<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) April 20, 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 March 25, 1998, Eastern Environmental Services, Inc. (the "Registrant" or
"Company") entered into an Agreement for the Sale and Purchase of Stock of
Atlantic Waste Disposal, Inc. (the "Atlantic Disposal Stock Purchase Agreement")
between the Registrant, Atlantic Waste Disposal, Inc. ("Atlantic Disposal"), its
wholly owned subsidiaries: Atlantic Transportation Services, Inc., Atlantic
Collection, Inc. and Resource Products, Inc.; and Brambles Waste Services, Inc.
(the "Seller"), to acquire all of the outstanding shares of stock of Atlantic
Waste Disposal, Inc., a wholly owned subsidiary of Brambles Waste Services, Inc.
which owns (100%) of the issued and outstanding shares of capital stock of
Atlantic Waste Disposal, Inc. Simultaneously with the execution of the Atlantic
Waste Disposal Stock Purchase Agreement, the Registrant entered into an
Agreement for the Sale and Purchase of Stock of Atlantic of New York, Inc. (the
"Atlantic New York Stock Purchase Agreement") between the Registrant, Atlantic
Disposal and Brambles Waste Services, Inc. (the "Seller"), to acquire all of the
outstanding stock of Atlantic of New York, Inc. from Brambles Waste Services,
Inc. The Seller is not affiliated with the Registrant nor with any of the
Registrant's subsidiaries. The description of the acquisition transactions set
forth herein are qualified in their entirety by reference to the agreements
which are filed herewith as Exhibits 10.1 and 10.2.
On April 20, 1998 the Seller delivered to the Registrant the schedules
required to be delivered under the Atlantic Disposal Stock Purchase Agreement
and the Atlantic New York Stock Purchase Agreement ("Schedules"). Once the
Registrant reviewed the Schedules, the Registrant determined that the
acquisitions were probable within the meaning of the applicable rules and
regulations of the Securities and Exchange Commission. Closing of the purchase
is subject to finalization of a review by the U.S. Department of Justice and the
Federal Trade Commission under the Hart Scott Rodino Antitrust Improvements Act
of 1976 as well as other governmental approvals and certain third party
consents. The acquisition is also subject to the waiver or expiration of a 90-
day right of first refusal held by a third party. Accordingly, although the
Registrant believes that the purchase will probably close by June 30, 1998 and
that the acquisitions are probable within the meaning of the applicable rules
and regulations of the Securities and Exchange Commission, no assurance is given
that the acquisitions will occur.
At closing under the Stock Purchase Agreements, Registrant is to purchase
all of the outstanding stock of Atlantic Waste Disposal, Inc. and Atlantic New
York, Inc. for total consideration of approximately $86 million to be funded
from borrowings under the Registrant's revolving credit facility and/or
available working capital. The acquisition is anticipated to be accounted for
using the "purchase" method of accounting.
Atlantic Disposal owns the assets and liabilities relating to the operation of a
Subtitle D municipal solid waste disposal facility currently operating on 48
acres of a 1,315 acre property owned by Atlantic Disposal in Southeastern
Virginia. Atlantic of New York, Inc. owns and operates a fully permitted and
rail served putrescible solid waste transfer station in Brooklyn, New York. The
acquired assets include trucks, containers, landfill equipment, permits and real
estate used in the operation of the landfill, hauling and transfer station
operations. The Registrant intends to continue to operate the business owned by
Atlantic Disposal and Atlantic New York. Substantially, all liabilities,
including landfill closure and post-closure liabilities, are to be assumed by
the Registrant after closing, except for intercompany, income tax related
liabilities, and certain contingent liabilities.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder of
Atlantic Waste Disposal, Inc.
Waverly, Virginia
We have audited the accompanying consolidated balance sheets of Atlantic Waste
Disposal, Inc. and subsidiaries (a wholly-owned subsidiary of Brambles Waste
Services, Inc.) (the "Company") as of June 30, 1997 and 1996, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Atlantic Waste Disposal, Inc. and
subsidiaries at June 30, 1997 and 1996, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
April 29, 1998
F-1
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT COMMON STOCK DATA)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 114 $ 156
Accounts receivable (net of allowance for doubtful
accounts of $32 in 1997 and $1,355 in 1996) (Note 3) 3,208 3,763
Other current assets 139 194
Assets held for sale (net of allowance for doubtful
accounts of $275 in 1997 and $ -0- in 1996) 209 484
------- -------
Total current assets 3,670 4,597
------- -------
PROPERTY AND EQUIPMENT, At cost (Note 4) 34,083 31,441
Less accumulated depreciation (3,993) (2,828)
------- -------
Property and equipment, net 30,090 28,613
------- -------
OTHER ASSETS:
Deferred acquisition costs (net of accumulated
amortization of $2,163 in 1997 and $1,396 in 1996) (Note 1) 25,352 24,256
Deferred income taxes (Note 7) 8,566 6,335
Escrow accounts, deposits and cash bonds 380 304
Other non-current assets 285 762
------- -------
Total other assets 34,583 31,657
------- -------
TOTAL $68,343 $64,867
======= =======
See notes to consolidated financial statements.
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
<S> <C> <C>
CURRENT LIABILITIES:
Cash overdraft $ 490 $ 429
Due to affiliated company (Note 8) 57,675 53,135
Accounts payable 812 1,937
Other current liabilities (Note 5) 1,661 1,862
-------- --------
Total current liabilities 60,638 57,363
-------- --------
NON-CURRENT LIABILITIES - Other non-current liabilities 35 -
-------- --------
CLOSURE RESERVES (Note 6) 670 504
-------- --------
Total liabilities 61,343 57,867
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 11) - -
STOCKHOLDER'S EQUITY:
Common stock, $1 par value - authorized, 1,000 shares;
issued and outstanding, 100 shares - -
Additional paid-in capital 20,998 17,141
Accumulated deficit (13,998) (10,141)
-------- --------
Total stockholder's equity 7,000 7,000
-------- --------
TOTAL $ 68,343 $ 64,867
======== ========
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 1996
SALES REVENUE $ 17,189 $ 23,257
COST OF SALES 16,335 21,656
-------- --------
Gross profit 854 1,601
OPERATING EXPENSES - Selling and administrative expenses 2,535 6,310
-------- --------
OPERATING LOSS 1,681 4,709
Other income (expense) 709 (2,019)
Interest expense 5,114 4,933
-------- --------
NET LOSS BEFORE INCOME TAXES 6,086 11,661
INCOME TAX BENEFIT (EXPENSE):
Current (2) (2)
Deferred 2,231 4,283
-------- --------
Total income tax benefit 2,229 4,281
-------- --------
NET LOSS $ 3,857 $ 7,380
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C>
BALANCE, JULY 1, 1995 $ - $10,778 $ 2,761 $8,017
Capital contributions - 6,363 - 6,363
Net loss - - 7,380 7,380
-------- ------- ------- ------
BALANCE, JUNE 30, 1996 - 17,141 10,141 7,000
Capital contributions - 3,857 - 3,857
Net loss - - 3,857 3,857
-------- ------- ------- ------
BALANCE, JUNE 30, 1997 $ - $20,998 $13,998 $7,000
======== ======= ======= ======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997 AND 1996
(AMOUNTS IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(3,857) $(7,380)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,979 2,271
Closure reserves 166 226
Deferred income taxes (2,231) (4,283)
Gain on purchase of permits (413) -
Loss on disposal of property and equipment 249 -
Loss on write-down of assets held for sale 275 -
Loss on write-down of deferred acquisition costs - 603
(Increase) decrease in:
Accounts receivable (546) 856
Assets held for sale - (484)
Other current assets (20) (5)
Escrow accounts, deposits and cash bonds (76) 21
Other non-current assets 34 81
Increase (decrease) in:
Accounts payable (731) 386
Other current liabilities (201) (774)
------- -------
Net cash used in operating activities (5,372) (8,482)
------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment (2,927) (5,191)
Deferred acquisition costs (253) (15)
Proceeds from sale of assets 52 -
------- -------
Net cash used in investing activities (3,128) (5,206)
------- -------
FINANCING ACTIVITIES:
Proceeds from advances from affiliate company 4,540 4,749
Proceeds from capital contributions 3,857 6,363
Cash overdraft 61 429
------- -------
Net cash provided by financing activities 8,458 11,541
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (42) (2,147)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 156 2,303
------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 114 $ 156
======= =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1997 AND 1996
(DOLLAR AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of Atlantic Waste Disposal, Inc. and its wholly-owned
subsidiaries: Atlantic of New York, Inc., Atlantic Transportation Services,
Inc. and Resource Products, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
DESCRIPTION OF BUSINESS - Atlantic Waste Disposal, Inc. (the "Company"), a
wholly-owned subsidiary of Brambles Waste Services, Inc., operates a solid
waste landfill facility located in Sussex County, Virginia. Atlantic of New
York, Inc. operates a solid waste transfer station in Brooklyn, New York.
The Company was in development stage until June 1994 when it commenced
accepting solid waste. The Company is primarily engaged in the business of
providing solid waste disposal services through nonhazardous waste disposal
facilities. The Company's customers include municipal, commercial and
industrial customers principally located in the eastern and mid-Atlantic
United States.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions regarding the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Such estimates include the Company's accounting for closure and
post-closure obligations, amortization of landfill cell costs, site
improvements and certain deferred acquisition costs, and estimates of
reserves such as the allowance for doubtful accounts.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment is stated on the basis of
cost. The Company provides depreciation over the estimated useful lives of
assets using the straight-line method for its property and equipment except
for landfill cells and site improvements. The estimated useful lives are
thirty years for buildings, the term of the lease for leasehold improvements,
five to ten years for vehicles, machinery, and equipment, and five to seven
years for furniture and fixtures.
Landfill cell costs include expenditures for acquisition of land and related
airspace, engineering, permitting, legal, capitalized interest and direct
site preparation costs which management believes are recoverable. The
Company commences depreciating landfill cell costs when construction is
completed and the constructed area begins to accept waste. Landfill cell
costs are depreciated, using the units-of-production method, based upon
consumed airspace of landfill capacity during the fiscal year in relation to
estimates of total available airspace. The Company considers total available
airspace to include permitted and active landfill cells as well as landfill
cells which are expected to be permitted within five years.
F-6
<PAGE>
Site improvements include various facility construction costs not directly
related to landfill cell construction. The Company depreciates these costs
using the units-of-production method based on airspace consumed to date
relative to estimates of total available airspace.
Annually, the Company prepares topographic analyses of the site using various
survey techniques to confirm airspace utilization during the current year and
remaining capacity. Engineering, legal and other costs associated with the
expansion of permitted capacity are deferred until receipt of all necessary
operating permits. Such costs are capitalized and amortized after receipt of
the necessary operating permits. The Company reviews the realization of
landfill cell development on a periodic basis. The portion of landfill cells
currently under development for future expansion and thus excluded from
depreciation totaled $113 and $4,489 at June 30, 1997 and 1996, respectively.
The Company capitalizes interest costs as part of the cost of developing
landfill cells and constructing disposal capacity. Interest costs of $225
and $125 were capitalized for the fiscal years ended June 30, 1997 and 1996,
respectively.
DEFERRED ACQUISITION COSTS - Deferred acquisition costs consist of various
costs associated with obtaining regulatory permits, constructing off-site
improvements to roadways and a railroad bridge, securing operating
agreements, and other costs which are not directly associated with the
purchase of tangible operating assets. Certain acquisition costs directly
associated with the landfill purchase are amortized using the units of
production method based on landfill capacity consumed in relation to
estimates of total available airspace. Acquisition costs for obtaining
regulatory permits are amortized using the straight-line method over an
estimated useful life of fifteen years. Acquisition costs associated with
obtaining the right to operate the waste transfer station are amortized
ratably over the life of the operating agreement.
LANDFILL CLOSURE AND POST-CLOSURE COSTS - Accrued landfill closure costs
include the cost of closure and post-closure monitoring and maintenance of
the landfill based on currently available facts, existing technology and
interpretation of presently enacted laws and regulations. Landfill post-
closure costs represent management's estimate of the current costs of the
future obligation associated with maintaining and monitoring the landfill for
generally a thirty year period subsequent to the closure of the landfill.
The Company estimates the future cost of closure and post-closure costs based
on its interpretation of the U.S. Environmental Protection Agency's Subtitle
D technical standards. The Company periodically updates its estimates of
future closure and post-closure costs with the impact of changes in estimates
accounted for on a prospective basis. The Company recognizes these costs on
the units-of-production method based on consumed airspace in relation to
management's estimate of total available airspace.
ESCROW ACCOUNTS, DEPOSITS AND CASH BONDS - The Company is required to
maintain escrow accounts, deposits and cash bonds to secure performance and
compliance with certain laws and regulations of the localities in which it
operates.
REVENUE RECOGNITION - The Company recognizes revenues upon receipt and
acceptance of waste material at its landfill and transfer station. Amounts
billed prior to services being performed are classified as deferred revenue.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
consist primarily of cash and cash equivalents, trade receivables, trade
payables and debt instruments. The book value of cash and cash equivalents,
trade receivables and trade payables are considered to be representative of
their respective fair values. The carrying value of the Company's long-term
debt approximates fair value based on current rates and terms.
F-7
<PAGE>
LONG-LIVED ASSETS - Long-lived assets consist primarily of property and
equipment and certain intangible assets. The recoverability of long-lived
assets is evaluated by an analysis of operating results and consideration of
other significant events or changes in the business environment. If
impairment exists, the carrying amount of the long-lived assets is reduced to
its estimated fair value.
NEW ACCOUNTING STANDARD - In October 1996, the AICPA issued SOP 96-1,
"Environmental Remediation Liabilities." The SOP provides guidance with
respect to the recognition, measurement and disclosure of environmental
remediation liabilities and, based on current circumstances, the Company does
not believe the effect of adoption will be material.
2. ACQUISITION
In December 1996, Atlantic of New York, Inc. (Atlantic) entered into a
purchase agreement to obtain the state and local regulatory permits for the
waste transfer station operated by Atlantic. Under a previous agreement,
Atlantic had purchased the right to operate the waste transfer station from
the company that held the permits. Concurrently with the previous agreement,
Atlantic entered into a second agreement which appointed the permit holding
company as the sub-operator of the waste transfer station.
Under the purchase agreement, Atlantic paid $100 to the permit holding
company in addition to other consideration for the assignment of the state
and local permits to Atlantic and the purchase of the waste transfer station
fixed assets. The other consideration included the elimination of accounts
receivable due to Atlantic from the permit holder of $1,101 and the
elimination of accounts payable due to the permit holder from Atlantic of
$422.
3. ACCOUNTS RECEIVABLE
The Company performs ongoing credit evaluations of it customers and generally
does not require collateral. The Company maintains an allowance for doubtful
accounts at a level that management believes is sufficient to cover potential
credit losses. The following is a rollforward of the Company's allowance for
bad debt at June 30, 1997 and 1996:
1997 1996
Balance at beginning of year $ 1,355 $ 47
Additions (charged to expense) 32 2,081
Deductions (1,355) (773)
------- ------
Balance at end of year $ 32 $1,355
======= ======
F-8
<PAGE>
4. PROPERTY AND EQUIPMENT
Balances of major classes of assets and the allowance for depreciation at
June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Landfill cells $14,751 $ 8,912
Site improvements 13,465 13,443
Machinery and equipment 2,394 1,932
Construction in progress 113 4,489
Buildings 312 312
Vehicles 418 385
Office furniture, fixtures and equipment 331 357
Leasehold improvements 2,299 1,611
------- -------
Total 34,083 31,441
Less accumulated depreciation (3,993) (2,828)
------- -------
Property and equipment, net $30,090 $28,613
======= =======
</TABLE>
5. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following at June 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Accrued compensation $ 295 $ 298
Accrued professional fees 464 323
Accrued income tax 2 2
Accrued construction - 457
Accrued base rent 229 277
Other 671 505
------ ------
$1,661 $1,862
====== ======
</TABLE>
6. ACCRUED LANDFILL CLOSURE
The Company will have financial obligations related to closure and post-
closure monitoring and maintenance of its landfill. While the exact amount
of future closure and post-closure obligations cannot be determined, the
Company has developed procedures to estimate these total projected costs
based on currently available facts, existing technology, and presently
enacted laws and regulations. Accordingly, the Company will continue to
periodically review and update underlying assumptions and projected costs and
record required adjustments. The closure and post-closure requirements are
established under the standards of the U.S. Environmental Protection Agency's
Subtitle D regulations. Final closure and post-closure accruals consider
estimates for the final cap and cover for the site,
F-9
<PAGE>
methane gas control, leachate management and groundwater monitoring, and
other operations maintenance costs to be incurred after the site discontinues
accepting waste, which is generally expected to be for a period of up to
thirty years after final site closure. The Company has accrued $670 and $504
for post-closure obligations as of June 30, 1997 and 1996, respectively.
7. INCOME TAXES
The Company and its subsidiaries are party to a tax sharing agreement with
its parent, and their results of operations are included in a consolidated
federal income tax return. Current benefits and expenses related to
consolidated federal income taxes are allocated to the Company and its
subsidiaries based on their taxable income or loss.
Deferred income taxes reflect the impact of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Deferred tax assets at June
30, 1997 and 1996 relate principally to net operating losses. These net
operating losses are recognized by the Company as deferred taxes as they will
be utilized to reduce their parent's consolidated federal income tax.
The Company has net operating loss carryforwards of $30,700 and $21,200 for
the years ended June 30, 1997 and 1996, respectively.
Temporary differences giving rise to significant components of the Company's
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization $ 3,608 $2,343
------- ------
Deferred tax assets:
Net operating loss carryforwards 10,442 7,218
Legal reserves and other accruals 727 774
State taxes 1,005 686
------- ------
Total deferred assets 12,174 8,678
------- ------
Net deferred tax assets $ 8,566 $6,335
======= ======
</TABLE>
F-10
<PAGE>
Significant components of the income tax expense (benefit) at June 30, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Current:
Federal $ - $ -
State 2 2
------- -------
2 2
------- -------
Deferred:
Federal (1,979) (3,771)
State (252) (512)
------- -------
(2,231) (4,283)
------- -------
Income tax benefit $(2,229) $(4,281)
======= =======
</TABLE>
The reconciliation of income tax benefit computed at the federal statutory
rate to actual income tax benefit is as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Federal statutory rate (34.0)% (34.0)%
Effect of:
State taxes, net of federal expense (2.7) (2.9)
Other 0.1 0.2
------ ------
</TABLE>
(36.6)% (36.7)%
===== =====
8. RELATED PARTY TRANSACTIONS
The parent of Brambles Waste Services, Inc., Brambles USA, Inc. provides
funding for landfill construction and purchases of assets as well as working
capital advances for operations. Amounts due Brambles USA, Inc. at June 30,
1997 and 1996 totaled $57,675 and $53,135, respectively. Interest on the
funding from Brambles USA, Inc. is charged monthly on the unpaid balance at
First Chicago Bank's prime rate. Interest costs for the years ended June 30,
1997 and 1996 totaled $5,339 and $5,058, respectively.
