<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 12, 1998
EASTERN ENVIRONMENTAL SERVICES, INC.
------------------------------------
(Exact name of issuer as specified in charter)
Delaware 0-16102 59-2840783
(State or Other Commission (I.R.S. Employer
Jurisdiction of File Number Identification
Incorporation) Number)
1000 Crawford Place, Mt. Laurel, New Jersey 08054
(Address of principal executive offices)
(609) 235-6009
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 12, 1998, Eastern Environmental Services, Inc. (the
"Registrant") consummated the acquisition of Kelly Run Sanitation, Inc. ("Kelly
Run") pursuant to the terms of a Stock Purchase Agreement (the "Agreement")
dated November 19, 1997, as amended February 12, 1998. The Agreement, between
the Registrant and United Waste Systems, Inc. ("United Waste" or "Seller")
provided for the acquisition of all the outstanding shares of stock of Kelly
Run, a wholly owned subsidiary of United Waste. The Seller is not affiliated
with the Registrant nor with any of the Registrant's subsidiaries. The
description of the acquisition transaction set forth herein is qualified in its
entirety by reference to the Agreement and its subsequent amendment, which are
filed herewith as Exhibits 10.1 and 10.2, respectively.
At closing under the Stock Purchase Agreement, Registrant purchased all of
the outstanding stock of Kelly Run for consideration of 250,000 unregistered
shares of the Registrant's common stock valued at $19.20 per share. The
acquisition is accounted for using the "purchase" method of accounting.
Kelly Run Sanitation, Inc. owns the assets and liabilities relating to the
Kelly Run Landfill, a 385 acre Subtitle D solid waste disposal facility located
in southwestern Pennsylvania. The acquired assets include landfill equipment,
permits and real estate used in the operation of the landfill. The Registrant
intends to continue to operate the business owned by Kelly Run Sanitation, Inc.
Substantially, all liabilities, including landfill closure and post-closure
liabilities, were assumed by the Registrant, except for the liability to close
the Phase II portion of the landfill and certain intercompany liabilities which
remain the responsibility of the Seller.
<PAGE>
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
-----------------------------------
(a) Financial statements of business acquired
It is impracticable to provide the required consolidated financial
statements of Kelly Run Sanitation, Inc. at the time of the filing of this
report. The required financial statements of Kelly Run Sanitation, 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 made as of November 19, 1997, by and between
United Waste Systems, Inc. and Eastern Environmental Services, Inc.
10.2 Amendment dated February 12, 1998 to Stock Purchase Agreement dated
November 19, 1997, by and between United Waste Systems, Inc. and Eastern
Environmental Services, Inc.
- --------------------------------------------------------------------------------
Signature
- ---------
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: February 26, 1998 By: /s/ Gregory M. Krzemien
-----------------------------
Gregory M. Krzemien,
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.1 Stock Purchase Agreement made as of November 19, 1997, by and between
United Waste Systems, Inc. and Eastern Environmental Services, Inc.
10.2 Amendment dated February 12, 1998 to Stock Purchase Agreement dated
November 19, 1997, by and between United Waste Systems, Inc. and
Eastern Environmental Services, Inc.
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
EASTERN ENVIRONMENTAL SERVICES, INC.
AND
UNITED WASTE SYSTEMS, INC.
FOR THE STOCK OF
KELLY RUN SANITATION, INC.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
RECITALS................................................ 1
ARTICLE I - CLOSING..................................... 2
ARTICLE II - TITLE INSURANCE............................ 4
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER.. 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF EASTERN.. 15
ARTICLE V - ADDITIONAL AGREEMENTS OF SELLER............. 16
ARTICLE VI - ADDITIONAL AGREEMENTS OF EASTERN........... 22
ARTICLE VII - CONDITIONS OF EASTERN..................... 22
ARTICLE VIII - CONDITIONS OF SELLER..................... 23
ARTICLE IX - INDEMNIFICATION............................ 24
ARTICLE X - OTHER PROVISIONS............................ 28
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is made and entered into on
November 19, 1997, by and between Eastern Environmental Services, Inc., a
Delaware corporation ("Eastern" or "Purchaser"), on one part, and United Waste
Systems, Inc., a Delaware corporation ("Seller"), on the other part.
RECITALS
Eastern is a waste services company engaged in the collection,
transportation and disposal of residential, commercial and industrial waste in
several eastern, southern, and Midwestern states. For purposes of this
Agreement, Eastern is sometimes hereinafter referred to as "Purchaser." Seller
is the owner of all of the outstanding shares of stock ("Company Shares") of
Kelly Run Sanitation, Inc., ("Company"), which, inter alia, is in the business
of operating a landfill in or about Allegheny County, Pennsylvania, known as the
Kelly Run Landfill (the "Landfill Business").
Company owns the "Property" (hereinafter defined), and Company operates its
business at the Property. The term "Property" shall mean those certain tracts
of land located in Allegheny County, known as the Kelly Run Landfill and
containing approximately 385 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.
Company also operates a waste collection, transportation and disposal
business for industrial, commercial and residential solid waste. The assets of
this business shall, simultaneously with the consummation of the transactions
set forth herein, be transferred to affiliates or subsidiaries of Seller (the
"Hauling Business").
Purchaser desires to purchase all of the Company Shares, and the Seller
desires to sell all of the Company Shares, all subject to the terms and
conditions contained herein.
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 Seller. The
Disclosure Binder is organized under subheadings which correspond
1
<PAGE>
to the various Schedules described in this Agreement, and each schedule therein
shall be subdivided, grouped and identified by Company. 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. Seller agrees to deliver the Disclosure Binder to Purchaser
simultaneously with the execution hereof.
ARTICLE I
CONSIDERATION AND CLOSING
-------------------------
SECTION 1.1 Incorporation of Recitals. The recitals set forth above are
-------------------------
incorporated herein by reference and are a part of this Agreement.
SECTION 1.2 Time and Place for Closing. Closing under this Agreement
--------------------------
shall take place within ten 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 Seller's counsel, Schnader Harrison Segal & Lewis LLP, Suite 2700,
Fifth Avenue Place, Pittsburgh PA 15222, 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. At the
---------------------------------------------------
Closing, Seller agrees to transfer and deliver to Purchaser all of the Company
Shares and Purchaser agrees to purchase and pay for the Company Shares, the
total consideration of a number of shares of Eastern's common stock ("EESI
Stock") having a value of $6,000,000, each share being valued at $24.00 per
share to be issued to Seller's parent corporation, USA Waste Services, Inc. In
addition to the value set forth herein, Purchaser shall reimburse Seller for all
reasonable expenditures incurred by Seller or Company from September 1, 1997 for
construction of Phase III airspace at the Landfill to the extent such capacity
constructed is not consumed as of the Closing Date. Seller shall also be
reimbursed for the Company's $250,000 capital contribution made directly to
Forward Township which was delivered by the Company on November 14, 1997 in
connection with the construction and development of a sewer line to the
Company's property as required under the consent agreement with the Pennsylvania
Department of Environmental Protection ("PADEP").
SECTION 1.4 Closing. Following execution of this Agreement, Purchaser and
-------
Seller shall be obligated to conclude the transaction strictly in accordance
with its terms within ten (10) 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 Seller to perform its 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 its actual damages resulting from the
default of Seller. If the failure to conclude this transaction is due to the
refusal and failure of Purchaser to perform its obligations under this
Agreement, Seller may, in addition to and not in limitation of any other rights
and remedies available to the Seller under this Agreement, or at law
2
<PAGE>
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
-----------
hereby may be terminated at any time prior to the Closing Date:
(a) by mutual written agreement of Eastern and Seller;
(b) by Eastern or Seller, in the event the other makes a material
misrepresentation under this Agreement or breaches a material covenant or
agreement under this Agreement.
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
Sections 1.5, Article IX, Section 10.1, Section 10.2 and Section 10.15 shall
survive and continue in full force and effect, notwithstanding termination. The
termination of this Agreement shall not limit, waive or prejudice the remedies
available to the parties, at law or in equity, for a breach of this Agreement.
If this agreement is terminated, all due diligence and other documentation
delivered to Eastern by the Company and Seller shall be returned to the Seller.
SECTION 1.6 Deliveries by Eastern. At the Closing, Eastern shall deliver
---------------------
or cause to be delivered, all duly and properly executed, authorized and issued
(where applicable):
(a) Certificates representing shares of EESI, as provided in Section 1.3
above, to be delivered upon delivery of the Company Shares;
(b) A favorable opinion from counsel for Eastern, dated the Closing Date,
in the form attached as Schedule 1.6(b);
(c) The Waste Disposal Agreement, in the form and content attached hereto
as Schedule 1.6(c) (the "Waste Disposal Agreement");
(d) A copy of resolutions of the directors of Eastern authorizing the
execution and delivery of this Agreement and each other agreement to be executed
in connection herewith (collectively, the "Collateral Documents") and the
consummation of the transactions contemplated herein and therein; and
(e) Copies of all substitute financial assurances, bonds and letter of
credit for the Landfill Business as more fully set forth in Section 5.16 hereof.
SECTION 1.7 Deliveries by Seller. At the Closing, Seller shall deliver to
---------------------
Eastern or cause to be delivered, all duly and properly executed, authorized and
issued (where applicable) the following:
3
<PAGE>
(a) Duly executed certificates in valid form evidencing all of the Company
Shares, 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 Eastern, the written
resignations of all officers and directors of the Company as of the time of
Closing;
(c) The Waste Disposal Agreement, in the form and content attached hereto
as Schedule 1.6(c) (the "Waste Disposal Agreement");
(d) A current certificate of good standing for the Company from each
applicable jurisdiction of incorporation and admission;
(e) A favorable opinion from counsel for Seller, dated the Closing Date,
in form attached as Schedule 1.7(e), which opinion may be from in-house counsel
to Seller;
(f) A release from Seller, in a form and content satisfactory to
Purchaser, which provides that the Seller and its subsidiaries are releasing the
Company from any and all claims, causes of action, debts and obligations
whatsoever existing on the Closing Date;
(g) The Certificate described at Section 7.1 executed by an officer of the
Company; and
(h) The books and records of the Company, including, without limitation,
all original financial and operating records, except those relating to the
Hauling Business, the corporate minute books and seals, the corporate stock
ledgers, and all title documents.
