement with an
action of specific performance, in addition to, and not in limitation of, any
other rigths and remedies available to the Purchasers, under this Agreement, or
at law or in equity, including, without limitation, an action to recover their
actual damages resulting from the default of Sellers. If the failure to conclude
this transaction is due to the refusal and failure of Purchasers to perform
their obligations to close under this Agreement, the Sellers, or either of them,
may, in addition to and not in limitation of any other rights and
6
<PAGE>
remedies available to the Sellers, or either of them, under this Agreement, or
at law or in equity, bring legal action to recover their actual damages
resulting from the default of the Purchasers.
This Agreement and the transactions contemplated hereby may be terminated
at any time prior to the Closing Date:
(a) by mutual written agreement of EESI and Vincent Morea, on behalf of
the Sellers;
(b) by EESI by that date which is fourteen days after the Approval Date
(or if such date is not a business day, then the next business day) if (i) EESI
is not satisfied in its sole discretion with the due diligence it has conducted
on the Company, including without limitation its due diligence with respect to
the matters described on the Schedules hereto, which Schedules the Purchasers
have not yet reviewed or (ii) without limiting the generality of the foregoing
clause (i), if EESI in its sole discretion determines that the matters disclosed
in the Schedules or any other matters of which it otherwise becomes aware of
during the course of its due diligence, are materially adverse to the
Purchasers, the Assets, or the Business. For purposes hereof, the "Approval
Date" shall mean that date on which the Purchasers have received written
approval from the Trade Waste Commission for the Purchasers to close the
transactions contemplated by this Agreement;
(c) by EESI or Vincent Morea, on behalf of the Sellers, by providing the
other with written notice thereof, if the Closing shall not have occurred by
April 30, 1997, or such other date as may be agreed to by the parties hereto in
writing, if such notifying party is ready, willing and able to consummate the
transactions contemplated by this Agreement and all of the conditions to the
other party's obligation to close as set forth in Article VI or VII, as
applicable, shall have been satisfied and the other party fails to consummate
the transactions contemplated by this Agreement for any reason whatsoever;
(d) by Vincent Morea, on behalf of the Sellers, or by EESI, on or prior to
April 30, 1997, or such other date as may be agreed to by the parties in
writing, in the event Purchasers or the Sellers, as applicable, makes a material
misrepresentation under this Agreement or breaches a material covenant or
agreement under this Agreement, and fails to cure such misrepresentation or
breach within ten (10) days from the date of written notice of the existence of
such misrepresentation or breach;
(e) by Vincent Morea, on behalf of the Sellers or EESI, if the Closing
shall not have occurred by April 30, 1997, or such other date as may be agreed
to by the parties hereto in writing, due to the non-fulfillment of a condition
precedent to such party's obligation to close as set forth at Article VI or VII
hereof, as applicable (through no fault or breach by the terminating party); or
(f) by the Purchasers and Sellers as provided in Section 9.14.
7
<PAGE>
All terminations shall be exercised by sending the other parties a written
notice of the termination. In the event this Agreement is terminated as
provided herein, this Agreement shall become void and be of no further force and
effect and no party hereto shall have any further liability to any other party
hereto, except that Section 1.9, Section 5.1, Article VIII, Section 9.1, Section
9.2 and Section 9.15 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement. In the event of termination by Vincent Morea,
on behalf of the Sellers, pursuant to the above Sections (c) or (d) hereof,
Vincent Morea, on behalf of the Sellers, shall be entitled to recover Sellers
costs and expenses, including reasonable attorneys fees, in connection with the
preparation, negotiation and execution of this Agreement.
Section 1.10. Deliveries by Purchasers. At the Closing, Purchasers shall
------------------------
deliver, all duly and properly executed, authorized and issued (where
applicable):
(a) The EESI Stock, as provided in Sections 1.3 and 1.4 above, to be
delivered to the Company;
(b) A certified copy of resolutions of the directors and shareholder of
EESI NY and the directors of EESI authorizing the execution and delivery of this
Agreement and each other agreement to be executed in connection herewith
(collectively, the "Collateral Documents") and the consummation of the
transactions contemplated herein and therein;
(c) A favorable opinion from counsel for Purchasers, dated the day of the
Closing in the form attached as Schedule 1.10(c);
(d) The Certificate described at Section 7.1;
(e) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(f) Other documents and instruments required by this Agreement, if any.
Section 1.11. Deliveries by Sellers. At the Closing, each of the Sellers,
---------------------
as applicable, shall deliver to Purchasers, all duly executed, the following:
(a) The Company shall deliver to EESI NY a duly executed Bill of Sale for
the Assets to be conveyed and assigned, in the form attached as Schedule
1.11(a);
(b) The Shareholder shall execute the Covenant Not to Compete Agreement
attached to this Agreement as Schedule 1.11(b);
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(c) The Company shall have delivered to EESI a current certificate of good
standing for the Company from the New York Secretary of State;
(d) A favorable opinion from counsel for the Company, dated the date of
the Closing, in form attached as Schedule 1.11(d);
(e) Each of the Sellers shall execute and deliver the Certificate
described at Section 6.1;
(f) An Assignment and Assumption Agreement in the form attached as
Schedule 1.10(e) attached hereto;
(g) The books and records of the Company to be delivered as set forth in
Section 1.5(q);
(h) Physical possession of all Assets; and
(i) Other documents and instruments required by this Agreement, if any.
Section 1.12. Transfer Tax, Allocation of Purchase Price and Bulk Sales
---------------------------------------------------------
(a) Purchasers shall pay all sales, transfer taxes and fees imposed on the
conveyance of the Assets by all governments, state, local and federal.
(b) The parties agree that the consideration for the sale of the Assets
shall be allocated among the Assets as set forth on Schedule 1.12(b) attached
hereto. The Sellers and the Purchasers acknowledge that the allocation has been
arrived at based upon their negotiations and shall be used by them for all
purposes, including, but not limited to, federal, state, and local tax and
financial reporting purposes, and they shall not take any position inconsistent
to the allocation. On the Closing Date, the Purchasers and the Sellers shall
execute Internal Revenue Form 8594 which form shall be binding on the Purchasers
and the Sellers and shall be filed with the income tax returns of the Purchasers
and the Sellers.
(c) The Purchasers hereby waive compliance by the Company with the
provisions of the New York Bulk Sales Law and the Sellers, jointly and
severally, covenant and agree to pay and discharge, when due, or contest in good
faith by appropriate proceedings, all claims of creditors which could be
asserted against the Purchasers or the Assets by reason of such noncompliance.
Simultaneously with the execution of this Agreement (and in any event, not less
than ten days prior to Closing), the parties shall complete New York State
Department of Taxation and Finance Form AU-196.10 (Notification of Sale,
Transfer or Assignment in Bulk) and the Purchasers shall promptly file it in the
appropriate office.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Whenever the phrase "to Sellers' knowledge", "to Shareholder's knowledge"
or a similar phrase is used in this Agreement, the phrase means the actual
knowledge of the Shareholder and the knowledge such Shareholder would or should
have had, if such Shareholder exercised reasonable diligence in the conduct of
the Shareholder's duties to the Company. With knowledge that Purchasers are
relying upon the representations, warranties and covenants herein contained, the
Sellers jointly and severally represent and warrant to Purchasers and make the
following covenants for the Purchasers' benefit:
Section 2.1. Organization and Standing. The Company is a corporation duly
-------------------------
organized, legally existing and in good standing under the laws of the state of
its incorporation, with full power and authority to own its properties and
conduct its business as now being conducted. The Company does not own any stock
or interest in any other corporation, partnership, or other business
organization, except as set forth on Schedule 2.1.
Section 2.2. Company Stock. The Company has the authorized and kind of
-------------
capital stock as set forth on Schedule 2.2. Schedule 2.2 hereto sets forth the
number of shares of the capital stock of the Company issued and outstanding.
Except as set forth in Schedule 2.2, the stock ("Company Shares") each
Shareholder owns in the Company is legally and validly authorized and issued,
fully paid and nonassessable. There are no outstanding rights of any kind to
acquire additional shares of any class of stock from the Company.
Section 2.3. Contracts, Permits and Material Documents. The items listed
-----------------------------------------
in Schedule 2.3 attached, are all of the following with respect to the Company
("Material Documents"): (i) leases for real and personal property excepting
office equipment, (ii) licenses, (iii) franchises, (iv) promissory notes,
guarantees, bonds, mortgages, liens, pledges, and security agreements under
which the Company is bound or under which the Company is the beneficiary, except
for the obligations evidencing Company Debt which are listed on Schedule 1.4,
(v) collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of the Company's
businesses, and (viii) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 2.5) which are binding on the Company or any of its property
and pursuant to which the Company derives any material benefit or has imposed
upon it any material detriment. For purposes of this Section 2.3 a material
benefit or material detriment shall be anything which provides a benefit or
imposes a detriment having a value of $25,000 or more. The Material Documents
listed on Schedule 2.3 are organized under separate headings for each of the
different type of documents listed. Except as set forth on Schedule 2.3 or
Schedule 1.4, neither the Company nor, to the knowledge of the Sellers, any
person or party to any of the Material Documents or the Company Debt, or bound
thereby is in material or knowing default
10
<PAGE>
under any of the Material Documents or the Company Debt, and, to the knowledge
of the Sellers, no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default. The Company is not a party to, and no
Company property is bound by, any agreement or instrument which is material to
the continued conduct of business operations of the Company, as now being
conducted, except as listed in Schedule 2.3 or Schedule 1.4.
Section 2.4. Personal Property. All items of personal property owned or
------------------
leased by the Company (except as set forth in Section 1.6), or used in the
business operations of the Company, will be transferred to Purchasers at
closing, in the condition set forth in subparagraphs (a) and (b) below:
(a) Attached hereto, made a part hereof and marked Schedule 2.4(a) is a
listing of all those items described in subparagraphs "i" and "ii," organized by
subparagraph.
(i) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors used in the Company's business operations
together with information as to the make, description of body and chassis, model
number, serial number and year of each such vehicle, all of which are owned or
leased by the Company, as listed on Schedule 2.4(a)(i) and, to the knowledge of
the Sellers, all of the vehicles are, in all material respects, in good
condition, normal wear and tear excepted, except as noted on Schedule 2.4(a)(i);
(ii) All containers used in the Company's business operations are in
good condition, in all material respects, normal wear and tear excepted, except
as noted on Schedule 2.4(a)(ii), and all containers used in the Company's
business operations having a size of 10 yards or greater together with
information as to container size are listed on Schedule 2.4(a)(ii);
(b) All other items of personal property owned, leased or used by the
Company, including, without limitation, all radios, compactors, recycling
equipment, furniture, office equipment and other equipment used in the Company's
business operations, the inventory of parts, tires and accessories maintained by
the Company, and the shop tools used by the Company are in good condition, in
all material respects, normal wear and tear excepted, except as noted on
Schedule 2.4(b);
Section 2.5. Customers. Each customer the Company serves (listed by
---------
account number and not by name) together with information as to the services
rendered to each such customer, frequency of service and rates charged, is
listed on Schedule 2.5 attached hereto. All customers are obligated under the
Company's standard form of contract, except for variations agreed to by the
Company which are not material in nature. The name and address of each customer
shall be provided by the Company to Purchasers at Closing. To the knowledge of
Sellers, each customer is creditworthy and no customer represents more than 3%
of the total annual billings of the Company. Neither the Company nor, to the
knowledge of the Sellers, any person or party to any of the customer contracts
is in material or knowing default under any of the customer contracts,
11
<PAGE>
and, to the knowledge of the Sellers, no act or event has occurred which with
notice or lapse of time, or both, would constitute such a default.
Section 2.6. Title. The Company has good and marketable title to, or a
-----
valid leasehold interest in all of its assets both real property and personal
property, each free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement ("Liens"), except the items set forth in subparagraphs "a" through
"c", and the items listed on Schedule 2.3 or Schedule 1.4 ("Permitted
Encumbrances").
(a) Liens imposed by law and incurred in the ordinary course of business
for indebtedness not yet due to carriers, warehousemen, laborers or materialmen
and the like; and
(b) Liens in respect of pledges or deposits under worker's compensation
laws or similar legislation;
(c) Liens for property taxes, assessments, or governmental charges not yet
subject to penalties for nonpayment;
Section 2.7. Financial Statements. Sellers have delivered to Purchaser
--------------------
true and correct copies of the following financial statements of the Company
complied by Jeffrey S. Cogas, C.P.A., P.C., (the "Financial Statements"): a
balance sheet as of December 31, 1995, and a statement of income for the period
ended December 31, 1995, prepared on a cash basis. The Financial Statements have
been prepared by the regular accountants of the Company, in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
in accordance with past custom and practice of the Company. The balance sheets
comprising the Financial Statements present fairly, in all material respects,
the financial condition of the Company as of the dates indicated thereon and the
statements of income present fairly, in all material respects, on a cash basis
the results of the operations of the Company for the periods indicated thereon.
Except as set forth on Schedule 2.7, since the date of the Financial Statements,
the Company has not (i) made any material change in its accounting policies or
(ii) effected any prior period adjustment to, or other restatement of, its
financial statements for any period. Except as set forth on Schedule 2.7, the
Financial Statements are consistent with the books and records of the Company
(which books and records are correct and complete in all material respects).
Since the date of the Financial Statements, except as set forth on Schedule 2.7,
there has not been any material adverse change in the income, expenses or assets
of the Company.
Section 2.8. Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) the Company Debt;
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<PAGE>
(ii) liabilities fully reflected in the Financial Statement, except
for liabilities not required to be disclosed therein in accordance with GAAP, as
applied on a basis consistent with past custom and practice;
(iii) liabilities disclosed in the Schedules attached to this
Agreement or not required to be disclosed therein by reason of amount or other
qualifications contained in the representations and warranties of this
Agreement; and
(iv) liabilities arising since the date of the Financial Statement
arising during the normal course of business consistent with past custom and
practice as allowed in accordance with Section 4.4 of this Agreement.
