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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 9, 1998
EASTERN ENVIRONMENTAL SERVICES, INC.
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(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.
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On March 9, 1998, Eastern Environmental Services, Inc. (the "Registrant")
consummated the acquisition of Bluegrass Containment, Inc. ("Bluegrass")
pursuant to the terms of a Stock Purchase Agreement dated March 2, 1998, as
amended March 9, 1998 by and among Thomas Smith, Jr. and Mark Rust
(collectively, the "Shareholders" or "Sellers") and the Registrant. The
description of the acquisition transaction set forth herein is qualified in its
entirety by the Stock Purchase Agreement and its subsequent amendment. The
Stock Purchase Agreement and its subsequent amendment are incorporated as
Exhibit 10.1 and Exhibit 10.2, respectively.
Pursuant to the Stock Purchase Agreement, as amended, the Registrant
purchased all of the outstanding common stock of Bluegrass resulting in the
Shareholders receiving unregistered shares of the Registrant's common stock,
$.01 par value valued at $24.25. Total stock consideration paid included a base
purchase price of $4,100,000 increased for the amount by which the accounts
receivable of Bluegrass exceeds accounts payable, closure and post-closure
collateral investments and operating cash in excess of $100,000; all amounts
measured as of the closing date. No cash was paid to the Shareholders for the
acquisition of the shares of the Company. The acquisition is to be accounted for
using the "pooling of interests" method.
The merger includes all of the assets and liabilities relating to the
operation of the Company. The acquired assets were used by the Shareholders in
the operation of a construction and demolition debris disposal facility. The
Registrant intends to continue to use the acquired assets for this purpose.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
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(A) COMBINED FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. It is impracticable to
provide the required financial statements of Bluegrass Containment, Inc. at
the time of the filing of this report. The required financial statements
of Bluegrass Containment, Inc. will be filed within the time period
required in accordance with applicable regulations under the Securities and
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 Stock Purchase Agreement dated March 2, 1998, between Eastern Environmental
Services, Inc., Thomas Smith, Jr. and Mark Rust.
10.2 Amendment No.1 dated March 9, 1998 to the Stock Purchase Agreement dated
March 2, 1998 by and between the Registrant and the Shareholders of
Bluegrass Containment, Inc.
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SIGNATURE
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Pursuant to the requirements of the Securities and 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: March 20, 1998 By: /s/ Gregory M. Krzemien
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Gregory M. Krzemien, Chief Financial Officer
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EXHIBIT INDEX
Exhibit
No. Description
- ---- -----------
10.1 Stock Purchase Agreement dated March 2, 1998, between Eastern
Environmental Services, Inc., Thomas Smith, Jr. and Mark Rust.
10.2 Amendment No.1 dated March 9, 1998 to the Stock Purchase Agreement dated
March 2, 1998 by and between the Registrant and the Shareholders of
Bluegrass Containment, Inc.
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
THE SHAREHOLDERS OF
BLUEGRASS CONTAINMENT, INC.
And
EASTERN ENVIRONMENTAL SERVICES, INC.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
RECITALS............................................................................... 1
ARTICLE I ACQUISITION; CLOSING......................................................... 2
ARTICLE II TITLE INSURANCE............................................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS.............................. 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................19
ARTICLE V ADDITIONAL AGREEMENTS OF SELLERS.............................................19
ARTICLE VI ADDITIONAL AGREEMENTS OF PURCHASER..........................................23
ARTICLE VII CONDITIONS OF PURCHASER....................................................24
ARTICLE VIII CONDITIONS OF SELLERS.....................................................25
ARTICLE IX INDEMNIFICATION.............................................................25
ARTICLE X OTHER PROVISIONS.............................................................28
</TABLE>
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SECTION OF DISCLOSURE SCHEDULE
ATTACHED TO THIS AGREEMENT
1.6(d) Employment Agreement
1.7(g) Noncompete Agreement
1.7(f) Release
ATTACHED AS PART OF DISCLOSURE BINDER
R.1 Legal Description of Property
1.3(e) Stock Allocation
1.4 Description of Assets to be Transferred
1.10(g) Noncompete Agreement
2.2 Permitted Exceptions
3.4 List of Personal Property
3.5 Customer List and Contracts
3.6 Real Property Interests
3.6(a) Exceptions to governmental compliance
3.6(b) Exceptions to lawful use of the Property
3.6(c) Exceptions to conduct in compliance with Applicable laws
3.6(e) Litigation or administrative proceedings for environmental
violations
3.6(f) Definition of "Hazardous Materials" and Environmental Conditions
3.6(h) Wetlands
3.6(i) Mechanic's liens
3.6(k) Exceptions to proceedings which would affect use of the Property
3.7(a) List of Company's Leased Personalty and Permitted
Encumbrances
3.9(a)(iii) Liabilities
3.10 Fiscal Condition of Company
3.12 Insurance Policies, etc.
3.13(a) Employment Agreements
3.13(b) Employee Information
3.13(c) Employee Benefit Plans, Funds or Programs
3.14(a) Exceptions to Company's operation in compliance with laws, etc.
3.14(b) Exceptions relating to environmental issues and liability
3.14(c) Landfills
3.14(d) Notices of Violation
3.14(f) Exceptions to Approvals
3.16 Exceptions to right of Company to enter this Agreement
3.19 Investments in Competing Companies
3.22 List of Litigation and Summaries
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of March 2,
1998, by and between Thomas Smith, Jr., and Mark Rust ("Shareholders") on the
one hand, and Eastern Environmental Services, Inc. ("Purchaser"), on the other
hand. Shareholders may sometimes be referred to as "Sellers" in this Agreement.
RECITALS
The Shareholders are the owners of all of the outstanding shares of stock
("Company Shares") of Bluegrass Containment of Kentucky, Inc. (the "Company"),
which is in the business of operating a landfill (the "Business") in or about
Hartford, Kentucky, known as the Bluegrass Containment Landfill.
The Company owns the "Property" (hereinafter defined). The term "Property"
shall mean those certain tracts of land located in Hartford, Kentucky, known as
the Bluegrass Containment Landfill and containing approximately 800 acres, as
more fully described on Schedule R.1 attached hereto and incorporated herein by
reference, together with the buildings and improvements thereon, if any
(collectively, the "Property"). For purposes of this Agreement, "Property"
shall also include (i) all of Company's right, title and interest in and to all
easements, rights-of-way, privileges and appurtenances thereto, (ii) all of
Company's right, title and interest in and to the beds of all streets, roads,
avenues or highways, open or proposed, abutting the Property, (iii) all of
Company's right, title and interest, if any, in and to any award in
condemnation, or damages of any kind, to which Company may have become entitled
or may hereafter be entitled, by reason of any exercise of the power of eminent
domain with respect to the Property or any other right, title or interest to be
sold hereunder or any part thereof, and (iv) all of Company's right, title and
interest in and to all surveys, architectural and engineering plans,
specifications, drawings, reports, etc., if any, presently existing or hereafter
prepared, with respect to the Property. The Company operates the Business at
the Property.
In accordance with the provisions of this Agreement, Sellers desire to sell
all of the outstanding shares of stock of the Company to Purchaser in exchange
for common stock of Purchaser, all on the terms contained herein. The parties
intend that the transactions contemplated hereby qualify as a reorganization,
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended, and be treated as a "pooling of interests" for accounting purposes.
Throughout this Agreement various Schedules are referenced as being
attached to this Agreement. Notwithstanding the fact that all Schedules are
referred to as being attached to this Agreement, some of the Schedules are not
attached but instead appear in a Disclosure Binder prepared by the Sellers. The
Disclosure Binder is organized under subheadings which correspond to the various
Schedules described in this Agreement. For purposes of identification, the
Disclosure Binder has been identified by the parties by a written statement
executed by the parties and appearing as the first page of the Disclosure
Binder. For purposes of this Agreement, a disclosure
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by Sellers of any fact on a Schedule shall be deemed a disclosure on every
Schedule of Sellers to the extent such disclosure properly could have been made
thereon but was not made, provided a cross-reference thereon sets forth the
Schedule where disclosure is made.
ARTICLE I
ACQUISITION; CLOSING
Section 1.1 Incorporation of Recitals. The recitals set forth above are
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incorporated herein by reference and are a part of this Agreement.
Section 1.2 Time and Place for Closing. Closing under this Agreement
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shall take place within fifteen days of the conditions set forth in Article VII
and Article VIII being satisfied or waived, time being of the essence, at the
offices of Purchaser, 1000 Crawford Place, Mount Laurel, New Jersey, 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." The exact Closing Date shall be established by a written notice sent
by Purchaser to Sellers.
Section 1.3 Agreement to Sell Stock of Companies; Consideration.
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(a) At the Closing, each of the Sellers agrees to transfer and deliver to
Purchaser all of the Company Shares owned by such Seller, as applicable, and
Purchaser agrees to purchase and pay for the Company Shares, the total
consideration of a number of shares of Purchaser's common stock ("Consideration
Stock") having a value of $4,100,000 ("Base Purchase Price"), each share being
valued ("Per Share Value") at the closing price of Purchaser's common stock on
the day which is the fifth trading day prior to the Closing Date. The Base
Purchase Price shall be increased by the amount, if any, by which the accounts
receivable of the Company (less an agreed-upon bad debt reserve) exceed the
accounts payable of the Company as of the Closing Date ("Accounts Receivable
Excess"). The Base Purchase Price shall also be increased by the amount of cash
held by Company in its regular checking and savings accounts in excess of
$100,000 ("Cash Excess"). The Base Purchase Price shall be further increased by
the dollar value of any freely tradeable mutual funds posted as collateral for
landfill closing and post-closing performance bonds, valued at the closing net
asset value as of the trading day which is the fifth trading day prior to
closing ("Collateral Securities"). At the Closing, Purchaser shall deliver to
Sellers Consideration Stock in the amount of: (i) the Base Purchase Price, plus
(ii) the Collateral Securities, plus (iii) that portion of the Cash Excess, if
any, consisting of cash in the Company's regular savings accounts in excess of
$100,000. The Consideration Stock shall not be registered under the Securities
Act of 1933 (the "Act") or any state securities law.