ARTICLE II
PROPERTY AND TRANSFERS
----------------------
SECTION 2.1 Owners Title Policy. Schedule 2.1 sets forth a title report
-------------------
containing a report of the title of the material parcels of the Kelly Run
Landfill, dated December 31, 1992 (the "Owners Policy"). The only parcel not
contained in such Owners Policy is approximately 1.8 acres purchased by the
Company and recorded on July 26, 1996. The 1.8 acre parcel is not within the
permitted air space calculations of Phase III of the Kelly Run Landfill.
Purchaser acknowledges that the delivery of such prior policy is acceptable
subject to the representations and warranties, terms and conditions set forth
herein.
SECTION 2.2 Transfers. Seller shall immediately preceding or
---------
simultaneously with the Closing set forth herein, transfer substantially all of
the assets of the Hauling Business from the Company to affiliates of Seller,
resulting in the Seller retaining all the assets of the Hauling Business. The
Hauling Business assets to be transferred are set forth on Schedule 2.2. Seller
shall have 90 days after Closing to transfer the Hauling Business off the
Property as more fully set forth in Section 5.18.
4
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
With knowledge that Eastern is relying upon the representations, warranties
and covenants herein contained, Seller represents and warrants to Eastern and
makes the following covenants for Eastern's benefit. When the phrase "to
Seller's knowledge" or any equivalent phrase is used in this Agreement, the
phrase shall mean the actual knowledge of an executive officer of Seller or the
information and/or knowledge of any executive officer of Seller would actually
possess had such executive officer acted with due diligence in the conduct of
his or her duties as an executive officer.
SECTION 3.1 Organization and Standing. The Company and Seller are
-------------------------
corporations duly organized, validly existing and in good standing under the
laws of the states of their incorporation, with full power and authority to own
their properties and conduct their business as now being conducted. Company
does not own any stock or interest in any other corporation, partnership, or
other business organization other than one share in WHX Corporation which is
held as an investment.
SECTION 3.2 Securities. All outstanding shares of stock of Company are
----------
legally and validly authorized and issued, fully-paid and nonassessable. Seller
owns all of the outstanding securities issued by the Company. There are no
outstanding rights of any kind to acquire additional shares of any class of
stock of the Company.
SECTION 3.3 Contracts, Permits and Material Documents. The items listed
-----------------------------------------
in Schedule 3.3 relating to the Landfill Business attached hereto are all of the
following ("Material Documents") with respect to the Company which provide a
benefit or impose a detriment of a value of $10,000 or more per year: (i) leases
for real and personal property, (ii) licenses, (iii) franchises, (iv) promissory
notes, guarantees, bonds, mortgages, liens, pledges, and security agreements
under which the Company is bound or under which the Company is the beneficiary,
(v) collective bargaining agreements, (vi) patents, trademarks, trade names,
copyrights, trade secrets, proprietary rights, symbols, service marks, and
logos, (vii) all permits, licenses, consents and other approvals from
governments, governmental agencies (federal, state and local) and/or third
parties relating to, used in or required for the operation of any of the
Landfill Business of the Company, (viii) all surety bonds, closure bonds or any
other obligation which the Company have liability for with respect to their
operations and (ix) other contracts, agreements and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 3.5) which are binding on the Company or its property and
pursuant to which the Company derives a benefit or incurs a detriment having a
value of $10,000 or more per year. The Material Documents listed on Schedule
3.3 are organized under subheadings for each of the different type of documents
listed. Except as set forth on Schedule 3.3, neither the Company nor to the
Seller's knowledge is any person or party to any of the Material Documents or
bound thereby is in material or knowing default under any of the Material
Documents, and, to the knowledge of Seller, 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 none of Company's properties relating to the
Landfill Business is bound by, any agreement or instrument which is material to
5
<PAGE>
the continued conduct of Landfill Business of the Company, as now being
conducted, except as listed in Schedule 3.3.
SECTION 3.4 Personal Property.
-----------------
(a) All furniture, office equipment, scale computer equipment owned by the
Company relating to the Landfill Business is in reasonably good condition given
its age and use, normal wear and tear excepted, and is sufficient in type,
quantity and quality to operate the Landfill Businesses currently conducted by
the Company in an efficient manner.
(b) Listed on Schedule 3.4(b) is all of the rolling stock, including motor
vehicles, trucks, earth-moving equipment and landfill compactors and attachments
used in the Landfill Business of the Company together with information as to the
make, description of body and chassis, model number, serial number and year of
each such vehicle ("Rolling Stock"). The Rolling Stock is owned by the Company.
The Rolling Stock not scrapped, is in operable condition subject to normal wear
and tear and subject to the Rolling Stock's age, except as noted on Schedule
3.4(b).
(c) The inventory of parts, tires and accessories are in reasonable
condition, and the shop tools owned by the Company relating to the Landfill
Business are in reasonable condition and are sufficient in type, quantity and
quality to operate the Landfill Business currently conducted by the Company in
an efficient manner.
(d) All landfill equipment and other equipment owned by the Company for use
in the Landfill Business and having a fair market value of $15,000 or more and
not listed on one of the above schedules is listed on Schedule 3.4(d) attached
hereto and is in operable condition, subject to normal wear and tear and subject
to their age, and is sufficient in type, quantity and quality to operate the
business currently conducted by the Company in an efficient manner.
SECTION 3.5 Customers. A list of customers of the Company's Landfill
---------
Business together with information as to the rates charged for each customer,
whether oral or in writing, is listed on Schedule 3.5 attached hereto. Neither
the Company nor any other person or party to any of the material 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 purchase of the Company by Eastern will not
create a default under any material customer contract relating to the Landfill
Business.
SECTION 3.6 Title.
-----
(a) Listed on Schedule 3.6 attached are the addresses and ownership
interest which Company has in any real property, including, without limitation,
fee ownership, lease, license or other form of interest.
(b) The Company has good and marketable title to, or a valid leasehold
interest in, all of its assets both real property and personal property, each
free and clear of any mortgages, pledges, liens, encumbrances, charge, claim,
security agreement or title retention or other security
6
<PAGE>
arrangement ("Liens"), except the types of liens set forth in subparagraphs (i)
through (iii), the encumbrances set forth on the Owner's Policy and the items
listed on Schedule 3.6 ("Permitted Encumbrances").
(i) Liens imposed by law and incurred in the ordinary course of
business for indebtedness not yet due to carriers, warehousemen, laborers or
materialmen and the like;
(ii) Liens in respect of pledges or deposits under workmen's
compensation laws or similar legislation;
(iii) Liens for property taxes, assessments, or governmental charges
not yet subject to penalties for nonpayment; and
(iv) Liens of record which do not have a material adverse affect upon
the use or operation of the Property as a landfill. It is agreed upon by the
parties that any detriment in excess of $15,000.00 shall have a material adverse
affect.
SECTION 3.7 Real Property.
-------------
(a) Other than as set forth on Schedule 3.7(a), to Seller's knowledge the
Property is, and at all times during the operation of the landfills located upon
the Property, to the extent required, has been, licensed, permitted and
authorized for the operation of a hazardous and/or municipal solid waste
landfill under all federal, state and local statutes, laws, rules, regulations,
orders, permits (including, without limitation, zoning restrictions and land use
requirements) and licenses and all administrative and judicial judgments,
rulings, decisions and orders affecting or otherwise applicable to the
protection of the environment, the Property and the conduct of the landfill
thereon.
(b) Other than as set forth on Schedule 3.7(b), to Seller's knowledge no
portion of the Property contains any areas that could be characterized as
disturbed, undisturbed or manmade wetlands or as "waters of the United States"
pursuant to any applicable laws or the procedural manuals of the Environmental
Protection Agency, U.S. Army Corps of Engineers or the Pennsylvania Department
of Environmental Protection ("PADEP"), whether such characterization reflects
current conditions or historic conditions which have been altered without the
necessary permits or approvals.
(c) Except for the expansion permit approval appeals listed on Schedule
3.7(c), there are no proceedings or amendments pending and brought by or to
Seller's knowledge 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 Company
to use the Property for a municipal solid waste landfill after the Closing Date.
(d) Other than as set forth on Schedule 3.7(d), there are no pending or, to
the Seller's knowledge, threatened condemnation or eminent domain proceedings
affecting all or any part of the Property.
7
<PAGE>
(e) Other than as set forth on Schedule 3.7(e), from the date of the Owners
Policy to the date hereof there are no unrecorded rights of third parties to
drill or explore for, collect, produce, mine, excavate, deliver or transport
oil, gas, coal, or other minerals in, on, beneath, across, over, through, from
or to any portion of the Property other than set forth in the Owners Policy or
otherwise reserved therein and to Seller's knowledge no party has any unrecorded
present or future right to possession of all or any part of the Property.
(f) Other than set forth on Schedule 3.7(f), no unremediated liens with
respect to environmental liability have been imposed against Seller, the Company
or the Property under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), any comparable Pennsylvania statute, or other
applicable law, and to Seller's knowledge no facts or circumstances exist which
would give rise to the same.
(g) Other than as set forth on Schedule 3.7(g), no portion of the Property
is listed on the CERCLIS list or the National Priorities List of Hazardous Waste
Sites or any similar list maintained by the Commonwealth of Pennsylvania and
neither the Company nor Seller is listed as a potentially responsible party
under CERCLA, any comparable Pennsylvania statute or other applicable law, and
neither the Company nor Seller has received a notice of such a listing.