(b) Substantially all accounts receivable of the Company as of the date
hereof are set forth by account number on Schedule 2.8(b), and all of such
accounts and all accounts arising since such date are, or will be, valid
accounts receivable. The accounts receivable less the bad accounts reserve
conveyed to Purchaser at Closing will be fully collected by Purchaser within 180
days after Closing. Schedule 2.8(b) gives the aging of each of the accounts
receivable of the Company. All accounts receivable have been generated in the
ordinary course of the Company's business consistent with past practice. To
Sellers' knowledge, there are no defenses or set-offs to any of the accounts
receivable. On the Closing Date, the accounts receivable, less the bad accounts
reserve on Schedule 2.8(b), plus the pre-paid expenses of the Company (which are
assigned to the Purchasers or which benefit the Purchasers) shall equal or
exceed the accounts payable, plus the accrued expenses of the Company plus
accrued and unpaid interest on the Company Debt.
(c) The Company's accounts payable as of the date of this Agreement are
attached hereto, made a part hereof and marked Schedule 2.8(c). Schedule 2.8(c)
gives the aging of each of the accounts payable of the Company. Schedule 2.8(c)
accurately reflects in all material respects the books and records of the
Company as of the date of Schedule 2.8(c).
(d) Except as set forth in Schedule 1.4, the Company Debt is not in
default, the Company Debt all requires the current monthly payment of accrued
interest, and there is no accrued interest owed on any of the Company Debt in
excess of the amount of accrued interest not yet payable for the current month.
Section 2.9. Fiscal Condition of The Company. Since the date of the
-------------------------------
Financial Statements, there has not (except as otherwise specifically permitted
by this Agreement or as set forth in the Schedules to this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others;
13
<PAGE>
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any stock dividend or other distribution of its
capital stock;
(c) Any sale or other disposition of any asset owned by the Company at the
close of business on the date of the Financial Statements, or acquired by it
since that date, other than in the ordinary course of business consistent with
past practice;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset, except in the ordinary course of business consistent with past
practices;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company, except damage,
destruction or loss which does not exceed $100,000 in the aggregate;
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee, except as required by law
or pursuant to a contract which is listed on Schedule 2.9(f) and except as
otherwise set forth in Schedule 2.9(f);
(g) Any loans or advances to the Company other than (i) renewals or
extensions of existing indebtedness, or (ii) loans and advances between the
Company and its affiliates, or (iii) loans extended under existing lines of
credit of the Company which loans will not exceed $50,000; or
(h) Any change in accounting method or practice, except for increases in
earning due to acquisition expenses being capitalized instead of expensed in
current periods.
Section 2.10. Tax Returns. The Company has filed all Federal and other tax
-----------
returns for all periods on or before the due date of such return (as may have
been extended by any valid extension of time) and has paid all taxes due for the
periods covered by the said returns. The Company is a Subchapter "S" corporation
under the Internal Revenue Service Code. The reserves for all taxes reflected in
the Financial Statements plus the reserves on Schedule 2.10 for all taxes from
the date of this agreement through the Closing Date, if any, are adequate to
cover all taxes, interest and penalties in connection therewith that may be
assessed with respect to the property and business operations for the period(s)
ending on the Closing Date and for all prior periods. Except for a Truck Mileage
Tax (MT 903) owed by the Company to the New York State Department of Taxation
and Finance, in an amount not to exceed $1,000.00, for the first quarter of
1997, the Company has filed, and will file (if due), in a timely manner all
requisite federal, state, local and other tax returns due for all fiscal periods
ended on or before the Closing Date.
Section 2.11. Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company or which the Company has had
issued and which have not expired
14
<PAGE>
are listed on Schedule 2.11 attached hereto. Schedule 2.11 includes the names
and addresses of the insurers and sureties, policy and bond numbers, types of
coverage or bond, time periods or projects covered and the names and addresses
of all known agents or agencies with respect to each listed insurance policy,
performance bond and letter of credit. The Company's current insurance policies,
performance bonds and letters of credits are in force and effect and the
premiums thereon are not delinquent. The Company has not received any
notification from any insurance carrier denying or disputing any claim made by
the Company or denying or disputing any coverage for any such claim or denying
or disputing the amount of any claim. Except as set forth on Schedule 2.11, the
Company has no claims against any of its insurance carriers under any of
policies insuring it pending or anticipated and there has been no occurrence of
any kind which would give rise to any such claim.
Section 2.12. Employees, Pensions and, ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee, except as listed on Schedule 2.12(a).
(b) Except as set forth on Schedule 2.12(b), no employee of the Company is
represented by any union. The name, address and social security number and
current rate of compensation of the Company's employees and capacity to which
each person is employed is listed on Schedule 2.12(b) attached. There is no
pending or, to the knowledge of the Sellers, threatened dispute between the
Company and any of its employees which might materially and adversely affect the
continuance of the Company's business operations. The Company is not deficient
or in arrears in contributing to any trust funds the Company are required to
contribute to in accordance with any contracts with unions, including, without
limitation, scholarship funds, legal aid funds, pension funds and health,
welfare or benefit funds ("Trust Funds"). There is no matter, action, audit,
suit or claim pending or, to the best knowledge of Sellers, threatened relating
to contributions of the Company to any Trust Fund, before any court, tribunal or
government agency.
(c) Attached hereto, made a part hereof and marked Schedule 2.12(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") which are currently maintained
and/or were established or sponsored by the Company (whether or not they are now
terminated) or to which the Company currently contributes, or has an obligation
to contribute in the future, including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions
("Plans"), whether or not the Plans are or are intended to be (i) covered or
qualified under the Code, ERISA or any other applicable law, (ii) written or
oral, (iii) funded or unfunded, or (iv) generally available to all employees of
the Company.
(d) The Company has delivered to the Purchasers (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii) true
and complete copies of the most
15
<PAGE>
recent financial statements with respect to the Plans, (iii) true and complete
copies of all annual reports for any Plan prepared within the past 5 years, and
(iv) all material filings submitted to and any correspondence received from any
government agency relating to any Plan within the past 5 years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency whether or not waived (as defined in
Section 302 of ERISA), or liability to the Pension Benefit Guaranty Corporation
("PBGC") under Section 4062 of ERISA, nor any prohibited transaction (as defined
in Section 406 of ERISA or Section 4975 of the Code), has occurred or exists
with respect to any Plan. All Plans are in substantial compliance with all
material applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other material law applicable to such Plans, and, in all
material respects, have been administered, operated and managed in substantial
accordance with the governing documents of the Plan and the requirements of
ERISA.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, threatened relating to any Plan, fiduciary of any
Plan or assets of any Plan, before any court, tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no adverse change in
the condition of the Plan since the date of the most recent Form 5500, audited
annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
Section 2.13. Legality of Operation.
---------------------
16
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(a) Except as disclosed in Schedule 2.13(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in material
compliance with all Federal, state and local laws, rules and regulations
including, without limitation, the following laws: land use laws; payroll,
employment, labor, or safety laws; or federal, state or local "anti-trust" or
"unfair competition" or "racketeering" laws such as but not limited to the
Sherman Act, Clayton Act, Robinson Patman Act, Federal Trade Commission Act, or
Racketeer Influenced and Corrupt Organization Act ("Law"). Except as disclosed
in Schedule 2.13(a), the Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to the Company's property and operations,
including, without limitation, any order, decree or directive of any court or
federal, state, municipal, or other governmental department, commission, board,
bureau, agency or instrumentality wherever located, federal, state and local
permits, orders, franchises and consents. Except as set forth on Schedule
2.13(a), with respect to any Law there are no claims, actions, suits or
proceedings pending, or, to the knowledge of the Sellers threatened against or
affecting the Company, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, wherever located, which would result in an material change in
the financial condition or business of the Company or which would invalidate
this Agreement or any action taken in connection with this Agreement. Except as
disclosed in Schedule 2.13(a), since January 1, 1990, no Company has received
notification of any past or present failure by the Company to comply with any
Law applicable to it or its assets. As used in this Section 2.13(a), "material"
shall mean any single event or number of events causing a loss to the Company of
$15,000 for an individual event or $50,000 for all events in the aggregate.
(b) Except as disclosed in Schedule 2.13(b) to this Agreement, the Company
is in material compliance with all Federal, state and local laws, rules and
regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.13(b), with
respect to any Environmental Law the Company is in material compliance with all
permits, licenses, and orders related thereto or issued thereunder with respect
to Environmental Laws, as are or may be applicable to the Company' property and
operations, including, without limitation, any order, decree or directive of any
court or federal, state, municipal, or other governmental department,
commission, board, bureau, agency or instrumentality wherever located. Except
as set forth on Schedule 2.13(b) there are no Environmental Law related claims,
actions, suits or proceedings pending, or, to the knowledge of the Sellers,
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, wherever located, which would result
in an adverse change in the financial condition or business of the Company of
$15,000 or more or which would invalidate this Agreement or any action taken in
connection with this Agreement. To the knowledge of the Sellers, except as set
forth on Schedule 2.13(b), since January 1, 1986 the Company has not
transported, stored, treated or disposed, nor has the Company allowed any third
persons, on its behalf, to transport, store, treat or dispose waste to or at
(i) any location other than a site lawfully
17
<PAGE>
permitted to receive such waste for such purpose or, (ii) any location currently
designated for remedial action pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar federal or
state statute; nor has the Company performed, arranged for or allowed by any
method or procedure such transportation or disposal in contravention of state or
federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and the Company has not
disposed, nor has the Company knowingly allowed third parties to dispose of
waste upon property owned or leased by the Company other than as permitted by,
and in conformity with, applicable Environmental Law. Except as disclosed in
Schedule 2.13(b), since January 1, 1986, the Company has not received
notification of any past or present failure by the Company to comply with any
Environmental Law applicable to it or its operations or its assets. Without
limiting the generality of the foregoing since January 1, 1986, the Company has
not received any notification (including requests for information directed to
the Company or, to the knowledge of the Sellers, an owner thereof) from any
governmental agency asserting that the business is or may be a "potentially
responsible person" for a remedial action at a waste storage, treatment or
disposal facility, pursuant to the provisions of CERCLA, or any similar federal
or state statute assigning responsibility for the costs of investigating or
remediating releases of contaminants into the environment. Since January 1,
1986, the Company has not received hazardous waste as defined in the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et seq., or in any
-- ---
similar federal or state statute. As used in this Section 2.13(b), "material"
shall mean any single event or number of events causing a loss to the Company
of $15,000.
(c) Except as set forth on Schedule 2.13 (c), since January 1, 1986 the
Company has never owned, operated, had an interest in, engaged in and/or leased
a waste transfer, recycling, treatment, storage, landfill or other disposal
facility. To the knowledge of Sellers, the Company has obtained and maintained,
when required to do so under applicable Environmental Laws, trip tickets,
signed by the applicable waste generators demonstrating the nature of all waste
deposited and or transported by the Company. To the Sellers' knowledge, no
employee, contractor or agent of the Company has, in the course and scope of
employment with the Company, been harmed by exposure to hazardous materials, as
defined under the Laws. No liens with respect to environmental liability have
been imposed against the Company under CERCLA, any comparable New York State
statute or other applicable Environmental Law, and to Sellers' knowledge no
facts or circumstances exist which would give rise to the same.
(d) Schedules 2.13(a) and 2.13(b) list all remedied violations of Laws and
Environmental Laws which existed within the past three years and all outstanding
unremedied notice of violations issued to the Company by any federal, state or
local regulatory agency.
(e) To the knowledge of Sellers, none of the Sellers are under
investigation by the District Attorney of any of the boroughs of New York City,
New York, for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, or unfair competition Laws.
18
<PAGE>
(f) All pending or, to Sellers' knowledge, threatened litigation and
administrative or judicial proceedings involving the Company, or its assets or
liabilities, and a description of all such proceedings is set forth on Schedule
2.13(f) attached.
Section 2.14. Corrupt Practices. The Company has not made, offered or
-----------------
agreed to offer anything of value to any employees of any customers of the
Company for the purpose of attracting business to the Company or any foreign or
domestic governmental official, political party or candidate for government
office or any of their respective employees or representatives in any manner
which would result in the Company being in material violation of any Law, nor
has the Company otherwise taken any action which would cause it to be in
material violation of the Foreign Corrupt Practices Act of 1977, as amended. As
used in this Section 2.14, "material" shall mean any single event or number of
events causing a loss to the Company of $15,000 individually or in the
aggregate.
Section 2.15. Legal Compliance. The Sellers have the right, power, legal
----------------
capacity and authority to enter into, and perform their respective obligations
under this Agreement, and, except as set forth in Schedule 2.15, no approvals or
consents of any other persons or entities are necessary in connection with the
transactions contemplated by this Agreement. Except as disclosed in Schedule
2.15 to this Agreement, the execution and performance of this Agreement will not
result in a material breach of or constitute a material default or result in the
loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which the Company
or any Seller is a party or by which such Company, Seller or any of their
property is bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on the Company or on any property of the Company.
Section 2.16. Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the express authority of any Seller is entitled to any
commission or finder's fee in connection with the transactions contemplated by
this Agreement.
Section 2.17. Intellectual Property. To the knowledge of the Sellers, the
---------------------
Company has not infringed and is not now infringing, on any trade name,
trademark, service mark or copyright belonging to any person, firm or
corporation ("Intellectual Property") and to the knowledge of the Sellers no one
has or is infringing any Intellectual Property right of the Company.
Section 2.18. Competition. Except as set forth on Schedule 2.18, no
-----------
salaried officer, nor any spouse or child of any of them, has any direct or
indirect interest in any competitor of the Company within the geographical area
in which the Company currently conducts business, or an interest in any supplier
or customer of the Company or in any person from whom or to whom the Company
leases any real or personal property, or in any other person with whom the
Company is doing business which interest adversely or materially affects the
business of the Company.