Brambles USA, Inc. also provides management services to the Company for which
it receives a management fee. Management fees charged by Brambles USA, Inc.
for the years ended June 30, 1997 and 1996 totaled $204 and $228,
respectively.
F-11
<PAGE>
9. SAVINGS PLAN
The Company participates in a 401(k) profit sharing savings plan sponsored by
Brambles USA, Inc. Eligible employees may contribute up to 15% of their
compensation and the Company contributes an amount equal to 50% of the
employee's contribution up to 2.5% of the employee's eligible compensation.
The Company also contributes 2.5% of employee's eligible compensation as part
of the profit sharing component of the plan. The Company's contribution to
the plan was $58 and $34 for the years ended June 30, 1997 and 1996,
respectively.
10. OPERATING LEASES
Atlantic of New York, Inc. leases its transfer station in Brooklyn, New York
under a noncancellable lease which expires March 31, 2004. The Company
leases various equipment under noncancellable leases with expiration dates
through April 18, 2000. Minimum future operating lease payments for years
ending June 30, are as follows:
<TABLE>
<CAPTION>
TRANSFER
EQUIPMENT STATION TOTAL
<S> <C> <C> <C>
1998 $62 $ 247 $ 309
1999 19 255 274
2000 6 262 268
2001 - 270 270
2002 - 279 279
Thereafter - 507 507
--- ------ ------
$87 $1,820 $1,907
=== ====== ======
</TABLE>
Rent expense under the above operating leases totaled $331 and $258 for the
years ended June 30, 1997 and 1996, respectively.
The Company leases railroad boxcars for the transportation of waste. At June
30, 1997, the Company had 99 boxcars under lease at a monthly rental of $32.
The boxcar lease expires August 14, 1997. Subsequent to year end, the
Company renewed the lease resulting in the addition of 25 boxcars at a
monthly rental of $38, and extending the term to May 14, 1998. Rent expense
for leased railroad boxcars totaled $318 and $326 for the years ended June
30, 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES
LAWS AND REGULATIONS - The Company is subject to extensive and evolving
federal, state, and local environmental laws and regulations in the United
States and elsewhere that have been enacted in response to technological
advances and the public's increased concern over environmental issues. The
majority of expenditures necessary to comply with environmental laws and
regulations are made in the normal course of business. Although the Company,
to the best of its knowledge, is in compliance in all material respects with
the laws and regulations affecting its operations, there is no assurance that
the Company will not have to expend substantial amounts for compliance in the
future.
F-12
<PAGE>
The Company is subject to the 1996 Air Regulation "New Source Performance
Standards" for control of landfill gas emissions. The Company filed the
initial notification required by this regulation indicating that it had not
passed the threshold in landfill gas emissions requiring installation of
control devices. The quantity of waste managed up to this point in Cell 1
would not have generated sufficient landfill gas to require installation of
control devices. With increased waste volumes, and operation of Cell 2,
during fiscal 1997 the Company may have passed this threshold, and an
evaluation is currently being completed by management. If the threshold has
been exceeded, the Company must design a control system, most likely a flare
device, and obtain the necessary air permits from the VA DEQ.
LITIGATION - The Company is involved in various claims and legal actions
arising in the ordinary course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material effect on
the Company's consolidated financial position, results of operations or
liquidity.
LANDFILL LEASE - The Company has entered into a Contract and Ground Lease
Agreement with Sussex County, Virginia (the "County"). Under the agreement,
the Company has conveyed its leasehold rights in the landfill site to the
County. The term of the agreement extends for twenty-five years with
automatic one-year extensions until the entire capacity of the landfill has
been utilized. The Contract and Ground Lease Agreement was most recently
amended on December 20, 1996 resulting primarily in revisions to the amount
of base rent paid to the County.
Upon the expiration of the agreement, the Company must pay a termination fee
of $100 to the County unless the Company exercises the purchase option
contained in the agreement. The purchase option allows the Company to
purchase the landfill property and improvements at the expiration of the
agreement for the fair market value of the buildings, but in no event will
the purchase price be less than $500.
OPERATING PERMIT - The Conditional Use Permit, which grants the Company
approval to operate the landfill, requires that the Company establish an
escrow account and fund the account at a rate of $5 per acre for each acre of
the landfill used for disposal. At June 30, 1997 and 1996, the Company had
deposited $235 and $165, respectively, into the escrow account. The escrow
funds and interest thereon shall be held for the benefit of the County
subject to certain withdrawal terms. Ten years subsequent to approval of the
final closure of the landfill, 50% of the escrow funds and interest thereon
may be disbursed to the Company. The remaining balance will be paid to the
Company twenty years after final closure of the landfill. However, the
County shall be entitled to draw upon the escrow account in the event of any
material contamination of the landfill or release of contaminants which is
not promptly remedied by the Company.
The Conditional Use Permit also contains a provision which requires the
Company to reimburse the County annually for the cost of inspection and
analysis of the waste material at the landfill. Such costs are to be
reimbursed at actual costs not to exceed $125 annually. The maximum
reimbursable costs is to increase at $25 increments every five years.
The Company has entered into an operating agreement with the assignor of the
landfill Conditional Use Permit which provides for royalty payments to the
assignor based on the gate price of each ton of waste accepted and quarterly
waste receipts. The agreement also contains a covenant that requires the
Company to maintain its stockholder's equity in an amount which does not fall
below $7,000.
F-13
<PAGE>
WETLANDS MITIGATION - The Company's total available airspace used to
depreciate landfill cells, site improvements and certain deferred acquisition
costs contains 12.5 acres of unpermitted wetlands. The Company expects to
submit a standard permit application to the U.S. Army Corps of Engineers in
July 1998 requesting permission to mitigate the wetlands on site. Regulatory
review by the U.S. Army Corps of Engineers is expected to conclude by
December 1999. Although there is no assurance that regulatory approval of
the standard permit application will be granted, the Company is not aware of
any matters that would preclude approval.
LANDFILL OPERATIONS AGREEMENT - The Company has subcontracted landfill
operations to a company which provides equipment operators and heavy landfill
equipment for the spreading of waste to active landfill cells. The
subcontract agreement is for a period of five years, and provides for monthly
charges based on machine hours. The subcontract was amended September 23,
1996 establishing minimum annual charges as well as extending the subcontract
for an additional year.
LETTERS OF CREDIT - The Company is required to maintain letters of credit
to guarantee performance under certain agreements, primarily closure and
post-closure reserve obligations. At June 30, 1997 and 1996, the Company had
letters of credit outstanding of $7,084 and $4,757, respectively.
CONSTRUCTION COMMITMENTS - Commitments under contacts for construction of
new landfill cells and other projects totaled $110 and $1,737 at June 30,
1997 and 1996, respectively.
12. SUBSEQUENT EVENTS
On August 12, 1997, the Company entered into a $2,700 construction contract
for the development of 17.5 acres of additional landfill capacity.
On March 25, 1998, Brambles Waste Services, Inc. entered into definitive
agreement with Eastern Environmental Services, Inc. for the proposed sale of
all of the Company's outstanding common stock for total consideration of
$85,600 subject to certain terms and conditions. In addition, the
acquisition of the Company is subject to the waiver or expiration of a 90-day
right of first refusal to acquire the landfill by a third party.
* * * * * *
F-14
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT COMMON STOCK DATA)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 88
Accounts receivable (net of allowance for
doubtful accounts of $32) 3,363
Other current assets 220
-------
Total current assets 3,671
-------
PROPERTY AND EQUIPMENT, At cost 38,264
Less accumulated depreciation (4,879)
-------
Property and equipment, net 33,385
-------
OTHER ASSETS:
Deferred acquisition costs (net of accumulated
amortization of $2,704) 24,811
Deferred income taxes 8,969
Escrow accounts, deposits and cash bonds 386
Other non-current assets 282
-------
Total other assets 34,448
-------
TOTAL $71,504
=======
See selected notes to consolidated financial statements.
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Due to affiliated company $ 60,391
Accounts payable 1,959
Other current liabilities 1,274
--------
Total current liabilities 63,624
--------
NON-CURRENT LIABILITIES - Other non-current liabilities 35
CLOSURE RESERVES 845
---
Total liabilities 64,504
--------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDER'S EQUITY:
Common stock, $1 par value - authorized, 1,000 shares;
issued and outstanding, 100 shares -
Additional paid-in capital 21,701
Accumulated deficit (14,701)
--------
Total stockholder's equity 7,000
--------
TOTAL $ 71,504
========
F-15
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1997 1996
--------- --------
<S> <C> <C>
SALES REVENUE $ 12,610 $ 7,651
COST OF SALES 9,919 7,861
-------- --------
Gross profit (loss) 2,691 (210)
OPERATING EXPENSES - Selling and administrative expenses 1,126 823
-------- ---------
OPERATING INCOME (LOSS) 1,565 (1,033)
OTHER INCOME 143 413
Interest expense 2,812 2,397
-------- --------
NET LOSS BEFORE INCOME TAXES 1,104 3,017
INCOME TAX BENEFIT (EXPENSE):
Current (1) (2)
Deferred 402 1,192
-------- --------
Total income tax benefit 401 1,190
-------- --------
NET LOSS $ 703 $ 1,827
======== ========
</TABLE>
See selected notes to consolidated financial statements.
F-16
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C>
BALANCE, JULY 1, 1997 $ - $20,998 $13,998 $7,000
Capital contributions - 703 - 703
Net loss - - 703 703
--------- ---------- ----------- ------
BALANCE, DECEMBER 31, 1997 $ - $21,701 $14,701 $7,000
========= ========== =========== ======
</TABLE>
See selected notes to consolidated financial statements.
F-17
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1997 1996
------- -------
OPERATING ACTIVITIES:
Net loss $ (703) $(1,827)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,462 846
Closure reserves 175 188
Deferred income taxes (403) (1,192)
Loss on write-down of assetes held for sale - 100
Gain on purchase of permits - (413)
Net (gain) loss on equipment sales (115) 46
(Increase) decrease in:
Accounts receivable 45 350
Other current assets (81) (56)
Escrow accounts, deposits and cash bonds (6) (4)
Other non-current assets 3 37
Increase (decrease) in:
Cash overdraft (490) (205)
Accounts payable 1,145 (1,238)
Other current liabilities (387) (460)
------- -------
Net cash provided by (used in)
operating activities 645 (3,828)
------- -------
INVESTING ACTIVITIES:
Purchase of property and equipment (4,240) (1,655)
Deferred acquisition costs - (247)
Proceeds from sale of equipment 150 52
------- -------
Net cash used in investing activities (4,090) (1,850)
------- -------
FINANCING ACTIVITIES:
Proceeds from capital contributions 703 1,827
Proceeds from advances from affiliate company 2,716 3,824
------- -------
Net cash provided by financing activities 3,419 5,651
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (26) (27)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 114 156
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 88 $ 129
======= =======
See selected notes to consolidated financial statements.
F-18
<PAGE>
ATLANTIC WASTE DISPOSAL, INC.
(A Wholly-Owned Subsidiary of Brambles Waste Services, Inc.)
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SIX MONTHS ENDED DECEMBER 31, 1997
(DOLLAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying consolidated financial statements
include the accounts of Atlantic Waste Disposal, Inc. and its wholly-owned
subsidiaries: Atlantic of New York, Inc., Atlantic Transportation Services,
Inc. and Resource Products, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The interim financial statements reflect all adjustments (which include only
normal recurring adjustments), which in the opinion of management, are
necessary to present fairly the financial position at December 31, 1997 and
1996, and results of operations for the six month periods then ended. The
results of operations for the periods ended December 31, 1997 and 1996 are
not necessarily indicative of the operating results for a full year.
DESCRIPTION OF BUSINESS - Atlantic Waste Disposal, Inc. (the "Company"), a
wholly-owned subsidiary of Brambles Waste Services, Inc., operates a solid
waste landfill facility located in Sussex County, Virginia. Atlantic of New
York, Inc. operates a solid waste transfer station in Brooklyn, New York.
The Company was in development stage until June 1994 when it commenced
accepting solid waste. The Company is primarily engaged in the business of
providing solid waste disposal services through nonhazardous waste disposal
facilities. The Company's customers include municipal, commercial and
industrial customers principally located in the eastern and mid-Atlantic
United States.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions regarding the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Such estimates include the Company's accounting for closure and
post-closure obligations, amortization of landfill cell costs, site
improvements and certain deferred acquisition costs, and estimates of
reserves such as the allowance for doubtful accounts.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment is stated on the basis of
cost. The Company provides depreciation over the estimated useful lives of
assets using the straight-line method for its property and equipment except
for landfill cells and site improvements. The estimated useful lives are
thirty years for buildings, the term of the lease for leasehold improvements,
five to ten years for vehicles, machinery, and equipment, and five to seven
years for furniture and fixtures.
Landfill cell costs include expenditures for acquisition of land and related
airspace, engineering, permitting, legal, capitalized interest and direct
site preparation costs which management believes are recoverable. The
Company commences depreciating landfill cell costs when construction is
completed and the constructed area begins to accept waste. Landfill cell
costs are depreciated, using the units-of-
F-19
<PAGE>
production method, based upon consumed airspace of landfill capacity consumed
during the fiscal year in relation to estimates of total available airspace.
The Company considers total available airspace to include permitted and
active landfill cells as well as landfill cells which are expected to be
permitted within five years.
Site improvements include various facility construction costs not directly
related to landfill cell construction. The Company depreciates these costs
using the units-of-production method based on airspace consumed to date
relative to estimates of total available airspace.
Annually, the Company prepares topographic analyses of the site using various
survey techniques to confirm airspace utilization during the current year and
remaining capacity. Engineering, legal and other costs associated with the
expansion of permitted capacity are deferred until receipt of all necessary
operating permits. Such costs are capitalized and amortized after receipt of
the necessary operating permits. The Company reviews the realization of
landfill cell development on a periodic basis.
The Company capitalizes interest costs as part of the cost of developing
landfill cells and constructing disposal capacity.
DEFERRED ACQUISITION COSTS - Deferred acquisition costs consist of various
costs associated with obtaining regulatory permits, constructing off-site
improvements to roadways and a railroad bridge, securing operating
agreements, and other costs which are not directly associated with the
purchase of tangible operating assets. Certain acquisition costs directly
associated with the landfill purchase are amortized using the units of
production method based on landfill capacity consumed in relation to
estimates of total available airspace. Acquisition costs for obtaining
regulatory permits are amortized using the straight-line method over an
estimated useful life of fifteen years. Acquisition costs associated with
obtaining the regulatory permits to operate the waste transfer station are
amortized ratably over the life of the transfer station lease.
LANDFILL CLOSURE AND POST-CLOSURE COSTS - Accrued landfill closure costs
include the cost of closure and post-closure monitoring and maintenance of
the landfill based on currently available facts, existing technology and
interpretation of presently enacted laws and regulations. Landfill post-
closure costs represent management's estimate of the current costs of the
future obligation associated with maintaining and monitoring the landfill for
generally a thirty year period subsequent to the closure of the landfill.
The Company estimates the future cost of closure and post-closure costs based
on its interpretation of the U.S. Environmental Protection Agency's Subtitle
D technical standards. The Company periodically updates its estimates of
future closure and post-closure costs with the impact of changes in estimates
accounted for on a prospective basis. The Company recognizes these costs on
the units-of-production method based on consumed airspace in relation to
management's estimate of total available airspace.
ESCROW ACCOUNTS, DEPOSITS AND CASH BONDS - The Company is required to
maintain escrow accounts, deposits and cash bonds to secure performance and
compliance with certain laws and regulations of the localities in which it
operates.
REVENUE RECOGNITION - The Company recognizes revenues upon receipt and
acceptance of waste material at its landfill and transfer station. Amounts
billed prior to services being performed are classified as deferred revenue.
F-20
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
consist primarily of cash and cash equivalents, trade receivables, trade
payables and debt instruments. The book value of cash and cash equivalents,
trade receivables and trade payables are considered to be representative of
their respective fair values. The carrying value of the Company's long-term
debt approximate fair value based on current rates and terms.
LONG-LIVED ASSETS - Long-lived assets consist primarily of property and
equipment and certain intangible assets. The recoverability of long-lived
assets is evaluated by an analysis of operating results and consideration of
other significant events or changes in the business environment. If
impairment exists, the carrying amount of the long-lived assets is reduced to
its estimated fair value.
NEW ACCOUNTING STANDARD - In October 1996, the AICPA issued SOP 96-1,
"Environmental Remediation Liabilities." The SOP provides guidance with
respect to the recognition, measurement and disclosure of environmental
remediation liabilities. The Company adopted SOP 96-1 in the first quarter
of fiscal 1998; however, the effect of such adoption was not material.
2. SUBSEQUENT EVENT
On March 25, 1998, Brambles Waste Services, Inc. entered into definitive
agreement with Eastern Environmental Services, Inc. for the proposed sale of
all of the Company's outstanding common stock for total consideration of
$85,600 subject to certain terms and conditions. In addition, the
acquisition of the Company is subject to the waiver or expiration of a 90-day
right of first refusal to acquire the landfill by a third party.
* * * * * *
F-21
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
Financial Information and Exhibits.
-----------------------------------
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Independent Auditors' Report
Consolidated Balance Sheets as of June 30, 1997 and 1996
Consolidated Statements of Operations for the Two Years Ended
June 30, 1997
Consolidated Statements of Stockholder's Equity for the Two Years Ended
June 30, 1997
Consolidated Statements of Cash Flows for the Two Years Ended June 30,
1997
Notes to Consolidated Financial Statements
Consolidated Balance Sheet as of December 31, 1997 (Unaudited)
Consolidated Statements of Operations for the Six Months Ended
December 31, 1997 and December 31, 1996 (Unaudited)
Consolidated Statement of Stockholder's Equity for the Six Months Ended
December 31, 1997 (Unaudited)
Consolidated Statements of Cash Flows for the Six Months Ended December 31,
1997 and December 31, 1996 (Unaudited)
Selected Notes to Consolidated Financial Statements (Unaudited)
(B) PRO FORMA FINANCIAL INFORMATION
Pro Forma Consolidated Statement of Operations for the Year Ended
June 30, 1997 (Unaudited)
Pro Forma Consolidated Statement of Operations for the Six Months Ended
December 31, 1997 (Unaudited)
Pro Forma Consolidated Balance Sheet as of December 31, 1997 (Unaudited)
(C) EXHIBITS
10.1 Agreement for the Sale and Purchase of Stock of Atlantic Waste Disposal,
Inc. dated March 25, 1998, by and among Atlantic Waste Disposal, Inc.,
Brambles Waste Services, Inc., Atlantic Transportation Services, Inc.,
Atlantic Collection, Inc., Resource Products, Inc. and the Registrant.
10.2 Agreement for the Sale and Purchase of Stock of Atlantic New York, Inc.
dated March 25, 1998, by and among Atlantic Waste Disposal, Inc., Brambles
Waste Services, Inc., Atlantic New York, Inc. and the Registrant.