(h) Other than the portion of the landfill which was previously permitted
as a hazardous waste disposal facility and the leachate created from such
disposal activity, to Seller's knowledge there have been no spills, leaks,
deposits or other releases into the environment or onto or under the Property of
any Hazardous Materials as defined in this Section 3.7(h), except as set forth
on Schedule 3.7(h). Other than the hazardous waste disposal portion of the
Landfill and except as set forth on Schedule 3.7(h), to Seller's knowledge the
Property does not contain any hazardous materials, hazardous wastes, hazardous
substances, toxic wastes or substances, infectious or medical waste or
radioactive waste as those terms are defined by the Resource Conservation and
Recovery Act of 1976; CERCLA; the Atomic Energy Act of 1954; the Toxic
Substances Control Act; the Occupational Health and Safety Act; any comparable
or similar Pennsylvania statute; any other applicable law; or the rules and
regulations promulgated under any of the foregoing, as each of the foregoing may
have been amended (collectively, "Hazardous Materials").
(i) Other than as set forth on Schedule 3.7(i), the Property contains no
underground or above-ground storage tanks or transformers containing Hazardous
Material, petroleum products or wastes or other hazardous substances regulated
by 40 CFR 280 or other applicable law.
SECTION 3.8 Financial Statements. Seller has delivered to Eastern true and
--------------------
correct copies of the following financial statements of the Company (the
"Financial Statements"):
(a) Unaudited balance sheets of the Company relating to the Landfill
Business as of December 31, 1995 and December 31, 1996, and a statement of
income for the periods ended December 31, 1995 and December 31, 1996, all
prepared on an accrual basis; and
(b) An unaudited balance sheet as of October 31, 1997 ("Most Recent Balance
Sheet"), and a statement of income for the ten (10) month period ended October
31, 1997 ("Most Recent
8
<PAGE>
Income Statement"), with respect to the Company's Landfill Business, prepared on
an accrual basis internally by the Company. The Most Recent Balance Sheet and
Most Recent Income Statement are hereafter referred to as the "Most Recent
Financial Statements."
The balance sheet present fairly, in all material respects, the financial
condition of the Company relating to the Landfill Business as of the dates
indicated thereon and the statement of income presents fairly, in all material
respects, on an accrual basis the results of the operations of the Company
relating to the Landfill Business for the periods indicated thereon. All revenue
and operating expenses have been prepared in accordance with Generally Accepted
Accounting Principles (GAAP). Since the date of the Most Recent Financial
Statements, the Company has not (i) made any material change in its accounting
policies (other than separating the Landfill Business from the Hauling Business)
or (ii) effected any prior period adjustment to, or other restatement of, its
financial statements for any period. The Most Recent Financial Statements are
consistent with the books and records of the Company (which books and records
are correct and complete in all material respects). Since the date of the Most
Recent Financial Statements, there has not been any material adverse change in
the income, expenses or assets of the Company except as set forth herein.
SECTION 3.9 Liabilities; Accounts Receivable and Working Capital. Except as
----------------------------------------------------
set forth on Schedule 3.9:
(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; and
(ii) accounts payable and accrued expenses arising since the date of
the Most Recent Balance Sheet arising during the normal course of business
consistent with past custom and practice.
(b) All accounts receivable of the Company relating to the Landfill
Business are, and all accounts receivable arising since the date of this
Agreement, will be valid and enforceable accounts receivable, and will be fully
collectable in the ordinary course of business, less an allowance for bad debt
set forth on Most Recent Balance Statement. All accounts receivable have been
generated in the ordinary course of the Landfill Business of the Company
consistent with past practice and there are no defenses or set-offs to any of
the accounts receivable.
(c) At Closing, the Company shall have working capital consisting of
current assets, which shall exclude cash and cash equivalents and current
liabilities which shall exclude closure and post-closure costs (each determined
in accordance with generally accepted accounting principles) in an amount no
less than zero, excluding any payables listed in the current liabilities for the
construction of Phase III of the Landfill for airspace which has not been
consumed and the accrual of host community fees which shall be pro-rated between
Buyer and Seller as of the date of Closing. It is acknowledged that current
assets shall include pre-paid expenses, inventory, accounts receivable-other,
and accounts receivable-trade (less allowance for doubtful accounts),
9
<PAGE>
and current liabilities shall include accounts payable, accrued expenses,
accrued vacation pay, and the current portion of any long-term liabilities but
excluding the current portion of any closure cost of Phase II which Seller is
obligated to pay under this Agreement. At Closing, the Company shall not have
any long-term liabilities as determined in accordance with GAAP including,
without limitation, those set forth on the Most Recent Balance Statement except
obligations regarding closure and post-closure of the landfill and litigation
assumed by Eastern.
(d) Within 90 days of the Closing, Eastern shall provide Seller with its
calculation of the working capital calculation as of the date of Closing
together with such documentation to verify such calculation and Seller shall pay
over to Eastern the amount of negative working capital at Closing or Eastern
shall pay over to Seller the sum equal to the amount by which the working
capital exceeds zero, such payment to be made within 30 days of the completion
of the working capital calculation.
SECTION 3.10 Fiscal Condition of the Company. Since the date of the Most
-------------------------------
Recent Balance Sheet, except as set forth in Schedule 3.10, with respect to the
Company there has not (except as otherwise specifically permitted by this
Agreement or as set forth in the Schedules to this Agreement) been:
(a) Any material adverse change in the financial condition, business
organization or personnel of the Company or in the relationships of the Company
with suppliers, customers or others relating to the Landfill 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 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 consistent
with past practice or other than the transfer of the Hauling Business;
(d) Any expenditure or commitment by the Company for the acquisition of any
single asset or any single business, except in the ordinary course of business
consistent with past practices and having an acquisition price of $25,000 or
less;
(e) Any damage, destruction or loss (whether or not insured) adversely
affecting the property, business or prospects of the Company taken as a whole,
except damage, destruction or loss which does not exceed $25,000 in the
aggregate;
(f) Any material bonuses or increases in the compensation payable or to
become payable by the Company to any officer or key employee, except in the
ordinary course of business or as required by law or pursuant to a contract
which is listed on a Schedule to this Agreement;
10
<PAGE>
(g) Any loans or advances to or by the Company other than renewals or
extensions of existing indebtedness and other than in the ordinary course of
business consistent with past practice; or
(h) Any change in accounting method or practice other than as contemplated
by this Agreement.
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 have paid all taxes due for
the periods covered by the said returns. Company is a Subchapter C corporation
under the Internal Revenue Code of 1986, as amended (the "Code"). The Company
has filed, and will file (if due), in a timely manner all requisite federal,
state, local and other tax returns due for all fiscal periods ended on or before
the date hereof, and as of the Closing shall have or will in a timely manner
file all such returns due for all periods ended on or before the Closing Date.
The Seller shall pay all Federal and other taxes, penalties and/or interest owed
by the Company which have accrued or are due for all periods prior to or through
the Closing Date.
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 have 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 banks, beneficiaries, agents or
agencies with respect to each listed insurance policy, performance bond and
letter of credit. The Company's current insurance policies, performance bonds
and letters of credits of the Company are in force and effect and the premiums
thereon are not delinquent. Except as set forth in Schedule 3.12, the Company
has not received any notification from any insurance carrier denying or
disputing any material claim made by the Company or denying or disputing any
coverage for any such claim or denying or disputing the amount of any claim. The
Company has no material claim against any of its insurance carriers under any of
policies insuring it pending or anticipated and there has been no occurrence of
any kind which would give rise to any such claim.
SECTION 3.13 Employees.
---------
(a) The Company does not have any contract of employment with an officer or
other employee, except as listed on Schedule 3.13(a).
(b) Except as set forth on Schedule 3.13(b), no employee of the Company is
represented by any union. A list of the name, address and social security number
and current rate of compensation of each of the Company's employees and capacity
in which each person is employed is set forth on Schedule 3.13(b) for the
Landfill Business. There is no pending or to Seller's knowledge threatened
dispute between the Company and any of its employees which might materially and
adversely affect the continuance of the business operations of the Company.
11
<PAGE>
(c) The Seller maintains a 401(k) plan for the Company employees both Union
and Non-Union. The Company is not obligated to make contributions to the 401(k)
plan or any other benefit plans, funds or programs (within the meaning of the
Code or the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (the "Plans")).
(d) The Seller shall be permitted upon Closing to terminate the Company's
participation in any Plans applicable to the Company and the Company shall not
participate after Closing in any such Plan, provided, however, the Company shall
remain obligated under the collective bargaining agreement with the Teamsters
Local 872.
SECTION 3.14 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 3.14(a) to this Agreement, and except
as to Environmental Laws, as hereinafter defined in Section 3.14(b) below, to
Seller's knowledge the Company is in material compliance with all Federal, state
and local laws, rules and regulations including, without limitation, the
following laws: land use or zoning laws; payroll, employment, labor, 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), to
Seller's knowledge the Company is in material compliance with all permits,
franchises, licenses, and orders that have been issued with respect to the Laws
and are or may be applicable to any of its property and operations, including,
without limitation, any order, decree or directive of any court or federal,
state, municipal, or other governmental department, commission, board, bureau,
agency or instrumentality wherever located, federal, state and local permits,
orders, franchises and consents. Except as set forth on Schedule 3.14(a), with
respect to any Law there are no actions, suits or proceedings pending, or to
Seller's knowledge threatened against or affecting any of 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 any 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), to Seller's knowledge 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 and involving the Landfill Business.