(b) Within 30 days after the Closing Date, Purchaser shall prepare and
deliver to Sellers the consolidated balance sheet for the Company as of the
close of business on the business day immediately preceding the Closing Date
(the "Closing Date Balance Sheet"). Sellers shall fully cooperate with Purchaser
during Purchaser's preparation of the Closing Date Balance Sheet. The Closing
Date Balance Sheet shall set forth, without limitation, the accounts payable,
accounts receivable (including an agreed-upon bad debt reserve), and cash
balances of the Company and shall
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have been prepared in accordance with generally accepted accounting principles,
applied consistently. Sellers shall have the right to review all of Purchaser's
work papers and all relevant records of the Company and their accountants
relating to the Closing Date Balance Sheet.
(c) The Closing Date Balance Sheet delivered by Purchaser to Sellers shall
be deemed to be and shall be final, binding and conclusive on the parties
hereto, unless Sellers dispute the Closing Date Balance Sheet in accordance with
this Section 1.3(c). Sellers may dispute any amounts reflected on the Closing
Date Balance Sheet (any such disputed amounts, the "Disputed Matters") provided,
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however, that Sellers shall be entitled to dispute any such matter only if
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Sellers shall notify Purchaser in writing of each Disputed Matter within fifteen
(15) days of Sellers' receipt of the Closing Date Balance Sheet. Any Disputed
Matters shall be subject to good faith negotiations between the parties for up
to fifteen (15) days prior to being referred to the Independent Accounting Firm
(as defined below). Any Disputed Matters not resolved by such good faith
negotiations shall be decided by an independent accounting firm acceptable to
both Sellers and Purchaser (the "Independent Accounting Firm"). The costs and
expenses of the Independent Accounting Firm shall be shared equally by Sellers
and Purchaser. The Independent Accounting Firm so chosen shall consider only
the Disputed Matters and Purchaser and Sellers shall use reasonable efforts to
cause the Independent Accounting Firm to render a final decision on the Disputed
Matters by delivering a written report to Purchaser and Sellers no later than
thirty (30) days after having received the assignment with respect thereto. The
decision of the Independent Accounting Firm with respect to all Disputed Matters
shall be based solely on whether the Closing Date Balance Sheet was prepared in
accordance with the requirements of this Agreement, shall be final and binding
upon the parties hereto, and shall not be subject to challenge in any court.
(d) Upon conclusive determination of the Company's cash balances, accounts
receivable and accounts payable as of the Closing Date as provided in Section
1.3(c), Purchaser shall deliver to Sellers additional Consideration Stock valued
at the Per Share Value in the amount of (i) the Accounts Receivable Excess, if
any, plus (ii) the amount of the Cash Excess, if any, in excess of that portion
for which Consideration Stock was delivered at closing in accordance with
Section 1.3(a).
(e) The Consideration Stock shall be allocated in the same proportions
that the Sellers own shares in the Company, as set forth on Schedule 1.3(e).
Section 1.4 Closing. Following execution of this Agreement, Purchaser and
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Sellers shall be obligated to conclude the transaction strictly in accordance
with its terms within fifteen (15) days after the conditions of Closing set
forth in Article VII and Article VIII have been satisfied or waived, time being
of the essence. If the failure to conclude this transaction is due to the
refusal and failure of Sellers to perform their obligations under this
Agreement, Purchaser may seek to enforce this Agreement with an action of
specific performance, in addition to, and not in limitation of, any other rights
and remedies available to the Purchaser under this Agreement, or at law or in
equity, including, without limitation an action to recover their actual damages
resulting from the default of Sellers. If the failure to conclude this
transaction is due to the refusal and failure of Purchaser to perform its
obligations under this Agreement, Sellers may, in addition to and not in
limitation of any
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other rights and remedies available to the Sellers under this Agreement, or at
law or in equity, bring legal action to recover their actual damages resulting
from the default of Purchaser.
Section 1.5 Termination. This Agreement and the transactions contemplated
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hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Purchaser and the Sellers;
(b) by Purchaser within sixty (60) days after the date of this Agreement,
if Purchaser is not satisfied, in its sole discretion, with the due diligence it
has conducted on the Company.
(c) by the Sellers, or by Purchaser in the event Purchaser or the Sellers,
as applicable, makes a material misrepresentation under this Agreement or
breaches a material covenant or agreement under this Agreement, and fails to
cure such misrepresentation or breach within ten (10) business days from the
date of written notice of the existence of such misrepresentation or breach; or
(d) by the Sellers or Purchaser, if the Closing shall not have occurred by
January 31, 1998, or such other date as may be agreed to by the parties hereto
in writing, due to the non-fulfillment of a condition precedent to such party's
obligation to close as set forth at Article VII or VIII hereof, as applicable
(through no fault or breach by the terminating party). However, if the only
condition to Closing which has not been satisfied is the condition set forth in
Section 7.5, the date of January 31, 1998, shall be extended to March 31, 1998,
at the option of Purchaser or Sellers, to be exercised through written notice to
Sellers or Purchaser, as applicable.
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 this Section 1.5, Article IX, Section 10.1, Section 10.2 and
Section 10.17 shall survive and continue in full force and effect,
notwithstanding termination. The termination of this Agreement shall not limit,
waive or prejudice the remedies available to the parties, at law or in equity,
for a breach of this Agreement.
Section 1.6 Deliveries by Purchaser. At the Closing, Purchaser shall
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deliver, all duly and properly executed (where applicable):
(a) The Consideration Stock due on the Closing Date, as provided in
Section 1.3 above to be delivered to the Sellers;
(b) A copy of the resolutions of the Board of Directors of Purchaser
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;
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(c) A favorable opinion from counsel for Purchaser, dated the day of the
Closing, to the effect that this Agreement has been duly and legally authorized
by all necessary corporate action on the part of Purchaser, has been duly and
legally executed and delivered by Purchaser, and is the valid, enforceable and
binding Agreement of Purchaser, except to the extent enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditor's rights generally; and
(d) An Employment Agreement with David Bradley in form and substance as
attached hereto as Schedule 1.6(d).
Section 1.7 Deliveries by Sellers. At the Closing, each of the Sellers,
---------------------
as applicable, shall deliver to Purchaser, all duly executed, the following:
(a) Duly executed certificates in valid form evidencing all of the Company
Shares owned by each Seller, duly endorsed in blank or accompanied by duly
executed stock powers attached or otherwise executed in the presence of
authorized representatives of Purchaser;
(b) Except as may be otherwise required by Purchaser, the written
resignations of all officers and directors of the Company as of the time of
Closing;
(c) A current certificate of good standing for the Company from each
applicable jurisdiction of admittance and incorporation;
(d) A certified copy of resolutions of the directors of the Company and
the Shareholders authorizing the execution and delivery of this Agreement and
each of the Collateral Documents;
(e) Each of the Sellers shall execute and deliver the Certificate
described at Section 6.1;
(f) A release from each Seller, in a form and content satisfactory to
Purchaser, which provides that the Sellers are releasing the Company from any
and all claims, causes of action, debts and obligations whatsoever existing on
the Closing Date;
(g) A Noncompete Agreement in form and substance attached as Schedule
1.7(g);
(h) An Employment Agreement with David Bradley in form and substance as
attached hereto as Schedule 1.6(d);
(i) A favorable opinion from counsel for the Sellers, dated the date of
the Closing, in form and substance satisfactory to counsel for Purchaser, to the
effect (i) that this Agreement and the Collateral Documents have been duly and
legally authorized, executed and delivered by the Sellers and are the valid,
enforceable and binding Agreements of the Sellers, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency, moratorium
or similar laws affecting the enforcement of creditor's rights generally, (ii)
those permits and licenses listed on Schedule 3.3(vii) are valid, have been duly
issued and are in full force and effect, and (iii) the
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Company is a business corporation duly organized, validly existing and in a
condition of good standing under the laws of each jurisdiction where it does
business;
(j) The books and records of the Company, including, without limitation,
all original financial and operating records, the corporate minute book and
seal, the corporate stock ledger, and all title documents; and
(k) Other documents and instruments required by this Agreement, if any.
ARTICLE II
TITLE INSURANCE
Section 2.1 Owners Title Policy. At Closing, the Company shall own, with
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respect to all real property owned by the Company, an extended coverage owners
policy of title insurance from a title company acceptable to Purchaser (the
"Title Company"), dated as of the Closing Date, in the amount equal to the fair
market value of such real property. The title policies shall include
comprehensive, zoning, access, non-imputation and contiguity endorsements, and
shall insure title to the real property to be in fee simple in Company subject
only to the Permitted Exceptions permitted by Section 2.2 hereof (the "Owners
Policy"). Sellers and Purchaser shall share the cost of the Owners Policy.
Section 2.2 Permitted Exceptions. The Owners Policy shall insure
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Company's interest in its real property to be free and clear of all encumbrances
and exceptions whatsoever except those listed on Schedule 2.2 attached hereto
("Permitted Exceptions").