23.1 Consent of Deloitte & Touche LLP
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: April 30, 1998 By: /s/ Gregory M. Krzemien
--------------------------
Gregory M. Krzemien, Chief Financial Officer
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
AND THE SIX MONTHS ENDED DECEMBER 31, 1997
The following unaudited pro forma consolidated statements of operations for
the year ended June 30, 1997 and the six months ended December 31, 1997 give
effect to (i) the acquisition on August 15, 1997 of all the outstanding stock of
Harford Disposal, Inc. ("Harford") by Eastern Environmental Services, Inc. (the
"Registrant") with immediately thereafter, all of the outstanding stock of
Pappy, Inc. being purchased by Harford for total consideration paid by Eastern
Environmental Services, Inc. of approximately $12 million. Harford's only
activity was the acquisition of Pappy, Inc. and therefore Pappy, as the
predecessor company, constitutes the business acquired by the Registrant; (ii)
the acquisition on August 20, 1997 of all the outstanding stock of Soil
Remediation of Philadelphia, Inc. ("SRP") by the Registrant for consideration
consisting of 270,000 unregistered shares of the Registrant's common stock
valued at $15.625 per share. Simultaneously, with the closing of the SRP
transaction, the Registrant and its wholly owned subsidiary, Eastern
Environmental Services, Inc. of Fairless Hills, Inc. ("EESI of Fairless"),
entered into an Agreement (the "Fairless Hills Agreement") dated August 20, 1997
with USA Waste Services, Inc. ("USA Waste"), USA Waste of Fairless Hills, Inc.
("USA Fairless"), Clean Soils of Fairless Hills, Inc. ("Clean Soils Fairless")
to evidence a transaction under which EESI of Fairless will acquire all stock of
Clean Soils Fairless and USA Fairless, two companies under common ownership with
SRP by USA Waste. The closing of the acquisition of the stock of Clean Soils
Fairless and USA Fairless are pending upon satisfaction of certain normal
conditions which the Registrant believes will be resolved; (iii) the acquisition
of Pine Grove, Inc. ("Pine Grove") pursuant to the terms of a Stock Purchase
Agreement for consideration of $46 million including the assumption of
approximately $12 million of debt; (iv) the acquisition of Bluegrass
Containment, Inc. ("Bluegrass") pursuant to the terms of a Stock Purchase
Agreement dated March 2, 1998, as amended March 9, 1998; (v) the acquisition of
Hudson Jersey Sanitation Co., West Milford Haulage, Inc., Frank Stamato &
Company, and Specialized Recycling Technologies, Inc. (collectively, "Stamato
Companies" or "Stamato") pursuant to the terms of a Stock Purchase Agreement
dated February 5, 1998; and (vi) the pending acquisition of Atlantic Waste
Disposal, Inc. ("Atlantic Disposal") and Atlantic Waste of New York, Inc.
("Atlantic New York") pursuant to the terms of Agreements for the Sale and
Purchase of Stock (the "Stock Purchase Agreements") dated March 25, 1998 for
total consideration of approximately $86 million.
The following unaudited pro forma consolidated statements of operations for
the year ended June 30, 1997 and the six months ended December 31, 1997 give
effect to the aforementioned transactions as if the transactions had occurred on
July 1, 1996. The following unaudited pro forma financial data may not be
indicative of what the results of operations or financial position of Eastern
Environmental Services, Inc. would have been, had the transactions to which such
data gives effect had been completed on the date assumed, nor are such data
necessarily indicative of the results of operations or financial position of
Eastern Environmental Services, Inc. that may exist in the future. The unaudited
pro forma financial data and related pro forma adjustments have been prepared by
the Registrant's management based in part on historical financial information
provided by the management of completed and pending acquisitions. The following
unaudited pro forma information should be read in conjunction with the notes
thereto, the other pro forma financial statements and notes thereto, and the
consolidated financial statements and notes of Eastern Environmental Services,
Inc. as of June 30, 1997 and for each of the three years in the period then
ended as filed in the Company's report on Form 8-K (filed February 27,1998) and
the historical financial statements of Atlantic Waste Disposal, Inc. appearing
elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR
THE YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Eastern
Environmental Pappy,
Services, Inc. Inc. SRP Clean Soils Pine Grove Bluegrass Stamato
-------------- ---------- ------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $96,056,945 $2,803,860 $ 3,649,026 $1,513,224 $14,559,569 $1,469,588 $23,104,053
Cost of revenues 65,496,657 910,970 6,944,870 1,755,047 9,804,650 917,128 16,438,668
Selling, general and
administrative expenses 15,579,744 430,787 704,137 165,768 1,274,391 93,830 3,310,633
Depreciation and
amortization 5,161,549 107,914 975,224 299,068 4,727,837 54,750 1,812,890
Merger costs 3,336,792 -- -- -- -- -- --
----------- ---------- ----------- ---------- ----------- ---------- -----------
Operating income
(loss) 6,482,203 1,354,189 (4,975,205) (706,659) (1,247,309) 403,880 1,541,862
Interest (expense)
income, net (2,539,931) 13,717 -- -- (151,454) -- (500,454)
Other income, net 131,819 552 -- -- 58,372 22,705 456,265
----------- ---------- ----------- ---------- ----------- ---------- -----------
Income (loss) before
income taxes 4,074,091 1,368,458 (4,975,205) (706,659) (1,340,391) 426,585 1,497,673
Income tax (expense)
benefit (1,606,205) -- 1,990,082 282,664 507,532 -- (49,491)
----------- ---------- ----------- ---------- ----------- ---------- -----------
Net income (loss) $ 2,467,886 $1,368,458 $(2,985,123) $ (423,995) $ (832,859) $ 426,585 $ 1,448,182
=========== ========== =========== ========== =========== ========== ===========
Net loss per share
Weighted average number
of shares outstanding
</TABLE>
<TABLE>
<CAPTION>
Pro
Pro Forma Forma
Atlantic Adjustments Consolidated
------------ ------------ -------------
<S> <C> <C> <C>
Revenues $17,189,000 $ -- $160,345,265
Cost of revenues $14,356,000 411 (1) 116,624,401
Selling, general and
administrative expenses 2,535,000 (86,918) (2) 24,007,372
Depreciation and
amortization 1,979,000 745,434 (1) 12,350,501
(1,256,280) (4)
(2,307,885) (5)
51,000 (7)
Merger costs -- -- 3,336,792
----------- ----------- ------------
Operating income
(loss) (1,681,000) 2,854,238 4,026,199
Interest (expense)
income, net (5,114,000) 9,750 (3) (12,195,372)
(1,976,000) (6)
(1,937,000) (8)
Other income, net 709,000 -- 1,378,713
----------- ----------- ------------
Income (loss) before
income taxes (6,086,000) (1,049,012) (6,790,460)
Income tax (expense)
benefit 2,229,000 (137,000) (9) 3,216,582
----------- ----------- ------------
Net income (loss) $(3,857,000) $(1,186,012) $ (3,573,878)
=========== =========== ============
Net loss per share $(.22)
============
Weighted average number
of shares outstanding 16,334,594 (10)
============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED JUNE 30, 1997
(1) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Pappy had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Pappy and to reflect the Company's
methodology of amortizing landfill site costs and closure and post-closure
costs. Landfill site costs and closure and post-closure costs are amortized
based upon consumed airspace using the unit-of-production method of airspace
filled during the period in relation to estimates of total available
airspace.
(2) To eliminate intercompany administrative charges related directly to cost
sharing arrangements provided by Pappy's prior parent, which were terminated
as a result of the purchase transaction.
(3) To eliminate interest expense of $9,750 related to debt of Pappy, Inc. not
acquired by the Registrant.
(4) To adjust depreciation and amortization expense for the change in the basis
of property, equipment and intangible assets as if the purchase of SRP and
Clean Soils had been completed on July 1, 1996 net of historical
depreciation and amortization expense of SRP and Clean Soils.
(5) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Pine Grove had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Pine Grove and to reflect the
Company's methodology of amortizing landfill site costs and closure and
post-closure costs. Landfill site costs and closure and post-closure costs
are amortized based upon consumed airspace using the unit-of-production
method of airspace filled during the period in relation to estimates of
total available airspace.
(6) To record additional interest expense of $1,976,000 from borrowings (at the
Company's average borrowing rate of 8.5% under the Company's revolving
credit facility) of approximately $27 million incurred to consummate the
acquisition of Pine Grove, net of historical interest expense of $318,000,
excluding interest on debt assumed.
(7) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Atlantic Waste Disposal, Inc. had been completed on July 1,
1996 net of historical depreciation and amortization expense of Atlantic
Waste Disposal, Inc. and to reflect the Company's methodology of amortizing
landfill site costs and closure and post-closure costs. Landfill site costs
and closure and post-closure costs are amortized based upon consumed
airspace using the unit-of-production method of airspace filled during the
period in relation to estimates of total available airspace.
(8) To record additional interest expense of $1,937,000 from borrowings (at the
Company's average borrowing rate of 8.5% under the Company's revolving
credit facility) of $85.6 million incurred to consummate the acquisition of
Atlantic Waste Disposal, Inc., net of historical interest expense of $5.1
million.
<PAGE>
(9) The Company's pro forma effective tax provision is after consideration of
state income taxes and federal and state income taxes related to the
termination of Sub "S" status of certain companies acquired accounted for
as pooling of interests.
(10) For the purposes of determining pro forma earnings per share, the issuance
of shares of Common Stock as consideration for the purchase of assets and
to reflect the shares issued relating to the mergers, respectively, were
considered to have been outstanding from July 1, 1996.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Eastern
Environmental Pappy, Pine
Services, Inc. Inc. Grove Bluegrass Stamato Atlantic
-------------- -------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $77,959,150 $197,131 $6,265,436 $1,028,514 $12,609,654 $12,610,000
Cost of revenues 49,437,429 92,161 3,424,611 474,353 8,495,737 8,461,000
Selling, general and
administrative expenses 11,455,113 86,012 386,816 94,899 1,492,529 1,126,000
Depreciation and
amortization 5,424,432 11,300 2,172,102 24,693 881,223 1,458,000
Merger costs 2,725,000 -- -- -- -- --
----------- -------- ---------- ---------- ----------- -----------
Operating income 8,917,176 7,658 281,907 434,569 1,740,165 1,565,000
Interest (expense) income,
net (977,794) 1,109 (109,907) __ (273,993) (2,812,000)
Other income (expense), net 273,564 600 3,421 29,769 (39,750) 143,000
----------- -------- ---------- ---------- ----------- -----------
Income (loss) before
income taxes 8,212,946 9,367 175,421 464,338 1,426,422 (1,104,000)
Income tax (expense)
benefit (3,556,000) -- (143,105) -- (8,751) 401,000
----------- -------- ---------- ---------- ----------- -----------
Net income $ 4,656,946 $ 9,367 $ 32,316 $ 464,338 $ 1,417,671 $ (703,000)
=========== ======== ========== ========== =========== ===========
Net income per share
Weighted average number of
shares outstanding
</TABLE>
<TABLE>
<CAPTION>
Pro
Pro Forma Forma
Adjustments Consolidated
------------ ----------------
<S> <C> <C>
Revenues $ -- $ 110,669,885
Cost of revenues -- 70,385,291
Selling, general and
administrative expenses (10,775) (2) 14,630,594
Depreciation and
amortization 140,158 (1) 9,198,195
(957,713) (4)
44,000 (6)
Merger costs -- 2,725,000
--------- -----------
Operating income 784,330 13,730,805
Interest (expense) income,
net 1,197 (3) (5,103,148)
(640,760) (5)
(291,000) (7)
Other income (expense), net -- 410,604
--------- -----------
Income (loss) before
income taxes (146,233) 9,038,261
Income tax (expense)
benefit 59,000 (8) (3,247,856)
--------- -----------
Net income $ (87,233) $ 5,790,405
========= ===========
Net income per share $.23
===========
Weighted average number of
shares outstanding 24,880,876 (9)
===========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
INCOME FOR THE SIX MONTHS ENDED DECEMBER 31, 1997
(1) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Pappy had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Pappy and to reflect the Company's
methodology of amortizing landfill site costs and closure and post-closure
costs. Landfill site costs and closure and post-closure costs are amortized
based upon consumed airspace using the unit-of-production method of airspace
filled during the period in relation to estimates of total available
airspace.
(2) To eliminate intercompany administrative charges related directly to cost
sharing arrangements provided by Pappy's prior parent, which were terminated
as a result of the purchase transaction.
(3) To eliminate interest expense of $1,197 related to debt of Pappy, Inc. not
acquired by the Registrant.
(4) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Pine Grove had been completed on July 1, 1996 net of historical
depreciation and amortization expense of Pine Grove and to reflect the
Company's methodology of amortizing landfill site costs and closure and
post-closure costs. Landfill site costs and closure and post-closure costs
are amortized based upon consumed airspace using the unit-of-production
method of airspace filled during the period in relation to estimates of
total available airspace.
(5) To record additional interest expense of $640,760 from borrowings (at the
Company's average borrowing rate of 7.25% under the Company's revolving
credit facility) of approximately $27 million incurred to consummate the
acquisition of Pine Grove, net of historical interest expense of $174,865,
excluding interest expense on debt assumed.
(6) To adjust depreciation and amortization expense for the change in the basis
of property, equipment, landfill site costs and intangible assets as if the
purchase of Atlantic Waste Disposal, Inc. had been completed on July 1,
1996 net of historical depreciation and amortization expense of Atlantic
Waste Disposal, Inc. and to reflect the Company's methodology of amortizing
landfill site costs and closure and post-closure costs. Landfill site costs
and closure and post-closure costs are amortized based upon consumed
airspace using the unit-of-production method of airspace filled during the
period in relation to estimates of total available airspace.
(7) To record additional interest expense of $291,000 from borrowings (at the
Company's average borrowing rate of approximately 7.25% under the Company's
revolving credit facility) of approximately $85.6 million incurred to
consummate the acquisition of Atlantic Waste Disposal, Inc., net of
historical interest expense of $2.8 million.
(8) The Company's pro forma tax provision reflects an effective rate of 36%
considering federal and state income taxes and the effect of merger
transactions with Sub S Corporations accounted for as poolings of interests.
(9) For the purposes of determining pro forma earnings per share, the issuance
of shares of Common Stock as consideration for the purchase of assets and
to reflect the shares issued relating to the mergers, respectively, were
considered to have been outstanding from July 1, 1997.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
The following unaudited pro forma consolidated balance sheet at December 31,
1997 gives effect to the (1) acquisition of Bluegrass Containment, Inc.
("Bluegrass") pursuant to the terms of a Stock Purchase Agreement dated March 2,
1998 as amended on March 9, 1998; (2) the acquisition of Hudson Jersey
Sanitation Co., West Milford Haulage, Inc., Frank Stamato & Company, and
Specialized Recycling Technologies, Inc. (collectively, "Stamato Companies" or
"Stamato") pursuant to the terms of a Stock Purchase Agreement dated February 5,
1998; and (3) the pending acquisition of Atlantic Disposal and Atlantic New York
pursuant to the terms of Agreements for the Sale and Purchase of Stock, both
dated March 25, 1998. The total consideration for the acquisition of Bluegrass
consisted of unregistered shares of the Registrant's common stock valued at
$24.25 per share and included a base purchase price of $4,100,000 increased for
the amount by which the accounts receivable of Bluegrass exceeds accounts
payable, closure and post-closure collateral investments and operating cash in
excess of $100,000. Consideration for the acquisition of the Stamato Companies
consisted of 1,386,344 registered shares of the Registrant's common stock valued
at $24.125 per share. The Registrant will purchase all of the outstanding stock
of Atlantic Disposal and Atlantic New York for total consideration of
approximately $86 million. The Bluegrass and Stamato transactions have been
accounted for using the "pooling of interests" method. The Atlantic Disposal
and Atlantic New York transactions are anticipated to accounted for using the
"purchase" method.
The following unaudited pro forma financial data may not be indicative of what
the financial condition of the Company would have been, had the transactions to
which such data gives effect been completed on the date assumed, nor are such
data necessarily indicative of the financial condition of the Company that may
exist in the future. The unaudited pro forma financial data and related pro
forma adjustments have been prepared by the Registrant's management based in
part on historical financial information provided by the management of completed
and pending acquisitions. The following unaudited pro forma information should
be read in conjunction with the notes thereto, the other pro forma financial
statements and notes thereto, and the historical financial statements and notes
of Eastern Environmental Services, Inc. as filed in the Company's report on Form
8-K (filed February 27, 1998) and the historical financial statements of
Atlantic Waste Disposal, Inc. appearing elsewhere in this filing.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
Eastern
Environmental Pro Forma
Services, Inc. Bluegrass Stamato Atlantic Adjustments
--------------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............. $ 5,231,625 $1,092,195 $ 942,079 $ 88,000 $ --
Accounts receivable, net of
allowance............................ 21,689,297 335,306 2,336,491 3,363,000
Deferred income taxes................. 1,410,000 -- -- -- --
Prepaid expenses and other current
assets............................... 3,660,110 5,386 565,281 220,000 --
------------ ---------- ----------- ----------- ------------
Total current assets................. 31,991,032 1,432,887 3,843,851 3,671,000 --
Net property, plant & equipment........ 134,995,731 231,427 8,936,049 33,385,000 51,699,000 (1)
Excess cost over fair market value of
net assets acquired................... 71,285,712 -- -- -- --
Intangible assets, net................. 14,412,328 -- 133,605 24,811,000 (24,811,000) (1)
Notes receivable from stockholders/
officers.............................. 432,902 -- -- -- --
Deferred income taxes.................. -- -- -- 8,969,000 (8,969,000) (1)
Other assets........................... 3,052,190 -- 391,061 668,000 --
------------- ---------- ----------- ------------ ------------
Total assets......................... $256,169,895 $1,664,314 $13,304,566 $ 71,504,000 $ 17,919,000
============= ========== =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities on long-term
debt................................. $ 1,235,245 $ -- $ 1,773,078 $ -- $ --
Current maturities of obligations
under capital leases................. 1,238,789 -- -- -- --
Due to affiliated company -- -- -- 60,391,000 (60,391,000) (1)
Accounts payable....................... 7,439,366 125,036 516,514 1,959,000 --
Accrued expenses and other current
liabilities........................... 12,990,512 327,000 139,624 1,274,000 (290,000) (1)
Deferred revenue....................... 3,452,693 -- 208,808 -- --
Income taxes payable................... 63,446 -- 35,230 -- --
Current portion of accrued landfill
closure and other environmental
costs................................. 2,078,000 200,000 -- -- --
------------- ---------- ----------- ------------ ------------
Total current liabilities............ 28,498,051 652,036 2,673,254 63,624,000 (60,681,000)
Deferred income taxes.................. 2,880,576 -- 187,645 -- --
Long-term debt......................... 51,197,650 -- 4,252,393 -- 85,600,000 (2)
Capital lease obligations--
long-term............................. 1,258,993 -- -- -- --
Accrued landfill closure and other
environmental costs................... 11,318,127 454,517 -- 845,000 --
Other long-term liabilities............ 13,221,023 -- -- 35,000 --
Stockholders' equity
Common stock.......................... 229,915 141,000 549,600 -- (675,755) (1)(3)
Additional paid-in capital............ 140,994,498 -- -- 21,701,000 (21,080,521) (1)(3)
Retained earnings (deficit)........... 6,647,321 416,761 5,696,950 (14,701,000) 14,701,000
Less treasury stock at cost--
39,100 common shares................. (76,259) -- (55,276) -- 55,276 (3)
------------- ---------- ----------- ------------ ------------
Total stockholders' equity........... 147,795,475 557,761 6,191,274 7,000,000 (7,000,000)
------------- ---------- ----------- ------------ ------------
Total liabilities and stockholders'
equity.............................. $256,169,895 $1,664,314 $13,304,566 $ 71,504,000 $ 17,919,000
============= ========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
As Adjusted
-------------
ASSETS
Current assets
<S> <C>
Cash and cash equivalents............. $ 7,353,899
Accounts receivable, net of
allowance............................ 27,724,094
Deferred income taxes................. 1,410,000
Prepaid expenses and other current
assets............................... 4,450,777
------------
Total current assets................. 40,938,770
Net property, plant & equipment........ 229,247,207
Excess cost over fair market value of
net assets acquired................... 71,285,712
Intangible assets, net................. 14,545,933
Notes receivable from stockholders /
officers.............................. 432,902
Deferred income taxes.................. --
Other assets........................... 4,111,251
------------
Total assets......................... $360,561,755
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities on long-term
debt................................. $ 3,008,323
Current maturities of obligations
under capital leases................. 1,238,789
Due to affiliated company --
Accounts payable....................... 10,039,916
Accrued expenses and other current
liabilities........................... 14,441,136
Deferred revenue....................... 3,661,501
Income taxes payable................... 98,676
Current portion of accrued landfill
closure and other environmental
costs................................. 2,278,000
------------
Total current liabilities............ 34,766,341
------------
Deferred income taxes.................. 3,068,221
Long-term debt......................... 141,050,043
Capital lease obligations--
long-term............................. 1,258,993
Accrued landfill closure and other
environmental costs................... 12,617,644
Other long-term liabilities............ 13,256,023
Stockholders' equity
Common stock.......................... 244,760
Additional paid-in capital............ 141,614,977
Retained earnings (deficit)........... 12,761,032
Less treasury stock at cost--
39,100 common shares................. (76,259)
------------
Total stockholders' equity........... 154,544,510
------------
Total liabilities and stockholders'
equity.............................. $360,561,755
============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(1) On March 25, 1998, Eastern Environmental Services, Inc. entered into Stock
Purchase Agreements for the pending acquisition to purchase all of the
outstanding stock of Atlantic Waste Disposal, Inc. and Atlantic of New York,
Inc. (collectively referred to as "Atlantic") for total anticipated
consideration paid by Eastern Environmental Services, Inc. of $85.6 million.