(b) Except as disclosed in Schedule 3.14(b) to this Agreement, to Seller's
knowledge the Company is in material compliance with all Federal, state and
local laws, rules and regulations relating to environmental issues of any kind
and/or the receipt, transport or disposal of any hazardous or non-hazardous
waste materials from any source ("Environmental Law"). Except as disclosed in
Schedule 3.14(b), with respect to any Environmental Law, to Seller's knowledge
the Company is in material compliance with all permits, licenses, and orders
related thereto or issued thereunder, as are or may be applicable to the
property and operations of the Company, 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 actions,
12
<PAGE>
suits or proceedings pending or to the knowledge of Seller 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 of
$25,000.00 or greater 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 set forth on Schedule 3.14(b), to the knowledge of
Seller the Company has not transported, stored, treated or disposed of, nor
allowed any third persons, on its behalf, to transport, store, treat or dispose
of waste to or at (i) any location other than a site lawfully permitted to
receive such waste for such purpose or, (ii) any location currently designated
for remedial action pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") or any similar federal or state
statute; nor has 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 any liability
for contamination of the environment; and the Company has not disposed of, 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 any notification of any past or present
failure by the Company to comply with any Environmental Law applicable to their
operations or their assets. Without limiting the generality of the foregoing,
except as set forth in Schedule 3.14(b), 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 Company 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.
(c) To the knowledge of Seller except for the business which the Company
currently conducts, 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 other than a compost facility and recycling
facility on the Property. The Company has obtained and maintained, when required
to do so under applicable Environmental Laws, trip tickets, signed by the
applicable waste generators demonstrating the nature of all waste deposited and
or transported by the Company. 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 Environmental Laws.
(d) To the knowledge of Seller Schedules 3.14(a) and 3.14(b) list all
remedied violations of Laws and Environmental Laws which existed within the past
ten years and all outstanding unremedied notices of violations issued to the
Company by any federal, state or local regulatory agency.
(e) To the knowledge of Seller no employee, officer, director, or
shareholder of the Company is under investigation by the Attorney General of any
state, by the District Attorney of any county of any state, or by any United
States Attorney or any other governmental investigative
13
<PAGE>
agency for the violation of any Laws, including, without limitation, the
violation of any anti-trust, racketeering, or unfair competition Laws.
(f) All pending litigation and administrative or judicial proceedings
involving the Company, or its assets or liabilities, are set forth on Schedule
3.14(f) attached, together with a description of each such proceeding.
SECTION 3.15 Corrupt Practices. To Seller's knowledge the Company has not
-----------------
made, offered or agreed to offer anything of value to any employees of any
customers of the Company (except in conformity with Law) 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. Seller has the right, power, legal capacity
----------------
and authority to enter into, and perform its obligations under this Agreement,
and, except as set forth in Schedule 3.16, no approvals or consents of any other
persons, business or governmental units are necessary to be obtained by Seller
or the Company in connection with the transactions, filings with or notices to,
contemplated by this Agreement. Except as disclosed in Schedule 3.16 to this
Agreement, the execution and performance of this Agreement will not result in a
material breach of or constitute a material default or result in the loss of any
material right or benefit under:
(a) Any charter, bylaw, agreement or other document to which the Seller or
Company are a party or by which the Seller or Company or any of their properties
are bound; or
(b) Any decree, order or rule of any court or governmental authority which
is binding on Seller or Company or on any property of the Company; or
(c) Any permit, certificate or license issued by any governmental authority
under which the Company operates or pursuant to which any of the property of the
Company is bound; or
(d) Any agreement to which Seller or the Company are bound, including,
without limitation, bank loan documents, agreements with customers or suppliers
and leases for equipment.
SECTION 3.17 Transaction Intermediaries. Except as disclosed in Schedule
--------------------------
3.17, no agent, broker, financial advisor or other person acting pursuant to the
express authority of the Company is entitled to any commission or finder's fee
in connection with the transactions contemplated by this Agreement.
SECTION 3.18 Intellectual Property. The Company has not infringed, and are
---------------------
not now infringing, on any trade name, trademark, service mark or copyright
belonging to any person, firm or corporation ("Intellectual Property") and no
one has or is infringing any Intellectual Property right of the Company. The
Company owns or has legally licensed all computer software
14
<PAGE>
used in connection with its business and has not infringed, and is not now
infringing, on the rights of any third parties by its use of computer software.
SECTION 3.19 Disclosure. The representations and warranties of Seller
----------
contained in this Agreement, or in any Schedule or other document delivered by
Seller pursuant hereto, do not to Seller's knowledge contain any untrue
statement of a material fact, or omit any statement of a material fact necessary
to make the statements contained not misleading. If, prior to Closing, Seller
becomes aware of any inaccuracy or misrepresentation or omission in any of the
Schedules, it shall immediately advise Eastern in writing of the inaccuracy,
misrepresentation or omission. If Purchaser elects to close the transaction
having actual knowledge that a material representation or warranty of the Seller
is not true or is not correct ("False Representation and Warranty"), the
Purchaser shall not be entitled to indemnification under Article IX of this
Agreement with respect to the part of the False Representation or Warranty which
Purchaser actually knew to be not true or not correct at the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EASTERN
------------------------------------------
With knowledge that Seller is relying upon the representations, warranties
and covenants contained herein, Eastern represents and warrants to Seller and
makes the following covenants for Seller's benefit.
SECTION 4.1 Organization and Existence. Eastern is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted. Eastern has all requisite corporate power and
authority to consummate the transactions contemplated by this Agreement.
SECTION 4.2 Authority Relative to this Agreement. The execution, delivery
------------------------------------
and performance of this Agreement by Eastern has been duly authorized and
approved by the Board of Directors of Eastern. No further corporate action is
necessary on the part of Eastern to consummate this Agreement in accordance with
its terms. Eastern has full authority to enter into and perform its obligations
under this Agreement, and neither the execution, delivery nor performance by
Eastern of this Agreement will (i) result in a violation or breach of any term
or provision nor constitute a default under the certificate of incorporation or
bylaws of Eastern or under any contract or agreement to which Eastern is a party
or by which it is bound, or violate any order, writ, injunction or decree of any
court, administrative agency or governmental body, or (ii) result in a violation
or breach of any term or provision, or constitute a default or accelerate the
performance required, under any indenture, mortgage, deed of trust or other
contract or agreement to which Eastern is a party or by which it or its
properties is bound.
SECTION 4.3 Commission Filings. Eastern has delivered to Seller current and
------------------
historical filings made by Eastern on Forms 8-K, 10-K, 10-Q and Proxy Statements
timely filed with the Securities and Exchange Commission ("SEC") for fiscal year
ending June 30, 1997 (the "Public Reports"). The Public Reports accurately and
completely describe, in all material respects, Eastern's financial status,
business operations and prospects as of the date of such filings and as
15
<PAGE>
of the date hereof, and do not omit any material fact(s) necessary to make the
information contained in the filings not misleading.
SECTION 4.4 Issued Common Stock. The EESI Stock to be issued pursuant to
-------------------
this Agreement have been duly authorized and, when issued, will be validly
issued, fully paid and nonassessable.
SECTION 4.5 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against the Seller for any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
SECTION 4.6 Consents and Approvals. No filing, action, consent or approval
----------------------
of any person, entity or governmental body is required by the Purchaser for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for any approval that may be required from the PADEP
due to a change of control of the Company.
SECTION 4.7 Accuracy of Representations. The representations and warranties
---------------------------
of the Purchaser contained in this Agreement do not to Purchaser's knowledge
contain any untrue statement of material fact, or, omit to state any statement
of a material fact necessary to make the statements contained therein or herein
not misleading. If Seller elects to Close the transaction knowing that a
representation or warranty of the Purchaser is not true or is not correct
("Purchaser False Representation or Warranty"), the Seller shall not be entitled
to indemnification under Article IX of this Agreement with respect to the part
of the Purchaser False Representation and Warranty which Seller knew to be not
true or not correct at the Closing.
ARTICLE V
ADDITIONAL AGREEMENTS OF THE PURCHASER AND SELLER
-------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 5.1 Plan of Reorganization. This Agreement contemplates the
----------------------
acquisition of all the outstanding stock of the Company solely in exchange for
voting stock of Eastern in a transaction 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. Eastern and Seller 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.
16
<PAGE>
SECTION 5.2 Restrictions on Transfer of Unregistered Stock. If the EESI
----------------------------------------------
Stock delivered to Seller at Closing is not registered under the Securities Act
of 1933 (the "Act"), the Seller understands and agrees that the following
restrictions and limitations are applicable to the Seller's purchase and resale
or other transfer of the EESI Stock, pursuant to the Act:
(a) Seller agrees that the EESI Stock shall not be sold or otherwise
transferred for a period of twelve months after the Closing Date, and thereafter
not unless the EESI 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 EESI Stock to be issued to the Seller:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933 or any state securities act. These share
have been acquired for investment and may not be sold pledged or
hypothecated until the date which is twelve months after the Closing Date.
Thereafter, these shares may not be sold, transferred, pledged or
hypothecated unless (i) they shall have been registered under the
Securities Act of 1933 and any applicable states securities act or (ii)
Eastern Environmental Services, Inc., shall have been furnished with an
opinion of counsel, reasonably satisfactory to counsel for Eastern
Environmental Services, Inc., that registration is not required under any
such acts."
(c) Stop transfer instructions will be imposed with respect to the EESI
Stock issued to Seller pursuant to this Agreement so as to restrict resale or
other transfer thereof except in accordance with the foregoing provisions of
this Agreement.
SECTION 5.3 Representations as to Private Offering. The EESI Stock is being
--------------------------------------
delivered to the Seller in a private placement under Section 5.2 of the Act and
under Regulation D promulgated under the Act. To induce Eastern to issue the
EESI Stock, Seller represents and warrants as follows:
(a) Seller represents and warrants that it is an accredited investor, as
that term is defined in Regulation D under the Act.
(b) Seller acknowledges that it has received a copy of the Public Reports.