Section 2.3 Survey. The Sellers shall furnish Purchaser with a survey
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relating to all of the real property owned by the Company that is sufficiently
current that the Title Company shall not have included a survey exception in the
Owner's Policy. If a new survey is required, Sellers and Purchaser shall share
the cost of such survey.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
With knowledge that Purchaser are relying upon the representations,
warranties and covenants herein contained, the Sellers each individually,
severally and jointly represent and warrant to Purchaser and make the following
covenants for Purchaser's benefit. The Sellers represent and warrant that the
representations and warranties contained in this Article III are true on the
date hereof and shall be true on the Closing Date.
Certain of the following representations and warranties are made "to
Sellers' knowledge." When so used, "Seller's knowledge" shall mean "Seller's
actual knowledge" (as hereinafter defined) together with that knowledge which
the Sellers (or any one of the Sellers) would have acquired through the proper
exercise of its/his/her duty, if any, to investigate the particular matter in
question.
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Section 3.1 Organization and Standing. The Company is 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.
Section 3.2 Company Stock. All of the authorized, issued, and outstanding
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shares of capital stock and other securities of the Company are owned by the
Shareholders, including without limitation equity securities, debt securities
and options. The Shareholders are the only owners of the securities of the
Company. The Company Shares each Seller owns are legally and validly authorized
and issued, fully paid and nonassessable and free and clear of all liens, claims
and encumbrances of every kind and nature and are not subject to any agreement
or instrument relating to the transfer, disposition or voting of such
securities. There are no outstanding rights of any kind to acquire additional
shares of any class from the Company nor has any person claimed any such rights.
All of the outstanding shares of the Company's capital stock have been duly
authorized, issued, and are fully and validly paid and non-assessable.
Section 3.3 Contracts, Permits and Material Documents. The items listed
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in Schedule 3.3, attached hereto, are all of the following with respect to the
Company ("Material Documents"): (i) leases for real and personal property, (ii)
licenses, (iii) franchises, (iv) promissory notes, guarantees, bonds, letters of
credit, mortgages, liens, pledges, and security agreements under which the
Company is bound or under which the Company is a beneficiary, (v) collective
bargaining agreements, (vi) patents, trademarks, trade names, copyrights, trade
secrets, proprietary rights, symbols, service marks, and logos, (vii) all
permits, licenses, consents and other approvals from governments, governmental
agencies (federal, state and local) and/or third parties relating to, used in or
required for the operation of the Company's businesses, including the license
authorizing the Company to operate a landfill at the Property, and (viii) other
contracts, agreements and instruments not listed on another Schedule attached to
this Agreement (such as the customer contracts listed on Schedule 3.5) which are
binding on the Company or any of its property or pursuant to which the Company
derives any material benefit or has imposed upon it any material detriment. For
purposes of this Section 3.3 a material benefit or material detriment shall be
anything which provides a benefit or imposes a detriment having a value of
$10,000 or more. The Material Documents listed on Schedule 3.3 are organized
under subheadings for each of the different type of documents listed. Neither
the Company nor, to Seller's knowledge, any person or party to the any of the
Material Documents or bound thereby is in material or knowing default under any
of the Material Documents, and no act or event has occurred which with notice or
lapse of time, or both, would constitute such a default. The Company is not a
party to, and the Company's property is not bound by any agreement or instrument
which is material to the continued conduct of its business operations as now
being conducted or with respect to which a default might materially and
adversely affect its properties, business operations, or financial condition of
the Company, except as listed in Schedule 3.3. To the Sellers' knowledge, the
documents listed on Schedule 3.3 confer on the Company all rights necessary to
enable the Company to conduct its operations as now being conducted.
Section 3.4 Personal Property. All items of personal property used in
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the business operations of the Company are listed on the schedules set forth
below, and are now and at closing
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will be: (i) owned by the Company by good and marketable title free of all
liens, and (ii) in good condition, normal wear and tear excepted, except as
noted on the applicable Schedule.
(a) All scales, earthmoving, landfill, and other equipment used in
the Company's landfilling operations, all of which are owned by the Company,
except as listed on Schedule 3.4(a);
(b) All rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors and accessories and attachments to the rolling
stock used in the Company's business operations together with information as to
the make, description of body and chassis, model number, serial number and year
of each such vehicle, all of which are owned by the Company, except as listed on
Schedule 3.4(b);
(c) All containers used in the Company's business operations together
with information as to container size and year of manufacture, all of which are
owned by the Company, except as listed on Schedule 3.4(c);
(d) All of the inventory of parts, tires and accessories listed on
Schedule 3.4(d);
(e) All of the shop tools listed on Schedule 3.4(e);
(f) All of the furniture and office or other equipment listed on
Schedule 3.4(f);
Sellers represent and warrant that, in the aggregate, the personal property of
the Company is sufficient for the Company to carry on its business as previously
conducted, and that the personal property is all in operable condition, except
as noted to the contrary on Schedules 3.4(a) through 3.4(f) attached.
Section 3.5 Customers. Schedule 3.5 attached hereto lists the name and
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address of each customer the Company serves, together with copies of all
customer contracts, and the information supplied thereon is true, correct, and
complete, in all material aspects. Neither the Company nor, to the Sellers'
knowledge, any person or party to the any of the customer contracts is in
material or knowing default under any of the customer contracts, and no act or
event has occurred which with notice or lapse of time, or both, would constitute
such a default. The Company has received no notice that any material customer
intends to not renew any contract or otherwise cease or curtail doing business
with the Company.
Section 3.6. The Property. The Company has never owned, leased or
------------
otherwise occupied, had an interest in or operated any real property other than
the Property, except as listed on Schedule 3.6 attached hereto and incorporated
herein by reference. The Company has good, marketable and insurable title to
the Property except for the Permitted Exceptions.
(a) In all material respects, except as set forth in Schedule 3.6(a)
attached hereto and incorporated herein, the Property is, and at all times
during operation of the landfill business thereon has been, licensed, permitted
and authorized for the operation of such business under all applicable
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federal, state and local statutes, laws, rules, regulations, orders, permits
(including, without limitation, zoning restrictions and land use requirements)
and licenses and all administrative and judicial judgments, rulings, decisions
and orders affecting or otherwise applicable to the protection of the
environment, the Property and the conduct of such business thereon
(collectively, the "Applicable Laws").
(b) Except as set forth in Schedule 3.6(b) attached hereto and
incorporated herein by reference, the Property is legally usable for its current
uses, and the Property can be used by the Purchaser after the Closing to operate
such business as is currently operated, without violating any Applicable Law or
private restriction, and such uses are legal, conforming uses.
(c) Except as set forth in Schedule 3.6(c) attached hereto and
incorporated herein by reference, all activities and operations conducted on the
Property, whether by Sellers or by third parties, are now being conducted and
have always been conducted in compliance with all Applicable Laws.
(d) The Sellers and Company shall make available on Purchaser's reasonable
request all engineering, geologic and other similar reports, documentation and
maps relating to the Property in the possession or control of the Shareholders
or the Company or its or their consultants or employed professional firms.
(e) Except as set forth in Schedule 3.6(e) attached hereto and
incorporated herein by reference, neither Sellers nor the Company nor the
Property now is or ever has been involved in any litigation or administrative
proceeding seeking to impose fines, penalties or other liabilities or seeking
injunctive relief for violation of any Applicable Laws relating to the
environment.
(f) There have been no spills, leaks, deposits or other releases into the
environment or onto or under the Property of any Hazardous Materials as defined
in Schedule 3.6(f) attached hereto or other material environmental conditions
other than as disclosed on Schedule 3.6(f).
(g) No party, other than the Company, has a present or future right to
possession of all or any part of the Property, except for any right defined in,
under or by any of the Permitted Exceptions.
(h) No portion of the Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any Applicable Laws or the procedural manuals of
the Environmental Protection Agency, U.S. Army Corps of Engineers or the
Commonwealth of Kentucky Department for Environmental Protection ("DEP") whether
such characterization reflects current conditions or historic conditions which
have been altered without the necessary permits or approvals, except as listed
on Schedule 3.6(h) attached hereto and incorporated herein by reference.
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(i) There are no mechanic's liens affecting the Property and no work has
been performed on the Property within twelve (12) months of the date hereof for
which a mechanic's lien could be filed, except as set forth in Schedule 3.6(i)
attached hereto and incorporated herein by reference.
(j) There are no levied or pending special assessments affecting all or
any part of the Property owed to any governmental entity and none is threatened.
(k) There are no proceedings or amendments pending and brought by or
threatened by, any third party which would result in a change in the allowable
uses of the Property or which would modify the right of the Company or the
Purchaser to use the Property for a solid waste landfill after the Closing Date,
except as set forth in Schedule 3.6(k) attached hereto and incorporated herein
by reference.
Section 3.7 Title.
-----
(a) The Assets. The Company has good and marketable title to all of its
----------
assets, both real property and personal property, tangible and intangible,
including, without limitation, all of the assets reflected on the "Most Recent
Balance Sheet" (hereinafter defined), all personal property currently located on
its premises, all cash and accounts receivable set forth in Schedule 3.9(c)
attached hereto, all items of personal property set forth on the schedules
attached hereto, and all trademarks and other intellectual property used in the
Company's business, except in each case, the Excluded Assets and that personal
property which the Company leases, all of which is listed on Schedule 3.7(a)
attached hereto and incorporated herein by reference. All of such assets are
owned by the Company free and clear of any mortgage, pledge, lien, encumbrance,
charge, claim, security agreement, agreement regarding or restricting transfer
or title retention or other security arrangement, except the items set forth in
subparagraphs (i) through (iii) below, and the items listed on Schedule 3.7(a)
("Permitted Company Assets Encumbrances"). Schedule 3.7(a) identifies all liens
by amount and by the document, instrument or law under which it arises.