The acquisition is anticipated to be accounted for under the purchase
method. Pursuant to the terms of the Stock Purchase Agreement, certain
property, equipment, intangible assets, other assets and working capital
were acquired and certain liabilities were assumed for consideration of
$85.6 million in cash. Certain intercompany balances due to Atlantic's
parent, tax liabilities, and certain contingent liabilities were not assumed
by the Registrant. With respect to the closure and post-closure liabilities,
the Company recorded an estimate of closure and post-closure liability for
the entire site utilizing engineering studies and state requirements as
compared to the percentage of airspace utilized at the date of the
acquisition. The allocation of the purchase price is preliminary and assumes
the historical book value of tangible assets approximates fair value. The
actual allocation will be based on management's final evaluation of such
assets and liabilities. The excess of the purchase price over the historic
cost of net assets was allocated to the value of the landfill site; however,
this excess may ultimately be allocated to other specific tangible and
intangible assets. The final allocation of the purchase price and the
resulting effect on operations may differ significantly from the pro forma
amounts included herein. The preliminary allocation of the purchase price is
as follows:
Property, equipment and landfill
site $85,084,000
Current assets acquired 3,671,000
Other assets acquired 668,000
Other liabilities (2,978,000)
Landfill closure, post-closure, and
other environmental costs (845,000)
-------------
$85,600,000
=============
(2) To record borrowings of $85.6 million under the Company's revolving credit
facility to effect the acquisition of Atlantic Waste Disposal, Inc.
(3) To record the exchange of Bluegrass Containment, Inc. stock and the stock of
the Stamato Companies for Eastern Environmental Services, Inc. common stock.
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ---- -----------
10.1 Agreement for the Sale and Purchase of Stock of Atlantic Waste
Disposal, Inc. dated March 25, 1998, by and among Atlantic Waste
Disposal, Inc., Brambles Waste Services, Inc., Atlantic
Transportation Services, Inc., Atlantic Collection, Inc., Resource
Products, Inc. and the Registrant.
10.2 Agreement for the Sale and Purchase of Stock of Atlantic New York,
Inc. dated March 25, 1998, by and among Atlantic Waste Disposal,
Inc., Brambles Waste Services, Inc., Atlantic New York, Inc. and
the Registrant.
23.1 Consent of Deloitte & Touche LLP
<PAGE>
Exhibit 10.1
------------
AGREEMENT FOR THE SALE AND PURCHASE
OF STOCK OF
ATLANTIC WASTE DISPOSAL, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
ACQUISITION; CLOSING
Section 1.1 Incorporation of Recitals, Exhibits, and Schedules...................... 2
Section 1.2 Time and Place for Closing.............................................. 2
Section 1.3 Excluded Liabilities; Distribution of Atlantic New York Stock........... 2
Section 1.4 Agreement to Sell Shares to Purchaser................................... 3
Section 1.5 Consideration........................................................... 3
Section 1.6 Deliveries by Purchaser................................................. 4
Section 1.7 Deliveries by Seller.................................................... 4
Section 1.8 Termination............................................................. 6
Section 1.9 Tax Treatment........................................................... 6
Section 1.10 Procedure for Termination; Effect of Termination........................ 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER,
ATLANTIC DISPOSAL AND THE SUBSIDIARIES
Section 2.1 Organization, Standing and Ownership.................................... 8
Section 2.2 Contracts, Permits and Material Documents............................... 9
Section 2.3 Personal Property....................................................... 10
Section 2.4 Customers............................................................... 11
Section 2.5 The Property............................................................ 11
Section 2.6 Sufficiency of Assets; Title; Consents.................................. 12
Section 2.7 Financial Statements.................................................... 12
Section 2.8 Liabilities; Accounts Receivable and Working Capital.................... 13
Section 2.9 Fiscal Condition........................................................ 14
Section 2.10 Tax Returns............................................................. 14
Section 2.11 Employees, Pensions and ERISA........................................... 15
Section 2.12 Legality of Operation................................................... 16
Section 2.13 Corrupt Practices....................................................... 18
Section 2.14 Authority............................................................... 18
Section 2.15 Transaction Intermediaries.............................................. 19
Section 2.16 Intellectual Property................................................... 19
Section 2.17 Litigation.............................................................. 19
Section 2.18 Management of Atlantic Disposal and Subsidiaries........................ 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Structure................................................................ 20
Section 3.2 Authorization to Proceed with this Agreement............................. 20
Section 3.3 Binding Effect........................................................... 20
Section 3.4 Legality of Operation.................................................... 20
Section 3.5 Financing................................................................ 21
Section 3.6 Absence of Intermediaries................................................ 21
Section 3.7 Commission Filings....................................................... 21
ARTICLE IV
ADDITIONAL AGREEMENTS OF SELLER, PURCHASER, ATLANTIC DISPOSAL AND THE SUBSIDIARIES
Section 4.1 Purchaser's Access to Records and the Property.......................... 21
Section 4.2 Seller's Access to Records and the Property............................. 21
Section 4.3 Continuation of Businesses.............................................. 22
Section 4.4 Continuation of Insurance............................................... 24
Section 4.5 No Solicitation......................................................... 24
Section 4.6 FIRPTA Certificate...................................................... 24
Section 4.7 Financial Statements.................................................... 24
Section 4.8 Consents and Approvals; Other........................................... 24
Section 4.9 Discharge of Excluded Liabilities....................................... 25
Section 4.10 SEC Filings............................................................. 25
Section 4.11 Updated Information..................................................... 25
Section 4.12 Landfill Lease.......................................................... 26
ARTICLE V
ADDITIONAL AGREEMENTS OF PURCHASER AND SELLER
Section 5.1 Payment of Expenses........................................................ 26
Section 5.2 Filing of Tax Returns and Payment of Taxes................................. 26
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 6.1 Compliance by Seller, Atlantic Disposal and the Subsidiaries............. 27
Section 6.2 Litigation Affecting This Transaction.................................... 28
Section 6.3 Governmental or Regulatory Consents...................................... 28
Section 6.4 Other Consents........................................................... 28
Section 6.5 Closing of New York Agreement............................................ 28
Section 6.6 Landfill Lease........................................................... 28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
Section 7.1 Compliance by Purchaser.................................................. 28
Section 7.2 Litigation Affecting This Transaction.................................... 29
Section 7.3 Governmental and Regulatory Consents..................................... 29
Section 7.4 Other Consents........................................................... 29
Section 7.5 Closing of New York Agreement............................................ 29
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification by Seller................................................ 29
Section 8.2 Indemnification by Purchaser............................................. 31
Section 8.3 Procedure for Indemnification with Respect to Third Party Claims......... 31
Section 8.4 Procedure for Non-Third Party Claims..................................... 32
Section 8.5 Survival of Claims....................................................... 33
Section 8.6 Prompt Payment........................................................... 33
Section 8.7 Insurance................................................................ 34
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nondisclosure by Seller................................................. 34
Section 9.2 Nondisclosure by Purchaser.............................................. 34
Section 9.3 Assignment; Binding Effect; Amendment................................... 35
Section 9.4 Entire Agreement........................................................ 35
Section 9.5 Counterparts............................................................ 35
Section 9.6 Notices................................................................. 35
Section 9.7 Governing Law........................................................... 36
Section 9.8 No Waiver............................................................... 37
Section 9.9 Time of the Essence..................................................... 37
Section 9.10 Captions................................................................ 37
Section 9.11 Severability............................................................ 37
Section 9.12 Construction............................................................ 37
Section 9.13 Extension or Waiver of Performance...................................... 37
Section 9.14 Liabilities of Third Parties............................................ 37
Section 9.15 Agreement Not Binding Until Fully Executed.............................. 38
Section 9.16 Publicity............................................................... 38
Section 9.17 Arbitration............................................................. 38
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
Schedules
- ---------
1.9 Allocation of Assets
2.2 Material Documents
2.3(a)(i) Landfill Equipment
2.3(a)(ii) Rolling Stock
2.3(a)(iii) Containers
2.3(a)(iv) Boxcars
2.3(a)(v) Other Personal Property over $50,000
2.4 Customer List and Contracts
2.5(d) Wetlands
2.6(b) Permitted Encumbrances
2.6(c) Exceptions to Consents and Approvals
2.9 Fiscal Condition of Company
2.11(a) Employment Agreements
2.11(b) Employee Information
2.11(c) Employee Benefit Plans, Funds or Programs
2.11(e) Non-Qualified Plans
2.12(a) Exceptions to Company's operation in compliance with laws, etc.
2.12(b) Exceptions relating to environmental issues and liability
2.12(c) Other Interests in Landfills
2.12(d) Exceptions to Compliance with Environmental Laws
2.12(e) Notices of Violation
2.13(g) Exceptions to Approvals
2.14 Exceptions to right of Company to enter this Agreement
2.17 List of Litigation and Summaries
3.4 Exceptions to Purchaser Compliance with Laws
6.4 Other Consents
Exhibits
- --------
A Legal Description of Landfill
B Guaranty
iv
<PAGE>
AGREEMENT FOR THE SALE AND PURCHASE OF
STOCK OF ATLANTIC WASTE DISPOSAL, INC.
This Agreement ("Agreement") for the Sale and Purchase of Stock of
Atlantic Waste Disposal, Inc., a Delaware corporation ("Atlantic Disposal"), is
made as of March 25, 1998, by and among Atlantic Disposal, Brambles Waste
Services, Inc., a Delaware corporation (the "Seller"), Atlantic Transportation
Services, Inc., a Delaware corporation ("Atlantic Transportation"), Atlantic
Collection, Inc., a Delaware corporation ("Atlantic Collection"), Resource
Products, Inc., a Delaware corporation ("Resource Products"), and Eastern
Environmental Services, Inc., a Delaware corporation ("Purchaser").
RECITALS
WHEREAS, (i) Brambles USA is a wholly-owned subsidiary of Brambles
Industries Limited; (ii) the Seller is a wholly-owned subsidiary of Brambles
USA, Inc.; (iii) Atlantic Disposal is a wholly-owned subsidiary of the Seller;
and (iv) each of Atlantic Transportation, Atlantic Collection, and Resource
Products, is a wholly-owned subsidiary of Atlantic Disposal. Atlantic
Transportation, Atlantic Collection and Resource Products are hereinafter
sometimes referred to individually as a "Subsidiary" and together as the
"Subsidiaries";
WHEREAS, Atlantic Disposal operates (i) a municipal solid waste
landfill in Waverly, Virginia (the "Landfill") (a legal description of which is
attached hereto as Exhibit A) pursuant to a Contract and Ground Lease Agreement
with the County of Sussex, Virginia dated September 19, 1991, as amended on May
18, 1995 and December 20, 1996 (the "Landfill Lease"), and (ii) through the
Subsidiaries, truck and rail transportation, waste collection and tire shredding
businesses (individually the business and operations of Atlantic Disposal and
each Subsidiary are hereinafter sometimes referred to as a "Business" and
collectively as the "Businesses") and all of the tangible and intangible assets
and properties owned by Atlantic Disposal and the Subsidiaries are sometimes
referred to herein as the "Assets";
WHEREAS, on the date hereof, the Purchaser, the Seller and Atlantic of
New York, Inc., a Delaware corporation ("Atlantic New York"), have entered into
an agreement for the sale and purchase of stock (the "New York Agreement")
pursuant to which Purchaser has agreed, subject to the terms and conditions of
the New York Agreement, to acquire all of the common stock of Atlantic New York;
WHEREAS, the Purchaser, the Seller, the Subsidiaries and Atlantic
Disposal wish to enter into this Agreement pursuant to which Purchaser may,
subject to the terms and conditions hereof, acquire ownership of all of the
outstanding shares of Atlantic Disposal's capital stock, par value $1 per share
(the "Shares"); and
1
<PAGE>
WHEREAS, Brambles USA has on the date hereof entered into a Guaranty
in the form attached hereto as Exhibit B.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby do hereby covenant and agree as follows:
ARTICLE I
ACQUISITION; CLOSING
Section 1.1 Incorporation of Recitals, Exhibits, and Schedules. The
--------------------------------------------------
recitals set forth above and each Exhibit and Schedule hereto are incorporated
herein by reference and are a part of this Agreement. This Agreement contains a
number of references to Schedules. In each case, the referenced Schedule has
been included in a separate disclosure letter, delivered to Purchaser and
specifically identified as such, prior to the execution hereof. The Schedules
contained in that disclosure letter are specifically incorporated by reference
herein as and if set forth herein.
Section 1.2 Time and Place for Closing. The closing for the purchase
--------------------------
and sale of the Shares by the Purchaser under this Agreement shall take place on
or before the fifteenth day after the conditions to Closing set forth in
Articles VI and VII are satisfied, time being of the essence, or such other date
as the parties mutually agree, at the offices of Purchaser's counsel, Drinker
Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, PA 19107 or such other
place as the parties hereto may agree upon. The actual date of closing will be
established by the Purchaser and the Seller within ten days after the date on
which the conditions are satisfied. The date that closing occurs is referred to
hereinafter as the "Closing Date" and the act of closing as the "Closing."
Section 1.3 Excluded Liabilities; Distribution of Atlantic New York
-------------------------------------------------------
Stock.
- -----
Prior to the Closing, Brambles Waste shall assume the Excluded
Liabilities (as defined below) and Atlantic Disposal shall distribute all of the
outstanding capital stock of Atlantic New York to Brambles Waste (the
"Distribution"). The term "Excluded Liabilities" means (i) all intercompany
obligations between Atlantic Disposal or any of the Subsidiaries, on the one
hand, and any of Brambles Industries Limited, Brambles USA, Brambles Waste,
Atlantic New York and any of their respective direct or indirect subsidiaries
(other than Atlantic Disposal or any of the Subsidiaries), on the other hand,
(ii) any Tax Liability (as defined in Section 2.10), and (iii) any cost,
expense, liability or claim relating to or arising from the matters involved in
United States Dredging Corp. v. Atlantic Waste Disposal, Inc., 96-CV 1989
- -------------------------------------------------------------
(E.D.N.Y.) (the "New York Case") or any related case or claim or counterclaim.
Section 1.4 Agreement to Sell Shares to Purchaser. At the Closing, the
-------------------------------------
Seller shall transfer to Purchaser (or, at the direction of Purchaser, its
assignee permitted under Section 9.3 of this Agreement) all of the Shares, free
and clear of any Encumbrance, in exchange for the Purchase Price (as defined
below).
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Section 1.5 Consideration. The aggregate purchase price (as adjusted,
-------------
the "Purchase Price") for the Shares shall be $80,600,000. The Purchase Price
shall be paid by federal wire transfer at Closing to the Seller pursuant to
instructions furnished by the Seller to the Purchaser in writing not fewer than
three business days prior to Closing, and shall be subject to adjustment as and
when provided for in Section 1.5(b).
(b) The Purchase Price shall be increased by the amount by which,
at Closing, the Net Working Capital (as defined below) is greater than zero, and
the Purchase Price shall be decreased by the amount by which, at Closing, the
Net Working Capital (as defined below) is less than zero. Any such increase or
decrease in Purchase Price shall be paid by the Purchaser or the Seller, as
applicable, within five (5) business days following the conclusive determination
of Net Working Capital (such fifth business day, the "Due Date"). The
determination of Net Working Capital shall be made as set forth in Section
1.5(c) below.
(c)(i) Within sixty (60) days after the Closing Date, the Purchaser
shall prepare and deliver to Seller the consolidated balance sheet for Atlantic
Disposal as of the close of business on the Closing Date (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall set forth the
consolidated Net Working Capital (as defined below) of Atlantic Disposal.
Seller shall have the right to review all of the Purchaser's work papers and all
relevant records of the Purchaser, Atlantic Disposal and the Subsidiaries
relating to the Closing Date Balance Sheet. For purposes of this Agreement, Net
Working Capital of Atlantic Disposal shall mean the current assets of Atlantic
Disposal, less all current liabilities excluding only the Excluded Liabilities,
in each case as determined in accordance with generally accepted accounting
principles, applied consistently with the accounting methods and principles used
to prepare the financial statements referred to in Section 2.7.