19
<PAGE>
Section 2.19. Disclosure. The representations and warranties of the
----------
Sellers contained in this Article II or in any Exhibit or Schedule or other
document delivered by the Sellers or the Company pursuant hereto, do not contain
any untrue statement of a material fact, or omit any statement of a material
fact necessary to make the statements contained not misleading. If prior to
Closing the Sellers become aware of any inaccuracy, or misrepresentation or
omission in any of the Schedules, they shall immediately advise Purchasers in
writing of the inaccuracy, misrepresentation or omission.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
--------------------------------------------
The Purchasers each, jointly and severally, represent and warrant to the
Sellers that:
Section 3.1. Structure. The Purchasers are corporations duly organized
---------
and legally existing in good standing under the laws of Delaware and EESI NY is
qualified to do business in New Jersey and the Purchasers are qualified in all
other jurisdiction in which they are required to be qualified.
Section 3.2. Authorization to Proceed with this Agreement. Purchasers
--------------------------------------------
have by proper corporate proceedings duly authorized the execution, delivery and
performance of this Agreement and each other agreement contemplated to be
entered into and no other corporate action is required by law or the Certificate
of Incorporation or by-laws of Purchasers.
Section 3.3. Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchasers' authority will be entitled to make any claim
against the Sellers for any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
Section 3.4. Public Reports. EESI has made all filings with Securities
--------------
and Exchange Commission that it is required to make under the Securities Act of
1933 (the "Act") and the Securities Exchange Act of 1934 (the "Exchange Act"),
as amended (collectively, the "Public Reports"). EESI has delivered to Sellers
all such Public Reports filed by EESI through March 31, 1997. The Public Reports
accurately and completely describe, in all material respects, EESI's financial
status, business operations and prospects as of the date of such filings, and do
not contain any untrue statement of a material fact or omit any material fact(s)
necessary to make the information contained in the filings not misleading.
Section 3.5. Authorized Stock. The total authorized capital stock of EESI
----------------
consists of 50,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of Class A Common Stock, par value $.01 per share, none of
which is outstanding. As of February 21, 1997, the outstanding shares of capital
stock of EESI consisted solely of 13,244,807 shares of Common Stock, par value
$.01. EESI NY has 1,000 shares of no-par-value common stock authorized and 100
shares issued, all of which are owned by EESI. All of such issued and
20
<PAGE>
outstanding shares of Purchasers have been duly authorized and validly issued,
are fully-paid and non-assessable and were issued in compliance with all federal
and state securities laws. Until Closing, EESI agrees it shall not redeem in
excess of five hundred thousand (500,000) of its shares of common stock.
Section 3.6. EESI Stock. All of the shares of EESI stock to be issued to
----------
the Company as contemplated by this Agreement and the Collateral Documents will,
upon delivery, be duly authorized and validly issued, fully paid and non-
assessable and issued in compliance with federal and state securities laws, free
and clear of all liens, charges, restrictions, mortgages, security interests or
claims of any kind.
Section 3.7. Authorization. The Purchasers have the power and authority
-------------
to enter into this Agreement and each of the Collateral Documents and to carry
out the transactions contemplated hereby and thereby and this Agreement and each
of the Collateral Documents to which the Purchasers are parties, as applicable,
constitutes the legal, valid and binding obligation of the Purchasers,
enforceable in accordance with its terms. The Purchasers have the power and
authority to own and lease their respective properties and to carry on their
respective businesses as now conducted.
Section 3.8. Contravention; Consents and Approvals. No filing, action,
-------------------------------------
consent or approval of any person, entity or governmental body is required by
the Purchasers for the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for the New York
Trade Waste Commission. The execution and delivery of this Agreement by the
Purchasers and the consummation of the transactions contemplated hereby by the
Purchasers will not result in a breach of the terms or conditions of, or
constitute a default under, or violate, (a) any provision of any law, regulation
or ordinance, (b) any agreement, lease, mortgage or other instrument or
undertaking, oral or written, to which any of the Purchasers are a party or by
which any of their properties or assets is or may be bound or affected, or (c)
any judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body.
Section 3.9. Accuracy of Representations. The representations and
---------------------------
warranties made by the Purchasers in this Agreement do not contain any untrue
statement of a material fact, or omit any statement of a material fact necessary
to make the statements contained therein not misleading.
Section 3.10. Hart-Scott-Rodino Filing. Purchasers, jointly and severally,
------------------------
represent and warrant that they shall make a Hart-Scott-Rodino anti-trust
notification filing, if such a filing is required by applicable law, at
Purchasers' expense.
ARTICLE IV.
ADDITIONAL AGREEMENTS OF SELLERS
--------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
21
<PAGE>
Section 4.1. Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------
Stock delivered to Company at Closing is not registered under the Securities Act
of 1933 ("Act"), the Company understands and agrees that the following
restrictions and limitations are applicable to the Company's purchase and resale
or other transfer of the EESI Stock, pursuant to the Act.
(a) Company agrees that the EESI Stock shall not be sold or otherwise
transferred, unless the EESI Stock is registered under the Act and state
securities laws or is exempt therefrom.
(b) Until the EESI Stock is registered under the Act, a legend in
substantially the following form will be placed on the certificates evidencing
the EESI Stock to be issued to the Company:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These shares
have been acquired for investment and may not be sold, transferred, pledged
or hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Eastern Environmental Services, Inc. shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Eastern
Environmental Services, Inc. that registration is not required under any
such acts."
(c) Stop transfer instructions will be imposed with respect to the EESI
Stock issued to Company pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
Section 4.2. Plan of Reorganization. This Agreement contemplates the
----------------------
exchange of substantially all of the assets of the Company solely in exchange
for the voting stock of EESI in a transaction intended to qualify as a
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall constitute a "plan of
reorganization" within the meaning of the Code. The parties hereto agree to take
no action inconsistent with the treatment of such exchange as a reorganization
under Code (S)368(a)(1)(C) and to comply with all IRS filing and other
requirements for such exchange.
Section 4.3. Access to Records. The Shareholder will cause the Company to
-----------------
give and the Company shall give Purchasers and their representatives, from the
date hereof until six years after the Closing Date, full access during normal
business hours upon reasonable notice to all of the properties, books,
contracts, documents and records of the Company pertaining to the Business, and
to make available to Purchasers and their representatives all additional
financial statements of and all information with respect to the business and
affairs of the Company that Purchasers may reasonably request.
Section 4.4. Continuation of Business. The Company will operate until the
------------------------
time of Closing, in the ordinary course of business, consistent with past
practice, so as to preserve its business organization intact, to assure, to the
extent possible, the availability to Purchasers of the
22
<PAGE>
present key employees of the Company, and to preserve for Purchasers the
relationships of the Company with suppliers, customers, and others, except if it
is determined in the judgment of the Company to be in the best interest of the
Company.
(a) Purchasers acknowledge that increases in Company Debt due to the
financing of single assets having a purchase price of no more than $150,000 are
in the ordinary course of Company's business. Prior to Closing, the Company may
decrease the Company Debt due to pre-payments outside of regularly scheduled
payments in an amount not exceeding $200,000 in the aggregate. Any reduction of
the Company Debt in excess of $200,000 shall not occur without the written
approval of EESI. EESI will not withhold its consent to a reduction of Company
Debt in excess of $200,000, if such reduction will not reduce the net income of
the Company.
(b) Purchasers acknowledge that management bonuses may be paid or accrued
prior to Closing; provided that any accrued and not paid management bonuses
shall be treated as an accounts payable for purposes of determining whether the
warranty and representation set forth in the last sentence of Section 2.8(b) was
true.
Section 4.5. Continuation of Insurances. The Shareholder will cause the
--------------------------
Company to and the Company shall keep in existence all policies of insurance
insuring the Company against liability and property damage, fire and other
casualty through the time of Closing, consistent with the policies currently in
effect.
Section 4.6. Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, the
Shareholder and the Company will not directly or indirectly solicit offers for
the Company or the Assets or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company's assets; nor
will the Shareholder permit the Company to do any of the foregoing.
Section 4.7 Audited Financial Statements.
----------------------------
(a) Sellers agree to cause the Company to prepare and the
Company shall prepare an audited balance sheet for the Company as of December
31, 1996 and a statement of income, cash flow and retained earnings for the
Company for the twelve month period ended December 31, 1996 ("Historical
Financial Statements") as rapidly as possible, but no later than 30 days after
the Closing Date (the "Post Closing Date"). Sellers shall also cause the
Company to prepare an unaudited balance sheet of the Company as of the end of
the calendar quarter completed immediately prior to the Closing Date and an
unaudited statement of income, cash flow and retained earnings for the period
ending with the completion of the calendar quarter ended prior to the
Closing Date ("Interim Financial Statements"). The Interim Financial Statements
are to be delivered by the Company on or before the Post Closing Date. Company
may select the
23
<PAGE>
accounting firm used to prepare such statements as required above, but said firm
must be reasonably acceptable to EESI. Purchasers shall pay the fee of the
accounting firm hired to prepare the statements required by this Section 4.7,
whether or not Closing occurs. If the Purchasers fail to pay the invoice of the
accounting firm hired to prepare the statements referred to in this Section 4.7,
then the Sellers may, on behalf of the Purchasers, pay such fees in which case
the Purchasers shall, promptly upon receiving from Sellers evidence of such
payment by Sellers to the accounting firm, reimburse the Sellers for such amount
together with interest computed at an annual interest rate equal to the higher
of 25% per annum or the maximum rate permitted by applicable law on any amounts
so advanced by Sellers from the date of such advancement to the date of
reimbursement by Purchasers.
(b) The Sellers acknowledge that the delivery of the Historical
Financial Statements to EESI on or prior to the Post Closing Date is of
paramount importance to EESI and its shareholders and that time is of the
essence because EESI will need the Historical Financial Statements in order to
file a Form 8-K as required by the Securities and Exchange Commission in a
timely manner. If the Sellers fail to deliver the Historical Financial
Statements to EESI on or prior to the Post Closing Date then EESI is hereby
irrevocably instructed to cancel all the outstanding shares of EESI Stock which
the Sellers received at Closing or any other shares of EESI Stock issued or to
be issued after the Closing in connection therewith, without any liability to
the Sellers, provided, however, that EESI or the Purchasers and the Sellers
-------- -------
promptly execute an Assignment and Assumption Agreement whereby the Purchasers
shall reassign all of the assets to be assigned to the Purchasers hereunder to
the Sellers and the Sellers shall reassume the liabilities to be assumed by the
Purchasers hereunder. After such cancellation by EESI and the execution of the
Assignment and Assumption Agreement referred to in the preceding sentence, this
Agreement shall be deemed terminated and neither party hereto shall have any
obligation to any other party.
ARTICLE V.
ADDITIONAL AGREEMENTS OF PURCHASERS
-----------------------------------
Section 5.1. Payment of Expenses. EESI will pay all expenses incurred by
-------------------
Purchasers in connection with the negotiation, execution and performance of this
Agreement. EESI will also pay the accounting fees for the audits to be
delivered by the Company as set forth in Section 4.7 and any accounting fees
incurred in connection with the preparation of audited financial statements for
the twelve month period ended December 31, 1994 and 1995, respectively. The
Company, before the Closing Date, will pay all reasonable legal and accounting
expenses incurred by the Shareholder and the Company (except for the accounting
fees set forth in Section 4.7 and the accounting fees EESI has agreed to pay in
the prior sentence) in connection with the negotiation, execution and
performance of this Agreement and the Collateral Documents.
Section 5.2. Registration Rights.
-------------------
24
<PAGE>
(a) This Section 5.2 shall apply to the EESI Stock, delivered under this
Agreement, as follows: (i) the Restricted Stock, as defined in Section 1.4,
shall be entitled to the registration rights set forth in this Section 5.2 on
the earlier of eighteen (18) months after the Closing Date or July 12, 1998; and
(ii) the Unrestricted Stock, as defined in Section 1.4, shall be entitled to the
registration rights set forth in this Section 5.2 commencing on the Closing
Date. For purposes of this Agreement the term "Unregistered Stock" shall mean
the EESI common stock consisting of the Restricted Stock and the Unrestricted
Stock as of the time that such stock is entitled to the registration rights set
forth in this Section 5.2. As soon as practical following the date that any
Unregistered Stock first becomes Unregistered Stock, as defined in this Section
5.2, but in any event within one hundred twenty (120) days after the date that
the Unregistered Stock first became Unregistered Stock, EESI shall file a
registration statement to register the Unregistered Stock under the Act for sale
to the public pursuant to a "shelf registration" on Form S-3 or other
appropriate form, if Form S-3 is not available under Rule 415 of the Act to
qualify such securities under the Act or if required any state "blue sky" laws.
Purchasers agree to include the Unregistered Stock in any registration statement
on Form S-3 that registers the 2,500,000 shares of common stock issued by EESI
in a private placement on July 12, 1996. EESI will give written notice to the
Sellers of the "shelf registration" at least 15 days before the registration
statement is filed. After receiving the notice of the "shelf" registration,
each Seller will advise EESI in writing of the intended method of disposition of
the Unregistered Stock to be registered, as required for EESI to prepare the
registration statement. Sellers recognize that the occurrence of certain
corporate developments, including significant acquisitions, may result in the
failure of the registration statement in which the Unregistered Stock is
registered to contain all information required in accordance with applicable law
until an amendment or supplement is filed and made available to the holders of
all such Unregistered Stock. Sellers recognize that in such event, sales under
the registration statement will be suspended until EESI files the amendments or
supplements required by the next sentence. EESI agrees, as promptly as
reasonably practicable, to prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period required pursuant to the terms of this Agreement and comply with the
provisions of the Act with respect to the disposition of all Unregistered Stock
covered by such registration statement during such period in accordance with the
intended methods of disposition by the holders thereof set forth in such
registration statement. EESI shall keep such registration statement current and
effective, until such time as all of the Unregistered Stock may be sold by the
Sellers at any time without restriction or pursuant to the provisions of Rule
144 without volume restrictions or until such earlier date as all of the shares
registered pursuant to such registration statement shall have been sold or
otherwise transferred to a third party.
(b) With respect to the registration of the Unregistered Stock, EESI will,
as expeditiously as possible: (i) furnish to the Sellers such number of
prospectuses, including copies of preliminary prospectuses, prepared in
conformity with the requirements of the Act, and such other documents, as the
Sellers may reasonably request in order to facilitate the public sale or other
disposition of the securities to be sold by the Sellers; and (ii) before filing
the registration
25
<PAGE>
statement, prospectus or amendments or supplements thereto, furnish to counsel
for Sellers copies of all such documents proposed to be filed.