(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(ii) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation; and
(iii) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment.
(b) The Property. The Company has good, marketable and insurable title to
------------
the Property free and clear of any mortgages, pledges, liens, encumbrances,
charge, claim, security agreement or title retention or other security
arrangement, except for the Permitted Exceptions.
Section 3.8 Financial Statements. Sellers have delivered to Purchaser
--------------------
true and correct copies of the following financial statements of the Company
(the "Financial Statements"):
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(a) Balance Sheets for the Company as of December 31, 1994, as of December
31, 1995 and as of December 31, 1996, and statements of income, cash flow and
retained earnings for the same periods, all prepared on an accrual basis by
Company's regular accountants.
(b) A balance sheet for the Company as of December 31, 1997 ("Most Recent
Balance Sheet"), and a statement of income, cash flow and retained earnings for
the period ended December 31, 1997 ("Most Recent Income Statement"), both
prepared on an accrual basis by the Company. The Most Recent Balance Sheet and
Most Recent Income Statement are hereafter referred to as the "Most Recent
Financial Statements."
The Financial Statements have been prepared by the regular accountants of
the Company, in accordance with generally accepted accounting principles
("GAAP"). All notes and contingent labilities required to be stated and
reflected under GAAP are stated and reflected on the Financial Statements.
Each of the Financial Statements (including all footnotes thereto) is true,
complete and correct in all material respects. The balance sheets present fairly
and accurately the financial condition of the Company as of the dates indicated
thereon and the statements of income present fairly and accurately on an accrual
basis the results of the operations of the Company for the periods indicated
thereon. The Company has not (i) made any material change in its accounting
policies or (ii) effected any prior period adjustment to, or other restatement
of, its financial statements for any period. The Financial Statements are
consistent with the books and records of the Company (which books and records
are correct and complete). Since the date of the Most Recent Financial
Statements, there has not been any material adverse change in the income,
expenses, assets, liabilities or financial condition of the Company.
Notwithstanding the foregoing, prior to and subsequent to Closing, Sellers
shall cooperate with Purchaser and its accounting firm in the preparation of
both: (i) audited Financial Statements for the Company (including balance sheets
for the Company and statements of income, cash flow and retained earnings)
prepared by the regular accountants of the Company (the "Company's Accountants")
in accordance with GAAP for each of the three (3) full fiscal years of the
Company immediately preceding Closing (the "Company's Audited Financial
Statements"), and (ii) unaudited Financial Statements for the Company (including
balance sheets for the Company and statements of income, cash flow and retained
earnings) prepared by the Company's Accountants in accordance with GAAP covering
each and every full (as of Closing) fiscal quarter of the Company in the
Company's fiscal year in which Closing occurs (the "Company's Stub Period
Financial Statements").
Section 3.9 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) The Company does not have any liabilities, fixed or contingent, other
than:
(i) liabilities fully reflected in the Most Recent Balance Sheet,
except for liabilities not required to be disclosed therein in accordance with
GAAP;
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<PAGE>
(ii) accounts payable arising since the date of the Most Recent
Balance Sheet arising during the normal course of business consistent with past
custom and practice; and
(iii) liabilities listed on schedule 3.9(a)(iii) attached.
(b) All accounts receivable of the Company less an agreed-upon bad
accounts reserve, are valid accounts receivable, and will be fully collectible
within 180 days of Closing. All accounts receivable have been generated in the
ordinary course of the Company's business and all services required to be
rendered for the accounts receivable to be due have been rendered. To Sellers'
knowledge, there are no defenses or set-offs to any of the accounts receivable.
On the Closing Date, the accounts receivable of the Company shall exceed the
accounts payable of the Company.
(c) At Closing, the Company shall have working capital consisting of
current assets in excess of current liabilities (each determined in accordance
with generally accepted accounting principles) in an amount no less than the
greater of $100,000 or the amount it has had on an historic basis as reflected
on the Financial Statements. It is acknowledged that current assets shall
include cash, cash equivalents, pre-paid expenses and accounts receivable (less
a bad debt allowance), and current liabilities shall include accounts payable,
accrued expenses, accrued vacation pay, and the current portion of any long-term
liabilities. At Closing, Company shall have no long-term liabilities.
Section 3.10 Fiscal Condition of Company. Since the date of the Most
---------------------------
Recent Balance Sheet, except as set forth on Schedule 3.10, there has not
(except as otherwise specifically permitted by this Agreement) been:
(a) Any material change in the financial condition, business organization
or personnel of the Company or in the relationships of the Company with
suppliers, customers or others, other than changes occurring in the ordinary
course of business;
(b) Any disposition by the Company of any of its capital stock or any
grant of any option or right to acquire any of its capital stock, or any
acquisition or retirement by the Company of any of its capital stock or any
declaration or payment of any dividend or other distribution of its capital
stock;
(c) Any sale or other disposition of any asset owned by the Company (other
than the Excluded Assets) at the close of business on the date of the Most
Recent Balance Sheet, or acquired by it since that date, other than in the
ordinary course of business or which individually do not exceed $5,000 or in the
aggregate, do not exceed $10,000;
(d) Any expenditure or commitment by the Company for the acquisition of
any single asset having an acquisition price of $10,000 or more;
(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 $10,000 in the aggregate;
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<PAGE>
(f) Any bonuses or increases in the compensation payable or to become
payable by the Company to any officer or key employee;
(g) Any loans or advances to the Company other than renewals or extensions
of existing indebtedness; or
(h) Any change in accounting method or practice.
Section 3.11 Tax Returns. The Company has filed all Federal and other
-----------
tax returns for all periods on or before the due date of such return (as may
have been extended by any valid extension of time) and has paid all taxes due
for the periods covered by the said returns. The Company has no liability for
taxes incurred by its operations prior to Closing, except for taxes for the
current fiscal year in an amount not exceeding the reserve therefor on the Most
Recent Balance Sheet. The Company is a Subchapter S corporation under the
Internal Revenue Service Code. Sellers warrant that they will pay with their own
funds any and all federal, state and local taxes due and payable by the Company
with respect to all periods prior to the Closing, to the extent such taxes
exceed the reserves for taxes established on the Company's Most Recent Balance
Sheet, including, without limiting the generality of the foregoing, all federal,
state and local income, sales, use franchise, excise and property taxes. The
reserves for all taxes reflected in the Most Recent Balance Sheet, if any, are
adequate to cover all taxes, interest and penalties in connection therewith that
may be assessed with respect to the property and business operations for the
period(s) ending on the Date of Closing and for all prior periods. The Company
has filed, and will file, in a timely manner all requisite federal, state, local
and other tax returns due for all fiscal periods ended on or before the date
hereof and as of the Closing shall have filed in a timely manner all such
returns due for all periods ended on or before the Closing Date. No federal,
state, local or other tax returns or reports filed by the Company (whether filed
prior to, on, or after the date hereof), will result in any taxes, assessments,
fees or other governmental charges in excess of the amounts reserved for on the
Most Recent Balance Sheet. The Company has duly withheld and collected all taxes
which the Company is required to withhold or collect by law, has paid over to
the proper authorities all such amounts required to be paid, and has in reserve
all amounts so withheld or collected which have not yet been required to be
paid. No taxing authority has asserted any deficiency for any prior tax period
of the Company, and the Sellers are not aware of any facts which would
constitute the basis for the assertion of such a deficiency.
Section 3.12 Policies of Insurance. All insurance policies, performance
---------------------
bonds, and letters of credit insuring the Company or which the Company has had
issued and which has not expired are listed on Schedule 3.12 attached hereto.
Schedule 3.12 includes, the names and addresses of the insurers and sureties,
policy and bond numbers, types of coverage or bond, time periods or projects
covered and the names and addresses of all known agents or agencies, issuing
banks, and beneficiaries, with respect to each listed insurance policy,
performance bond and letter of credit. The Company's current insurance policies,
performance bonds and letters of credits are still in force and effect and the
premiums thereon are not delinquent. The Company has not received notification
from any insurance carrier denying or disputing any claim made by the Company or
denying or
13
<PAGE>
disputing any coverage for any such claim or denying or disputing the amount of
any claim. The Company does not have any claim against any of its insurance
carriers under any policies insuring it pending or anticipated and there has
been no occurrence of any kind which would give rise to any such claim.
Section 3.13 Employees, Pensions and, ERISA.
------------------------------
(a) The Company does not have any contract of employment with an officer
or other employee that is not terminable without penalty on notice of two weeks
or less, except as listed on Schedule 3.13(a).
(b) No employee of the Company is represented by any union. The name,
social security number and current rate of compensation of each of the Company's
employees and department in which each person is employed is listed on Schedule
3.13(b) attached. There is no pending or threatened dispute between the Company
and any of its employees which might materially and adversely affect the
continuance of any Company's business operations.
(c) Attached hereto made a part hereof and marked Schedule 3.13(c) lists
all employee benefit plans, funds or programs (within the meaning of the
Internal Revenue Code of the United States ("Code") or the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) which are currently
maintained and/or were established or sponsored by the Company (whether or not
they are now terminated) or to which the Company currently contributes, or has
an obligation to contribute in the future, including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions ("Plans"), whether or not the Plans are or are intended to be (i)
covered or qualified under the Code, ERISA or any other applicable law, (ii)
written or oral, (iii) funded or unfunded, or (iv) generally available to all
employees of the Company.