(ii) The Closing Date Balance Sheet delivered by the Purchaser to
Seller shall be deemed to be and shall be final, binding and conclusive on the
parties hereto, unless Seller disputes the Closing Date Balance Sheet in
accordance with this Section 1.5(c)(ii). Seller may dispute any amounts
reflected on the Closing Date Balance Sheet (any such disputed amounts, the
"Disputed Matters") by giving written notice to the Purchaser of each Disputed
Matter within forty-five (45) days of receipt of the Closing Date Balance Sheet.
Any Disputed Matters shall be subject to good faith negotiations between the
parties for up to fifteen (15) days prior to being referred to the Independent
Accounting Firm (as defined below). Any Disputed Matters not resolved by such
good faith negotiations shall be decided by an independent accounting firm
acceptable to both Seller and Purchaser (the "Independent Accounting Firm").
The costs and expenses of the Independent Accounting Firm shall be shared
equally by the Seller and the Purchaser. The Independent Accounting Firm so
chosen shall consider only the Disputed Matters and the Purchaser and the Seller
shall use reasonable efforts to cause the Independent Accounting Firm to render
a final decision on the Disputed Matters by delivering a written report to
Purchaser and Sellers no later than thirty (30) days after having received the
assignment with respect thereto. The decision of the Independent Accounting
Firm with respect to all Disputed Matters shall be based solely on whether
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the Closing Date Balance Sheet was prepared in accordance with the requirements
of this Agreement, shall be final and binding upon the parties hereto and shall
not be subject to challenge in any court.
Section 1.6 Deliveries by Purchaser. At the Closing, the Purchaser
-----------------------
shall deliver to the Seller:
(a) The Purchase Price, as provided in Section 1.5 above;
(b) A certified copy of the resolutions of the Board of Directors of
Purchaser authorizing the execution and delivery of this Agreement and the other
agreements, documents and instruments referred to herein or required hereby (the
"Collateral Documents") and the consummation of the transactions contemplated
herein and therein;
(c) A certificate in form and substance reasonably satisfactory to
the Sellers executed by the Chief Executive and Chief Financial Officers of the
Purchaser to the effect that the condition precedent to the obligation of the
Seller hereunder set forth in Section 7.1 is satisfied; provided that if such
condition is not satisfied and the Seller elects to close, the certificate shall
contain such exceptions as may be reasonably acceptable to Seller and Purchaser;
(d) Such other certificates and writings as may reasonably be
requested by the Seller to effectuate or evidence the completion of the
pertinent transactions contemplated hereby and the satisfaction by the Purchaser
of the pertinent terms and conditions hereof;
(e) A release from the Purchaser providing that the Purchaser is
releasing Atlantic Disposal and the Subsidiaries from any and all claims, causes
of action, debts, and obligations whatsoever relating to events occurring at or
prior to Closing, except any and all obligations arising under this Agreement
and the Collateral Documents, in form and content satisfactory to Seller.
Section 1.7 Deliveries by Seller. At the Closing, the Seller shall
--------------------
deliver or cause to be delivered to the Purchaser:
(a) A certificate in form and substance reasonably satisfactory to
Purchaser executed by the Chief Executive and Chief Financial Officers of the
Seller, Atlantic Disposal and the Subsidiaries as Purchaser shall request to the
effect that the condition precedent to the obligations of Purchaser hereunder
set forth in Section 6.1 is satisfied; provided that if such condition is not
satisfied and the Purchaser elects to close, the certificate shall contain such
exceptions as may be reasonably acceptable to Purchaser and Seller.
(b) A release from the Seller in form and content satisfactory to
Purchaser, which provides that the Seller and its affiliates are releasing
Atlantic Disposal and the Subsidiaries from any and all claims, causes of
action, debts, and obligations whatsoever, except any and all obligations
arising under this Agreement and the Collateral Documents, and from events
occurring after the Closing;
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(c) Current certificates of good standing for the Seller, Atlantic
Disposal and the Subsidiaries from the Secretaries of State of their respective
jurisdictions of formation and each jurisdiction in which they are qualified as
a foreign corporation or other business entity;
(d) Such certified and authenticated copies of all documents,
agreements, and filings executed or made in connection with this Agreement and
the assumption of the Excluded Liabilities as the Purchaser may reasonably
request;
(e) Duly executed releases or terminations of financing statements,
or other evidence reasonably satisfactory to Purchaser and Purchaser's lenders
that all liens, mortgages on and security interests in the Assets (other than
those comprising Permitted Encumbrances and Encumbrances which are not,
individually or in the aggregate, material) have been released and terminated;
(f) At Purchaser's cost, a bring down endorsement of the title
insurance policy with respect to the real property subject to the Landfill Lease
(the "Property");
(g) Certificates representing all of the Shares, duly endorsed for
transfer or with stock powers affixed thereto executed in blank in proper form
for transfer, free and clear of any Encumbrance;
(h) Copies of the Certificates of Incorporation and Bylaws of
Atlantic Disposal and each Subsidiary, certified, as appropriate, by the
Secretary of State of its respective state of incorporation or the Secretary of
the appropriate corporation as appropriate;
(i) Such other assignments, certificates, bills of sale, deeds, title
policies, affidavits, indemnities, estoppels and other instruments of conveyance
and warranty (in proper recordable or fileable form, as appropriate) as may
reasonably be requested by Purchaser to effectuate or evidence the completion of
the pertinent transactions contemplated hereby and the satisfaction by the
Seller of the pertinent terms and conditions hereof; and
(j) Substantially all books and records of Atlantic Disposal and the
Subsidiaries.
Section 1.8 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(a) by mutual consent of Purchaser and Seller (it being understood
that Purchaser and Seller shall, if a condition to Closing contained in Article
VI or VII becomes impossible of fulfillment using the efforts required by this
Agreement, promptly terminate this Agreement pursuant to this Section 1.8(a));
(b) by Purchaser or Seller, if a material breach of any provision of
this Agreement has been committed by the other and such breach has not been
waived or cured within ten (10) days after notice or if a Closing shall not have
occurred by 165 days from the execution of this Agreement; provided,
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<PAGE>
however, that neither Purchaser nor Seller shall be entitled to terminate this
Agreement if the other is ready, willing and able to close and has brought,
prior to the termination of this Agreement by any party under this Section 1.8,
a claim for specific performance of this Agreement, in which case this Agreement
may not be terminated until a final determination of such claim for specific
performance pursuant to Section 9.18 of this Agreement; or
(c) by Purchaser or Seller, if the New York Agreement has been
terminated pursuant to its terms.
Section 1.9 Tax Treatment.
-------------
(a) Allocation of Purchase Price. The purchase price for the Shares
----------------------------
(including assumed liabilities of Atlantic Disposal and the Subsidiaries) shall
be allocated among the assets of Atlantic Disposal in accordance with Schedule
--------
1.9 which shall be prepared by Seller and delivered to Purchaser within 60 days
- ---
after the Closing Date. Seller shall prepare for Buyer's review a schedule
setting forth (a) the modified aggregate deemed sales price (the "MADSP") at
which the Atlantic Disposal is deemed to have sold its assets for tax purposes
as a result of the Section 338(h)(10) Election, (b) the adjusted grossed-up
basis (the "AGUB") at which the Atlantic Disposal is deemed to have purchased
its assets for tax purposes as a result of such election, and (c) the
allocations of MADSP and AGUB among the assets of the Atlantic Disposal
(collectively, the "Proposed Initial Allocation"). The Proposed Initial
Allocation shall be determined in accordance with Section 338 of the Code and
the applicable regulations thereunder, in a manner consistent with the
allocation set forth on Schedule 1.9 hereto. Unless Purchaser shall have
------------
objected in writing to the Proposed Initial Allocation within 30 days of the
receipt thereof, Seller will be deemed to have agreed to the Proposed Initial
Allocation, which shall become the Initial Allocation. The Initial Allocation
shall be set forth on a statement (the "Initial Allocation Statement") signed by
the president or any vice president of Purchaser and Seller. If any increase or
decrease in MADSP and/or AGUB occurs, the amount of such increase or decrease
and the allocation thereof among the assets of the Atlantic Disposal
(collectively, the "Adjustment Allocation") shall be set forth on a statement
(the "Adjustment Allocation Statement") prepared by Seller and delivered to
Purchaser in accordance with Treas. Reg. (S)1.338(b)-3(d) or Treas. Reg.
(S)1.338(b)-3(e), whichever is applicable. The Adjustment Allocation Statement
shall be subject to the consent of Purchaser. Purchaser and Seller will, to the
maximum extent permitted under applicable law, (a) file, or cause to be filed,
all Tax Returns in a manner consistent with the Initial Allocation and any
Adjustment Allocations and (b) not take any action inconsistent therewith.
(b) Any dispute regarding the Proposed Initial Allocation or any
Adjustment Allocation shall be subject to good faith negotiations between the
parties for up to sixty (60) days prior to being referred to the Tax Dispute
Accountants (as defined below). At the end of such sixty day period, any
remaining dispute regarding the Proposed Initial Allocation or any Adjustment
Allocation shall be submitted for resolution to independent accountants of
nationally recognized standing reasonably satisfactory to Purchaser and Seller
(the "Tax Dispute Accountants"). The decision of the Tax Dispute Accountants
shall be final, conclusive and binding on the parties. The fees and expenses of
the Tax
6
<PAGE>
Dispute Accountants in resolving a dispute will be borne equally by Purchaser
and Seller except that the Tax Dispute Accountants may, if justice requires,
allocate such expenses and fees in any other manner they may determine between
the Purchaser, one the one hand, and Seller on the other.
(c) Section 338(h)(10) Election. The parties intend for the purchase
---------------------------
of Shares constitutes a "qualified stock purchase" for purposes of Section
338(d)(3) of the Code, Seller and Purchaser shall join in making an election
under Section 338(h)(10) of the Code with respect to the purchase of the Shares
(the "338(h)(10) Election"). Seller shall deliver to Purchaser at the Closing
(1) Internal Revenue Service Form 8023 and any applicable similar forms required
by state or local law fully completed with respect to the purchase of the Shares
and executed by a duly authorized officer of Brambles USA, and (2) all
additional data and materials required to be attached to such Form 8023 and any
applicable similar forms required by state or local law pursuant to Temp. Treas.
Reg. (S)1.338-1T or otherwise. Brambles USA shall attach a copy of such Form
8023 to the consolidated Federal income tax return for the affiliated group of
corporations of which it is the common parent for its taxable period which
includes the Closing Date and otherwise shall cooperate fully with Purchaser in
making the 338(h)(10) Election.
(d) Federal and State Tax Treatment. The parties hereto acknowledge
-------------------------------
that for Federal income tax purposes (and for state tax purposes for those
states that use a taxpayer's Federal income tax liability or Federal taxable
income as a base for computing such taxpayer's state tax liability, or whose
income tax provisions are otherwise similar to the Federal income tax in this
respect) the purchase of the Shares and the 338(h)(10) Election will be treated
in all respects as a sale of assets by Atlantic Disposal to a newly-formed
subsidiary of Purchaser followed by a complete liquidation of Atlantic Disposal
into Seller, and the parties agree to report the transaction in a manner
consistent with this treatment. The parties also agree that neither Purchaser
nor Atlantic Disposal shall be liable for any taxes, including income, transfer,
franchise, sales or use taxes, resulting from the purchase of the Shares and the
338(h)(10) Election.
Section 1.10 Procedure for Termination; Effect of Termination. A party
------------------------------------------------
terminating this Agreement pursuant to Section 1.8 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
and all further obligations of the parties under this Agreement will terminate;
provided, however, that no termination shall limit or impair any party's right
to pursue all legal remedies or limit any party's responsibility for any breach
of or failure to perform under this Agreement by another party. In addition to
any other remedy that the Purchaser or the Seller may have under this Agreement
or at law or in equity, the Purchaser shall be entitled to require the Seller to
specifically perform their obligations under this Agreement, and the Seller
shall be entitled to require the Purchaser to specifically perform its
obligations under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER,
7
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ATLANTIC DISPOSAL AND THE SUBSIDIARIES
With knowledge that Purchaser is relying upon the representations and
warranties herein contained, the Seller, Atlantic Disposal and the Subsidiaries
each individually, severally and jointly represent and warrant to Purchaser, as
of the date hereof, and, as updated pursuant to Section 4.11, as of the Closing
Date, as follows. Certain of the following representations and warranties are
made to the knowledge of the Seller, Atlantic Disposal and Subsidiaries. When so
used, "knowledge" shall mean the actual knowledge of Jeffrey Cooper, Jerry
Johnson, Andrew Dondero, Robert J. Anderson, T. Michael Phelan, William Ziegler
and David Webster.
Section 2.1 Organization, Standing and Ownership.
------------------------------------
(a) Each of the Seller, Atlantic Disposal and the Subsidiaries is a
corporation, duly organized, validly existing, and in good standing under the
laws of its jurisdiction of formation and has all necessary corporate power and
authority to carry on its business as presently conducted, to own and lease the
assets and properties which it owns and leases and to perform all of its
obligations under each agreement and instrument by which it is bound. Each of
the Seller, Atlantic Disposal and the Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
jurisdiction in which it is required to qualify to do business, except where the
failure to be so qualified and in good standing would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
condition (financial or otherwise) or operations of Atlantic Disposal or the
Businesses, or on the Assets after taking into consideration the liabilities of
Atlantic Disposal and the Subsidiaries (a "Material Adverse Effect").
(b) All of the authorized capital stock of each Subsidiary is owned
of record by Atlantic Disposal as of the date hereof and at the Closing will be
owned of record by Atlantic Disposal free and clear of any Encumbrance.
(c) All of the capital stock of Seller is owned of record by Brambles
USA, free and clear of any Encumbrance. No individual, trust, corporation,
partnership, limited liability, joint venture, governmental body, tribunal,
agency, or instrumentality (individually a "Person" and collectively "Persons")
has any right (contractual, equitable, statutory or otherwise) option or warrant
to acquire any capital stock, indebtedness or obligation of Atlantic Disposal or
any Subsidiary and neither Atlantic Disposal nor any Subsidiary holds
beneficially or of record any equity or other interest (or has any obligation,
option, warrant, agreement or right to acquire) any equity interest in any
entity other than the Subsidiaries and Atlantic New York).
(d) All of the capital stock of Atlantic Disposal is owned of record
by the Seller free and clear of any Encumbrance. No Person (other than
Purchaser) has any statutory, equitable, contractual or other right of any kind
to acquire additional securities, interests, capital stock, indebtedness or
obligation of any kind in or from Atlantic Disposal nor has any Person claimed
any such rights. The
8
<PAGE>
Shares constitute all of the authorized capital stock of Atlantic Disposal. The
Shares have been duly authorized and validly issued, and are free and clear of
any Encumbrance.
Section 2.2 Contracts, Permits and Material Documents.
-----------------------------------------
(a) The items listed in Schedule 2.2 are all of the following that
are used by, in or for the benefit of the Businesses, in each case as and at the
date hereof ("Material Documents"): (i) leases for real and personal property;
(ii) licenses; (iii) franchises; (iv) promissory notes, guarantees, bonds,
letters of credit, mortgages, liens, pledges, and security agreements; (v)
collective bargaining agreements; (vi) patents, trademarks, trade names,
copyrights, trade secrets, trademarks, proprietary rights, symbols, service
marks, logos and all other intellectual property; (vii) permits, licenses,
consents and other approvals from governments, governmental agencies (federal,
state and local) and/or third parties relating to, used in or required for the
operation of the Businesses, including the license authorizing Atlantic Disposal
to operate a landfill at the Property ("Government Authorizations"); and (viii)
all other contracts, agreements (whether oral or written) and instruments not
listed on another Schedule attached to this Agreement (such as the customer
contracts listed on Schedule 2.4), in each such case, which are binding on
Atlantic Disposal or a Subsidiary and pursuant to which any of them derives any
material benefit or has imposed upon it any material detriment. The Material
Documents listed on Schedule 2.2 represent all of the items listed in subclauses
(i) through (viii) of the preceding sentence of Atlantic Disposal and the
Subsidiaries, including, without limitation, interests in leases for real
property, agreements and permits and licenses, except for documents under which
the aggregate liability and obligations of Atlantic Disposal and the
Subsidiaries does not and after the Closing will not exceed $200,000.
(b) Neither the Seller, Atlantic Disposal nor the Subsidiaries nor,
to their knowledge, 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 no act or event has occurred which with notice or lapse of time,
or both, would constitute such a default, and the Landfill Lease is in full
force and effect and not in default in any respect. The Assets include all
rights necessary to enable Atlantic Disposal and the Subsidiaries to conduct the
Businesses as they are now being conducted. Except as disclosed on Schedule 2.2,
the Seller, Atlantic Disposal and each Subsidiary have performed all of their
obligations required to be performed by them under each Material Document.
(c) Each Material Document is in full force and effect, and is valid,
binding and enforceable against the parties thereto in accordance with its
terms.
Section 2.3 Personal Property. The Assets include all items of
-----------------
tangible personal property owned, leased or otherwise held for use by or in the
Businesses (the "Personal Property") and include, without limitation, the
following:
(i) Earthmoving, landfill, and other equipment used in the
landfilling operations, all of which are listed on Schedule 2.3(a)(i);
9
<PAGE>
(ii) Rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors and accessories and attachments to the rolling
stock together with information as to the make, description of body and chassis,
model number, serial number and year of each such vehicle all of which are
listed on Schedule 2.3(a)(ii);
(iii) Containers together with information as to container size
and year of manufacture, all of which are listed on Schedule 2.3(a)(iii);
(iv) Railroad boxcars, all of which are listed on Schedule
2.3(a)(iv);
Inventory of parts, tires and accessories;
(v) Shop tools;
(vi) Furniture and office or other equipment; and
(vii) Other tangible personal property having a book value or
original acquisition price in excess of $50,000, all of which are listed on
Schedule 2.3(a)(viii).
(a) At the Closing the Personal Property shall be in good operating
condition, normal wear and tear excepted.
Section 2.4 Customers. Schedule 2.4 attached hereto lists the name and
---------
address of each customer that provides or has provided within the past two years
prior to the date hereof more than 3% of the gross revenues of the Businesses
for any fiscal year, together with copies (or, in the case of oral contracts,
summaries), of all customer contracts with such customers, and the information
supplied thereon is true, correct and complete, in all material aspects. As of
the date hereof, neither the Seller, Atlantic Disposal nor the Subsidiaries nor,
to their knowledge, any Person or party to any of the customer contracts with
such customers 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. As of the date hereof, the Seller,
Atlantic Disposal and the Subsidiaries have not received any notice that any
such customer intends not to renew any contract or otherwise cease or curtail
doing business with any of them and, no such customer is currently renegotiating
any material term of any contract or any material contract. Except as would not
reasonably be expected to have a Material Adverse Effect, each such customer
contract is in full force and effect, and valid, binding and enforceable against
the parties thereto in accordance with its terms. Except as disclosed on
Schedule 2.4, each such customer contract is assignable without the consent,
approval by or authorization of any Person.