(c) Upon any registration under the Act of any of the Unregistered Stock,
EESI shall indemnify Sellers in accordance with the provisions of Article VIII
from and against any and all losses, claims, damages and liabilities
(collectively a "Security Liability") to which Sellers may become subject under
the Act, any state securities or "blue sky" law, any other statute or at common
law, insofar as such Security Liability (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which such
securities were registered, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto or any filing or other
application under the Act or applicable federal or state securities law or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein (i.e., in any registration statement, prospectus, application or
filing) or necessary in order to make the statements therein not misleading or
(iii) any violation or alleged violation by EESI to which such Sellers may
become subject under the Act, or other Federal or state laws or regulations, at
common law or otherwise. Notwithstanding the above, EESI shall not be liable to
Sellers if and to the extent that any Security Liability arises out of or is
based upon any untrue statement or omission made in such registration statement,
preliminary or final prospectus or amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to EESI by Sellers
which is stated in writing to be specifically intended for such use; and
provided further, that EESI shall not be required to indemnify Sellers against
any Security Liability which arises out of the failure of Sellers to deliver a
final prospectus made available to Sellers by EESI.
(d) All expenses incurred in effecting the registrations provided for in
this Section 5.2 shall be paid by EESI, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for EESI, fees and disbursement of counsel for Sellers (up to $2,500 per
year), underwriting expenses (other than commissions or discounts which shall be
shared by the parties registering shares of EESI's common stock in proportion to
the number of shares registered in each particular offering), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or "blue sky" laws of any jurisdictions.
(e) Sellers agree that, with respect to the first underwritten public
offering for the sale of EESI Stock pursuant to an effective registration
statement which occurs after the Closing Date, they will enter into a "lock-up"
agreement which would prohibit them from selling any Restricted Stock or
Unrestricted Stock for a period of 90 days commencing on the date such
registration statement becomes effective, if such a "lock-up" agreement is
requested by the underwriter of such public offering.
Section 5.3. Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchasers shall allow the Sellers and their agents access
to all business records and files of the Company pertaining to the operation of
the Company prior to the Closing Date which were
26
<PAGE>
delivered to the Purchasers in accordance with Section 1.5(q) of this Agreement
("Records") where the Shareholder or Company require access to the Records for
the purpose of preparing their tax returns, responding to any audit or
informational request regarding their tax returns or if required by them for use
in a judicial proceeding in which they are a party. Access to the records shall
be during normal working hours at the location where such Records are stored.
The Sellers shall have the right, at their own expense, to make copies of any
Records provided, however, that any such access or copying shall be had or done
in such a manner so as not to interfere unreasonably with the normal conduct of
the Purchasers' business. For a period of six years after the Closing Date, the
Purchasers shall not dispose of or destroy any material Records without first
providing written notice to the Shareholder at least 30 days prior to the
proposed date of such disposition or destruction.
ARTICLE VI.
CONDITIONS OF PURCHASERS
------------------------
The obligations of Purchasers to effect the transaction contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing.
Section 6.1. Compliance by Sellers. The Sellers shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by Sellers prior to or at the Closing Date.
All representations and warranties of Sellers contained in this Agreement shall
be true and correct at and as of the Closing Date, with the same force and
effect as though made at and as of the Closing Date, except for changes
expressly permitted by this Agreement and the Purchasers shall have received a
Certificate duly executed by each of the Sellers as to the foregoing.
Section 6.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control the Assets
which, in the judgment of the Boards of Directors of Purchasers, made in good
faith and based upon advice of their counsel, makes it inadvisable to proceed
with the transaction contemplated by this Agreement.
Section 6.3. Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Company and the Company shall have not suffered any material
loss or damage to any of the Assets, whether or not covered by insurance, since
the date of the Financial Statements; there shall not have been any cancellation
or modification of any Material Documents except for such cancellation or
modification set forth in Schedule 6.3 to this Agreement or for such
cancellation or modification of any Material Documents which, singly or in the
aggregate, is not reasonably likely to have a material adverse effect on the
operations, financial condition or business of the Company its Business or
Assets (it being understood that all cancellations and modifications of Material
27
<PAGE>
Documents which affect revenue shall be computed in the purchase price
adjustment provided for in Section 1.4(a)(iv)); there shall be a sufficient
number of rolling stock, vehicles and other equipment in good working condition
to provide service to the customers of the Company on the Closing Date and to
otherwise conduct the business of the Company in its customary and usual manner.
Section 6.4. Opinion of Counsel. The Sellers shall have delivered to
------------------
the Purchasers the opinion of counsel, dated the Closing Date, in the form
annexed hereto as Schedule 1.11(d).
Section 6.5. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Purchasers shall have
been furnished with appropriate evidence, reasonably satisfactory to Purchasers
and their counsel, of the granting of such approvals, authorizations and
consents, including, without limitation, EESI NY being granted a trade waste
license by the New York City Trade Waste Commission.
ARTICLE
CONDITIONS OF SELLERS
---------------------
The obligations of the Sellers to transfer the Assets in accordance with
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 7.1. Compliance by Purchasers. The Purchasers shall have
------------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by them at or prior to or at the
Closing Date. All representations and warranties of Purchasers contained in this
Agreement shall be true and correct at and as of the Closing Date, with the same
force and effect as though made at and as of the Closing Date, except for
changes expressly permitted by this Agreement and the Sellers shall have
received a Certificate duly executed by an officer of the Purchasers as to the
foregoing.
Section 7.2. Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of Purchasers to own, operate or control any of the
Assets and which, in the judgment of the Sellers, made in good faith and based
upon advice of their counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.3. Guarantees. The Sellers shall be released from any
----------
liability they have under guarantees they have made with respect to the
Company's debts or obligations, as set forth on Schedule 7.3 ("Guarantees"). If,
after a good faith attempt, Purchasers cannot obtain the release of the
Shareholder from the Guarantees, this condition shall be waived and Purchasers
will
28
<PAGE>
indemnify Sellers under the provisions of Section 8.2 from any and all
liability, expense and claims made against Sellers with respect to the
Guarantees.
Section 7.4. Payment. The Purchasers shall have delivered to the
-------
Company, as applicable, the EESI Stock in accordance with Sections 1.3 and 1.4.
Section 7.5. Consents. All approvals, authorizations and consents
--------
required to be obtained shall have been obtained, and the Sellers shall have
been furnished with appropriate evidence, reasonably satisfactory to them and
their counsel, of the granting of such approvals, authorizations and consents.
Section 7.6. Opinion of Counsel. The Purchasers shall have delivered
------------------
to the Company the opinion of counsel to the Purchasers, dated the Closing Date,
in the form annexed hereto as Schedule 1.10(c).
Section 7.7. Material Adverse Change. There shall not have been, and
-----------------------
on the Closing Date shall not be in existence, any event, condition or state of
facts which could reasonably be expected to result in, any material adverse
change in the condition (financial or otherwise), assets, real property,
personal property, results of operations, business or prospects of EESI and its
subsidiaries taken as a whole and, in any event, and without limiting the
generality of the foregoing, the closing price of EESI's stock on the Closing
Date shall not be less than $5.00 per share.
ARTICLE
INDEMNIFICATION
---------------
Section 8.1. Indemnification by Sellers. The Sellers each agree that
--------------------------
they will each, jointly and severally, indemnify, defend, protect and hold
harmless the Purchasers and their officers, shareholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parent, agents, employees, successors
and assigns from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, penalties, costs and expenses whatsoever
(including specifically, but without limitation, reasonable attorneys' fees and
expenses of investigation) whether equitable or legal, matured or contingent,
known or unknown to the Sellers, foreseen or unforeseen, ordinary or
extraordinary, patent or latent, whether arising out of occurrences prior to,
at, or after the date of this Agreement, from (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the Sellers, set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Sellers
made in this Agreement or in the Collateral Documents and to be performed by
Sellers before or after the Closing Date; (c) the imposition upon, claim
against, or payment by the Purchasers of any liability or obligation of the
Company other than the Assumed Liabilities (d) any claim by a third party that,
if true, would mean that a condition for indemnification set forth in
29
<PAGE>
subsections (a), (b) or (c) of this Section 8.1 of this Agreement has occurred.
The indemnification in this Section 8.1 is subject to the limitations set forth
in Section 8.5 and 8.6.
Section 8.2. Indemnification by Purchasers. The Purchasers each agree
-----------------------------
that they will each, jointly and severally, indemnify, defend, protect and hold
harmless each Seller, and each of their respective officers, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, heirs, legal
representatives, successors and assigns, as applicable, from and against all
claims, damages, actions, suits, proceedings, demands, assessments, adjustments,
penalties, costs and expenses whatsoever (including specifically, but without
limitation, reasonable attorneys' fees and expenses of investigation) whether
equitable or legal, matured or contingent, known or unknown to the Purchasers,
foreseen or unforeseen, ordinary or extraordinary, patent or latent, whether
arising out of occurrences prior to, at, or after the date of this Agreement,
incurred by them, or either of them, as a result of or incident to: (a) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties of Purchasers set forth in this Agreement or in the Schedules
attached to this Agreement or in the Collateral Documents; (b) nonfulfillment of
any agreement, covenant or condition on the part of Purchasers made in this
Agreement or in the Collateral Documents and to be performed by Purchasers
before or after the Closing Date; (c) any Security Liability; (d) any of the
Guarantees; (e) the imposition upon, claim against, or payment by the Sellers of
any of the Assumed Liabilities; and (f) any claim by a third party that, if
true, would mean that a condition for indemnification set forth in subsections
(a), (b), (c), (d) or (e) of this Section 8.2 has occurred. The indemnification
in this Section 8.2 is subject to the limitations set forth in Sections 8.5 and
8.6.
Section 8.3. Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims
------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article VIII, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party (it being agreed that Rivkin, Radler & Kremer is
satisfactory) so long as (i) the Indemnifying Party notifies the Indemnified
Party in writing within fifteen days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party pursuant to the provisions of Article VIII, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the
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<PAGE>
Indemnified Party with evidence reasonably acceptable to the Indemnified Party
that the Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations hereunder,
(iii) the Third Party Claim involves only monetary damages and does not seek an
injunction or equitable relief, (iv) settlement of, or adverse judgment with
respect to the Third Party Claim is not, in the good faith judgment of the
Indemnified Party, likely to establish a precedential custom or practice adverse
to the continuing business interests of the Indemnified Party, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 8.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If the conditions set forth in Section 8.3(b) above are or become
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses) and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
VIII.
Section 8.4. Procedure for Non-Third Party Claims. If Purchasers or
------------------------------------
Sellers wish to make a claim for indemnity under Section 8.1 or Section 8.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 8.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the parties from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 8.1 or
Section 8.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 8.1 or Section
8.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the
31
<PAGE>
objections ("Indemnification Objection"). If no Indemnification Objection is
sent within forty-five (45) days after the Indemnification Demand is sent, the
Indemnifying Party shall be deemed to have acknowledged the correctness of the
claim or claims specified in the Indemnification Demand and shall pay the full
amount claimed in the Indemnification Demand within sixty (60) days of the day
the Indemnification Demand is dated. If for any reason the Indemnifying Party
does not pay the amounts claimed in the Indemnification Demand, within thirty
days of the Indemnification Demand's date, the Indemnified Party may institute
legal proceedings to enforce payment of the indemnification claim contained in
the Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
Section 8.5. Survival of Claims.
------------------
(a) All of the respective representations and warranties of the Sellers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Sellers pertaining to anti-
trust Laws, unfair competition Laws and racketeering Laws set forth in Section
2.13 shall survive for thirty months after the Closing Date, (ii) the
representations and warranties of Sellers made in the first two sentences of
Section 2.13(b) as to matters of which they had no knowledge shall survive for
eighteen months after the Closing Date, and all other representations and
warranties pertaining to Environmental Laws set forth in Section 2.13,
including, without, limitation the representations and warranties of the Sellers
made in the first two sentences of Section 2.13(b) as to matters of which
Sellers had knowledge shall survive for thirty months after the Closing Date,
(iii) all representations and warranties of Sellers pertaining to federal, state
and local taxes, including, without limitation, the representations and
warranties set forth in Section 2.10 shall survive until the expiration of the
applicable statute of limitations on any claim which can be brought against the
Sellers by tax authorities or governmental agencies or governmental units and
(iv) all representations and warranties other than set forth in (i), (ii) and
(iii) above shall survive until eighteen months from the Closing Date.
(b) All of the respective representations and warranties of Purchasers
shall survive consummation of the transactions contemplated by this Agreement as
follows: (i) all representations and warranties of Purchasers set forth in
Section 3.4 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought with respect to the sale of a
security and (ii) all representations and warranties other than set forth in (i)
above shall survive until eighteen months from the Closing Date.
(c) Notwithstanding the provisions of Section 8.5(a) and 8.5(b) above,
which provides that representations, warranties and obligations expire after
certain stated periods of time, if within the stated period of time, an
Indemnification Demand is given, or a suit or action based upon representation
or warranty is commenced, the Indemnified Party shall not be precluded from
pursuing such claim or action, or from recovering from the Indemnifying Party
(whether through the courts or otherwise) on the claim or action, by reason of
the expiration of the representation or warranty.