(d) The Company has delivered to the Purchaser (i) true and complete
copies of all Plan documents and other instruments relating thereto, (ii)
accurate and complete detailed summaries of all oral Plans, (iii) true and
complete copies of the most recent financial statements with respect to the
Plans, (iv) true and complete copies of all annual reports for any Plan prepared
within the past 5 years, and (v) all filings submitted to and any correspondence
received from any government agency relating to any Plan within the past 5
years.
(e) Each Plan which is intended to be qualified under Section 401(a) and
exempt from tax under Section 501(a) of the Code has been determined by the IRS
to be so qualified and such determination remains in effect and has not been
revoked. Nothing has occurred since the date of any such determination which
may adversely affect such qualification or exemption, or result in the
imposition of excise taxes or tax on unrelated business income under the Code or
ERISA except as set forth on Schedule 3.13 (e), attached hereto made a part
hereof. No Plan is funded through a trust intended to be exempt from tax under
Section 501(c) of the Code.
(f) No reportable event (as defined in Section 4043 of ERISA or the
regulations thereunder) for which the reporting requirements have not been fully
waived, or accumulated funding deficiency
14
<PAGE>
whether or not waived (as defined in Section 302 of ERISA), or liability to the
Pension Benefit Guaranty Corporation ("PBGC") under Section 4062 of ERISA, nor
any prohibited transaction (as defined in Section 406 of ERISA or Section 4975
of the Code), has occurred or exists with respect to any Plan. All Plans are in
substantial compliance with all applicable provisions of ERISA and the
regulations issued thereunder, as well as with all other law applicable to such
Plans, and, in all material respects, have been administered, operated and
managed in substantial accordance with the governing documents of the Plan and
the requirements of ERISA. The Company has no unfunded obligations or
liabilities with respect to any Plan and the present value of the benefit
liabilities of each Plan which is a Pension Plan is less than the fair market
value of the assets of such Plan.
(g) There is no matter, action, audit, suit or claim pending or, to the
best knowledge of Sellers, after due inquiry of the Company, threatened relating
to any Plan, fiduciary of any Plan or assets of any Plan, before any court,
tribunal or government agency.
(h) Each most recent Plan audit report, actuarial report and annual
report, certified by the Plan's actuaries and auditors, as the case may be,
fairly presents the actuarial status and the financial condition of the Plan as
at the date thereof and the results of operations of the Plan for the plan year
reflected therein and, subject to changes in amounts attributable to investment
performance and normal employee turnover, there has been no material adverse
change in the condition of the Plan since the date of the most recent Form 5500,
audited annual financial statement or actuarial valuation report.
(i) The transaction contemplated herein will not accelerate any liability
under the Plans because of an acceleration of any rights or benefits to which
any employee may be entitled thereunder.
(j) The Company has no obligations with respect to, and makes no
contributions to, any Multi-Employer Pension Plan.
Section 3.14 Legality of Operation. In regard to the Company:
---------------------
(a) Except as disclosed in Schedule 3.14(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined, the Company is in compliance
with all Federal, state and local laws, rules and regulations including, without
limitation, the following laws: land use laws; payroll, employment, labor, or
safety laws; or federal, state or local "anti-trust" or "unfair competition" or
"racketeering" laws such as but not limited to the Sherman Act, Clayton Act,
Robinson Patman Act, Federal Trade Commission Act, or Racketeer Influenced and
Corrupt Organization Act ("Law"). Except as disclosed in Schedule 3.14(a), the
Company is in compliance with all permits, franchises, licenses, and orders that
have been issued with respect to the Laws and are or may be applicable to 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 3.14(a), with
15
<PAGE>
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 adverse 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 3.14(a), the Company has received no notification of any past or
present failure by the Company to comply with any Law applicable to it or its
assets.
(b) Except as disclosed in Schedule 3.14(b) to this Agreement, the Company
is in compliance with all Federal, state and local laws, rules and regulations
relating to environmental issues of any kind and/or the receipt, transport or
disposal of any hazardous or non-hazardous waste materials from any source
("Environmental Law"). Except as disclosed in Schedule 3.14(b), with respect to
any Environmental Law the Company is in compliance with all permits, licenses,
and orders related thereto or issued thereunder with respect to Environmental
Laws, as are or may be applicable to the 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. Except as set forth on
Schedule 3.14(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 $5,000 or more
or which would invalidate this Agreement or any action taken in connection with
this Agreement. Except as set forth on Schedule 3.14(b), 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 3.14(b), 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, the Company has
not received any notification (including requests for information directed to
the Company or an owner thereof) from any governmental agency asserting that the
business is or may be a "potentially responsible person" for a remedial action
at a waste storage, treatment or disposal facility, pursuant to the provisions
of CERCLA, or any similar federal or state statute assigning responsibility for
the costs of investigating or remediating releases of contaminants into the
environment. The Company has not received hazardous waste as defined in the
Resource
16
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Conservation and Recovery Act, 42 USCA Section 6901 et seq., or in any similar
-- ---
federal or state statute.
(c) Except as listed in Schedule 3.14(c) attached hereto and incorporated
herein by reference, the Company has never owned, operated, had an interest in,
engaged in and/or leased a waste transfer, recycling, treatment, storage,
landfill or other disposal facility except for the facility located at the
Property. The Company has obtained and maintained, when required to do so under
applicable Laws, trip tickets, signed by the applicable waste generators
demonstrating the nature of all waste deposited and or transported by the
Company. No employee, contractor or agent of the Company has, in the course and
scope of employment with the Company, been harmed by exposure to hazardous
materials, as defined under the Laws. No liens with respect to environmental
liability have been imposed against the Company under CERCLA, any comparable
Pennsylvania, statute or other applicable Law, and no facts or circumstances
exist which would give rise to the same.
(d) Attached hereto as Schedule 3.14(d) is a list of all Notice of
Violations issued to the Company by any federal, state or local regulatory
agency. There are no notices of violation either from a federal, state or local
authority received by the Company or outstanding, except as listed in Schedule
3.14(d).
(e) No Seller is under investigation by any District Attorney or similar
state or local official or agency or the Justice Department of the United States
of America for the violation of any Laws, including, without limitation,
racketeering, unfair competition, or anti-trust. No facts or circumstances
exist which would cause the Company to be liable for the violation of any Laws
including, without limitation, racketeering, unfair competition, or anti-trust.
(f) Except as set forth in Schedule 3.14(f), all licenses, approvals,
permits and certificates ("Government Authorizations") needed or required for
the operation of the Company's business are set forth on Schedule 3.3. All such
Government Approvals are in full force and effect, the Company is in compliance
with all such Government Approvals, and all such Government Approvals have been
validly and legally obtained by the Company.
Section 3.15. Corrupt Practices. To the Sellers' knowledge, the Company
-----------------
has not made, offered or agreed to offer anything of value to any employees of
any customers of the Company for the purpose of attracting business to the
Company or any foreign or domestic governmental official, political party or
candidate for government office or any of their respective employees or
representatives, nor has the Company otherwise taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended.
Section 3.16 Legal Compliance. Except as listed in Schedule 3.16 attached
----------------
hereto and incorporated herein, the Sellers and the Company have the right,
power, legal capacity and authority to enter into, and perform their respective
obligations under this Agreement, and no approvals or consents of any other
persons are necessary in connection with the transactions contemplated by this
Agreement, except for any consent or approval of the DEP which may be required
in relation to the Company's permit to operate a landfill. The execution,
delivery and performance of this Agreement
17
<PAGE>
have been duly authorized by all necessary action of the directors and
shareholders of the Company. The execution, delivery and performance of this
Agreement will not result in a breach of or constitute a default or result in
the loss of any material right or benefit under:
(a) Any charter, by-law, agreement or other document to which the Company
is a party or by which the Company or any of its property is bound; or
(b) Any decree, order or rule of any court of governmental authority which
is binding on the Company or on the property of the Company.
Section 3.17 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the authority of the Company or any of the Sellers is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
Section 3.18 Intellectual Property. To the Sellers' knowledge, the
---------------------
Company has not infringed and is not now infringing, on any trade name,
trademark, service mark, copyright, trade secret or patent belonging to any
person, firm or corporation ("Intellectual Property") and no one has or is
infringing any Intellectual Property right of the Company.
Section 3.19 Competition. No salaried officer, shareholder or employee
-----------
of the Company, nor any spouse, child or other relative of any of them, has any
direct or indirect interest in any competitor of the Company within the
geographical area in which the Company currently conducts business, or an
interest in any supplier or customer of the Company or in any person from whom
or to whom the Company leases any real or personal property, or in any other
person with whom the Company is doing business which interest adversely or
materially affects the business of the Company, excepting only those investments
of not more than five percent of the capital stock of a business, the stock of
which is traded on a national securities exchange or over-the-counter, where
such investments are set forth on Schedule 3.19 attached hereto and incorporated
herein by reference.
Section 3.20 Disclosure. Neither the representations and warranties of
----------
the Sellers contained in this Agreement nor any information contained in any
Exhibit or Schedule or other document delivered by the Sellers or the Company to
Purchaser contains any untrue statement of a material fact, or, to Sellers'
knowledge, omits to state any statement of a material fact necessary to make the
statements contained therein or herein not misleading. No investigation
conducted by the Purchaser shall be deemed to limit or vitiate in any way the
effect of the representations and warranties made herein; however, Purchaser
shall disclose to Sellers at or prior to Closing any representation or warranty
which Purchaser shall have found to be untrue or incorrect.