Section 2.5 The Property. Neither Atlantic Disposal nor any of the
------------
Subsidiaries has ever owned, leased or otherwise occupied, had an interest in or
operated any real property other than the Property, except as disclosed in
Schedule 2.5. Atlantic Disposal has, and at the Closing will have, a good and
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<PAGE>
marketable leasehold interest in full force and effect in the Property, and that
interest is insurable at regular standard rates by a reputable title company.
(a) Seller, Atlantic Disposal and the Subsidiaries have made
available to Purchaser all engineering, geologic and other similar reports,
documentation, surveys, title reports and maps relating to the Property in the
possession or control of Seller, Atlantic Disposal and the Subsidiaries or their
consultants or employed professional firms.
(b) No person, other than Atlantic Disposal, has a present or future
right to possession of all or any part of the Property, except for any right
defined in, under or by any of the Permitted Encumbrances.
(c) No portion of the Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any Applicable Laws or the procedural manuals of
the Environmental Protection Agency, U.S. Army Corps of Engineers or the
Virginia Department of Environmental Protection ("DEP") whether such
characterization reflects current conditions or historic conditions which have
been altered without the necessary permits or approvals, except as listed on
Schedule 2.5(c).
(d) There are no levied or pending special assessments affecting all
or any part of the Property owed to any governmental entity and, to the Sellers'
knowledge, none is threatened.
(e) There are no proceedings or amendments pending and brought by or,
to the knowledge of the Seller, Atlantic Disposal and the Subsidiaries
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 Atlantic Disposal to use
the Property for a solid waste landfill after the Closing Date.
Section 2.6 Sufficiency of Assets; Title; Consents.
--------------------------------------
(a) The Assets will include all of the assets and properties used by
the Sellers, Atlantic Disposal and the Subsidiaries in the conduct of the
Businesses as of the date hereof together with all assets and properties
acquired by the Sellers, Atlantic Disposal and the Subsidiaries from and after
the date hereof, except, in each case, for assets that have been disposed of not
in breach of this Agreement. Such assets are sufficient to carry on the
Business after the Closing as previously conducted by the Sellers, Atlantic
Disposal and the Subsidiaries.
(b) Except as noted on Schedule 2.6(b), each Asset is presently owned
by Atlantic Disposal or a Subsidiary, free and clear of any security interests,
liens, mortgages, rights of third parties, title retention agreements, options,
equities and other restrictions on transfer or disposition (individually, an
"Encumbrance") and collectively "Encumbrances") other than (i) liens for taxes
that have not yet become delinquent and (ii) the Encumbrances listed on Schedule
2.6(b), (collectively, the "Permitted Encumbrances"). Upon the consummation of
the Closing all of the Assets will be owned by Atlantic
11
<PAGE>
Disposal or a wholly-owned subsidiary of Atlantic Disposal free and clear of any
Encumbrance, except for Permitted Encumbrances. Each of Atlantic Disposal and
the Subsidiaries has and upon the consummation of the Closing will have good and
marketable title to all of the Assets, except for assets held under lease or
license. Schedule 2.6(b) identifies or specifically references another Schedule
identifying all liens and leases by amount affecting any of Assets and the
document, instrument or law under which it arises.
(c) Except as set forth on Schedule 2.6(c), no consent, approval,
ratification, waiver or other authorization of any Person (including, without
limitation, Government Authorizations) is necessary or appropriate for the
consummation of the transactions contemplated hereby (including, without
limitation, for the continuation of the Businesses by Atlantic Disposal and the
Subsidiaries without interruption as of the Closing).
Section 2.7 Financial Statements.
--------------------
(a) To the knowledge of the Seller, Atlantic Disposal and the
Subsidiaries, there is no material inaccuracy in the audited, consolidated
balance sheets for Brambles USA as of June 30, 1996 and June 30, 1997,
heretofore provided to Purchaser, and audited consolidated statements of income,
cash flow, and retained earnings for the twelve months then ended or the
unaudited, consolidated balance sheet for Brambles USA at December 31, 1997 and
unaudited consolidated statements of income, cash flow, and retained earnings
for the six-months then ended.
(b) The Seller, Atlantic Disposal and the Subsidiaries have
heretofore provided to Purchaser true and correct copies of unaudited
consolidated balance sheets for Atlantic Disposal and the Subsidiaries as of
June 30, 1996 and June 30, 1997, and unaudited consolidated statements of
income, cash flow and retained earnings for the twelve months then ended, all
prepared on an accrual basis.
(c) The Seller, Atlantic Disposal and the Subsidiaries have
heretofore provided to Purchaser true and correct copies of an unaudited
consolidated balance sheet for Atlantic Disposal and the Subsidiaries as of
December 31, 1997 ("Most Recent Balance Sheet"), and unaudited consolidated
statements of income, cash flow and retained earnings for the six months then
ended ("Most Recent Income Statement"), both prepared on an accrual basis and
consistently with the unaudited financial statements referred to in Section
2.7(b). The Most Recent Balance Sheet and Most Recent Income Statement are
hereafter referred to as the "Most Recent Financial Statements." Together, the
financial statements referred to in Sections 2.7(b) and (c) are hereinafter
referred to as the "Seller's Financial Statements."
The Seller's Financial Statements have been prepared in accordance with
Australian generally accepted accounting principles consistently applied as in
effect on the date hereof ("GAAP"), except in the case of the interim Seller's
Financial Statements, for the absence of footnotes. All notes and contingent
liabilities required to be stated and reflected under GAAP are stated and
reflected on the Seller's Financial Statements. Each of the Seller's Financial
Statements (including all footnotes thereto) is true, complete
12
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and correct in all material respects. The consolidated balance sheets included
in Seller's Financial Statements present fairly and accurately in all material
respects the consolidated financial condition of Atlantic Disposal and the
Subsidiaries as of the dates indicated thereon and the statements of income
included in Seller's Financial Statements present fairly and accurately in all
material respects on an accrual basis the results of the operations of such
Atlantic Disposal and the Subsidiaries for the periods indicated thereon. Since
the respective dates of the Seller's Financial Statements, Atlantic Disposal and
the Subsidiaries have not (i) made any material change in accounting policies or
(ii) effected any prior period adjustment to, or other restatement of, any
Seller's Financial Statements for any period.
Section 2.8 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) Atlantic Disposal and the Subsidiaries, on a consolidated basis,
have no liabilities other than (i) liabilities fully reflected or reserved for
in the Most Recent Financial Statements, (ii) liabilities incurred in the
ordinary course of the Businesses since the date of the Most Recent Financial
Statements, and (iii) liabilities, the existence of which are reflected on any
Schedule to this Agreement.
(b) All accounts receivable have been generated in the ordinary
course of the Businesses and all services required to be rendered for such
accounts receivable to be due have been rendered. To the knowledge of the
Seller, Atlantic Disposal and the Subsidiaries, there are no valid defenses or
set-offs to any of the accounts receivable.
Section 2.9 Fiscal Condition. Since the date of the Most Recent Balance
----------------
Sheet, except as set forth on Schedule 2.9, there has not been and, at the
Closing, there shall not have been:
(a) Any material adverse change in the condition (financial or
otherwise) and operations of Atlantic Disposal, the Subsidiaries or the
Businesses or of the Assets after taking into consideration the liabilities of
Atlantic Disposal and the Subsidiaries (a "Material Adverse Change"), or any
event, condition or contingency that is reasonably likely to result in such a
Material Adverse Change;
(b) Any disposition by Atlantic Disposal or any Subsidiary 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 Atlantic Disposal and any
Subsidiary 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, property or right
owned by Atlantic Disposal or any Subsidiary at the close of business on the
date of the Most Recent Balance Sheet, or acquired by them since that date,
other than in the ordinary course of business and not exceeding $200,000 in
value in the aggregate;
(d) Any expenditure or commitment by or on behalf of Atlantic
Disposal or any Subsidiary for the acquisition of any asset having an
acquisition price of $100,000 or more or assets having aggregate acquisition
prices of $200,000 or more;
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(e) Any increase in excess of ten percent (10%) in the compensation
payable or to become payable by Atlantic Disposal or any Subsidiary to any
officer or key employee.
(f) any event which would be prohibited or would require the consent
of Purchaser under Section 4.3.
Section 2.10 Tax Returns. Atlantic Disposal and the Subsidiaries have
-----------
filed or will file all Federal and other tax returns, including without
limitation, income tax, franchise tax, corporate shell tax, sales tax, and use
tax, for all periods ending on or before the Closing Date, on or before the due
date of such return (as may have been extended by any valid extension of time)
and have paid or will pay all taxes owed by Atlantic Disposal and the
Subsidiaries for the periods covered by the said returns, except for such
failures to file or pay as could not result in a liability of Atlantic Disposal
or the Subsidiaries (a "Tax Liability") for such taxes or give rise to a lien on
the Assets or the capital stock of Atlantic Disposal or any Subsidiary.
Section 2.11 Employees, Pensions and ERISA.
-----------------------------
(a) Neither Atlantic Disposal, nor any Subsidiary has any contract of
employment with an officer or other employee that is not terminable without
penalty or payment other than accrued salary and benefits on notice of two weeks
or less, except as listed on Schedule 2.11(a).
(b) No employee of Atlantic Disposal or any Subsidiary is represented
by any union and there have been no organizing or other campaigns within the
past three years seeking such representation. The name, social security number
and current rate of compensation of each of the employees of the Businesses and
the department in which each person is employed is listed on Schedule 2.11(b)
attached hereto. There is no pending or threatened dispute between (i) the
Seller, Atlantic Disposal and the Subsidiaries and (ii) any of these employees
which might materially and adversely affect the continuance of the Businesses.
(c) Schedule 2.11(c) lists all employee benefit plans (as defined in
Section 2(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), funds or programs and any other employee benefit programs or
policies which are currently maintained by the Seller, Atlantic Disposal and the
Subsidiaries for the benefit of any employee of Atlantic Disposal or any
Subsidiary or to which any of them currently contributes or has an obligation to
contribute for the benefit of any employee of Atlantic Disposal or any
Subsidiary (collectively, the "Plans"), including, without limitation,
agreements containing "golden parachute" provisions, whether or not the Plans
are or are intended to be (i) covered or qualified under the Internal Revenue
Code of 1986, as amended (the "Code"), ERISA or any other applicable law, (ii)
written or oral, or (iii) funded or unfunded.
(d) The Seller, Atlantic Disposal and the Subsidiaries have delivered
to the Purchaser (i) true and complete copies of all Plan documents and other
instruments relating thereto as currently in
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effect, (ii) accurate and complete detailed summaries of all oral Plans, (iii)
true and complete copies of the most recent financial statements with respect to
the Plans, (iv) true and complete copies of all annual reports for any Plan
prepared within the past three years, and (v) all filings submitted to and any
correspondence received from any government agency relating to any Plan within
the past three years.
(e) Each Plan which is intended to be qualified under Section 401(a)
and exempt from tax under Section 501(a) of the Code has received a favorable
determination letter from the IRS and no such letter relating to any Plan has
been revoked. To the knowledge of the Seller, Atlantic Disposal and the
Subsidiaries, nothing has occurred since the date of any such determination
letter which may adversely affect such qualification or exemption, or result in
the imposition of excise taxes or tax on unrelated business income under the
Code or ERISA except as set forth on Schedule 2.11(e).
(f) No Plan is subject to Title IV of ERISA. All Plans have been
administered, operated and managed in substantial compliance with the governing
documents of the Plan and the applicable requirements of ERISA and the Code and
other applicable laws and regulations.
(g) There is no material matter, action, audit, suit or claim pending
(other than routine claims for benefits) or, to the knowledge of the Seller,
Atlantic Disposal and the Subsidiaries, threatened relating to any Plan,
fiduciary of any Plan or assets of any Plan, before any court, tribunal or
government agency.
(h) The transactions contemplated herein will not accelerate any
liability under any Plan because of an acceleration of any rights or benefits to
which any employee may be entitled thereunder.
(i) Each most recent Plan audit report, and annual report, certified
by the Plan's auditors, fairly presents the actuarial status and the financial
condition of the Plan as at the date thereof and the results of operations of
the Plan for the plan year reflected therein and, subject to changes in amounts
attributable to investment performance and normal employee turnover, there has
been no material adverse change in the condition of the Plan since the date of
the most recent Form 5500 or audited annual financial statement.
(j) The Seller, Atlantic Disposal and the Subsidiaries have not had,
at any time, any obligations with respect to, and does not make and has not made
at any time contributions to, any multi-employer plan (as defined in Section
3(37) of ERISA).
Section 2.12 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 2.12(a) the Seller, Atlantic
Disposal and each of the Subsidiaries and the Property is and, upon the
consummation of the Closing will be, in compliance with all Federal, state and
local laws, rules and regulations, orders, decrees, directives, permits,
franchises, and consents applicable to it, the Businesses or the Assets
including, without limitation, the following laws: land use laws, zoning,
payroll, employment, labor, or safety laws; or federal, state or local
15
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"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, but
excluding all Environmental Laws (as defined below) which are addressed in (b)
below, ("Law"). The Property at all times during the operation of the landfill
business has been licensed, permitted, and authorized as a landfill accepting
municipal solid waste in accordance with all applicable Laws. Except as
disclosed in Schedule 2.12(a) the Seller, Atlantic Disposal and each of the
Subsidiaries is, and upon consummation of the Closing, will be, in compliance
with all Government Authorizations. Except as disclosed in Schedule 2.12(a),
neither Seller, Atlantic Disposal nor the Subsidiaries has received notification
of any past or present failure by Atlantic Disposal or any Subsidiary to comply
with any Law applicable to it or its assets or to the Businesses or the Assets.
(b) Except as disclosed in Schedule 2.12(b) to this Agreement,
Atlantic Disposal and each Subsidiary is in compliance with all Federal, state
and local laws, rules and regulations relating to environmental issues of any
kind and/or the receipt, transport or disposal of any hazardous or non-hazardous
waste materials from any source ("Environmental Law"). Except as disclosed in
Schedule 2.12(b), with respect to any Environmental Law, each of Atlantic
Disposal and the Subsidiaries are in compliance with all permits, licenses, and
orders related thereto or issued thereunder with respect to Environmental Laws,
as are applicable to their respective property and operations, including,
without limitation, any order, decree or directive of any court or federal,
state, municipal, or other governmental department, commission, board, bureau,
agency or instrumentality wherever located. Except as set forth on Schedule
2.12(b), none of Atlantic Disposal or any Subsidiary has transported, stored,
treated or disposed, or allowed any third persons, on their behalf, to
transport, store, treat or dispose waste to or at (i) any location other than a
site lawfully permitted to receive such waste for such purpose or, (ii) any
location currently designated for remedial action pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") or any similar
federal or state statute; nor has any of them performed, arranged for or allowed
by any method or procedure such transportation or disposal in contravention of
state or federal laws and regulations or in any other manner which may result in
liability for contamination of the environment; and none of them has disposed,
or knowingly allowed third parties to dispose of waste upon property owned or
leased by any of them other than as permitted by, and in conformity with,
applicable Environmental Laws. Without limiting the generality of the
foregoing, neither Atlantic Disposal nor any Subsidiary has received any
notification (including requests for information from any governmental agency
asserting that the Business is or may be a "potentially responsible person" for
a remedial action at a waste storage, treatment or disposal facility) pursuant
to the provisions of CERCLA, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment. Atlantic Disposal and the Subsidiaries have
not received hazardous waste as defined in the Resource Conservation and
Recovery Act, 42 USCA Section 6901 et seq., or in any similar federal or state
-- ---
statute in quantities which would require remediation.
(c) Except as listed in Schedule 2.12(c), neither Atlantic Disposal
nor any Subsidiary has ever owned, operated, had an interest in, and/or leased a
waste transfer, recycling, treatment, storage, landfill or other disposal
facility except for the facility located at the Property. Each of Atlantic
Disposal
16
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and the Subsidiaries has obtained and maintained, when required to do so under
applicable Laws, trip tickets, signed by the applicable waste generators
demonstrating the nature of all waste deposited and or transported by any of
them. To the knowledge of the Seller, Atlantic Disposal and the Subsidiaries, no
employee, contractor or agent of any of Atlantic Disposal or any Subsidiary has,
in the course and scope of employment therewith, been harmed by exposure to
hazardous materials, as defined under the Environmental Laws. No liens with
respect to environmental liability have been imposed against any of Atlantic
Disposal or any Subsidiary under CERCLA or any comparable state statute or other
applicable Law, and no facts or circumstances exist which would give rise to the
same.
(d) Except as disclosed in Schedule 2.12(d), neither Atlantic
Disposal nor any Subsidiary has received notification of any past or present
failure by any of them to comply with any Environmental Law applicable to it or
its operations or its assets.
(e) Schedule 2.12(e) is a list of all notices of violations of
Environmental Law issued to any of Atlantic Disposal or any Subsidiary
pertaining to the Assets or the Businesses by any federal, state or local
regulatory agency. There are no notices of violation of Environmental Law
either from a federal, state or local authority received by any of them or
outstanding, except as listed in Schedule 2.12(e).
(f) To the knowledge of Seller, Atlantic Disposal and the
Subsidiaries, neither the Seller, Atlantic Disposal nor any Subsidiary is under
investigation by any District Attorney or similar state or local official or
agency or the Justice Department of the United States of America for the
violation of any Laws, including, without limitation, racketeering, unfair
competition or anti-trust. No facts or circumstances exist which would cause any
of them to be liable for the violation of any Laws including, without
limitation, racketeering, unfair competition, or anti-trust Laws.
(g) Except as set forth in Schedule 2.12(g), all licenses, approvals,
permits, certificates and other Government Authorizations needed or required for
the operation of the Businesses are set forth on Schedule 2.3. All such
Government Authorizations are in full force and effect, each of the Atlantic
Disposal and the Subsidiaries is in compliance with all such Government
Authorizations, and all such Government Authorizations have been validly and
legally obtained.
Section 2.13 Corrupt Practices. To the knowledge of Seller, Atlantic
-----------------
Disposal and the Subsidiaries, neither Atlantic Disposal nor any Subsidiary has
made, offered or agreed to offer anything of value to any employees of their
customers for the purpose of attracting business or any foreign or domestic
governmental official, political party or candidate for government office or any
of their respective employees or representatives, nor have any of them otherwise
taken any action which would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law applicable to United States or
foreign election campaign contributions.
Section 2.14 Authority. Except as listed in Schedule 2.14, each of the
---------
Seller, Atlantic Disposal and the Subsidiaries, has the right, power, legal
capacity and authority to enter into, and, if a signatory
17
<PAGE>
thereto, perform their respective obligations in respect of the transactions
under this Agreement, the Collateral Documents and the New York Agreement. The
execution, delivery and performance of this Agreement and the New York Agreement
have been duly authorized by all necessary action of the Seller, Atlantic
Disposal and the Subsidiaries. Except as set forth on Schedule 2.14, the
execution, delivery and performance of this Agreement, the Collateral Documents
and the New York Agreement will not result in a breach of or constitute a
default or result in the loss of any material right or benefit under:
(a) Any certificate, by-law, agreement or other document to which any
Seller or Subsidiary is a party or by which the Seller, Atlantic Disposal or the
Subsidiaries or any of its property is bound; or
(b) Any decree, order or rule of any court of governmental authority
which is binding on the Seller, Atlantic Disposal or the Subsidiaries or on the
property of any of them.