(c) The Seller represents and warrants that the EESI Stock is being
acquired for its own account without a view to public distribution or resale and
that the Seller has no contract, undertaking, agreement or arrangement to sell
or otherwise transfer or dispose of EESI Stock, or any portion thereof, to any
other person.
(d) The Seller represent and warrant that, in determining to acquire the
EESI Stock, it has relied solely upon its independent investigation, including
the advice of its legal counsel and accountants or other financial advisers or
purchaser representatives, and have, during the course of discussions concerning
the acquisition of the EESI Stock, been offered the opportunity to ask
17
<PAGE>
such questions and inspect such documents concerning Eastern and its business
and affairs as it has requested so as to more fully understand the nature of the
investment and to verify the accuracy of the information supplied.
(e) THE SELLER ACKNOWLEDGES THAT THE ACQUISITION OF THE EESI STOCK INVOLVES
A HIGH DEGREE OF RISK, and represents and warrants that it can bear the economic
risk of the acquisition of the EESI Stock, including the total loss of its
investment.
(f) The Seller represents and warrants that (i) it has adequate means of
providing for its current needs and financial contingencies, (ii) it has no need
for liquidity in this investment, (iii) it has no debts or other obligations,
and cannot reasonably foresee any other circumstances, that are likely in the
future to require it to dispose of the EESI Stock, and (iv) all its investments
in and commitments to non-liquid investments are, and after their acquisition of
the EESI Stock will be reasonable in relation to its net worth and current
needs.
(g) The Seller understands that no federal or state agency has approved or
disapproved the EESI Stock or made any finding or determination as to the
fairness of the EESI Stock for investment.
(h) The Seller understands that the EESI Stock is being offered and sold in
reliance on specific exemptions from the registration requirements of federal
and state securities laws and that Eastern 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 Seller to acquire the EESI Stock.
SECTION 5.5 Access to Records. Seller will give to Eastern and its
-----------------
representatives, from the date hereof until the Closing Date, full access during
normal business hours, upon reasonable notice, to all of the properties, books,
contracts, documents and records of the Company relating to the Landfill
Business, and will make available to Eastern and its representatives all
additional financial statements of and all information with respect to the
business and affairs of the Company relating to the Landfill Business that the
other party may reasonably request.
SECTION 5.6 Continuation of Business. Seller will operate the Landfill
------------------------
Business of the Company until the Closing Date in the ordinary course of
business, consistent with past practice, so as to preserve its Landfill Business
organization intact, to assure, to the extent possible, the availability to
Eastern of the present key employees of the Company and to preserve for Eastern
the relationships of the Company with suppliers, customers, and others relating
to the Landfill Business.
SECTION 5.7 Continuation of Insurance. Seller will keep in existence all
-------------------------
policies of insurance insuring the Company against liability and property
damage, fire and other casualty through the Closing Date, consistent with the
policies currently in effect. After Closing, Seller may cancel all policies of
insurance it has on the Company and Eastern shall effective upon the Closing be
responsible for insuring the Company.
18
<PAGE>
SECTION 5.8 Standstill Agreement. Until the Closing Date, unless this
--------------------
Agreement is earlier terminated pursuant to the provisions hereof, Seller will
not, directly or indirectly, solicit offers for the shares or the assets of the
Company or for a merger or consolidation involving any of 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 any or all of the Company by
merger, consolidation or other combination or acquiring any of the Company's
assets.
SECTION 5.9 Consents. Seller and Eastern shall cooperate with each other
--------
and use their best efforts to obtain all approvals, authorizations and consents
required to be obtained to consummate the transaction set forth in this
Agreement, including, without limitation, (i) any required approval of PADEP of
the transactions contemplated by this Agreement, (ii) the approval of the
Department of Justice and the Pennsylvania Attorney General, and (iii) the
approval of every regulatory agency of federal, state, or local government that
may be required in the opinion of either Eastern or Seller.
SECTION 5.10 Audited Financial Statements. Seller agrees to cooperate with
----------------------------
Purchaser after the Closing to have prepared audited balance sheets for the
Company as of December 31, 1995 and December 31, 1996 and June 30, 1997 and
statements of income for the twelve-month periods ended December 31, 1995 and
December 31, 1996 and the six-month period ended June 30, 1997, to the extent
required by Rule S-X of the Securities Act of 1934. All such financial
statements required to be audited shall be prepared by Purchaser's accountants
or their designee at the expense of Purchaser. Seller shall grant to Eastern
access to its books and records in order to have the audit completed within 60
days of the Closing. Seller will sign a standard representation letter to the
auditors and provide Eastern with standard attorney's audit letters in
preparation of the audit.
SECTION 5.11 FIRPTA Certificate. If applicable, purchaser and Seller
------------------
acknowledge that the financial provisions of this Agreement are subject to the
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), and
that the Internal Revenue Code ("Code") Sections 1445 and 6039C require
Purchaser in certain circumstances to withhold ten percent (10%) of the amount
realized by the Purchaser. Among other circumstances, Purchaser is not required
to withhold said amount if Seller furnishes Purchaser with a certificate stating
the Seller's U.S. Taxpayer Identification Number and that the Seller[?] is not a
foreign person within the meaning of the Code. Seller agrees to provide to
Purchaser at Closing such certificate as is reasonably necessary to insure that
such withholding is not required under FIRPTA.
SECTION 5.12 Waste Disposal Agreement. Seller shall cause its wholly owned
------------------------
subsidiaries, Chambers Developments Company, Inc. and William H. Martin, Inc.,
to dispose of its municipal solid waste at the Kelly Run Landfill, by entering
into the Waste Disposal Agreement attached as Schedule 1.6(c).
SECTION 5.13 Landfill Closure. Purchaser and Seller acknowledge that the
----------------
Phase II disposal area as designated on the Phase III permit application plans
dated June 4, 1996, and approved by PADEP in the permit for Phase II must be
closed to comply with the terms of the permit issued
19
<PAGE>
by PADEP. Seller at its own cost and expense shall properly close the Phase II
area as required by the Phase II Permit and PADEP with the synthetic cap to be
in place by July 1, 1998 and the closure completed on or before September 30,
1998. Closure of the Phase II area shall be performed in a manner acceptable to
PADEP. Seller shall use its commercially reasonable efforts to provide Purchaser
with detailed plans for the closure of the Phase II area for Purchaser's review
and approval. Purchaser shall provide Seller such reasonable access as is
necessary to complete the closure operations in a timely manner without
adversely affecting the Company's business.
SECTION 5.14 Outside Counsel. Seller shall execute such conflict-of-
---------------
interest waivers as may be required by counsel representing the Company in the
appeals proceedings listed on Schedule 3.7(d) to continue such representation up
through the final non-appealable outcome of such proceedings.
SECTION 5.15 Books and Records. From the Closing Date to six years after
-----------------
the Closing Date, the Purchaser shall allow the Seller and its 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 this Agreement ("Records") where the Seller
requires access to the Records for any purpose. Access to the Records shall be
during normal working hours at the location where such Records are stored. The
Seller shall have the right, at its own expense, to make copies of any Records
provided, however, that any such access or copying shall be had or done in such
a manner so as not to interfere unreasonably with the normal conduct of the
Purchaser's business.
SECTION 5.16 Bonds.
-----
(a) Except as set forth below both prior to and after Closing, Purchaser
shall use every reasonable commercial effort to cause (i) Seller and its
subsidiaries (other than the Company) to be released from any and all
obligations Sellers have under the letters of credit, (ii) Seller to be paid or
have returned to it all collateral it or its subsidiaries pledged, deposited or
posted under the terms of the trust agreement, (iii) Seller and its subsidiaries
other than the Company to be released from any and all obligations Seller has
under any closure and post-closure bonds applicable to the Landfill Business as
set forth below.
(b) Seller and/or the Company have posted the following financial
assurances with the PADEP:
(i) Phase I surety bond $71,404
(ii) Phase I surety bond $62,800
(iii) Phase II letter of credit $800,000
(iv) Phase II letter of credit $1,807,660
(v) WDA closure surety bond $340,000
(vi) WDA closure surety bond $285,649
(vii) WDA closure certificate of deposit $350,000
(viii) WDA post-closure surety bond $1,138,989
(ix) Phase III letter of credit $1,439,325
20
<PAGE>
Eastern shall only be responsible to substitute at Closing and as set forth
herein the financial assurances set forth in (b)(i) (ii) (iii) (viii) and (ix)
above ("Eastern Financial Assurance") and all performance bonds relating to
Customer Contracts and Seller shall maintain the financial assurances for
closure of previously filled landfill space as set forth in (b)(iv) (v) (vi) and
(vii) ("Seller Financial Assurance"). Seller shall be responsible to have the
PADEP release Seller's Financial Assurance in accordance with applicable laws
and Eastern shall use reasonable commercial efforts after Closing to assist
Seller in the release of Seller's Financial Assurance and do all actions
reasonably necessary or appropriate, including submit all reasonable permit
modifications and submittals to the PADEP as long as they do not negatively
effect airspace or operating costs for Phase III, to have the Seller Financial
Assurances returned to Seller in a prompt manner so that Seller shall be
responsible only for closure (and not post-closure) for Phase II of the Landfill
and the Western Disposal Area of the Landfill. Seller shall not have any
responsibility or liability for closure or post-closure bonding for Phase I.