Section 3.21 Continuation of Legal Status. To Seller's knowledge, no
----------------------------
written agreement between the Company and any third party shall be impaired or
in any way limited by the transactions contemplated by this Agreement.
18
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Section 3.22 Litigation. All pending or, to Sellers' knowledge,
----------
threatened litigation, administrative or judicial proceedings or investigations
by any governmental agency or officials involving the Company or its Property or
assets, liabilities or the Company Shares, together with a description of each
such proceedings, is set forth on Schedule 3.22 attached. There is no pending
or, to Sellers' knowledge, threatened litigation, administrative or judicial
proceedings or investigation involving the Company or its Property, assets,
liabilities or the Company Shares, except as listed on Schedule 3.22.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers that the representations
and warranties contained in this Article IV are true on the date hereof and
shall be true on the Closing Date.
Section 4.1 Structure. Purchaser is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
Section 4.2 Authorization to Proceed with this Agreement. Purchaser has,
--------------------------------------------
by proper corporate proceedings, duly authorized the execution, delivery and
performance of this Agreement.
Section 4.3 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against the Company or against the Sellers for any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 4.4 Commission Filings. Purchaser has delivered to Sellers
------------------
current and all historical filings made by Purchaser on Forms 8-K, 10-K, 10-Q
and Proxy Statements timely filed with the Securities and Exchange Commission
("SEC") for fiscal year ending June 30, 1997 (the "Public Reports"). The Public
Reports accurately and completely describe, in all material respects,
Purchaser's financial status, business operations and prospects as of the date
of such filings and as of the date hereof, and do not omit any material fact(s)
necessary to make the information contained in the filings not misleading.
Section 4.5 Issued Common Stock. The Consideration Stock to be issued
-------------------
pursuant to this Agreement has been duly authorized and, when issued, will be
validly issued, fully paid and nonassessable.
ARTICLE V
ADDITIONAL AGREEMENTS OF SELLERS
The Sellers covenant and agree with Purchaser as follows:
Section 5.1 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all of the outstanding stock of Company solely in exchange for
voting stock of Purchaser in a transaction
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intended to qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Code, and shall constitute a "plan of reorganization" within
the meaning of the Code. The parties hereto agree to take no action
inconsistent with the treatment of such exchange as a reorganization under Code
Section 368(a)(1)(B) and to comply with all IRS filing and other requirements
for such exchange. Purchaser and Sellers agree that a material factor in their
execution of this Agreement is that the transactions contemplated by this
Agreement shall constitute a "plan of reorganization" within the meaning of the
Code. If for any reason a provision in this Agreement would prevent the
transaction from qualifying as a reorganization within the meaning of the Code,
the parties agree to negotiate in good faith to modify the Agreement so the
transaction can qualify as a reorganization, as long as the economics of the
transaction are not changed.
Section 5.2 Pooling Restrictions. Purchaser and Sellers have agreed that
--------------------
a material factor in their execution of this Agreement is that the transactions
contemplated by this Agreement be treated as a "pooling of interests" for
accounting purposes. If for any reason a provision in this Agreement would
prevent the transaction being accounted for as a "pooling of interests," the
parties agree to negotiate in good faith to modify the Agreement so the
transaction can be accounted for as a "pooling of interests." Notwithstanding
any other provision of this Agreement, prior to the publication and
dissemination by Purchaser of consolidated financial results which include
results of combined operations of the Company and Purchaser for at least 30 days
on a consolidated basis following the Closing Date, Sellers shall not sell or
otherwise transfer or dispose of, or in any way reduce their risk relative to,
any shares of the Consideration Stock received by Sellers (including by way of
example and not limitation, engaging in put, call, short-sale, straddle or
similar market transactions). Purchaser agrees that such consolidated financial
results shall be published and disseminated no later than 120 days after the
Closing Date. The Securities Exchange Commission ("SEC") has issued Accounting
Series Release Nos. 130 and 135, as amended (collectively, the "ASRs"), setting
forth certain restrictions applicable to the availability of "pooling-of-
interests" accounting treatment in transactions of the type contemplated by this
Agreement. Sellers therefore covenant and agree with Purchaser to hold the
Consideration Stock and to comply with the ASRs until the requirements of the
ASRs have been met. In addition, the certificates evidencing the Consideration
Stock to be received by Sellers will bear a legend substantially in the form set
forth below:
"The shares represented by this certificate may not be sold,
transferred or assigned, and Eastern Environmental Services,
Inc., shall not be required to give effect to any attempted
sale, transfer or assignment prior to the publication and
dissemination of financial statements by Eastern
Environmental Services, Inc., which include the results of
at least 30 days of combined operations of Eastern
Environmental Services, Inc., and the company acquired by
Eastern Environmental Services, Inc., for which these shares
are issued. Upon the written request of the holder hereof
directed to Eastern Environmental Services, Inc., the issuer
agrees to remove this restrictive legend (and any stop order
places with the transfer agents) when the requirements of
Accounting Series Releases Nos. 130 and 135, as amended, of
the Securities Exchange Commission have been met."
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Section 5.3 Restrictions on Transfer of Unregistered Stock. The Sellers
----------------------------------------------
understand and agree that the following restrictions and limitations are
applicable to the Sellers' purchase and resale or other transfer of the
Consideration Stock, pursuant to the Securities Act of 1933 (the "Act"):
(a) Sellers agree that the Consideration Stock shall not be sold or
otherwise transferred, unless the Consideration Stock is registered under the
Act and state securities laws or is exempt therefrom.
(b) A legend in substantially the following form will be placed on the
certificates evidencing the Consideration Stock to be issued to the Sellers:
"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
Consideration Stock issued to Sellers pursuant to this Agreement so as to
restrict resale or other transfer thereof except in accordance with the
foregoing provisions of this Agreement.
Section 5.4 Representations as to Private Offering. The Consideration
--------------------------------------
Stock is being delivered to the Sellers in a private placement under Section 4.2
of the Act and under Regulation D promulgated under the Act. To induce
Purchaser to issue the Consideration Stock, each Seller represents and warrants
as follows:
(a) Each Seller represents and warrants that he or she is a resident of
Kentucky and is an accredited investor, as that term is defined in Regulation D
under the Act.
(b) Each Seller acknowledges that they have received a copy of the Public
Reports.
(c) The Sellers represent and warrant that the Consideration Stock is
being acquired for their own account without a view to public distribution or
resale and that the Sellers have no contract, undertaking, agreement or
arrangement to sell or otherwise transfer or dispose of Consideration Stock, or
any portion thereof, to any other person.
(d) The Sellers represent and warrant that, in determining to acquire the
Consideration Stock, they have relied solely upon their independent
investigation, including the advice of their legal counsel and accountants or
other financial advisers or purchaser representatives, and have, during the
course of discussions concerning their acquisition of the Consideration Stock,
been offered the opportunity to ask such questions and inspect such documents
concerning Eastern and
21
<PAGE>
its business and affairs as they have requested so as to more fully understand
the nature of the investment and to verify the accuracy of the information
supplied.
(e) THE SELLERS ACKNOWLEDGE THAT THE ACQUISITION OF THE CONSIDERATION
STOCK INVOLVES A HIGH DEGREE OF RISK, and represents and warrants that they can
bear the economic risk of the acquisition of the Consideration Stock, including
the total loss of their investment.
(f) The Sellers represent and warrant that (i) they have adequate means of
providing for their current needs and financial contingencies, (ii) they have no
need for liquidity in this investment, (iii) they have no debts or other
obligations, and cannot reasonably foresee any other circumstances, that are
likely in the future to require them to dispose of the Consideration Stock, and
(iv) all their investments in and commitments to non-liquid investments are, and
after their acquisition of the Consideration Stock will be reasonable in
relation to their net worth and current needs.
(g) The Sellers understand that no federal or state agency has approved or
disapproved the Consideration Stock or made any finding or determination as to
the fairness of the Consideration Stock for investment.
(h) The Sellers understand that the Consideration Stock is being offered
and sold in reliance on specific exemptions from the registration requirements
of federal and state securities laws and that Purchaser is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
applicability of such exemption and the suitability of Sellers to acquire the
Consideration Stock.
Section 5.5 Access to Records and the Property. The Sellers will cause
----------------------------------
the Company to give to Purchaser and its representatives, experts and advisors,
from and after the date of execution of this Agreement and up until Closing,
full access to all of the properties (including the Property), assets, books,
contracts, documents, records, contracts and customer lists of the Company, and
to make available to Purchaser and its representatives, experts and advisors all
additional financial statements of and all information with respect to the
business and affairs of the Company that Purchaser may reasonably request.
Purchaser and its representatives shall have the right to copy any information
or documentation the Purchaser is entitled to inspect under this Section 5.3.
Section 5.6 Continuation of Business. The Sellers will operate the
------------------------
Company until the time of Closing, using prudent business judgment so as to
preserve its business organization intact, to assure, to the extent possible,
the availability to Purchaser of the present key employees of the Company, and
to preserve for Purchaser the relationships of the Company with suppliers,
customers, and others, all to the end that every bona fide effort be made that
---- ----
the ongoing business of the Company will not be impaired at the time of Closing.
Section 5.7 Continuation of Insurance. The Sellers will cause the Company
-------------------------
to keep in existence all policies of insurance insuring the Company against
liability and property damage, fire and other casualty through the time of
Closing.