Section 2.15 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the authority of the Seller, Atlantic Disposal and the
Subsidiaries is entitled to any commission or finder's fee in connection with
the transactions contemplated by this Agreement.
Section 2.16 Intellectual Property. To the knowledge of the Seller,
---------------------
Atlantic Disposal and the Subsidiaries, neither Atlantic Disposal nor any
Subsidiary has infringed or is infringing, on any trade name, trademark, service
mark, copyright, trade secret or patent belonging to any person, firm or
corporation ("Intellectual Property") and no one has or is infringing any
Intellectual Property right of any of them.
Section 2.17 Litigation. All pending or, to the knowledge of the Seller,
----------
Atlantic Disposal and the Subsidiaries threatened litigation, claims,
administrative or judicial proceedings or investigations by any governmental
agency or officials involving or potentially involving any of Atlantic Disposal,
any Subsidiary, the Businesses, the Property, the Assets, the Shares, this
Agreement or any of the transactions contemplated hereby, as of the date hereof,
together with a description of each such proceeding, is set forth on Schedule
2.17. As of the date hereof, there is no pending or, to the knowledge of the
Seller, Atlantic Disposal and the Subsidiaries, threatened litigation,
administrative or judicial proceedings or investigation involving any of
Atlantic Disposal, any Subsidiary, the Businesses, the Assets, the Shares except
as listed on Schedule 2.17, which could affect Atlantic Disposal, any
Subsidiary, the Businesses or the Assets.
Section 2.18 Management of Atlantic Disposal and Subsidiaries. As of the
------------------------------------------------
date hereof, the persons listed in the preamble to this ARTICLE II include the
principal members of the current management of Atlantic Disposal and the
Subsidiaries and hold the positions set forth next to their respective names
below:
Name position
-------------
Jeffrey Cooper President and General Manager, Atlantic Disposal
18
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Jerry Johnson Director of Operations, Atlantic Disposal
Andrew Dondero Controller, Atlantic Disposal
Robert J. Anderson President, Chief Executive Officer, Brambles USA
T. Michael Phelan Vice President, Corporate Development and
Acquisitions, Brambles USA
William Ziegler Vice President, Health, Safety and Environmental
Affairs, ENSCO
David Webster Chief Financial Officer, Brambles USA and Vice
President, Treasurer and Secretary, Atlantic
Disposal
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Seller that the representations
and warranties contained in this Article III are true on the date hereof.
Section 3.1 Structure. Purchaser is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
Section 3.2 Authorization to Proceed with this Agreement. Purchaser has
--------------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and the New York Agreement and to perform its obligations hereunder
and thereunder. Purchaser has, by proper corporate proceedings, duly authorized
the execution, delivery and performance of this Agreement.
Section 3.3 Binding Effect. This Agreement has been, and on the Closing
--------------
Date the New York Agreement will be, legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their respective
terms.
Section 3.4 Legality of Operation. Except as disclosed in Public
---------------------
Reports, and except as would not reasonably be expected to have a material
adverse effect on the ability of Purchaser to consummate the transactions
contemplated hereby (a "Purchaser Material Adverse Effect"), Purchaser is, and
upon the consummation of the Closing will be, in compliance with all Laws.
Except as disclosed in Schedule 3.4, and except as would not reasonably be
expected to have a Purchaser Material Adverse Effect, Purchaser is and upon the
consummation of the Closing will be, in compliance with all Government
Authorizations. Except as set forth on Schedule 3.4 and except as would not
reasonably be expected to have a Purchaser Material Adverse Effect or which
would invalidate this Agreement or any action taken or to be taken in connection
with this Agreement, with respect to any Law, there are no claims, actions,
suits, or proceedings pending, or, to the knowledge of Purchaser, threatened
against or affecting the Purchaser 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.
19
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Section 3.5 Financing. Purchaser has available to it, as of the date of
---------
this Agreement and as of the Closing, sufficient funds to enable it to
consummate the transactions contemplated by this Agreement, including, without
limitation, the Closing.
Section 3.6 Absence of Intermediaries. No agent, broker, or other
-------------------------
person acting pursuant to Purchaser's authority will be entitled to make any
claim against Seller for any commission or finder's fee in connection with the
transactions contemplated by this Agreement.
Section 3.7 Commission Filings. Purchaser has delivered to Sellers its
------------------
Form 10-Q for the quarter ending December 31, 1997, its Form 10-K for the fiscal
year ending June 30, 1997, all Form 8-K's, if applicable, filed by it since
December 31, 1997 through the date hereof, and any Proxy Statements or
Registration Statements, if applicable, filed by it since December 31, 1997 (the
"Public Reports").
ARTICLE IV
ADDITIONAL AGREEMENTS OF SELLER, PURCHASER, ATLANTIC DISPOSAL AND THE
SUBSIDIARIES
The Seller covenants and agrees with Purchaser as follows:
Section 4.1 Purchaser's Access to Records and the Property. The Seller
----------------------------------------------
will give to Purchaser and its representatives, experts and advisors, from and
after the date of execution of this Agreement and up until Closing, such access
during regular business hours and upon reasonable notice, to the properties of
Atlantic Disposal (including the Property), and to assets, books, contracts,
documents, records, contracts and customer lists relating to the Businesses as
Purchaser may reasonably request, and to make available to Purchaser and its
representatives, experts and advisors all additional financial statements of and
all information with respect to the Businesses that Purchaser may reasonably
request, except where Seller, Atlantic Disposal and the Subsidiaries reasonably
believe that such access may be prohibited by applicable law. Any such access
shall be coordinated exclusively through Brambles USA's management in Chicago,
Illinois. Notwithstanding the foregoing, Purchaser shall not contact any
customer of the Businesses, nor shall Purchaser contact any counter party to any
Material Document, for any reason, without the prior written consent of Brambles
USA. Purchaser and its representatives shall have the right to copy any
information or documentation the Purchaser is entitled to inspect under this
Section 4.1, except as is reasonably objected to by Seller, Atlantic Disposal
and the Subsidiaries.
Section 4.2 Seller's Access to Records and the Property. The Purchaser
-------------------------------------------
will give to Seller and its representatives, experts and advisors, from and
after the date of Closing, such access during regular business hours and upon
reasonable notice, to the Property, and to the assets, books, contracts,
documents, records, contracts and customer lists relating to the Businesses for
the period prior to the Closing Date as Seller may reasonably request, and to
make available to Seller and its representatives, experts and advisors all
additional financial statements of and all information with respect to the
Businesses that Seller may
20
<PAGE>
reasonably request. If Seller's request causes Purchaser to incur unreasonable
additional out-of-pocket costs, Seller shall reimburse Purchaser for the
reasonable costs incurred in meeting Seller's request.
Section 4.3 Continuation of Businesses
--------------------------
(a) The Seller, Atlantic Disposal and the Subsidiaries will operate
the Businesses until the time of Closing using prudent business judgment so as
to preserve the business organizations. Each of Atlantic Disposal and the
Subsidiaries shall carry on its business in, and only in, the usual, regular and
ordinary course, consistent with past practice and in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use its best efforts to preserve intact its present business organization, keep
available the services of its present officers and employees, and preserve its
relationships with customers, contractors, and others having business dealings
with it to the end that its goodwill and ongoing business shall be unimpaired at
the Closing. The Parties acknowledge the obligations of Seller under the New
York Agreement.
(b) Prior to the Closing, Seller, Atlantic Disposal and the
Subsidiaries shall not, without the prior consent of Purchaser, do, cause or
permit to occur any one or more of the following with respect to Atlantic
Disposal or any Subsidiary:
(i) Enter into or assume any contract or agreement which would
be a Material Document as defined in Section 2.2(a) had the contract or
agreement existed on the date this Agreement was executed, or amend any contract
or agreement which is a Material Document as defined in Section 2.2(a), or
forfeit or amend any license or permit or other qualification necessary or
useful to conduct the Businesses;
(ii) Borrow or agree to borrow any funds or voluntarily incur,
assume or become subject to whether directly or by way of guarantee, capital
lease or otherwise, any obligation for borrowed money or any obligation which
would be treated as long-term debt in accordance with GAAP;
(iii) Make any distribution of assets to its stockholders,
including without limitation cash and cash equivalents; provided, however, that
Atlantic Disposal may distribute cash and cash equivalents to Seller to the
extent it would not result in negative Net Working Capital;
(iv) Make any change in any profit-sharing, bonus, deferred
compensation, insurance, pension, retirement or other employee benefit plan;
(v) Enter into any collective bargaining agreement or enter
into any employment contracts or increase the compensation payable to or to
become payable by Atlantic Disposal or any Subsidiary after the Closing to any
person to be employed by Atlantic Disposal or any Subsidiary after the Closing,
except, upon notice, in the ordinary course of the Businesses upon compensation
anniversary dates;
21
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(vi) Fail to pay or discharge when due any material
obligations, liabilities or debts;
(vii) Create or permit the creation of any Encumbrance of any
nature whatsoever (other than Permitted Encumbrances) on any of the Assets or
the Shares;
(viii) Take any action that would be required to be disclosed on
Schedule 2.9 pursuant to Sections 2.9(b), (c), (d), or (e) had it occurred prior
to the date hereof;
(ix) Make any change in its authorized or issued capital stock;
grant any stock option or other right to purchase shares of its capital stock or
other securities; issue or make any commitment to issue any security, including
any security convertible into capital stock; grant any registration rights or
purchase, redeem, retire or make any other acquisition of any shares of its
capital stock or other securities;
(x) Amend its certificate or articles of incorporation or
bylaws (or equivalent governing documents);
(xi) Execute, modify, amend or extend the term of any contract,
agreement or arrangement with any customer under which Atlantic Disposal or any
Subsidiary would be obligated to make payments or provide goods or services
after the Closing Date in an aggregate amount, or having an aggregate value, in
excess of $250,000;
(xii) Make any modification to Permit No. 562 issued by the
Virginia Department of Environmental Protection;
(xiii) Make any modification, amendment or extension to the term
of any of the following agreements: Disposal Agreement dated March 1, 1997, Rail
Expansion Agreement dated September 10, 1997, Contract and Ground Lease
Agreement between the County of Sussex, Virginia and Atlantic Development
Company, L.P. dated December 19, 1991, as amended by the First and Second
Amendments thereto, respectively, dated as of the 18th day of May, 1995 and the
20th day of December, 1996, respectively, the Operating Agreement between
Atlantic Waste Disposal, Inc. and Atlantic Development Company, L.P. dated as of
November 5, 1992, and the Agreement made as of June 1, 1994 by and between
Shoosmith Bros. and Atlantic Waste Disposal; or
(xiv) Enter into any agreement relating to any merger,
consolidation, combination, spinoff (other than the Distribution) or other
similar transaction involving Atlantic Disposal or any Subsidiary or otherwise
take any action prohibited by Section 4.4.
Section 4.4 Continuation of Insurance. The Seller will cause Atlantic
-------------------------
Disposal and each of its Subsidiaries to have at the Closing all policies of
insurance presently maintained and insuring any of the Assets against liability
and property damage, fire and other casualty.
22
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Section 4.5 No Solicitation. Unless and until this Agreement is
---------------
terminated without the Closing having taken place neither Seller, Atlantic
Disposal nor the Subsidiaries will directly or indirectly solicit offers for the
sub-lease of the Property, or acquisitions or sales of Shares or other stock or
assets of Atlantic Disposal or any Subsidiary or for a merger or consolidation
involving Atlantic Disposal or any Subsidiary 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 by merger, consolidation or other combination the
Businesses or any assets or properties of Atlantic Disposal or any Subsidiary.
Section 4.6 FIRPTA Certificate. Purchaser and the 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 the Seller furnishes Purchaser with a certificate stating their
U.S. Taxpayer Identification Numbers and that they are not foreign persons
within the meaning of the Code. Accordingly, Seller shall provide to Purchaser
at Closing such certificate as is reasonably necessary to insure that such
withholding is not required under FIRPTA.
Section 4.7 Financial Statements. Prior to the Closing, Seller shall
--------------------
deliver (or cause to be delivered) to the Purchaser consolidated financial
statements for Atlantic Disposal and the Subsidiaries (including consolidated
balance sheets for Atlantic Disposal and the Subsidiaries and consolidated
statements of income, cash flow and retained earnings) in accordance with GAAP
covering each and every full (as of the Closing) fiscal quarter of Atlantic
Disposal and the Subsidiaries through the Closing.
Section 4.8 Consents and Approvals; Other. As promptly as practicable
-----------------------------
after the date of this Agreement, the Seller, Atlantic Disposal and the
Subsidiaries will make all filings required to be made by them in order to
consummate the transactions contemplated herein. The Seller and Purchaser shall
use all commercially reasonable efforts to cause the conditions to Closing in
Article VI and VII (including, without limitation, the obtaining of consent to
the acquisition by Purchaser through its acquisition of the Shares of the rights
of Atlantic Disposal under the Landfill Lease), to be satisfied and to obtain
all requisite approvals, authorizations, and consents to the transactions
contemplated hereby, including the obtaining of all Government Authorizations
and other consents necessary and appropriate to effect the Closing; provided,
however, that Seller, Atlantic Disposal and the Subsidiaries shall not (except
as they may otherwise agree in writing) be required to pay money other than the
reasonable expenses and costs of Seller, Atlantic Disposal and the Subsidiaries
and third parties to obtain any such consent nor will they be required to modify
or amend any contractual arrangements in a manner adverse to them to obtain any
such consent.
Section 4.9 Discharge of Excluded Liabilities. At or prior to the
---------------------------------
Closing, Seller shall discharge all intercompany liabilities referred to in
clause (i) of the definition of Excluded Liabilities. Following the Closing, the
Seller and Brambles USA shall (a) promptly discharge, as they become due, all
other
23
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Excluded Liabilities, if any, and shall take all steps necessary to
ensure that no Excluded Liability shall become an obligation or liability of
Atlantic Disposal or any Subsidiary and (b) defend the New York Case and pay and
discharge when due all costs, expenses, and liabilities associated with the New
York Case. The Purchaser shall make available to the Seller all records and
personnel reasonably requested by Seller in connection with the New York Case.
Section 4.10 SEC Filings. Seller, Atlantic Disposal and the Subsidiaries
-----------
shall cooperate and shall use all reasonable efforts to cause their auditors to
cooperate with all reasonable requests of Purchaser and its auditors necessary
to audit or reaudit all prior periods for activities of Atlantic Disposal and
the Subsidiaries to the extent necessary to enable Purchaser and/or any
affiliate of Purchaser to make periodic reports pursuant to the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), to make a
public offering of its securities under the Securities Act of 1933, as amended
(the "Securities Act"), or to make a private placement of its securities, and
Seller, Atlantic Disposal and the Subsidiaries hereby consent to the use of
historical financial information, to be included (if required by the rules and
regulations of the Securities and Exchange Commission (the "Commission") or any
applicable state securities law) in any of Purchaser's or Purchaser's
affiliate's filing with the Commission or any state securities commission under
either the Securities Exchange Act or the Securities Act and in any prospectus
or memorandum used in connection with any offering of their securities. The
cooperation of Seller shall include, without limitation, the execution of any
audit representation letters reasonably requested by Purchaser's auditors.
Purchaser shall indemnify and hold harmless Seller, Atlantic Disposal and the
Subsidiaries against any and all fees and expenses incurred or to be incurred at
any time in the future to comply with the foregoing. Purchaser acknowledges
that neither Seller, Atlantic Disposal nor the Subsidiaries shall have any
responsibility to any purchaser of securities in Purchaser for any information
provided pursuant to this Section 4.10 and Purchaser shall indemnify and hold
harmless Seller, Atlantic Disposal and the Subsidiaries and their respective,
officers, directors, employees or representatives in connection with any
information provided pursuant to this Section 4.10 against claims made by any
such purchaser of securities.
Section 4.11 Updated Information. Not less than three days prior to the
-------------------
Closing, the Sellers shall provide the Purchaser with a Schedule or Schedules
listing all events and matters occurring after the date hereof which would have
been required to be disclosed on a Schedule to this Agreement if they had
occurred prior to the date hereof, together with a certificate of Sellers to the
effect that, each representation and warranty as supplemented is true and
correct as of the date of the certificate.
Section 4.12 Landfill Lease. The Seller, Atlantic Disposal, and, as
--------------
applicable, the Subsidiaries, shall use their reasonable best efforts to obtain
an amendment to the Landfill Lease in form and substance satisfactory to
Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS OF PURCHASER AND SELLER
24
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Section 5.1 Payment of Expenses. Purchaser will pay all expenses
-------------------
(including legal and accounting fees) incurred by it in connection with the
negotiation, execution and performance of this Agreement and the Collateral
Documents. Except as otherwise specified herein, the Seller, Atlantic Disposal
and the Subsidiaries will pay all expenses incurred by Seller, Atlantic Disposal
and the Subsidiaries (including legal and accounting fees) in connection with
the negotiation, execution and performance of this Agreement and the Collateral
Documents and the consummation of the transactions hereunder and thereunder.
Additionally, the Purchaser shall bear the following expenses: (i) filing and
other fees payable under the Hart-Scott-Rodino Anti-Trust Improvements Act of
1976, as amended, (ii) the costs of auditing any accounting records of Atlantic
Disposal or its Subsidiaries for any period requested by Purchaser pursuant to
Section 4.10 and (iii) the cost of the title policies and surveys, if any, with
respect to the Property required by Purchaser as a condition of the Closing.
Section 5.2 Filing of Tax Returns and Payment of Taxes.
------------------------------------------
(a) As soon as practicable after the Closing Date, Brambles USA and
the Seller will prepare and file or cause to be prepared and filed all
appropriate tax returns that are required to be filed for the operations of
Atlantic Disposal and its subsidiaries for the Pre-Closing Tax Period (as
defined in Section 5.2(b)) and will timely pay or cause to be paid the amount of
taxes shown to be due on such tax returns. The books and records of the Seller,
Atlantic Disposal and its subsidiaries will be maintained, and the Federal,
state and other income tax returns of the "affiliated group" (as defined in
Section 1504(a) of the Code) of which the Seller and each of Atlantic Disposal
and its subsidiaries is a member (the "Seller Group") will be filed, so as to
accurately reflect the operations of Atlantic Disposal and its subsidiaries for
the Pre-Closing Tax Period. Purchaser shall prepare and file or cause to be
prepared and filed all appropriate tax returns for the operations of Atlantic
Disposal and its subsidiaries for all taxable periods after the Pre-Closing Tax
Period and will timely pay or cause to be paid the amount of taxes shown to be
due on such tax returns.