Eastern hereby grants Seller a limited power of attorney to execute and deliver
any instruments or certifications necessary in the name of the Company solely in
connection with the closing and capping of Phase II of the Landfill and for the
return of the Seller's Financial Assurance. The power of attorney may not be
used to obligate the Company to pay any money or undertake any action, except it
is hereby acknowledged by the parties that the release of the Seller's Financial
Assurance may result in an increase in the post-closure bonds. The Sellers
shall provide to Eastern copies of any documents to be submitted under the power
of attorney 30 days prior to submittal. Eastern shall use its best efforts to
negotiate with PADEP to post financial assurances satisfactory to PADEP and
Eastern for post-closure of these areas. All correspondence to or from the
PADEP regarding bonding at the landfill for Phase II and the Western Disposal
Area shall be given to the other party hereto until such time as all of Seller's
Financial Assurance is released by the PADEP. If Eastern for whatever reason
fails to deliver such financial assurance for post-closure as set forth herein
for 30 days after the written request of PADEP which prevents the return of
Seller's Financial Assurance, Eastern shall be responsible to reimburse Seller
for any substantiated costs or expenses incurred by Seller for the continued
posting of such financial assurance.
(c) Eastern shall grant reasonable access to the Company's books and
records and its properties and shall cooperate with Seller to permit Seller to
conclude all closure activity and obtain any certifications necessary to obtain
the return of Seller's Financial Assurances.
SECTION 5.17 Obligations Relating to the Closure Bonds. The Seller shall
-----------------------------------------
cooperate with Purchaser in Purchaser's notification of its obligations in
Section 5.16, executing any documents required to cause the payment bond,
performance bond, closure bond and post-closure bond to be replaced, as long as
such documents do not obligate Seller to pay any money or incur future
liability.
SECTION 5.18 Transfer of Hauling Business. Seller shall have up to ninety
----------------------------
(90) days from the date of Closing to remove the Hauling Business from the
Property. Seller shall be responsible to pay for insurance for its operations
during such period and shall be responsible for all costs and expenses of
operating the Hauling Business after the Closing. Seller shall be given
reasonable access to the facilities of the Company in order to effectively
transition the Hauling Business from the Property. Such access shall include,
without limitation, offices, parking and maintenance
21
<PAGE>
facilities. Seller shall not during such 90 day period interfere with the
operations of the Company and upon the request of the Company, the Seller shall
relocate its rolling stock and equipment to accommodate the Company's operation
and office use.
SECTION 5.19 Retained Litigations. The Company's and Buyer's employees who
--------------------
would have knowledge shall cooperate fully with Seller, at Seller's expense,
with respect to the investigation, preparation, and prosecution or defense of
any actual or threatened litigation or other judicial or administrative
proceeding arising out of or relating to the Hauling Business and certain other
litigation arising out of the Landfill Business (hereinafter referred to as the
"Retained Litigations"). Buyer hereby assigns to Seller any and all interests,
including claims, counterclaims, cross-claims and causes of action, which Buyer
now has or may in the future have with respect to the Retained Litigations, and
Buyer and/or Company shall further take any and all actions necessary in the
future to fully effect such assignment. Buyer shall provide Seller with
reasonable access to any and all documents, as defined under any applicable rule
of civil procedure, which are in the possession, custody or control of the
Company or Buyer and which concern, refer or relate in any way to the Retained
Litigations. Buyer shall further make Company's employees available to Seller as
reasonably necessary for the pursuit of the Retained Litigations. Set forth on
Schedule 5.19 is a list of the Retained Litigations which with respect to the
Landfill Business are only those designated on Schedule 5.19.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES AND EASTERN
------------------------------------------------
The parties hereto covenant and agree with the other, as applicable, as
follows:
SECTION 6.1 Payment of Expenses. Eastern will pay all expenses incurred by
-------------------
Eastern in connection with the negotiation, execution and performance of this
Agreement. Seller will pay all legal and accounting expenses incurred by Seller
and the Company in connection with the negotiation, execution and performance of
this Agreement and the Collateral Documents.
ARTICLE VII
CONDITIONS OF EASTERN
---------------------
The obligations of Eastern to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
each of the following items which are conditions to the Closing:
SECTION 7.1 Compliance by Seller. Seller and the Company shall have
--------------------
performed and complied with all material obligations and conditions required by
this Agreement to be performed or complied with by Seller and the Company at or
prior to the Closing Date. All representations and warranties of Seller
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date, with the same force and effect as though made at
and as of the Closing Date, except for changes expressly permitted by this
Agreement, and Eastern shall
22
<PAGE>
have received a Certificate duly executed by an officer of Company representing
and warranting the foregoing.
SECTION 7.2 Litigation Affecting This Transaction. There shall be no actual
-------------------------------------
or threatened action by or before any court which seeks to restrain, prohibit or
invalidate the transaction contemplated by this Agreement or which might affect
the right of Eastern to own, operate in its entirety or control the Company or
the business the Company operates, which, as a result of the transaction
contemplated by this Agreement, might affect such right as to Eastern or any
affiliate thereof subsequent to the Closing Date and which, in the judgment of
the Board of Directors of Eastern, made in good faith and based upon advice of
its counsel, makes it inadvisable to proceed with the transaction contemplated
by this Agreement.
SECTION 7.3 Fiscal Condition of Business. Relating to the Landfill Business
----------------------------
there shall have been no material adverse change in the results of operations,
financial condition or business of the Company, and the Landfill Business shall
have not suffered any material loss or damage to any of its properties or
assets, whether or not covered by insurance, since the date of the Most Recent
Balance Sheet.
SECTION 7.4 Opinion of Counsel. Seller shall have delivered to the Eastern
------------------
the opinion of counsel, dated the Closing Date, in the form annexed hereto as
Schedule 1.7(e).
SECTION 7.5 Waste Disposal Agreements. The Seller shall have executed and
-------------------------
delivered to Eastern the Waste Disposal Agreement.
SECTION 7.6 Release. Seller shall have executed and delivered to Eastern
-------
the Release described at Section 1.7(f).
SECTION 7.7 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of PADEP to the change in control of the Company, (ii) the approval of
the Federal Trade Commission and Department of Justice, and (iii) the approval
of every regulatory agency of federal, state, or local government that may be
required in the opinion of either Eastern or Seller. Eastern shall have been
furnished with appropriate evidence, reasonably satisfactory to Eastern and its
counsel, of the granting of such approvals, authorizations and consents.
ARTICLE VIII
CONDITIONS OF SELLER
--------------------
The obligations of Seller to effect the transaction contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
each of the following conditions:
SECTION 8.1 Compliance by Eastern. Eastern shall have performed and
---------------------
complied with all material obligations and conditions required by this Agreement
to be performed or complied with by it at or prior to the Closing Date. All
representations and warranties of Eastern contained in this Agreement shall be
true and correct in all material respects at and as of the Closing Date, with
23
<PAGE>
the same force and effect as though made at and as of the Closing Date, except
for changes expressly permitted by this Agreement.
SECTION 8.2 Litigation Affecting This Transaction. There shall be no
-------------------------------------
actual or threatened action by or before any court which seeks to restrain,
prohibit or invalidate the transaction contemplated by this Agreement or which,
in the judgment of Seller, made in good faith and based upon advice of its
counsel, makes it inadvisable to proceed with the transaction contemplated by
this Agreement.
SECTION 8.3 Material Adverse Change. There shall not have been, and on the
-----------------------
Closing Date shall not be in existence, any event, condition or state of facts
which could reasonably be expected to result in, any material adverse change in
the condition (financial or otherwise), assets, real property, personal
property, results of operations, business or prospects of Eastern and its
subsidiaries taken as a whole.
SECTION 8.4 Waste Disposal Agreements. Eastern shall have executed and
-------------------------
delivered the Waste Disposal Agreement.
SECTION 8.5 Opinion of Counsel. Eastern shall have delivered to Seller the
------------------
opinion of counsel to Eastern, dated the Closing Date, in the form annexed
hereto as Schedule 1.6(c).
SECTION 8.6 Consents. All approvals, authorizations and consents required
--------
to be obtained shall have been obtained, including, without limitation, (i) the
consent of PADEP to the change in control of the Company, (ii) the approval of
the Federal Trade Commission, the Department of Justice and the Attorney General
for the Commonwealth of Pennsylvania, and (iii) the approval of every regulatory
agency of federal, state, or local government that may be required in the
opinion of either Eastern or Seller. Eastern shall have been furnished with
appropriate evidence, reasonably satisfactory to Eastern and its counsel, of the
granting of such approvals, authorizations and consents.
ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.1 Indemnification by Seller. Seller agrees that it will
-------------------------
indemnify, defend, protect and hold harmless Eastern and its officers,
shareholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, legal representatives, successors and assigns from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) whether equitable or legal, matured or contingent, known or
unknown to such Seller, foreseen or unforeseen, ordinary or extraordinary,
patent or latent, whether arising out of occurrences prior to, at, or after the
date of this Agreement, from: (a) any breach of, misrepresentation in, untruth
in or inaccuracy in the representations and warranties by the Seller, set forth
in this Agreement or in the Schedules attached to this Agreement; (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 Seller before or
24
<PAGE>
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, 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 prior to the date of Closing involving
Seller or the Company and to the knowledge of Seller; (e) any suit, action,
obligation, liability, cost or expense in any nature arising from the Retained
Litigation or arising from the operation of the Hauling Business before or after
Closing, and any violation of an environmental law (as defined herein) or any
responsibility for disposal at a third party site under any environmental law
other than the Kelly Run Landfill; (f) any underfunding by the Company or Seller
under any Plan; and (g) any claim by a third party that, if true, would mean
that a condition for indemnification set forth in subsections (a), (b), (c), (d)
or (e) of this Section 9.1 of this Agreement has occurred.