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Section 5.8 Standstill Agreement. Unless and until this Agreement is
--------------------
terminated without the Closing having taken place, the Shareholders will not
directly or indirectly solicit offers for the Property, the Company Shares or
the assets of the Company or for a merger or consolidation involving the
Company, or respond to inquiries from, share information with, negotiate with or
in any way facilitate inquiries or offers from, third parties who express or who
have heretofore expressed an interest in acquiring the Company by merger,
consolidation or other combination or acquiring any of Company' assets; nor will
the Shareholders permit the Company to do any of the foregoing.
Section 5.9 FIRPTA Certificate. Purchaser and Sellers acknowledge that
------------------
the financial provisions of this Agreement are subject to the requirements of
the Foreign Investment in Real Property Tax Act ("FIRPTA"), and that the
Internal Revenue Code ("Code") Sections 1445 and 6039C require Purchaser in
certain circumstances to withhold ten percent (10%) of the amount realized by
the Sellers. Among other circumstances, Purchaser are not required to withhold
said amount if Company furnishes Purchaser with a certificate stating the
Company's U.S. Taxpayer Identification Number and that the Company is not a
foreign person within the meaning of the Code. Company agrees to provide to
Purchaser at Closing such certificate as is reasonably necessary to insure that
such withholding is not required under FIRPTA.
ARTICLE VI
ADDITIONAL AGREEMENTS OF PURCHASER
Section 6.1 Payment of Expenses. Purchaser will pay all expenses
-------------------
(including legal fees) incurred by them in connection with the negotiation,
execution and performance of this Agreement. The Sellers will pay all expenses
incurred by the Sellers (including legal fees) in connection with the
negotiation, execution and performance of this Agreement. Additionally, the
cost of preparing the Audited Financial Statements and the Stub Period Financial
Statements shall be borne by Eastern.
Section 6.2 Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchaser shall allow the Sellers and their professional
advisers access to all business records and files of the Company pertaining to
the operation of the Company prior to the Closing Date which were delivered to
the Purchaser in accordance with Section 1.7 of this Agreement ("Records") where
the Shareholders or Sellers require access to the Records for the purpose of
preparing their tax returns, responding to any audit or informational request
regarding their tax returns or if required by them for use in a judicial
proceeding in which they are a party. Access to the records shall be during
normal working hours at the location where such Records are stored. The Sellers
shall have the right, at their own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchaser' business. For a period of six years after the Closing Date, the
Purchaser shall not dispose of or destroy any material Records without first
providing written notice to the Sellers at least 30 days prior to the proposed
date of such disposition or destruction.
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<PAGE>
ARTICLE VII
CONDITIONS OF PURCHASER
The Obligations of Purchaser to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following items which are conditions to the Closing:
Section 7.1 Compliance by Sellers. The Sellers and the Company shall have
---------------------
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by the Sellers and Company at or
prior to the Closing Date. All representations and warranties of Sellers
contained in this Agreement shall be true and correct at and as of the Date of
Closing, with the same force and effect as though made at and as of the Date of
Closing, except for changes expressly permitted by this Agreement, and Purchaser
shall have received a Certificate duly executed by each of the Sellers
representing and warranting the foregoing.
Section 7.2 Due Diligence Investigation. As a condition of Closing, the
---------------------------
Purchaser shall be satisfied with the results of the due diligence investigation
it has made concerning the Company and the transactions, as set forth in this
Agreement.
Section 7.3 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Assets, the Property, or the Business or which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
purchaser or any affiliate thereof subsequent to the Date of Closing and which,
in the judgment of the Board of Directors of Purchaser, made in good faith and
based upon advice of its counsel, makes it inadvisable to proceed with the
transaction contemplated by this Agreement.
Section 7.4 Fiscal Condition of Business. There shall have been no
----------------------------
material adverse change in the results of operations, financial condition or
business of the Company, and the Company shall have not suffered any material
loss or damage or any of its properties or assets, whether or not covered by
insurance, since the date of the Most Recent Balance Sheet.
Section 7.5 Governmental Approvals. Purchaser and the Company will have
----------------------
advised the DEP and every other controlling regulatory agency of the change in
control of the Company and the DEP and each agency shall not have objected to
the transaction. While both the Sellers and the Purchaser shall cooperate with
each other in this process, the Purchaser shall pay the cost thereof.
Section 7.6 Opinion of Counsel. Sellers shall have delivered to the
------------------
Purchaser the opinion of counsel, dated the Closing Date, in the form described
in Section 1.7.
Section 7.7 Noncompetition Agreements. The Sellers shall have executed and
-------------------------
delivered to Purchaser the Noncompetition Agreements.
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<PAGE>
Section 7.8 Pooling Determination. Purchaser shall have received
---------------------
notification from its regular accountants that the transaction contemplated
herein may be treated for accounting purposes as a "pooling of interests."
ARTICLE VIII
CONDITIONS OF SELLERS
The obligations of the Sellers to effect the transactions contemplated by
this Agreement shall be subject to the fulfillment at or prior to the time of
Closing of each of the following conditions:
Section 8.1 Compliance by Purchaser. The Purchaser shall have performed
-----------------------
and complied with all of the obligations and conditions required by this
Agreement to be performed or complied with by it at or prior to or at the
Closing Date. All representations and warranties of Purchaser contained in this
Agreement shall be true and correct at and as of the Date of Closing, with the
same force and effect as though made at and as of the Date of Closing, except
for changes expressly permitted by this Agreement.
Section 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which
might affect the right of Purchaser to own, operate in its entirety or control
any of the Assets, the Property, or the Business or which, as a result of the
transaction contemplated by this Agreement, might affect such right as to
Purchaser or any affiliate thereof subsequent to the Date of Closing and which,
in the judgment of the Sellers, made in good faith and based upon advice of
their counsel, makes it inadvisable to proceed with the transaction contemplated
by this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification by Sellers. Each Seller, Jointly and
--------------------------
severally, agrees that it will indemnify, defend, protect and hold harmless
Purchaser and its officers, shareholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parent, agents, employees, legal representatives,
successors and assigns from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) whether equitable or legal,
matured or contingent, known or unknown to such Seller, foreseen or unforeseen,
ordinary or extraordinary, patent or latent, whether arising out of occurrences
prior to, at, or after the date of this Agreement, from: (a) any breach of,
misrepresentation in, untruth in or inaccuracy in the representations and
warranties by the 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 a Seller
made in this Agreement and to be performed by a Seller before or after the
Closing Date; (c) violation of the requirements of any governmental authority
relating to the reporting and payment (to the extent payment exceeds the amount
reserved for in the Most Recent Financial Statement) of federal, state, local or
other income,
25
<PAGE>
sales, use, franchise, excise or property tax liabilities of the Company arising
or accrued prior to the Closing Date; (d) any violation of any federal, state or
local "anti-trust" or "racketeering" or "unfair competition law", including,
without limitation, the Sherman Act, Clayton Act, Robinson Patman Act, Federal
Trade Commission Act, or Racketeer Influenced and Corrupt Organization Act; and
(e) any claim by a third party that, if true, would mean that a condition for
indemnification set forth in subsections (a), (b), (c) or (d) of this Section
9.1 of this Agreement has occurred.
Section 9.2 Indemnification by Purchaser. Purchaser agrees that it will
----------------------------
indemnify, defend, protect and hold harmless Sellers and their officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, heirs, legal representatives, successors and
assigns, as applicable, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, penalties, costs and expenses
whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by it, as a result of or
incident to: (a) any breach of, misrepresentation in, untruth in or inaccuracy
in the representations and warranties of Purchaser 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 Purchaser made in this Agreement and to be performed by Purchaser
before or after the Closing Date; (c) any claim by a third party that, if true,
would mean that a condition for indemnification set forth in subsections (a),
(b), or (c) of this Section 9.2 has occurred.
Section 9.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
- ------
(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification 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 so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse
26
<PAGE>
judgment with respect to the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice adverse to the continuing business interests of the Indemnified Party,
and (v) the Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses), and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
IX.
Section 9.4 Procedure for Non-Third Party Claims. If Purchaser or any
------------------------------------
Seller wishes to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party notification which
makes the provisions of Section 9.3 applicable, the party desiring
indemnification ("Indemnified Party") shall deliver to the party from which
indemnification is sought ("Indemnifying Party") a written demand for
indemnification ("Indemnification Demand"). The Indemnification Demand shall
state: (a) the amount of losses, damages or expenses to which the Indemnified
Party has incurred or has suffered or is expected to incur or suffer to which
the Indemnified Party is entitled to indemnification pursuant to Section 9.1 or
Section 9.2, as applicable; (b) the nature of the event or occurrence which
entitles the Indemnified Party to receive payment under Section 9.1 or Section
9.2, as applicable. If the Indemnifying Party wishes to object to an
Indemnification Demand, the Indemnifying Party must send written notice to the
Indemnified Party stating the objections and the grounds for the objections
("Indemnification Objection"). If no Indemnification Objection is sent within
thirty (30) days after the Indemnification Demand is sent, the Indemnifying
Party shall be deemed to have acknowledged the correctness of the claim or
claims specified in the Indemnification Demand and shall pay the full amount
claimed in the Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification
27
<PAGE>
Demand, within thirty days of the Indemnification Demand's date, the Indemnified
Party may institute legal proceedings to enforce payment of the indemnification
claim contained in the Indemnification Demand and any other claim for
indemnification that the Indemnified Party may have.