32
<PAGE>
Section 8.6. Limitation of Liability. Notwithstanding anything else to
-----------------------
the contrary contained herein, neither the Purchasers nor any other party
entitled to indemnification pursuant to Section 8.1 hereof, shall be entitled to
assert any claim for indemnification contained in Section 8.1 unless and until
such time as claims of indemnification thereunder, exceed ("Basket") (i) Fifteen
Thousand Dollars ($15,000), in the aggregate, for claims made regarding the
falsity of the representations and warranties of Sellers made in the first two
sentences of Section 2.13(b), where Sellers had no knowledge of the falsity of
the representation or warranty, (ii) Fifteen Thousand Dollars ($15,000) in the
aggregate for claims made regarding the falsity of the representations and
warranties of Sellers made in Section 2.14, where Sellers had no knowledge of
the falsity of the representation or warranty, (iii) Fifteen Thousand Dollars
($15,000), in the aggregate, for claims made against Purchasers due to
Environmental Law violations of the Company asserted against Purchasers where
Sellers had no knowledge of the Environmental Law violation and where the
violation occurred prior to the Closing Date, (iv) One Hundred Dollars ($100.00)
in the aggregate, for claims made regarding the falsity of any representation or
warranty of Sellers made under Section 2.8(b), and (v) Ten Thousand Dollars
($10,000) in the aggregate, for all other claims, including, without limitation,
claims made under the first two sentences of Section 2.13(b) and Section 2.14
where Sellers had knowledge of the falsity of the representation or warranty and
for Environmental Law violations of the Company asserted against Purchasers
where Sellers had knowledge of the violation. Purchasers shall only be entitled
to assert claims for indemnification that exceed the applicable Basket; it being
understood and agreed that the applicable Basket amount shall be excluded from
the indemnification contained in Section 8.1 and shall be borne 100% by the
Purchasers and the parties entitled to be indemnified thereunder so that the
Sellers, as applicable, shall have no liability with respect thereto. In
addition, notwithstanding anything else contained herein to the contrary, the
obligations of the Sellers pursuant to the indemnification contained in Section
8.1 shall be limited to an aggregate of seventy-five (75%) percent of the value
of the EESI Stock delivered to Company, as valued under Section 1.3 at closing,
as adjusted under Section 1.4.
Section 8.7. Insurance Proceeds. In determining the amount of loss for
------------------
which Purchasers, or any party entitled to be indemnified pursuant to Section
8.1 of this Agreement is entitled, the loss shall be reduced by any proceeds
(under insurance policies maintained by Purchasers ) which are paid to any of
the Purchasers with respect to the loss for which indemnification is sought. If
Sellers pay Purchasers a payment which satisfies Sellers obligations under this
Article VIII, in full, with regard to a loss for which Purchasers were entitled
to indemnification in accordance with Section 8.1 and after such payment by
Sellers, any of the Purchasers receives insurance proceeds (under insurance
policies maintained by any of the Purchasers) in payment of the same loss,
Purchasers will reimburse the Sellers for the amount the Sellers have paid up
to, but not exceeding, the insurance proceeds received. Notwithstanding the
prior two sentences, a loss or losses incurred by Purchasers shall not be
reduced and Sellers shall not be reimbursed by or with the amount of insurance
proceeds paid to Purchasers equaling, in the aggregate, the applicable Basket
for which Purchasers were not indemnified. The initial amounts of insurance
proceeds received by Purchasers up to the amount of the applicable Basket with
respect to any loss or losses for which indemnification under Section 8.1
applies, shall
33
<PAGE>
compensate Purchasers for not being able to initiate an indemnification claim
until an aggregate loss equal to the applicable Basket is suffered by the
Purchasers as set forth in Section 8.6. Purchasers shall use their reasonable
efforts to assert the claim giving rise to any loss for which they are entitled
to be indemnified under Section 8.1, with the issuer of the applicable insurance
policy.
ARTICLE IX.
OTHER PROVISIONS
----------------
Section 9.1. Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of the Company such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company. Sellers agree that for a period of five (5) years from
the Closing Date and as to any Records received by them under Section 5.3 of
this Agreement, five (5) years from their receipt of the Records, they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of the Sellers, unless (i) such information becomes
known to the public generally through no fault of Sellers, (ii) the Sellers are
compelled to disclose such information by a governmental entity or pursuant to a
court proceeding, or (iii) the Closing does not take place. In the event of a
breach or threatened breach by Sellers of the provisions of this Section,
Purchasers shall be entitled to an injunction restraining Sellers from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchasers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2. Nondisclosure by Purchasers. Purchasers recognize and
---------------------------
acknowledge that they have in the past, currently have, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchasers, jointly and
severally, agree that none of them will utilize such information in the business
or operation of Purchasers, or any of their affiliates or disclose such
confidential information to any person, firm, corporation, association, or other
entity for any purpose or reason whatsoever, unless (i) such information becomes
known to the public generally through no fault of Purchasers or any of their
affiliates (ii) Purchasers are compelled to disclose such information by a
governmental entity or pursuant to a court proceeding or (iii) Closing takes
place. In the event of a breach or threatened breach by Purchasers of the
provisions of this Section, the Sellers shall be entitled to an injunction
restraining Purchasers from utilizing or disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting Sellers from pursuing any other available remedy for such breach or
threatened breach, including, without limitation, the recovery of damages.
Section 9.3. Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the
34
<PAGE>
merger of Purchasers) and shall be binding upon and shall inure to the benefit
of the parties hereto, the successors of Purchasers, and the Sellers. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
Section 9.4. Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 9.5. Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 9.6. Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchasers, addressed to them at:
President
1000 Crawford Place
Mt. Laurel, NJ 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
Vincent Morea
One Laredo Drive
Colts Neck, NJ 07722
with a copy to:
35
<PAGE>
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, NY 11556-0111
Attn: Barry R. Shapiro, Esq.
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 9.6.
Section 9.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
Section 9.8. No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 9.9. Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 9.10. Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 9.11. Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
36
<PAGE>
Section 9.12. Extension or Waiver of Performance. Either Vincent Morea on
-----------------------------------
behalf of the Sellers, or Purchasers may extend the time for or waive the
performance of any of the obligations of the other, waive any inaccuracies in
the representations or warranties by the other, or waive compliance by the other
with any of the covenants or conditions contained in this Agreement, provided
that any such extension or waiver shall be in writing and signed by Vincent
Morea on behalf of the Sellers and the Purchasers.
Section 9.13. Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, heirs, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 9.14. Disclosure on Schedules. The parties acknowledge that
-----------------------
notwithstanding the provisions of the Agreement stating all Schedules and
Exhibits to this Agreement are attached to the Agreement, none of the Schedules
have been attached and certain of the Exhibits have not been attached. Sellers
will deliver to Purchasers all Schedules to be attached to this Agreement as
soon as reasonably possible but no later than seven (7) days from the date of
this Agreement. Purchasers will have fourteen (14) days from the Approval Date
(as defined in Section 1.9(b)), to review the Schedules and terminate the
Agreement by sending written notice to Company, if Purchasers are not satisfied
with any material matter revealed by any Schedule. The parties hereto shall use
their best efforts to agree upon and attach to this Agreement all Exhibits not
attached to this Agreement on the date of this Agreement's execution. If the
parties can not agree upon any Exhibits not attached to this Agreement, within
seven (7) days after the date of this Agreement, any of the parties may
terminate this Agreement by sending written notice of termination to the other
parties. Once the Schedules are produced and the Exhibits agreed upon the
parties hereto shall execute a signature page which states that attached to the
signature page are the Schedules and Exhibits to this Agreement. For purposes of
this Agreement, a disclosure by any party hereto of any fact on any Schedule
shall be deemed a disclosure on every Schedule of any party hereto to the extent
such disclosure properly could have been made thereon but was not made. The
parties to this Agreement shall have the obligation to supplement or amend the
Schedules being delivered concurrently with the execution of this Agreement and
annexed hereto with respect to any matter hereafter arising or discovered which,
if existing or known at the date of this Agreement, would have been required to
be set forth or described in the Schedules. The obligations of the parties to
amend or supplement the Schedules shall terminate on the Closing Date.
Notwithstanding any such amendment or supplementation, the condition to Closing
set forth in Section 6.1 shall not be satisfied, if the amendment or
supplementation of any Schedule by Sellers results in any of Sellers'
representations and warranties changing in a manner which the Purchaser in good
faith believes is materially adverse to the Purchasers, the Assets or the
Business.
Section 9.15. Arbitration.
-----------
37
<PAGE>
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall be settled by arbitration in accordance with the commercial
rules (the "Rules") of the American Arbitration Association then obtaining, in
New York, New York and judgment upon the award rendered in such arbitration
shall be final and binding upon the parties and may be confirmed in any court
having jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
arbitrate shall not bar any party from seeking temporary or provisional remedies
in any Court having jurisdiction if such party can establish irreparable harm.
Notice of the demand for arbitration shall be filed in writing with the other
party to this Agreement, which such demand shall set forth in the same degree of
particularity as required for complaints under the Federal Rules of Civil
Procedure the claims to be submitted to arbitration. Additionally, the demand
for arbitration shall be stated with reasonable particularity with respect to
such demand with documents attached as appropriate. In no event shall the demand
for arbitration be made after the date when institution of legal or equitable
proceedings based on such claim, dispute or other matter in question would be
barred by the applicable statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be taken, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
(e) Counsel to the Purchasers and the Sellers in connection with the
negotiation of and consummation of the transactions under this Agreement shall
be entitled to represent their respective party in any and all proceedings under
this Section or in any other proceeding (collectively, "Proceedings"). The
Purchasers and the Sellers, respectively, waive the right and agree they shall
not seek to disqualify any such counsel in any such Proceedings for any reason,
including but not limited to the fact that such counsel or any member thereof
may be a witness in any such Proceedings or possess or have learned of
information of a confidential or financial nature of the party whose interests
are adverse to the party represented by such counsel in any such Proceedings.
38
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Robert Kramer
---------------------------------
Name: Robert Kramer
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
---------------------------------
Name: Robert Kramer
Title: Vice President
COMPANY
CONEY ISLAND RUBBISH REMOVAL, INC.
By: /s/ Vincent Morea
---------------------------------
Name: Vincent Morea
Title: President
SHAREHOLDER
/s/ Vincent Morea
-------------------------------------
Vincent Morea
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert M. Kramer
---------------------------------
Robert M. Kramer
39
<PAGE>
EXHIBIT 10.3
------------
Amendment No. 1 dated as of May 12, 1997, to Agreement and Plan of
Reorganization made as of April 7, 1997 by and among Coney Island Rubbish
Removal Inc., Vincent Morea, Eastern Environmental Services, Inc., and Eastern
Waste of New York Inc. (the "Agreement"). All capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Agreement.
RECITALS
--------
The parties have entered into the Agreement which provides that the Closing
thereunder shall occur on or prior to April 30, 1997. The parties hereto wish
to extend the termination date and to make certain other modifications to the
Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, received to the
full satisfaction of each of them, the parties hereto agree to amend the
Agreement as follows:
ARTICLE I. AMENDMENTS.
1.1 Section 1.3(b) of the Agreement is hereby deleted in its entirety.
1.2 Section 1.4 of the Agreement is hereby amended as follows:
(a) Section 1.4(a) of the Agreement is hereby amended by deleting the
phrase "One Million Seven Hundred and Ten Thousand Dollars ($1,710,000)
therefrom and substituting the phrase One Million Two Hundred Thirty-Two
Thousand Five Hundred Dollars ($1,232,500)" therefor.
(b) Section 1.4(a)(iii) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted thereof.
(c) Section 1.4(a)(iv) is hereby deleted from the Agreement in its
entirety and the phrase "Intentionally Omitted" is substituted therefor.
(d) Section 1.4(b)(i) is hereby amended by deleting the phrase "One
Million Six Hundred Seventy Thousand ($1,670,000) Dollars" therefrom and
substituting the new phrase "One Million One Hundred Eighty-Two Thousand Two
Hundred Thirty-Six 83/100 ($1,182,236.83) Dollars" therefor.
1.3 Section 1.5 of the Agreement is hereby amended as follows:
<PAGE>
(a) Section 1.5(h) of the Agreement is hereby amended and
restated in its entirety to read as follows: "all accounts receivable
(including, without limitation, all receivables billed for which
services were not rendered as of May 1, 1997) of Coney Island arising
out of the Business on and after May 1, 1997".
(b) Section 1.5(o) of the Agreement is hereby amended and
restated in its entirety to read as follows: "(o) All of the interest
of Coney Island in all tangible and intangible property, including
without limitation, prepaid expenses and all cash generated by the
Company on or after May 1, 1997;".
1.4 Section 1.6 is hereby amended and restated in its entirety to
read as follows:
Section 1.6 Excluded Assets. "The parties agree that the only
---------------
tangible and intangible property owned by the Company and not being
sold to Purchasers are accounts receivable created prior to May 1,
1997, the cash on hand of the Company generated prior to May 1, 1997,
the corporate records of the Company other than the records set forth
in Section 1.5(q) above, and the other assets listed on Schedule 1.6
("Excluded Assets")."
1.5 Section 1.7 of the Agreement is hereby amended as follows:
(a) Clause (iii) of Section 1.7 is hereby amended and restated
in its entirety to read as follows: "the accounts payable of the
Company on and after May 1, 1997 which were incurred in the ordinary
course of business as historically operated;"
(b) The following new clause (vii) is hereby added to Section
1.7: "and (vii) accrued expenses, accrued interest and accrued unpaid
vacation accrued on or after May 1, 1997 which were incurred in the
ordinary course of business as historically operated"
1.6 Section 1.8 of the Agreement is hereby amended by adding the
following new clause (j) thereto: "and (j) expenses, accounts payable, interest
and unpaid salary and/or vacation accrued after May 1, 1997 and before the
effective date of the management agreement to be entered into between the
Company and EESI NY."
1.7 Section 1.9 of the Agreement is hereby amended as follows:
"(a) Subsection 1.9(b) is hereby deleted therefrom
2
<PAGE>
and the phrase "Intentionally Omitted" is substituted therefor.
(b) Subsections 1.9(c), (d) and (e) of the Agreement are hereby
amended by deleting the phrase, "April 30, 1997" therefrom and
substituting the phrase therefor: "July 31, 1997 which date may be
extended indefinitely by the Purchasers, if the Sellers shall be paid
by Purchaser on or before July 31, 1997 the amount of EESI Stock to be
delivered to the Sellers under this Agreement calculated as if the
Closing under this Agreement had occurred (the "Payment"). If the
Payment is made, then on the Closing Date the Sellers shall not
receive any further payment of EESI Stock and the only payment
obligations of Purchasers under this Agreement with respect to the
purchase price shall be to pay the Company Debt on the Closing Date to
the holders of such Company Debt as provided in this Agreement. "
(c) The following new subsection (g) is added thereto: "(g) by
Vincent Morea, on behalf of the Sellers or EESI, if the transactions
contemplated by the Leone Agreement (as defined in Section 6.6) do not
close for any reason whatsoever."