SECTION 9.2 Indemnification by Eastern. Eastern agrees that it will
--------------------------
indemnify, defend, protect and hold harmless Seller and its 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) 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 of Eastern set forth in this Agreement or in the Schedule attached to
this Agreement or in the Collateral Documents; (b) nonfulfillment or
nonperformance of any agreement, covenant or condition on the part of Eastern
made in this Agreement and to be performed by Eastern before or after the
Closing Date; (c) any claim arising from an action or circumstance in connection
with the operation of the Landfill Business after Closing and which does not
involve the falsity of a material representation or warranty of Seller; (d) any
claim by a third party that, if true, would mean that a condition for
indemnification set forth in subsections (a), (b), or (c) of this Section 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 IX, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
25
<PAGE>
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice satisfactory to
the Indemnified Party so long as (i) the Indemnifying Party notifies the
Indemnified Party in writing within ten days after the Indemnified Party has
given notice of the Third Party Claim that the Indemnifying Party will indemnify
the Indemnified Party pursuant to the provisions of Article IX, as applicable,
from and against the entirety of any adverse consequences (which will include,
without limitation, all losses, claims, liens, and attorneys' fees and related
expenses) the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (iii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iv)
settlement of, or adverse judgment with respect to the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice adverse to the continuing business interests of
the Indemnified Party, and (v) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 9.3(b) above, (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in (but not control) the defense of the Third Party Claim, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (which will not be unreasonably withheld), and
(iii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party (which will not be unreasonably
withheld). In the case of (c)(ii) or (c)(iii) above, any such consent to
judgment or settlement shall include, as an unconditional term thereof, the
release of the Indemnifying Party from all liability in connection therewith.
(d) If any condition set forth in Section 9.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim and any matter it may deem appropriate and the Indemnified Party
need not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the cost of defending against the Third
Party Claim (including attorneys' fees and expenses), and (iii) the Indemnifying
Party will remain responsible for any adverse consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Article
IX.
SECTION 9.4 Procedure for Non-Third Party Claims. If Eastern or any Seller
------------------------------------
wishes to make a claim for indemnity under Section 9.1 or Section 9.2, as
applicable, and the claim does not arise out of a third party 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,
26
<PAGE>
damages or expenses to which the Indemnified Party has incurred or has suffered
or is expected to incur or suffer to which the Indemnified Party is entitled to
indemnification pursuant to Section 9.1 or Section 9.2, as applicable; (b) the
nature of the event or occurrence which entitles the Indemnified Party to
receive payment under Section 9.1 or Section 9.2, as applicable. If the
Indemnifying Party wishes to object to an Indemnification Demand, the
Indemnifying Party must send written notice to the Indemnified Party stating the
objections and the grounds for the objections ("Indemnification Objection"). If
no Indemnification Objection is sent within thirty (30) days after the
Indemnification Demand is sent, the Indemnifying Party shall be deemed to have
acknowledged the correctness of the claim or claims specified in the
Indemnification Demand and shall pay the full amount claimed in the
Indemnification Demand within forty-five (45) days of the day the
Indemnification Demand is dated. If for any reason the Indemnifying Party does
not pay the amounts claimed in the Indemnification Demand, within thirty days of
the Indemnification Demand's date, the Indemnified Party may institute legal
proceedings to enforce payment of the indemnification claim contained in the
Indemnification Demand and any other claim for indemnification that the
Indemnified Party may have.
SECTION 9.5 Survival of Claim. All of the respective representations,
-----------------
warranties and obligations of the parties to this Agreement shall survive
consummation of the transactions contemplated by this Agreement as follows: (i)
all representations and warranties pertaining to federal, state and local taxes,
including, without limitation, the representations and warranties set forth in
Section 3.11 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 two 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 Limitation of Liability; Setoff. Notwithstanding anything else
-------------------------------
to the contrary contained herein, the obligations of the Seller and Purchaser
pursuant to the indemnification contained in Section 9.1 and Section 9.2 shall
be limited to Five Million Dollars ($5,000,000);
SECTION 9.7 Prompt Payment. In the event that any party is required to make
--------------
any payment under this Article IX, such party shall promptly pay the
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.
27
<PAGE>
ARTICLE X
OTHER PROVISIONS
----------------
SECTION 10.1 Nondisclosure by Seller. Seller recognize and acknowledge that
-----------------------
it has in the past, currently has, and in the future will have certain
confidential information of Eastern such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of Eastern. Seller agrees that for a period of five (5) years from the
Closing Date it will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Eastern, unless (i) such
information becomes known to the public generally through no fault of Seller,
(ii) 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 Seller of the provisions of this
Section, Eastern shall be entitled to an injunction restraining Seller from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Eastern from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
SECTION 10.2 Nondisclosure by Eastern. Eastern recognizes and acknowledges
------------------------
that it has in the past, currently has, and prior to the Closing Date, will have
access to certain confidential information of the Company, such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company. Eastern agrees that it will
not utilize such information in the business or operation of Eastern 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 Eastern or any of its affiliates, (ii) Eastern is compelled to disclose
such information by a governmental entity or pursuant to a court proceeding, or
(iii) Closing takes place. In the event of a breach or threatened breach by
Eastern of the provisions of this Section, Seller shall be entitled to an
injunction restraining Eastern from utilizing or disclosing, in whole or in
part, such confidential information. Nothing contained herein shall be construed
as prohibiting Seller from pursuing any other available remedy for such breach
or threatened breach, including, without limitation, the recovery of damages.
SECTION 10.3 Assignment; Binding Effect; Amendment. This Agreement and the
-------------------------------------
rights of the parties hereunder may not be assigned (except after Closing by
operation of law by the merger of Eastern) and shall be binding upon and shall
inure to the benefit of the parties hereto, and the successors of Eastern. This
Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto.
SECTION 10.4 Entire Agreement. This Agreement, is the final, complete and
----------------
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as the Agreement. The Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior to
28
<PAGE>
contemporaneous discussions, correspondence, or oral or written agreements of
any kind. The parties to this Agreement have relied on their own advisors for
all legal, accounting, tax or other advice whatsoever with respect to the
Agreement and the transactions contemplated hereby.
SECTION 10.5 Counterparts. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
SECTION 10.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Eastern, addressed to it at:
President
1000 Crawford Place, Suite 101
Mount Laurel, New Jersey 08054
with a copy to:
Robert M. Kramer, Esq.
Robert M. Kramer & Associates, P.C.
1150 First Avenue, Suite 900
King of Prussia, Pennsylvania 19406
(b) If to Seller, addressed to it at:
Office of General Counsel
USA Waste Services, Inc.
1001 Fannin, Suite 4000
Houston, Texas 77002
with a copy to:
Megan E. Harmon, Esquire
Schnader Harrison Segal & Lewis LLP
120 Fifth Avenue
Suite 2700, Fifth Avenue Place
Pittsburgh, PA 15222
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
29
<PAGE>
received, if earlier. Any party may change the address for notice by notifying
the other parties of such change in accordance with this Section 10.6.
SECTION 10.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Pennsylvania.
SECTION 10.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
SECTION 10.9 Time of the Essence. Time is of the essence of this Agreement.
-------------------
SECTION 10.10 Captions. The headings of this Agreement are inserted for
--------
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
SECTION 10.11 Severability. In case any provision of this Agreement shall
------------
be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as most
nearly to retain the intent of the parties. If such modification is not
possible, such provision shall be severed from this Agreement. In either case
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.
SECTION 10.12 Construction. The parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"Including" means included, without limitation.
SECTION 10.13 Extension or Waiver of Performance. Either Seller or Eastern
-----------------------------------
may extend the time for or waive the performance of any of the obligations of
the other, waive any inaccuracies in the representations or warranties by the
other, or waive compliance by the other with any of the covenants or conditions
contained in this Agreement, provided that any such extension or waiver shall be
in writing and signed by Seller and Eastern.
SECTION 10.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on
30
<PAGE>
any persons other than the parties to it and their respective officers,
shareholders, directors, affiliates, subsidiaries, parents, agents, employees,
legal representatives, successors and assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third
persons to any party to this Agreement, nor shall any provisions give any third
person any rights of subrogation or action over or against any party to this
Agreement.
SECTION 10.15 Publicity. Prior to Closing, except as may be required by
---------
law, no party to this Agreement shall issue any press release or otherwise make
any statement with respect to the transactions contemplated by this Agreement
without the prior consent of the other party, which shall not be unreasonably
withheld.
SECTION 10.16 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or relating to
this Agreement shall be settled by arbitration in Pittsburgh, Pennsylvania, in
accordance with the commercial rules (the "Rules") of the American Arbitration
Association then obtaining, and judgment upon the award rendered in such
arbitration shall be final and binding upon the parties and may be confirmed in
any court having jurisdiction thereof. Notwithstanding the foregoing, this
Agreement to arbitrate shall not bar any party from seeking temporary or
provisional remedies in any Court having jurisdiction. Notice of the demand for
arbitration shall be filed in writing with the other party to this Agreement,
which such demand shall set forth in the same degree of particularity as
required for complaints under the Federal Rules of Civil Procedure the claims to
be submitted to arbitration. Additionally, the demand for arbitration shall be
stated with reasonable particularity with respect to such demand with documents
attached as appropriate. In no event shall the demand for arbitration be made
after the date when institution of legal or equitable proceedings based on such
claim, dispute or other matter in question would be barred by the applicable
statutes of limitations.
(b) The arbitrators shall have the authority and jurisdiction to
determine their own jurisdiction and enter any preliminary awards that would aid
and assist the conduct of the arbitration or preserve the parties' rights with
respect to the arbitration as the arbitrators shall deem appropriate in their
discretion. The award of the arbitrators shall be in writing and it shall
specify in detail the issues submitted to arbitration and the award of the
arbitrators with respect to each of the issues so submitted.
(c) Within sixty (60) days after the commencement of any arbitration
proceeding under this Agreement, each party shall file with the arbitrators its
contemplated discovery plan outlining the desired documents to be produced, the
depositions to be take, if ordered by the arbitrators in accordance with the
Rules, and any other discovery action sought in the arbitration proceeding.
After a preliminary hearing, the arbitrators shall fix the scope and content of
each party's discovery plan as the arbitrators deem appropriate. The arbitrators
shall have the authority to modify, amend or change the discovery plans of the
parties upon application by either party, if good cause appears for doing so.
(d) The award pursuant to such arbitration will be final, binding and
conclusive.