Section 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 2.10 shall survive until the expiration of the applicable statute of
limitations on any claim which can be brought against the Company by tax
authorities or governmental agencies or governmental units and (ii) all
representations and warranties other than set forth in (i) above shall survive
until three years from the Closing Date. Notwithstanding the prior sentence
which provides that the representations and warranties expire after certain
stated periods of time, if within the stated period of time, a notice of a claim
for indemnification or Indemnification Demand is given, or a suit or action
based upon representation or warranty is commenced, the Indemnified Party shall
not be precluded from pursuing such claim or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the claim or
action, by reason of the expiration of the representation or warranty.
Section 9.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article IX, such party shall promptly pay the
Indemnifying Party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Article IX, the Indemnifying Party shall, nevertheless, pay when due such
portion, if any, of the obligation as shall not be subject to dispute. The
portion in dispute shall be paid upon a final and non-appealable resolution of
such dispute. Upon the payment in full of any claim, the Indemnifying Party
shall be subrogated to the rights of the Indemnified Party against any person
with respect to the subject matter of such claim.
ARTICLE X
OTHER PROVISIONS
Section 10.1 Nondisclosure by Sellers. Sellers recognize and acknowledge
------------------------
that they have in the past, currently have, and in the future will have certain
confidential information of Purchaser such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Purchaser. Sellers agree that for a period of ten (10) years from the
Closing Date they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Purchaser, unless (i) such
information becomes known to the public generally through no fault of any
Seller, (ii) a Seller is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) the Closing does
not take place. In the event of a breach or threatened breach by any Seller of
the provisions of this Section, Purchaser shall be entitled to an injunction
restraining such Seller from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting Purchaser from
pursuing
28
<PAGE>
any other available remedy for such breach or threatened breach, including,
without limitation, the recovery of damages.
Section 10.2 Nondisclosure by Purchaser. Purchaser recognize and
--------------------------
acknowledges that it has in the past, currently has, and prior to the Closing
Date, will have access to certain confidential information of the Company, such
as lists of customers, operational policies, and pricing and cost policies that
are valuable, special and unique assets of the Company. Purchaser agree that it
will not utilize such information in the business or operation of Purchaser or
any of its affiliates or disclose such confidential information to any person,
firm, corporation, association, or other entity for any purpose or reason
whatsoever, unless (i) such information becomes known to the public generally
through no fault of Purchaser or any of its affiliates, (ii) Purchaser is
compelled to disclose such information by a governmental entity or pursuant to a
court proceeding, or (iii) Closing takes place. In the event of a breach or
threatened breach by Purchaser of the provisions of this Section, Sellers shall
be entitled to an injunction restraining Purchaser from utilizing or disclosing,
in whole or in part, such confidential information. Nothing contained herein
shall be construed as prohibiting Sellers from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 10.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, personal representatives and assigns.
This Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
Section 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to contemporaneous
discussions, correspondence, or oral or written agreements of any kind. The
parties to this Agreement have relied on their own advisors for all legal,
accounting, tax or other advice whatsoever with respect to the Agreement and the
transactions contemplated hereby.
Section 10.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
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(a) If to Purchaser, addressed to it at:
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 400
Mount Laurel, New Jersey 08054
with a copy to:
Robert M. Kramer & Assoc., P.C.
1150 First Avenue, Suite 900
King of Prussia, PA 19406
(b) If to Sellers, addressed to them at:
Mark Rust
6524 U.S. Route 231 North
Cromwell, Kentucky 42333
with a copy to:
William A. Buckaway, Jr.
Tilford, Dobbins, Alexander, Buckaway & Black
1400 One Riverfront Plaza
Louisville, Kentucky 40202
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 10.6.
Section 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the Commonwealth of Kentucky,
without giving effect to any choice or conflict of law provision or rule
(whether of the Commonwealth of Kentucky or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the
Commonwealth of Kentucky.
Section 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
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Section 10.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
Section 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
Section 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
Section 10.12 Construction. Any reference to any federal, state, local
------------
or foreign statute herein shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" means included, without limitation.
Section 10.13 Extension or Waiver of Performance. Either the Seller or
-----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Sellers and the
Purchaser.
Section 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies
under or by reason of this Agreement on any persons other than the parties to it
and their respective successors, legal representative and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third persons to any party to this Agreement, nor shall any
provisions give any third person any rights of subrogation or action over or
against any party to this Agreement.
Section 10.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
Section 10.16 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this Agreement shall issue any press release or otherwise make
any statement with respect to the transactions contemplated by this Agreement
without the prior consent of the other party, which shall not be unreasonably
withheld.
Section 10.17 Non-binding Arbitration.
-----------------------
(a) Each and every controversy or claim arising out of or relating to this
Agreement shall first be attempted to be settled by non-binding arbitration in
Lexington, Kentucky, in accordance with the commercial rules (the "Rules") of
the American Arbitration Association then obtaining. This Agreement to arbitrate
shall not bar any party from seeking temporary or provisional remedies
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in any Court having jurisdiction. Notice of the demand for arbitration shall be
filed in writing with the other party to this Agreement, which such demand shall
set forth in the same degree of particularity as required for complaints under
the Federal Rules of Civil Procedure the claims to be submitted to arbitration.
Additionally, the demand for arbitration shall be stated with reasonable
particularity with respect to such demand with documents attached as
appropriate. In no event shall the demand for arbitration be made after the
date when institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable statutes
of limitations.
(b) The arbitrators shall have the authority and jurisdiction to determine
their own jurisdiction and enter any preliminary awards that would aid and
assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The
arbitrators shall have the authority to modify, amend or change the discovery
plans of the parties upon application by either party, if good cause appears for
doing so.
(d) The award pursuant to such arbitration will be non-binding and any
party may seek additional or alternative remedies in any court having
jurisdiction.
(e) Counsel to Sellers and Purchaser 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"). Sellers and
Purchaser, 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SHAREHOLDERS
WITNESS:
/s/ Terrell Black /s/ Thomas W. Smith, Jr.
__________________________________ ________________________________
Thomas W. Smith, Jr.
WITNESS:
/s/ Terrell Black /s/ Mark A. Rust
__________________________________ ________________________________
Mark A. Rust
COMPANY
BLUEGRASS CONTAINMENT, INC.
By: /s/ Thomas W. Smith, Jr.
_____________________________
Its: President
____________________________
PURCHASER
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Robert M. Kramer
-----------------------------
Robert M. Kramer
Executive Vice President
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EXHIBIT 10.2
AMENDMENT NO. 1
TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 dated as of March 9, 1998 (the "Amendment"), has been
executed by and between Eastern Environmental Services, Inc., and the
Shareholders of Bluegrass Containment, Inc.
RECITALS
The parties to this Amendment have entered into a Stock Purchase Agreement
dated March 2, 1998 ("Agreement"). The parties hereto wish to make certain
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 hereby agree to amend the
Agreement as follows:
ARTICLE I
AMENDMENTS
1.1 All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
1.2 Section 1.3(a) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
"At the Closing, each of the Sellers agrees to transfer and deliver to Purchaser
all of the Company Shares owned by such Seller, as applicable, and Purchaser
agrees to purchase and pay for the Company Shares, the total consideration of a
number of shares of Purchaser's common stock having the value set forth
hereinafter ("Consideration Stock"), each share being valued ("Per Share Value")
at $24.25 per share. The total value of the Consideration Stock valued at the
Per Share Value shall equal $4,100,000 ("Base Purchase Price") as increased as
hereinafter set forth. The Base Purchase Price shall be increased by the
amount, if any, by which the accounts receivable of the Company (less an agreed-
upon bad debt reserve) exceed the accounts payable of the Company as of the
Closing Date ("Accounts Receivable Excess"). The Base Purchase Price shall also
be increased by the amount of cash held by Company in its regular checking and
savings accounts in excess of $100,000 ("Cash Excess"). The Base Purchase Price
shall be further increased by the dollar value of any freely tradeable mutual
funds posted as collateral for landfill closing and post-closing performance
bonds, valued at the closing net asset value as of the trading day which is the
fifth trading day prior to closing ("Collateral Securities"). At the Closing,
Purchaser shall deliver to Sellers Consideration Stock in the amount of
$4,806,932 (the "Closing Payment Amount"). The Consideration Stock shall not be
registered under the Securities Act of 1933 (the "Act") or any state securities
law."
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1.3 Section 1.3(d) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
"Upon conclusive determination of the Company's cash balances, accounts
receivable and accounts payable as of the Closing Date as provided in Section
1.3(c), Purchaser shall deliver to Sellers additional Consideration Stock valued
at the Per Share Value in the amount of (i) the Base Purchase Price plus the
amount of the Accounts Receivable Excess, if any, plus the amount of the Cash
Excess, if any, plus the amount of the Collateral Securities, less (ii) the
Closing Payment Amount delivered at closing in accordance with Section 1.3(a)."
1.4 The Closing Date under the Agreement shall be March 9, 1998.
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
X of the Agreement.
[The Remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
SHAREHOLDERS
WITNESS:
/s/ Terrell Black /s/ Thomas W. Smith, Jr.
_____________________________________ ________________________________________
Thomas W. Smith, Jr.
WITNESS:
/s/ Terrell Black /s/ Mark A. Rust
_____________________________________ ________________________________________
Mark A. Rust
COMPANY
BLUEGRASS CONTAINMENT, INC.
By: /s/ Thomas W. Smith, Jr.
____________________________________
Its: President
___________________________________
PURCHASER
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Robert M. Kramer
---------------------------------
Robert M. Kramer
Executive Vice President
3