1.8 Section 2.8 is hereby amended by deleting subsections (b) and (c)
therefrom and substituting in each case the phrase "Intentionally Omitted".
1.9 Article II is hereby amended by adding the following new Section
2.20 thereto:
"2.20 Notices and Customer Register. Sellers have sent the
-----------------------------
"Notice of Reduction and Carting Rates" to all its customers as
required by the Trade Waste Commission. Sellers have prepared a
computerized customer register which conforms to the Trade Waste
Commission requirements."
1.10 Article IV is hereby as amended as follows:
(a) Section 4.1 is hereby amended by adding the following new
subsections (d) and (e) thereto:
"(d) Sellers agree that prior to July 12, 1998, they shall not
sell, trade, or otherwise dispose of Restricted Stock in an open
market or brokered sales transaction, whether or not they would
otherwise be able to legally enter into such a transaction, provided
however, that Sellers may enter into a private placement transaction
with respect to the Restricted Stock at any time."
3
<PAGE>
"(e) Sellers agree that, with respect to an underwritten public
offering for the sale of EESI Stock pursuant to an effective
registration statement which occurs after the earlier of the Closing
Date, or delivery of EESI Stock pursuant to Section 1.9(c), (d), or
(e), they will enter into a "lock-up" agreement which would prohibit
them from selling any Restricted Stock for a period of 90 days
commencing on the date such registration statement becomes effective,
if such a "lock-up" agreement is requested by the underwriter of such
public offering."
(b) Article IV is hereby further amended by adding the following
new subsections 4.8 and 4.9 thereto:
"4.8 Trade Waste Regulations. Sellers shall deliver to the
-----------------------
Trade Waste Commission by May 8, 1997, if the Closing has not
occurred prior to such date, a letter certifying that it has sent
to customers the notice referred to in Section 2.20."
"4.9 Cash. Sellers shall not distribute any cash of the
----
Company resulting from receivables generated on or after May 1,
1997 by the Company on or after May 1, 1997 for any purpose
whatsoever without the prior written consent of the Purchaser."
1.11 Article V is hereby as follows:
(a) (i) The following new sentence is hereby added to Section
5.2(a): "Notwithstanding anything in this Agreement to the contrary,
EESI shall not be obligated to file a registration statement with
respect to the Restricted Stock if at such time it would be obligated
to file a registration statement hereunder if the Sellers are able to
sell the Restricted Stock without volume limitations under Rule 144."
(ii) Section 5.2(e) of the Agreement is hereby deleted in
its entirety.
(b) Article V is amended by adding the following new Sections
5.4, 5.5 and 5.6 thereto:
(a) "5.4 Union Contracts. After the Closing Date Purchaser
---------------
shall enter into a union contract which is substantially similar to
the union contracts listed on Schedule 2.3."
(b) "5.5 Accounts Receivable. Purchaser shall for a period of
-------------------
ninety (90) days after the Closing Date (the
4
<PAGE>
"Collection Period") collect on behalf of Sellers any accounts
receivable generated by the Business prior to May 1, 1997, it being
understood that the Purchaser shall have no liability with any such
account receivable which is not collected. Any payments in respect of
such accounts receivables which the Purchaser collects during the
Collection Period and which are not identified or reconciled to a
specific account receivable generated by the Business after May 1,
1997 shall be remitted to William Leone, as agent for the Sellers, on
a weekly basis for the first month and thereafter on a bi-monthly
basis together with a payment application statement generated in the
ordinary course of business. After the expiration of the Collection
Period, Sellers shall collect the accounts receivable generated by the
Business prior to May 1, 1997 and Purchaser shall have no further
obligation to collect such account receivables."
"(c) 5.6 Closing Adjustments.
-------------------
(a) If the management agreement between the Company and EESI NY
(the "Management Agreement") is entered into on or prior to May 15,
1997, the Sellers and Purchasers will account to each other with
respect to the expenses of the Business generated in the ordinary
course on a historical basis which accrued and the revenues of the
Business which were generated on and after May 1, 1997 through the
Closing Date. To the extent Sellers paid any expenses related to the
Business on or after May 1, 1997 from funds which were not generated
by the Business through the rendering of services on or after May 1,
1997 (such expenses being "Sellers' Expense"), Purchasers shall pay in
cash to Sellers at Closing a dollar amount equal to the Sellers'
Expense. If the Closing occurs after May 15, 1997, the accounting
referred to in this Section 5.6(a) shall not be applicable.
(b) If the Management Agreement is executed after May 15,
1997, then all references in this Agreement to the allocation of
accounts receivable, accounts payable, accrued interest, unpaid
vacation and accrued expenses to the Sellers for the period prior to
May 1, 1997 and to the Purchasers from and after May 1, 1997 shall be
deemed to be of no force and effect and the Sellers and Purchasers
hereby agree that the new date for allocating all accounts receivable,
accounts payable accrued interest, unpaid vacation and accrued
expenses to the Sellers and Purchasers shall be the date on which the
Company and EESI NY enter into the management agreement to be dated
the date of the closing under the Leone Agreement (the "Management
Date"), it being understood that if the Closing under the Leone
Agreement occurs
5
<PAGE>
after May 15, 1997, the Sellers shall be responsible for all accounts
payable, accrued interest, accrued unpaid vacation and salary, and
accrued unpaid expenses prior to the Management Date and shall be
entitled to receive collections from all accounts receivable generated
by the Business prior to the Management Date, in addition to all cash
on hand in the Company on the Management Date. If the Closing under
the Leone Agreement occurs after May 15, 1997, the Purchasers and
Sellers shall re-execute the Assignment and Assumption Agreement,
Bills of Sale, and such other documents as are necessary to give
effect to the allocation described in the preceding two sentences."
"(c) If the closing under the Leone Agreement occurs on or prior
to May 15, 1997, then the amount of EESI Stock to be delivered to the
Sellers pursuant to Section 1.4(b)(i) shall be calculated based upon
the Company Debt set forth in Schedule 1.4 as of May 1, 1997 and the
amount of EESI Stock to be delivered to the Sellers pursuant to
Section 1.4(b)(ii) shall be calculated based upon a per share value of
$13.50. If the Management Agreement is executed after May 15, 1997,
then the amount of EESI Stock to be delivered to the Sellers pursuant
to Section 1.4(b)(i) shall be calculated based upon the Company Debt
set forth in Schedule 1.4 as of the Closing Date and the amount of
EESI Stock to be delivered to the Sellers pursuant to Section
1.4(b)(ii) shall be calculated based upon a per share value based upon
the closing price for EESI's Common Stock on the NASDAQ National
Market for the trading day which is five trading days prior to the
Closing Date. If the Purchasers exercise their option to extend this
Agreement indefinitely by delivering EESI Stock to Sellers, then all
references to the "Closing Date" in this subsection (c) and in Section
1.4(b) shall mean the date of the delivery of the EESI stock to the
Sellers by the Purchasers, whether or not a Closing under this
Agreement has occurred."
1.12 Article VI of the Agreement is hereby amended by adding the
following new Section 6.6 thereto:
"Section 6.6. Other Transactions. Closing shall have taken place
------------------
under the Reorganization Agreement ("Leone Agreement") dated October 23, 1996 by
and between Purchasers, Eastern Container Corporation, Eastern Waste of L.I.,
Inc., Curbside Leasing, Inc., WSI Holdings, Inc., Waste Services, Inc., N.Y.
Waste, Inc., L.I. Waste Services, Inc., and KC Waste Services, Inc., and certain
named individuals, as amended."
1.13 The third sentence of Section 9.14 of the Agreement
6
<PAGE>
is hereby amended and restated in its entirety to read as follows:
(a) "Purchasers will have fourteen (14) days from that date on
which the Purchasers have received written approval from the Trade
Waste Commission for the Purchasers to close the transactions
contemplated by this Agreement (the "Approval Date") to review any new
or revised Schedule delivered to Purchasers on or prior to the
Approval Date and terminate the Agreement by sending written notice to
the Company if Purchasers are not satisfied with any material matter
revealed by any such new or revised Schedule."
1.14 The following new Schedules 1.4, 1.6, 1.12(b), 2.7, 2.13(c) and
2.13(f) attached hereto are hereby substituted for Schedules 1.4, 1.6, 1.12(b),
2.7, 2.13(c) and 2.13(f) to the Agreement.
1.15 Notwithstanding anything in the Agreement to the contrary, all
references in the Agreement to the phrase "Escrow Stock", "Escrow Agent",
"Accounts Receivable Payment" and "Receivable Payment Statement" are hereby
deleted.
ARTICLE II. MISCELLANEOUS.
2.1 All references in the Agreement to "this Agreement" or like terms
shall mean and be a reference to the Agreement as amended by this Amendment and
all references to "the Agreement" or a like term in any agreement executed in
connection with the Agreement shall mean and be a reference to the Agreement as
amended by this Amendment.
2.2 Except as specifically amended by this Amendment, the Agreement
shall remain in full force and effect.
7
<PAGE>
2.3 This Amendment hereby incorporates, includes and is subject to
Article IX of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
PURCHASERS
EASTERN ENVIRONMENTAL
SERVICES, INC.
By: /s/ Robert Kramer
------------------------------------
Name: Robert M. Kramer
Title: Vice President
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
-------------------------------------
Name: Robert M. Kramer
Title: Vice President
COMPANY
CONEY ISLAND RUBBISH REMOVAL, INC.
By: /s/ Vincent Morea
--------------------------------------
Name: Vincent Morea
Title: President
SHAREHOLDER
/s/ Vincent Morea
----------------------------------------
Vincent Morea
AS TO THE OBLIGATIONS OF ESCROW AGENT IN SECTION 1.3(b) ONLY
ROBERT M. KRAMER & ASSOCIATES, P.C.
By: /s/ Robert Kramer
--------------------------------------
Robert M. Kramer
8
<PAGE>
EXHIBIT 10.4
------------
MANAGEMENT AGREEMENT
--------------------
This Agreement ("Management Agreement") is made as of May 12, 1997, by and
between GOLDEN GATE CARTING CO., INC., a New York corporation (the "Company")
and EASTERN WASTE OF NEW YORK, INC., a Delaware corporation (the "Manager").
RECITALS
--------
Company is engaged in the business of providing solid waste services,
including the collection, hauling, transfer and disposal of solid waste and
recyclable materials from commercial and industrial customers located in the
five boroughs of New York City, New York (the "Business"). Manager is engaged,
among other things, in providing administrative, management, consulting,
financial, marketing and operational support services to the solid waste
industry. Company and Manager have negotiated an Agreement and Plan of
Reorganization dated April 7, 1997 as amended by amendment No. 1 dated May 12,
1997 (the "Acquisition Agreement") pursuant to which Company will sell and
Manager will buy substantially all of Company's solid waste collection accounts
(the "Accounts") and associated equipment (collectively the "Assets"), in the
solid waste collection and disposal business, all as further set forth in the
Acquisition Agreement. The parties have filed with the New York City Trade Waste
Commission for approval to consummate the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Appointment of Manager; Relationship of Company and the Manager;
----------------------------------------------------------------
Manager Fee. Manager shall provide administrative, management, consulting,
- -----------
financial, marketing and operational support services to the Company, as
hereinafter provided. Manager shall conduct the Business on its own behalf, for
its own benefit, and retain all revenues generated by the Business and pay on
behalf of the Company all expenses and liabilities incurred and accrued by the
Business in the ordinary course of operating the Business (it being understood
that any professional fees relating to the dispute with the Gebbia Parties do
not constitute ordinary course operating expenses) on and after the date of this
Agreement, including without limitation a management fee of 10% of the revenues
(the "Management Fee"), which fee shall be deemed an ordinary operating expense.
Notwithstanding anything in this Agreement to the contrary, the revenues
generated by the Business shall be applied as follows: first, the revenues shall
be applied to pay the ordinary course operating expenses (including without
limitation
<PAGE>
the Management Fee) and then to pay on behalf of the Company, normal monthly
installments of Company Debt and professional fees, provided however, Manager
shall only pay professional fees relating to the dispute with the Gebbia Parties
and all or part of the normal monthly installments of Company Debt or set aside
monies for such installments of Company Debt which is not paid as instructed in
writing by the Company; and second, the balance of the revenues, if any, shall
be retained by Manager. Manager shall have no obligation to make any payments on
Company Debt or to pay professional fees related to the dispute with the Gebbia
Parties unless the revenues less operating expenses, including without
limitation the Management Fee, is sufficient to cover any installment of Company
Debt and such professional fees. Manager, at all times, shall be independent of
the Company. The Company shall permit the Business and the Assets to remain in
its name to accommodate the Manager. Nothing contained herein shall be deemed to
make or render the Company a partner, co-venturer or other participant in the
business or operations of the Manager, or in any manner to render Company
liable, as principal, surety, guarantor, agent or otherwise for any of the
debts, obligations or liabilities of Manager. Excluded from this Management
Agreement is any authority with respect to the Excluded Assets (as defined in
the Acquisition Agreement), all control over the responsibility for which shall
remain with the Company (except, with respect to accounts receivables, as set
forth in Section 8).
2. Management Services. Commencing on the date of this Agreement, Manager
-------------------
will provide, supply and render such administrative, management, consulting,
financial, marketing and operational support services as are necessary to
provide service to the Accounts and, as more specifically described below,
shall:
(a) Administer, supervise and control all of the finances of the Business,
including payroll, taxes, accounting, bookkeeping, record keeping, managing or
accounts payable, and accounts receivable, banking, financial records and
reporting functions as they pertain to the Accounts, with the power to make such
changes therein, in its sole discretion, and to incorporate such functions into
systems used by Manager.
(b) Select and employ all personnel necessary to service the Accounts.
(c) Supervise and control the purchase of all materials and supplies, and
acquire, lease, dispose of and repair equipment and facilities necessary to
provide safe and adequate service to the Accounts.