31
<PAGE>
(e) Counsel to Seller 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"). Seller 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.
SECTION 10.17 Disclosure on Schedules. The parties to this Agreement shall
-----------------------
have the obligation to supplement or amend the Schedules being delivered
concurrently with the execution of this Agreement and annexed hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules. The obligations of the parties to amend or
supplement the Schedules shall terminate on the Closing Date. Notwithstanding
any such amendment or supplementation, the condition to Closing set forth in
Section 7.1 shall not be satisfied if the amendment or supplementation of any
Schedule by Seller results in any of Seller's representations and warranties
changing in a manner which the Purchaser in good faith believes is materially
adverse to the Purchaser.
[THIS SPACE INTENTIONALLY LEFT BLANK]
32
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /S/ ROBERT M. KRAMER
--------------------------------
ROBERT M. KRAMER,
EXECUTIVE VICE PRESIDENT
UNITED WASTE SYSTEMS, INC.
BY: /S/ RONALD H. JONES
---------------------------------
NAME: RONALD H. JONES
TITLE: VICE PRESIDENT AND TREASURER
GUARANTEE
USA Waste Services, Inc. joins this Stock Purchase Agreement for the
purposes of financially guaranteeing Seller's obligations hereunder.
USA WASTE SERVICES, INC.
BY: /S/ CHARLES A. WILCOX
--------------------------------
NAME: CHARLES A. WILCOX
TITLE: REGIONAL VICE PRESIDENT
33
<PAGE>
Exhibit 10.2
AMENDMENT TO STOCK PURCHASE AGREEMENT
-------------------------------------
This Amendment to Stock Purchase Agreement ("Amendment") is made and
entered into on February 12, 1998, by and between Eastern Environmental
Services, Inc., a Delaware corporation ("Purchaser") on one part and United
Waste Systems, Inc., a Delaware corporation ("Seller"), on the other part.
RECITALS
--------
Purchaser and Seller entered into a Stock Purchase Agreement dated November
19, 1997 ("Agreement"). The parties wishing to resolve certain issues raised
between them in connection with consummating the transaction set forth in the
Agreement have entered into this Amendment. The parties have entered into this
Amendment with the intent and purpose of inducing each other to consummate the
transaction under the Agreement.
NOW, THEREFORE, intending to be legally bound hereby and in exchange for
the mutual benefits and burdens set forth in this Amendment, the parties have
agreed as follows:
1. DEFINITIONS AND INCORPORATION. All terms defined in the Agreement and
-----------------------------
not specifically defined in this Amendment shall have the meanings given to the
terms set forth in the Agreement. This Amendment shall be incorporated into the
Agreement and shall form part of the Agreement. The representations,
warranties, covenants and obligations of the parties, as set forth in this
Amendment, shall be deemed to be representations, warranties, covenants and
obligations of the Agreement, as fully as though they were set forth in the
Agreement.
2. VIOLATIONS. Seller agrees that it shall pay all fines and penalties
----------
levied in connection with the violation of Environmental Law, which violation
occurred prior to the Closing Date (the "Pre-Closing Violation"). Seller
shall take any action needed to be taken to correct a Pre-Closing Violation to
the satisfaction of the PADEP and, if applicable, the Allegheny County Health
<PAGE>
Department ("AHD") ("Corrective Actions"). Seller shall be responsible for
paying the cost of any Corrective Actions up to an amount not to exceed
$150,000. All Pre-Closing Violations and fines levied in connection with Pre-
Closing Violations shall be corrected and paid by Seller prior to the fine or
violation having any negative impact on the Company or the Company's business
operations.
3. BALANCE SHEET AND WORKING CAPITAL. On January 28, 1998, Seller
---------------------------------
submitted to Purchaser updated Schedules to the Agreement. One of the updated
Schedules was a Balance Sheet and Statement of Operations for the periods ended
December 31, 1995, December 31, 1996 and December 31, 1997 ("Updated Financial
Statements"). Another Schedule submitted by Seller to Purchaser on January 28,
1998 was a summary of working capital as of December 31, 1997 ("Summary of
Working Capital"). The December 31, 1997 Balance Sheet forming a part of the
Updated Financial Statements has a negative cash balance of One Hundred Eleven
Thousand One Hundred Thirty Dollars ($111,130). Seller agrees that as of
Closing the Company shall not have a negative cash balance or if the Company
does have a negative cash balance, Seller will solely be responsible for paying
any loans, advances or outstanding checks which caused the negative cash
balance. The updated Financial Statements reflect that as of December 31, 1997
there were Inter-Company Accounts Receivable and Accounts Payable in the total
amount of $23,951,597.00. Seller represents and warrants that the Inter-Company
Liability is a liability of the Company currently owed to its corporate parent,
United Waste Systems, Inc., and/or USA Waste Services, Inc. and that such
liability will be contributed as equity to the Company prior to Closing and will
not be assumed by the Purchaser. As of the date of the Closing there shall be
no Inter-Company Account Receivable or Account Payable owed by the Company.
Purchaser and Seller agree that notwithstanding the submission of the Summary of
Working Capital, Section 3.9(d) of the Agreement shall remain in
2
<PAGE>
full force and effect and that Purchaser shall prepare a working capital
calculation as of the date of Closing within 90 days of the Closing and payment
shall be made based on the calculation as set forth in Section 3.9(d).
4. SEWER CONNECTION FEE. The Company is subject to a Consent Decree
--------------------
dated March 13, 1996 entered in the matter of Commonwealth of Pennsylvania
Department of Environmental Protection vs. Kelly Run Sanitation, Inc., No. 356
M.D. 1995 ("Consent Decree"). Pursuant to the Consent Decree the Company is
obligated to dispose of its leachate and ground water into the Forward Township
sanitary sewer system as soon as an intercept and sewer line were constructed
connecting the Company's Landfill into the Forward Township sanitary sewer
system. The interceptor has been constructed and the Company may connect into
it upon paying a tap in fee and connection fee totaling approximately $766,505
("Interceptor Fee"). Seller acknowledges that the Interceptor Fee shall be
treated as a current liability of the Company as of the date of Closing, for
purposes of calculating the amount of working capital and whether Purchaser owes
a payment to Seller or Seller owes a payment to Purchaser under the provisions
of Section 3.9(c) and 3.9(d) of the Agreement.
5. AMOUNT OF CONSTRUCTION COST. Section 1.3 of the Agreement provides
---------------------------
that Purchaser shall reimburse Seller for all reasonable expenditures incurred
by Seller or Company from September 1, 1997 for construction of Phase III
airspace at the Landfill to the extent such capacity constructed is not consumed
as of the Closing Date ("Construction Costs"). The parties agree that the
amount of Construction Costs to be reimbursed to Seller by Purchaser for third
party costs and expenses and internal cost allocations is $410,784.80 in total.
6. PHASE II CLOSURE. Section 1.3 of the Agreement provides that the
----------------
Purchaser shall
3
<PAGE>
reimburse the Seller for the Construction Costs and a $250,000 payment made to
Forward Township which was delivered by the Company on November 14, 1997 in
connection with the Consent Decree ("Reimbursement Payment"). The Agreement also
provides in Section 5.13 that Seller is responsible, at its own cost and
expense, to properly close the Phase II area required by the Phase II permit and
PADEP with the synthetic cap to be in place by July 1, 1998 and the closure
completed on or before September 30, 1998 ("Phase II Closure"). Notwithstanding
anything contrary to the Agreement, to secure Seller's performance under the
Agreement, as amended by the Amendment, the parties agree that the Reimbursement
Payment shall not be paid by Purchaser to Seller until such time as the Phase II
Closure has been substantially completed with all completed work paid for by
Seller. In order to expedite the Phase II Closure, Seller agrees to hire and pay
for a Project Manager who will be located at the Company's landfill and will be
in charge of all aspects of the Phase II Closure, on behalf of Seller. The
Project Manager hired by Seller shall coordinate the Phase II Closure with the
Company so that the Phase II Closure is conducted so as to minimize, to the
extent reasonably possible, any negative impact on the operations of the
Company's Landfill. If Seller requests that Purchaser's or Company's employees
perform any Phase II Closure work, Seller shall reimburse the Company for the
Company's or Purchaser's internal costs of its employees, equipment and
materials used in the Phase II Closure. The final cover soil for the Phase II
Closure shall be taken from (i) the area of the landfill which is being
excavated for the construction of a disposal cell, if at the time the cover soil
for the Phase II Closure is needed a disposal cell is being excavated, or (ii)
the Landfill's soil borrow area, if at the time the cover soil for the Phase II
Closure is needed a disposal cell is not being excavated.
7. HIGHWAY PERMIT. Seller represents and warrants to Purchaser that it
--------------
has all
4
<PAGE>
necessary highway permits required for the Company and its customers to use the
highways around the landfill for the transport of waste to the landfill for
disposal at the rate of 1,250 tons per day.
8. NO OTHER AMENDMENTS. Except as set forth in this Amendment, there are
-------------------
no Amendments to the Agreement and the Agreement, as modified by this Amendment,
is in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EASTERN ENVIRONMENTAL SERVICES, INC.
BY: /S/ ROBERT M. KRAMER
---------------------------------------------
ROBERT M. KRAMER, EXECUTIVE VICE PRESIDENT
UNITED WASTE SYSTEMS, INC.
BY: /S/ RONALD H. JONES
---------------------------------------------------
RONALD H. JONES, VICE PRESIDENT & TREASURER
GUARANTEE
USA Waste Services, Inc. joins this Amendment for the purposes of
financially guaranteeing Seller's obligations under the Amendment and the
Agreement.
USA WASTE SERVICES, INC.
BY: /S/ CHARLES A. WILCOX
----------------------------------------------------
CHARLES A. WILCOX, REGIONAL VICE PRESIDENT
5