(d) Manage, at Manager's sole discretion, all costs and all pricing on a
customer-by-customer basis, estimate all costs on new contracts, bid on and
enter into new contracts, and control all costs for contracts in progress. It is
understood and agreed that such pricing must be within the Company's tariff as
modified from
-2-
<PAGE>
time to time by rate band adjustments authorized by the New York City Trade
Waste Commission.
(e) Commence, defend and control all legal actions, arbitrations,
investigations and proceedings that arise due to events occurring in connection
with the Accounts during the term of this Management agreement.
(f) Maintain the Assets in good repair, order and condition, normal and
reasonable wear and tear excepted.
(g) Operate the Assets to service the Accounts, as determined in Manager's
sole discretion.
3. Obligations of the Company. After Closing under the Acquisition
--------------------------
Agreement, the Company shall not, without the Manager's prior written consent:
(a) Modify, amend, or do anything to affect any of the Accounts;
(b) Create or incur any indebtedness or other liability or obligation in
connection with the Assets or Accounts;
(c) Enter into or terminate any lease, agreement, contract or other
commitment in connection with the Business;
(d) Release or create or incur any mortgage, lien or other encumbrance
with respect to the Assets, Business or Accounts;
(e) Sell, abandon or otherwise dispose of any of the Accounts;
(f) Make any commitment relating to any of the Accounts; or
(g) Cancel or waive any claim or right with respect to the Accounts or
Business.
The Company shall have no obligations other than those set forth in this
Management Agreement.
4. Additional Agreements of Company. The Company agrees that at all times
--------------------------------
during the term of this Agreement the Company shall:
(a) Do nothing, and permit nothing to be done (which is within the control
of the Company), which will or might cause the Company to operate in an improper
or illegal manner.
(b) Not cause a default in any of the terms, conditions and obligations of
any of the contracts and other agreements of the Company.
(c) To the extent permissible by law, maintain its corporate existence in
good standing, maintain in full force its licenses and
-3-
<PAGE>
permits in the State of New York and comply fully with all laws respecting its
formation, existence, activities and operations.
(d) Allow Manager and the employees, attorneys, accountants and other
representatives of Manager full and free access to the Company's books and
records, and all of the facilities of the Company so long as they relate to the
Accounts.
(e) Assist Manager to name itself as an additional named insured under all
policies of insurance and give all notices and present all claims under all
policies of insurance in due and timely fashion. All premiums for insurance
shall be paid by the Manager.
5. Payroll Expenses. Manager shall have the power to fix the compensation
----------------
of all persons employed to service the Accounts. It is understood that Manager
will be solely responsible for supplying the personnel required to service the
Accounts and will be responsible for all compensation to be paid.
6. General and Administrative Activities. To the extent that Manager
-------------------------------------
shall deem it necessary or desirable, Manager shall have the power and authority
to combine and integrate, at its own office (including those of an affiliate),
the "general and administrative" (as such term is used in accounting practice)
activities of the Business, including, but not limited to, all accounting,
bookkeeping, record-keeping, paying, receiving and other fiscal or financial
activities, with those of Manager.
7. Location. During the term of this Agreement, the Accounts will be
--------
serviced by Manager from the Business's facility located in 1281 Metropolitan
Avenue, Brooklyn, N.Y. or any other location selected by Manager.
8. Billing and Compensation. a) During the term of this Agreement,
------------------------
Manager will bill the Accounts in the name of the Company. Manager will collect
all revenues and pay all expenses associated with servicing the Accounts.
Manager will retain any and all profits and incur any and all losses resulting
from servicing the Accounts. If any customer whose account is transferred
hereunder pays Manager for services rendered by the Company prior to the date of
this Agreement, Manager shall promptly pay said amount to the Company and the
Company shall promptly pay to Manager all payments on the customer accounts
which are received by the Company for services rendered by Manager, all in the
manner set forth in the Acquisition Agreement.
b) Promptly after the date of this Agreement, but in any event not
later than three months from the date hereof, Manager shall use its best
efforts to deliver to the Company a monthly accounting of revenues
generated, operating expenses and payments of Company Debt.
-4-
<PAGE>
9. Equipment. During the term of this Management Agreement, all equipment
---------
utilized in servicing the Accounts will bear New York City decals issued to the
Company. Manager will pay the cost of any decals, etc. issued during the term of
this Management with respect to equipment utilized in servicing the Accounts.
Manager may make any modifications to the equipment it deems necessary.
10. Term of Agreement; Termination of Rights.
----------------------------------------
(a) The term of this Management Agreement shall commence on the latter of
the date that (i) closing occurs under the Agreement and Plan of Reorganization
dated October 23, 1996, as amended between Manager, Eastern Waste of L.I. Inc.,
Eastern Container Corporation, Eastern Environmental Services, Inc., Curbside
Leasing, Inc., Waste Services, Inc., N.Y. Waste Services, Inc. and L.I. Waste
Services, Inc. and (ii) the date that the management arrangement set forth in
this Management Agreement is approved by the New York City Trade Waste
Commission. This Management Agreement expires upon Closing under the Acquisition
Agreement, or upon the termination of the Acquisition Agreement or at the
election of Manager, on that date specified in a written notice from the Manager
to the Company if the Manager is prevented from performing its obligations
hereunder or realizing any benefits hereunder as a result of any injunction,
restraining order or other court order.
(b) Company may, at its option, upon ten (10) days' written notice
terminate this Management Agreement (if such default is not cured within such
ten (10) day period or such longer period as required to effect a cure if a cure
is commenced within ten days and is diligently prosecuted): (i) if Manager shall
violate any material provision of this Management Agreement or the Acquisition
Agreement; (ii) if Manager shall violate or be in material breach of any
provision, representation, warranty, covenant or undertaking herein; or (iii) if
Manager (a) makes an assignment for the benefit of creditors, (b) is adjudicated
a bankrupt, (c) files or has filed against it any bankruptcy, reorganization,
liquidation or similar petition or any petition seeking the appointment of a
receiver, conservator or other representative, or (d) proposes a composition
arrangement with creditors, provided however that any failure by the Manager to
perform its obligations hereunder as a result of the bankruptcy of the Company,
or any injunction, restraining order or other court order obtained by the Gebbia
Parties in connection with the dispute as to the Gebbia Debt (as such terms are
defined in the Acquisition Agreement) shall not constitute a default under this
Agreement. The Company may also terminate this Agreement if the Company and the
Manager cannot agree upon the accounting by Manager to the Company of revenues
and expenses.
(c) The Manager may terminate this Agreement at any time for any reason
whatsoever after three months from the date of this Agreement. The date on which
this Agreement is terminated pursuant
-5-
<PAGE>
to Section 10(a) or (b) above or this Section 10(c) is hereinafter referred to
as the "Expiration Date".
11. Indemnification.
---------------
(a) Manager shall indemnify, defend and hold harmless Company and its
affiliates, their respective shareholders, officers, directors, employees, and
agents, against and in respect of any and all losses, claims, damages, causes of
action, actions, obligations, liabilities, deficiencies, suits, proceedings,
actual out-of-pocket obligations and expenses (including cost of investigation,
interest, penalties and reasonable attorneys' fees) (collectively, "Losses")
arising out of or due to the operation of the Business by Manager, its
affiliates, agents, servants and/or employees after Closing under the provisions
of the Management Agreement except for losses attributable to any actions taken
by the Gebbia Parties (as defined in the Acquisition Agreement) or their
counsel. The obligations set forth in this Section 11(a) shall survive for a
period of one (1) year following the Expiration Date.
(b) Company shall indemnify, defend and hold harmless Manager and its
affiliates, their respective shareholders, officers, directors, employees, and
agents, against and in respect of any and all Losses arising out of or due to
the operation of the Business by Company, its affiliates, agents, servants
and/or employees prior to the commencement of the term of this Management
Agreement, including without limitation any Losses arising in connection with
the dispute between the Gebbia Parties and the Company as to the indebtedness
owed by the Company to the Gebbia Parties. The obligations set forth in this
Section 11(b) shall survive for a period of one (1) year following the
Expiration Date. The obligations set forth in this Agreement are in addition to,
and not in lieu of the Gebbia Indemnity (as defined in the Acquisition
Agreement).
(c) If a party entitled to indemnification (the "Indemnitee") receives
notice of any claim or the commencement of any action or proceeding with respect
to which a party is obligated to provide indemnification (the "Indemnifying
Party") pursuant to subsections (a) and (b) of this Section, the Indemnitee
shall promptly give the Indemnifying Party notice thereof (Indemnification
Notice"). Such Indemnification Notice shall be a condition precedent to any
liability of the Indemnifying Party under the provisions for indemnification
contained in this Management Agreement. Except as provided below, the
Indemnifying Party may compromise, settle or defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee. In any event, the
Indemnitee, the Indemnifying Party and the Indemnifying Party's counsel shall
cooperate in the compromise of, or defense against, any such asserted liability.
If the Indemnifying Party provides the Indemnitee a defense to a third party
claim at the Indemnifying
-6-
<PAGE>
Party's cost with a qualified attorney, Indemnitee may participate and/or
monitor the defense with an attorney of the Indemnitee's selection (at the
Indemnitee's own expense). Provided that the Indemnifying Party pays for the
full cost of the settlement of any claim, the Indemnifying Party may settle any
claim without the consent of the Indemnitee. If the Indemnifying Party chooses
to defend any claim, the Indemnitee shall make available to the Indemnifying
Party any books, records or other documents within its control that are
necessary or appropriate for such defense.
(d) If a party is entitled to indemnification under this Management
Agreement and the Acquisition Agreement, the party seeking indemnification must
elect to proceed under either this Section 11 or under Article VIII of the
Acquisition Agreement, and may not seek indemnity under both this Management
Agreement and the Acquisition Agreement.
12. Trade Waste Approval. The parties acknowledge that this Management
--------------------
Agreement as well as the Acquisition Agreement are subject to approval by the
New York City Trade Waste Commission and they will cooperate in seeking such
approval.
13. Additional Provisions.
---------------------
(a) This Management Agreement sets forth the entire understanding and
agreement among he parties hereto with reference to the subject matter hereof
and may not be modified, amended, discharged or terminated except by a written
instrument signed by the parties hereto.
(b) This Management Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements
made, delivered and to be performed within such State.
(c) This Management Agreement may not be assigned by Company or Manager,
except that Manager may in its sole discretion assign this Management Agreement
to a properly licensed affiliate performing similar types of services. Upon any
assignment Manager shall remain primarily liable and also be jointly and
severally liable to Company for performance of Manager's duties herein.
(d) All of the terms and provisions of this Management Agreement shall be
binding upon, inure to the benefit of, and be enforceable by each of the parties
hereto and their respective successors and assigns. Except for affiliates of
the Company and Manager and their respective shareholders, officers, directors,
employees and agents, no person other than the parties hereto shall be a third
party beneficiary of this Management Agreement or have any rights hereunder.
(e) No failure on the part of any party hereto to exercise, and no delay
in exercising, any right, power or remedy hereunder
-7-
<PAGE>
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other rights, power or remedy.
(f) No publicity release or announcement concerning this Management
Agreement or the transactions contemplated hereby shall be issued without
advance approval of the form and substance thereof by Company.
(g) Any notice or other communication required or which may be given
hereunder shall be in writing and either delivered personally to the addressee,
telecopied to the addressee or mailed, certified or registered mail, or sent by
a nationally recognized express courier service, postage or sending charges
prepaid, and shall be deemed given when so delivered personally, telecopied, if
by certified or registered mail, four days after the date of mailing, or if by
express courier service, two days after the date of sending, as follows:
(i) If to the Company, to:
Nicholas Pittas, Jr.
5 Birch Court
Oyster Bay, NY 11771
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, N.Y. 11556-0111
Attn: Barry R. Shapiro, Esq.
(ii) If to Manager, to:
Eastern Environmental Services, Inc.
1000 Crawford Place
Mt. Laurel, NJ 08054
With a copy to:
Robert M. Kramer, Esq.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
and to such other address of addresses as the Company or Manager, as the case
may be, may designate to the other by notice as set forth above.
(h) Any legal action, suit or proceeding arising out of or relating to
this Management Agreement or the transactions contemplated hereby may be
instituted in any state or Federal court
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<PAGE>
located in New York City, State of New York, and each party waives any objection
which such party may not or hereafter have to the laying of the venue of any
such action, suit or proceeding, an d irrevocably submits to the jurisdiction of
any such court in any such action, suit or proceeding. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given by registered or certified mail, return
receipt requested, or by any other means of mail which requires a signed
receipt, postage prepaid, mailed to such party as herein provided. Nothing
herein contained shall be deemed to affect the right to any party to service of
process in any other manner permitted by law.
(i) If any provision of this Management Agreement shall be determined by a
court of competent jurisdiction to be invalid or unenforceable, such
determination shall not affect the remaining provisions of this Management
Agreement, all of which shall remain in full force and effect.
(j) This Management Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
(k) The headings in this Management Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Management Agreement.
(l) Manager shall name Company as an additional insured on liability
policies and shall provide Company evidence of same within five (5) days of
execution of this Management Agreement.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first above written.
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
-------------------------------
Robert M. Kramer
Executive Vice President
GOLDEN GATE CARTING, INC.
By: /s/ Nicholas Pittas
-------------------------------
Nicholas Pittas, Jr.
President
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<PAGE>
EXHIBIT 10.5
------------
MANAGEMENT AGREEMENT
--------------------
This Agreement ("Management Agreement") is made as of May 12, 1997, by and
between CONEY ISLAND RUBBISH REMOVAL, INC., a New York corporation (the
"Company") and EASTERN WASTE OF NEW YORK, INC., a New York corporation (the
"Manager").
RECITALS
--------
Company is engaged in the business of providing solid waste services,
including the collection, hauling, transfer and disposal of solid waste and
recyclable materials from commercial and industrial customers located in the
five boroughs of New York City, New York (the "Business"). Manager is engaged,
among other things, in providing administrative, management, consulting,
financial, marketing and operational support services to the solid waste
industry. Company and Manager have negotiated an Agreement and Plan of
Reorganization dated April 7, 1997 as amended by amendment No. 1 dated May 12,
1997 (the "Acquisition Agreement") pursuant to which Company will sell and
Manager will buy substantially all of Company's solid waste collection accounts
(the "Accounts") and associated equipment (collectively the "Assets"), in the
solid waste collection and disposal business, all as further set forth in the
Acquisition Agreement. The parties have filed with the New York City Trade
Waste Commission for approval to consummate the Acquisition Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
1. Appointment of Manager; Relationship of Company and the Manager.
---------------------------------------------------------------
Manager shall provide administrative, management, consulting, financial,
marketing and operational support services to the Company, as hereinafter
provided. Manager shall conduct the Business on its own behalf, for its own
benefit, and retain all revenues generated by the Business and pay all expenses
and liabilities incurred and accrued by the Business on and after the date of
this Agreement including without limitation, all installments of Company Debt.
Manager, at all times, shall be independent of the Company. The Company shall
permit the Business and the Assets to remain in its name to accommodate the
Manager. Nothing contained herein shall be deemed to make or render the Company
a partner, co-venturer or other participant in the business or operations of the
Manager, or in any manner to render Company liable, as principal, surety,
guarantor, agent or otherwise for any of the debts, obligations or liabilities
of Manager. Excluded from this Management Agreement is any authority with
respect to the
<PAGE>
Excluded Assets (as defined in the Acquisition Agreement), all control over the
responsibility for which shall remain with the Company (except, with respect to
accounts receivables, as set forth in Section 8).
2. Management Services. Commencing on the date of this Agreement,
-------------------
Manager will provide, supply and render such administrative, management,
consulting, financial, marketing and operational support services as are
necessary to provide service to the Accounts and, as more specifically described
below, shall:
(a) Administer, supervise and control all of the finances of the Business,
including payroll, taxes, accounting, bookkeeping, record keeping, managing or
accounts payable, and accounts receivable, banking, financial records and
reporting functions as they pertain to the Accounts, with the power to make such
changes therein, in its sole discretion, and to incorporate such functions into
systems used by Manager.
(b) Select and employ all personnel necessary to service the Accounts.
(c) Supervise and control the purchase of all materials and supplies, and
acquire, lease, dispose of and repair equipment and facilities necessary to
provide safe and adequate service to the Accounts.
(d) Manage, at Manager's sole discretion, all costs and all pricing on a
customer-by-customer basis, estimate all costs on new contracts, bid on and
enter into new contracts, and control all costs for contracts in progress. It
is understood and agreed that such pricing must be within the Company's tariff
as modified from time to time by rate band adjustments authorized by the New
York City Trade Waste Commission.
(e) Commence, defend and control all legal actions, arbitrations,
investigations and proceedings that arise due to events occurring in connection
with the Accounts during the term of this Management agreement.
(f) Maintain the Assets in good repair, order and condition, normal and
reasonable wear and tear excepted.
(g) Operate the Assets to service the Accounts, as determined in Manager's
sole discretion.
3. Obligations of the Company. After Closing under the Acquisition
--------------------------
Agreement, the Company shall not, without the Manager's prior written consent:
(a) Modify, amend, or do anything to affect any of the Accounts;
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<PAGE>
(b) Create or incur any indebtedness or other liability or obligation in
connection with the Assets or Accounts;
(c) Enter into or terminate any lease, agreement, contract or other
commitment in connection with the Business;
(d) Release or create or incur any mortgage, lien or other encumbrance
with respect to the Assets, Business or Accounts;
(e) Sell, abandon or otherwise dispose of any of the Accounts;
(f) Make any commitment relating to any of the Accounts; or
(g) Cancel or waive any claim or right with respect to the Accounts or
Business.
The Company shall have no obligations other than those set forth in this
Management Agreement.
4. Additional Agreements of Company. The Company agrees that at all
--------------------------------
times during the term of this Agreement the Company shall:
(a) Do nothing, and permit nothing to be done (which is within the control
of the Company), which will or might cause the Company to operate in an improper
or illegal manner.
(b) Not cause a default in any of the terms, conditions and obligations of
any of the contracts and other agreements of the Company.
(c) To the extent permissible by law, maintain its corporate existence in
good standing, maintain in full force its licenses and permits in the State of
New York and comply fully with all laws respecting its formation, existence,
activities and operations.
(d) Allow Manager and the employees, attorneys, accountants and other
representatives of Manager full and free access to the Company's books and
records, and all of the facilities of the Company so long as they relate to the
Accounts.
(e) Assist Manager to name itself as an additional named insured under all
policies of insurance and give all notices and present all claims under all
policies of insurance in due and timely fashion. All premiums for insurance
shall be paid by the Manager.
5. Payroll Expenses. Manager shall have the power to fix the
----------------
compensation of all persons employed to service the Accounts. It is understood
that Manager will be solely responsible for supplying the personnel required to
service the Accounts and will be responsible for all compensation to be paid.
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<PAGE>
6. General and Administrative Activities. To the extent that Manager
-------------------------------------
shall deem it necessary or desirable, Manager shall have the power and authority
to combine and integrate, at its own office (including those of an affiliate),
the "general and administrative" (as such term is used in accounting practice)
activities of the Business, including, but not limited to, all accounting,
bookkeeping, record-keeping, paying, receiving and other fiscal or financial
activities, with those of Manager.
7. Location. During the term of this Agreement, the Accounts will be
--------
serviced by Manager from the Business's facility located in 1281 Metropolitan
Avenue, Brooklyn, N.Y. or any other location selected by Manager.
8. Billing and Compensation. During the term of this Agreement, Manager
------------------------
will bill the Accounts in the name of the Company. Manager will collect all
revenues and pay all expenses associated with servicing the Accounts. Manager
will retain any and all profits and incur any and all losses resulting from
servicing the Accounts. If any customer whose account is transferred hereunder
pays Manager for services rendered by the Company prior to the date of this
Agreement, Manager shall promptly pay said amount to the Company and the Company
shall promptly pay to Manager all payments on the customer accounts which are
received by the Company for services rendered by Manager, all in the manner set
forth in the Acquisition Agreement.
9. Equipment. During the term of this Management Agreement, all
---------
equipment utilized in servicing the Accounts will bear New York City decals
issued to the Company. Manager will pay the cost of any decals, etc. issued
during the term of this Management with respect to equipment utilized in
servicing the Accounts. Manager may make any modifications to the equipment it
deems necessary.
10. Term of Agreement; Termination of Rights.
----------------------------------------
(a) The term of this Management Agreement shall commence on the latter of
the date that (i) closing occurs under the Agreement and Plan of Reorganization
dated October 23, 1996, as amended between Manager, Eastern Waste of L.I. Inc.,
Eastern Container Corporation, Eastern Environmental Services, Inc., Curbside
Leasing, Inc., Waste Services, Inc., N.Y. Waste Services, Inc. and L.I. Waste
Services, Inc. and (ii) the date that the management arrangement set forth in
this Management Agreement is approved by the New York City Trade Waste
Commission. This Management Agreement expires upon Closing under the
Acquisition Agreement, or upon the termination of the Acquisition Agreement.
(b) Company may, at its option, upon ten (10) days' written notice
terminate this Management Agreement (if such default is not cured within such
ten (10) day period or such longer period as required to effect a cure if a cure
is commenced within 10 days and diligently prosecuted): (i) if Manager shall
violate any material
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<PAGE>
provision of this Management Agreement or the Acquisition Agreement; (ii) if
Manager shall violate or be in material breach of any provision, representation,
warranty, covenant or undertaking herein; or (iii) if Manager (a) makes an
assignment for the benefit of creditors, (b) is adjudicated a bankrupt, (c)
files or has filed against it any bankruptcy, reorganization, liquidation or
similar
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<PAGE>
petition or any petition seeking the appointment of a receiver, conservator or
other representative, or (d) proposes a composition arrangement with creditors.
The date on which this Agreement is terminated pursuant to Section 10(a) above
or this Section 10(b) is hereinafter referred to as the "Expiration Date".
11. Indemnification.
---------------
(a) Manager shall indemnify, defend and hold harmless Company and its
affiliates, their respective shareholders, officers, directors, employees, and
agents, against and in respect of any and all losses, claims, damages, causes of
action, actions, obligations, liabilities, deficiencies, suits, proceedings,
actual out-of-pocket obligations and expenses (including cost of investigation,
interest, penalties and reasonable attorneys' fees) (collectively, "Losses")
arising out of or due to the operation of the Business by Manager, its
affiliates, agents, servants and/or employees after Closing under the provisions
of the Management Agreement. The obligations set forth in this Section 11(a)
shall survive for a period of one (1) year following the Expiration Date.
(b) Company shall indemnify, defend and hold harmless Manager and its
affiliates, their respective shareholders, officers, directors, employees, and
agents, against and in respect of any and all Losses arising out of or due to
the operation of the Business by Company, its affiliates, agents, servants
and/or employees prior to the commencement of the term of this Management
Agreement. The obligations set forth in this Section 11(b) shall survive for a
period of one (1) year following the Expiration Date.
(c) If a party entitled to indemnification (the "Indemnitee") receives
notice of any claim or the commencement of any action or proceeding with respect
to which a party is obligated to provide indemnification (the "Indemnifying
Party") pursuant to subsections (a) and (b) of this Section, the Indemnitee
shall promptly give the Indemnifying Party notice thereof (Indemnification
Notice"). Such Indemnification Notice shall be a condition precedent to any
liability of the Indemnifying Party under the provisions for indemnification
contained in this Management Agreement. Except as provided below, the
Indemnifying Party may compromise, settle or defend, at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, any such
matter involving the asserted liability of the Indemnitee. In any event, the
Indemnitee, the Indemnifying Party and the Indemnifying Party's counsel shall
cooperate in the compromise of, or defense against, any such asserted liability.
If the Indemnifying Party provides the Indemnitee a defense to a third party
claim at the Indemnifying Party's cost with a qualified attorney, Indemnitee may
participate and/or monitor the defense with an attorney of the Indemnitee's
selection (at the Indemnitee's own expense). Provided that the Indemnifying
Party pays for the full cost of the settlement of any claim, the Indemnifying
Party may settle any claim without the consent of the Indemnitee. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the
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<PAGE>
Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense.
(d) If a party is entitled to indemnification under this Management
Agreement and the Acquisition Agreement, the party seeking indemnification must
elect to proceed under either this Section 11 or under Article VIII of the
Acquisition Agreement, and may not seek indemnity under both this Management
Agreement and the Acquisition Agreement.
12. Trade Waste Approval. The parties acknowledge that this Management
--------------------
Agreement as well as the Acquisition Agreement are subject to approval by the
New York City Trade Waste Commission and they will cooperate in seeking such
approval.
13. Additional Provisions.
---------------------
(a) This Management Agreement sets forth the entire understanding and
agreement among he parties hereto with reference to the subject matter hereof
and may not be modified, amended, discharged or terminated except by a written
instrument signed by the parties hereto.
(b) This Management Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to agreements
made, delivered and to be performed within such State.
(c) This Management Agreement may not be assigned by Company or Manager,
except that Manager may in its sole discretion assign this Management Agreement
to a properly licensed affiliate performing similar types of services. Upon any
assignment Manager shall remain primarily liable and also be jointly and
severally liable to Company for performance of Manager's duties herein.
(d) All of the terms and provisions of this Management Agreement shall be
binding upon, inure to the benefit of, and be enforceable by each of the parties
hereto and their respective successors and assigns. Except for affiliates of
the Company and Manager and their respective shareholders, officers, directors,
employees and agents, no person other than the parties hereto shall be a third
party beneficiary of this Management Agreement or have any rights hereunder.
(e) No failure on the part of any party hereto to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other rights, power or remedy.
(f) No publicity release or announcement concerning this Management
Agreement or the transactions contemplated hereby shall
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<PAGE>
be issued without advance approval of the form and substance thereof by Company.
(g) Any notice or other communication required or which may be given
hereunder shall be in writing and either delivered personally to the addressee,
telecopied to the addressee or mailed, certified or registered mail, or sent by
a nationally recognized express courier service, postage or sending charges
prepaid, and shall be deemed given when so delivered personally, telecopied, if
by certified or registered mail, four days after the date of mailing, or if by
express courier service, two days after the date of sending, as follows:
(i) If to the Company, to:
Vincent Morea
One Laredo Drive
Colts Neck, N.J. 07722
with a copy to:
Rivkin, Radler & Kremer
EAB Plaza
Uniondale, N.Y. 11556-0111
Attn: Barry R. Shapiro, Esq.
(ii) If to Manager, to:
Eastern Environmental Services, Inc.
1000 Crawford Place
Mt. Laurel, NJ 08054
With a copy to:
Robert M. Kramer, Esq.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
and to such other address of addresses as the Company or Manager, as the case
may be, may designate to the other by notice as set forth above.
(h) Any legal action, suit or proceeding arising out of or relating to
this Management Agreement or the transactions contemplated hereby may be
instituted in any state or Federal court located in New York City, State of New
York, and each party waives any objection which such party may not or hereafter
have to the laying of the venue of any such action, suit or proceeding, an d
irrevocably submits to the jurisdiction of any such court in any such action,
suit or proceeding. Any and all service of process and any other notice in any
such action, suit or proceeding shall be effective against any party if given by
registered or certified
-8-
<PAGE>
mail, return receipt requested, or by any other means of mail which requires a
signed receipt, postage prepaid, mailed to such party as herein provided.
Nothing herein contained shall be deemed to affect the right to any party to
service of process in any other manner permitted by law.
(i) If any provision of this Management Agreement shall be determined by a
court of competent jurisdiction to be invalid or unenforceable, such
determination shall not affect the remaining provisions of this Management
Agreement, all of which shall remain in full force and effect.
(j) This Management Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
(k) The headings in this Management Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Management Agreement.
(l) Manager shall name Company as an additional insured on liability
policies and shall provide Company evidence of same within five (5) days of
execution of this Management Agreement.
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the date first above written.
EASTERN WASTE OF NEW YORK, INC.
By: /s/ Robert Kramer
-------------------------------
Robert M. Kramer
Executive Vice President
CONEY ISLAND RUBBISH REMOVAL, INC.
By: /s/ Vincent Morea
-------------------------------
Vincent Morea
President
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