(b) For purposes of this Agreement, "Pre-Closing Tax Period" means
----------------------
the period (including all prior taxable years) ending on and including the
Closing Date. In the case of jurisdictions with respect to which a taxable
period of Atlantic Disposal or a subsidiary does not end on the Closing Date,
there shall be a deemed short taxable period ending on and including the Closing
Date and a second deemed short taxable period beginning on and including the day
after the Closing Date. For purposes of allocating gross income and deductions
between deemed short taxable periods, all amounts of income and deduction shall
be deemed to have accrued pro rata during Atlantic Disposal or such subsidiary's
actual taxable period, except for items of income or loss arising from an
extraordinary event, which shall be reflected in the period in which such event
occurred, and all taxes other than income taxes shall be deemed to have accrued
pro-rata during Atlantic Disposal's or such subsidiary's actual tax period.
(c) Purchaser and Seller will cooperate fully with each other in
connection with (i) the preparation and filing of any Federal, state or local
tax returns that include the business and operations of Atlantic Disposal and
its subsidiaries with respect to any tax return that includes operations of
Atlantic Disposal and its subsidiaries within the Pre-Closing Tax Period, and
(ii) any audit examination by any
25
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government taxing authority of the tax returns referred to in clause (i). Such
cooperation shall include, without limitation, the furnishing or making
available of records, books of account or other materials of Atlantic Disposal
and its subsidiaries necessary or helpful for the defense against assertions of
any taxing authority as to any tax returns which include operations of Atlantic
Disposal and its subsidiaries within the Pre-Closing Tax Period.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to purchase the Shares shall be subject to the
fulfillment or waiver by the Purchaser at or prior to the time of the Closing of
each of the following items:
Section 6.1 Compliance by Seller, Atlantic Disposal and the
-----------------------------------------------
Subsidiaries. The Seller, Atlantic Disposal and the Subsidiaries shall (a) have
- ------------
performed and complied with all of the obligations and conditions required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date; (b) there shall not have occurred any Material Adverse Change, and
(c) all representations and warranties of Seller, Atlantic Disposal and the
Subsidiaries contained in this Agreement shall have been true and correct when
made, and (d) each representation and warranty made in this Agreement by Seller,
Atlantic Disposal and the Subsidiaries, shall be true and correct as of the
Closing Date; provided, however, that where the failure to perform such
obligations and/or the failure of representations and warranties to be true and
correct, taken in the aggregate (and including any changes reflected as
supplemental disclosures provided pursuant to Section 4.11), would not have a
Material Adverse Effect, the condition to Closing set forth in subpart 6.1(d)
shall be deemed waived. Purchaser shall have received a Certificate of the
Seller, Atlantic Disposal and the Subsidiaries duly executed by the Chief
Executive and Chief Financial Officers of each Seller, Atlantic Disposal and the
Subsidiaries to such effect.
Section 6.2 Litigation Affecting This Transaction. No order, statute,
-------------------------------------
rule, regulation, executive order, injunction, stay, decree or restraining order
shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions to be
consummated at the Closing; no action, suit, investigation or proceeding by any
governmental or regulatory authority or instrumentality shall be pending which
seeks to restrain, prohibit or declare illegal the transactions to be
consummated at the Closing.
Section 6.3 Governmental or Regulatory Consents. All governmental or
-----------------------------------
regulatory consents, approval, permits, and authorizations necessary for the
performance by Purchaser and the Seller, Atlantic Disposal and the Subsidiaries
of their respective obligations at the Closing, including termination of the
waiting period under the HSR Act and the obtaining of all necessary consents
under the Landfill Lease, shall have been obtained, shall unconditionally permit
the consummation of the transactions contemplated to be effected at the Closing
and shall be satisfactory to Purchaser in its sole discretion.
26
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Section 6.4 Other Consents. The consents set forth on Schedule 6.4
--------------
shall have been obtained, shall unconditionally permit the consummation of the
transactions contemplated to be effected at the Closing and shall be
satisfactory to Purchaser in its sole discretion.
Section 6.5 Closing of New York Agreement. The closing of the
-----------------------------
transactions contemplated by the New York Agreement shall have occurred or shall
be occurring concurrently.
Section 6.6 Landfill Lease. The Landfill Lease shall have been amended
--------------
and such amendment shall be satisfactory in form and substance to Purchaser in
its sole discretion.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of the Seller to transfer the Shares in accordance with
this Agreement shall be subject to the fulfillment or waiver in writing by the
Seller at or prior to the time of the Closing of each of the following
conditions:
Section 7.1 Compliance by Purchaser. The Purchaser shall have performed
-----------------------
and complied in all material respects with all of the obligations and conditions
required by this Agreement to be performed or complied with by it at or prior to
or at the Closing Date. All representations and warranties of Purchaser
contained in this Agreement shall be true and correct 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.
Section 7.2 Litigation Affecting This Transaction. No order, statute,
-------------------------------------
rule, regulation, executive order, injunction, stay, decree or restraining order
shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions to be
consummated at the Closing, and no action, suit, investigation or proceeding by
any governmental or regulatory authority or instrumentality shall be pending
which seeks to restrain, prohibit or declare illegal the transactions to be
consummated at the Closing.
Section 7.3 Governmental and Regulatory Consents. All governmental or
------------------------------------
regulatory consents, approval, permits and authorizations necessary for the
performance by Purchaser and the Seller, Atlantic Disposal and the Subsidiaries
of their respective obligations at the Closing, including termination of the
waiting period under the HSR Act, shall have been obtained, shall
unconditionally permit the consummation of the transactions contemplated to be
effected at the Closing and shall be satisfactory to Seller in its sole
discretion.
27
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Section 7.4 Other Consents. The consents identified in Schedule 7.4
--------------
shall have been obtained, shall unconditionally permit the consummation of the
transactions contemplated to be effected at the Closing and shall be
satisfactory to Sellers in their sole discretion.
Section 7.5 Closing of New York Agreement. The closing of the
-----------------------------
transactions contemplated by the New York Agreement shall have occurred or shall
be occurring concurrently.
ARTICLE VII
INDEMNIFICATION
Section 8.1 Indemnification by Seller.
-------------------------
(a) Seller shall indemnify, defend, protect and hold harmless
Purchaser, its officers, directors, affiliates, subsidiaries, agents, employees,
legal representatives, successors and assigns and Atlantic Disposal and each
Subsidiary 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) ("Damages"), from: (i) any breach of, misrepresentation in, untruth in
or inaccuracy in the representations and warranties by Seller, Atlantic Disposal
and Subsidiaries set forth in this Agreement or in any representation or
warranty brought current by the certificates described in Sections 4.11 and 6.1
(without regard to whether such breaches or failures of representations or
warranties had a Material Adverse Effect); (ii) all events and matters occurring
after the date hereof which are set forth in any updated schedules delivered
under Section 4.11 to the extent that the matter or event reflects a detrimental
change to the Business, Assets, Shares, or Atlantic Disposal and the
Subsidiaries from the schedules delivered at execution of the Agreement; however
changes which occurred in the ordinary course of business and not as a result of
the Seller's breach of this Agreement shall not be the basis of an
indemnification claim; (iii) nonfulfillment or nonperformance of any agreement
or covenant on the part of Seller, Atlantic Disposal and Subsidiaries made in
this Agreement and to be performed by any of them before or after the Closing
Date including potential assessment under Paragraph 1.1502-6(b) of the Internal
Revenue Code; (iv) violation of the requirements of any governmental authority
relating to the reporting and payment of federal, state, local or other income,
sales, use, franchise, excise or property tax liabilities of the Seller,
Atlantic Disposal and Subsidiaries (to the extent such taxes result in a lien on
the Assets or Atlantic Disposal or any Subsidiary becomes liable for such taxes)
or arising or accrued prior to the Closing Date; and (v) any Excluded Liability.
The Purchaser and the Seller have agreed, for the purposes of determining
whether or not the conditions to the obligations of the Purchaser to close have
been satisfied, pursuant to 6.1(d), that the Purchaser will be obligated to
close notwithstanding breaches of representations or warranties contained in
this Agreement or brought current by the certificate described in 4.11, if such
breaches do not result in a Material Adverse Effect. For the purposes of
indemnification, however, Purchaser shall be entitled to claim, subject to the
limitations set forth in Section 8.1(d), for breaches of representations and
warranties contained in this Agreement or brought current by the certificate
described in Section 4.10, notwithstanding the immateriality of any such breach.
28
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(b) The indemnification provided for in this Section 8.1 shall
be Purchaser's sole and exclusive remedy for any Damages arising out of or
relating to the transactions contemplated by this Agreement, except as set forth
in the next sentence and except insofar as any such Damages are caused by the
fraudulent misconduct of any Seller. The limitations set forth in the
immediately preceding sentence and Section 8.1(c) below shall not apply to any
Damages arising out of any breach of or failure to perform obligations under the
New York Agreement; Section 4.9 or any failure to perform covenants required to
be performed prior to Closing. This Section is not intended to limit the remedy
of specific performance provided for in Section 1.10.
Without limiting the generality of the first sentence of
this Section 8.1(b), each of Purchaser and Atlantic Disposal expressly waives
and releases any claim that it may have, now or in the future, against Seller or
any of its affiliates pursuant to CERCLA or any similar state or local law;
provided, however, that nothing in this sentence shall limit any right that the
Purchaser may have under this Agreement, the New York Agreement or any
Collateral Document, including any right in respect of a breach of a
representation and warranty relating to CERCLA.
(c) Notwithstanding the foregoing, in no event shall the Seller
be liable for any Damages pursuant to Section 8.1(a)(i) or for covenants to be
performed after Closing, except for the covenant in Section 4.9 (to which the
limitation of liability does not apply) unless the aggregate amount of such
Damages exceeds $500,000, in which case the Seller shall only be liable for the
amount of such Damages in excess of $500,000. Likewise, Seller shall not be
liable for Damages under Section 8.1(a)(i) or for covenants to be performed
after Closing, except for the covenant in Section 4.9 to which the limitation of
liability does not apply in excess of an amount equal to 50% of the Purchase
Price.
Section 8.2 Indemnification by Purchaser. (a) Purchaser agrees that it
----------------------------
will indemnify, defend, protect and hold harmless Seller, and its officers,
shareholders, directors, affiliates, subsidiaries, parents, agents, employees,
heirs, legal representatives, successors and assigns, as applicable, from and
against all Damages incurred by it, as a result of or incident to: (i) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties of Purchaser set forth in this Agreement; and (ii) nonfulfillment
or nonperformance of any agreement or covenant on the part of Purchaser made in
this Agreement and to be performed by Purchaser before or after the Closing
Date.
(b) The indemnification provided for in this Section 8.2 shall
be the Seller's sole and exclusive remedy for any Damages arising out of or
relating to the transactions contemplated by this Agreement, except as set forth
in the next sentence and except insofar as any such Damages are caused by the
fraudulent misconduct of Purchaser. The limitations set forth in the immediately
preceding sentence and Section 8.2(c) below shall not apply to any Damages
arising out of any breach of or failure to perform obligations under the New
York Agreement or failure to perform covenants required to be performed prior to
Closing. This Section is not intended to limit the remedy of specific
performance provided for in Section 1.10.
29
<PAGE>
(c) Notwithstanding the foregoing, in no event shall the
Purchaser be liable for any Damages under Section 8.2(a)(i) or for covenants to
be performed after Closing unless the aggregate amount of such Damages exceeds
$500,000, in which case the Purchaser shall only be liable for the amount of
such Damages in excess of $500,000. Likewise, Purchaser shall not be liable for
Damages under Section 8.2(a)(i) or for covenants to be performed after Closing
in excess of an amount equal to 50% of the Purchase Price.
Section 8.3 Procedure for Indemnification with Respect to Third Party
---------------------------------------------------------
Claims.
- ------
(a) If any third party shall notify a party to this Agreement
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other party to
this Agreement (the "Indemnifying Party") under this Article VIII, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party 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 this Article VIII,
as applicable, from and against the entirety of any adverse consequences (which
will include, without limitation, all losses, claims, liens, and attorneys' fees
and related expenses) the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Third Party Claim involves only monetary damages and does not seek an
injunction or equitable relief, (iii) 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 (iv) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8.3(b) above, 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. 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 Indemnified Party from all liability in connection therewith.
30
<PAGE>
(d) If any condition set forth in Section 8.3(b) above is or
becomes unsatisfied, (i) the Indemnified Party may defend against the Third
Party Claim with counsel of its choice and the Indemnifying Party shall have the
right to participate in (but not control) such defense, and (ii) 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, (iii) 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 (iv) the
Indemnifying Party will remain responsible for any adverse consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Article VIII. Notwithstanding the above, if the only item in Section 8.3(b)
which was not satisfied is item 8.3(b)(iii), the Indemnified Party will consult
with the Indemnifying Party prior to settling a Third Party Claim.
Section 8.4 Procedure for Non-Third Party Claims. If Purchaser, Seller,
------------------------------------
Atlantic Disposal, or the Subsidiaries wishes to make a claim for indemnity
under Section 8.1 or Section 8.2, as applicable, and the claim does not arise
out of a third party notification which makes the provisions of Section 8.3
applicable, the party desiring indemnification ("Indemnified Party") shall
deliver to the party from which indemnification is sought ("Indemnifying Party")
a written demand for indemnification ("Indemnification Demand"). The
Indemnification Demand shall state: (a) the amount of losses, damages or
expenses to which the Indemnified Party has incurred or has suffered or is
expected to incur or suffer to which the Indemnified Party is entitled to
indemnification pursuant to Section 8.1 or Section 8.2, as applicable; and (b)
the nature of the event or occurrence which entitles the Indemnified Party to
receive payment under Section 8.1 or Section 8.2, as applicable. If the
Indemnifying Party wishes to object to an Indemnification Demand, the
Indemnifying Party must send written notice to the Indemnified Party stating the
objections and the grounds for the objections ("Indemnification Objection"). If
no Indemnification Objection is sent within 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 8.5 Survival of Claims. The respective representations and
------------------
warranties 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 Excluded Liabilities shall survive until the later
of the expiration of the applicable statute of limitations on any claim which
can be brought against Atlantic Disposal by tax authorities or governmental
agencies or governmental units or one year after a final, nonappealable order
has been entered in the New York Case and (ii) all representations and
warranties other than those set forth in (i) above shall survive until the date
which is 18 months after the Closing Date. Notwithstanding the prior sentence
which provides that the representations and warranties expire
31
<PAGE>
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. No investigation made by Purchaser shall limit in
any way Purchaser's rights to recover damages. The covenants and agreements of
the parties set forth in this Agreement to be performed after Closing shall
survive Closing in accordance with their terms.
Section 8.6 Prompt Payment. In the event that any party is required to
--------------
make any payment under this Article VIII, such party shall promptly pay the
Indemnified 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 VIII, 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.
Section 8.7 Insurance. If Seller pays an Indemnification Demand,
---------
Purchaser agrees to provide Seller upon Seller's request information concerning
any insurance coverages Purchaser has that could result in an insurance recovery
relating to the event which resulted in the indemnity payment ("Insured
Indemnity Event"). Upon Seller's request, Purchaser shall make a claim with its
insurers for the Insured Indemnity Event. If Purchaser receives any insurance
proceeds from the submitted claim, Purchaser shall retain from the insurance
proceeds the amount of Damages from the Insured Indemnity Event not paid to it
by Seller, due to the provision in Section 8.1(a) which provides that Seller is
not liable for the first $500,000 of Damages, and Purchaser shall pay the Seller
the balance of the insurance proceeds. This Section 8.7 does not impose any
requirement on Purchaser to commence litigation against its insurers unless
Seller pays all costs and expenses of such litigation.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nondisclosure by Seller. Seller, Atlantic Disposal and the
-----------------------
Subsidiaries recognize and acknowledge that they have in the past, currently
have, and in the future will have certain confidential information of Purchaser
such as lists of customers, operational policies, and pricing and cost policies
that are valuable, special and unique assets of Purchaser. Seller, Atlantic
Disposal and the Subsidiaries agree that for a period of ten (10) years from the
date hereof they will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of Purchaser, unless (i) such
information becomes known to the public generally through no fault of Seller,
Atlantic Disposal and the Subsidiaries, or (ii) Seller, Atlantic Disposal
32
<PAGE>
and the Subsidiaries is compelled to disclose such information by a governmental
entity or pursuant to a court proceeding. In the event of a breach or threatened
breach by Seller, Atlantic Disposal and the Subsidiaries of the provisions of
this Section, Purchaser shall be entitled to an injunction against such
disclosure, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchaser from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2 Nondisclosure by Purchaser. Purchaser 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 Seller,
Atlantic Disposal and the Subsidiaries, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Seller, Atlantic Disposal and the Subsidiaries. Purchaser agrees
that it will not utilize such information in the business or operation of
Purchaser or any of its affiliates or for ten (10) years from the date hereof
disclose such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, unless (i)
such information becomes known to the public generally through no fault of
Purchaser or any of its affiliates, (ii) Purchaser is compelled to disclose such
information by a governmental entity or pursuant to a court proceeding, or (iii)
Closing takes place. In the event of a breach or threatened breach by Purchaser
of the provisions of this Section, Seller, Atlantic Disposal and the
Subsidiaries shall be entitled to an injunction restraining Purchaser from
utilizing or disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting Seller, Atlantic
Disposal and the Subsidiaries from pursuing any other available remedy for such
breach or threatened breach, including, without limitation, the recovery of
damages.
Section 9.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, personal representatives and assigns.
This Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto. Notwithstanding the foregoing, the Purchaser may assign this Agreement
and all of its rights and obligations hereunder to any directly or indirectly
wholly-owned subsidiary of the Purchaser; provided that, in connection with any
such assignment, the Purchaser shall execute an guarantee and suretyship
agreement, in form and substance reasonably satisfactory to the Seller, pursuant
to which the Purchaser shall guarantee and stand surety for all of the
obligations of its assignee hereunder.
Section 9.4 Entire Agreement. This Agreement together with the
----------------
Collateral Documents is the final, complete and exclusive statement and
expression of the agreement among the parties hereto with relation to the
subject matter of this Agreement, it being understood that there are no oral
representations, understandings or agreements covering the same subject matter
as the Agreement. The Agreement supersedes, and cannot be varied, contradicted
or supplemented by evidence of any prior to contemporaneous discussions,
correspondence, or oral or written agreements of any kind, including, without
limitation, the Letter of Intent, dated November 20, 1997 by and among Purchaser
and Brambles
33
<PAGE>
USA. The parties to this Agreement have relied on their own advisors for all
legal, accounting, tax or other advice whatsoever with respect to the Agreement
and the transactions contemplated hereby.
Section 9.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
Section 9.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
34
<PAGE>
(a) If to Purchaser, addressed to it at:
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 101
Mount Laurel, New Jersey 08054
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107-3496
Attention: H. John Michel, Jr.
(b) If to Seller, Atlantic Disposal and the Subsidiaries
addressed to:
Brambles USA, Inc.
The Wrigley Building
400 North Michigan Avenue
Suite 610
Chicago, Illinois 60611
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603-3441
Attention: Scott J. Davis
Notice shall be deemed given and effective the day personally delivered, the day
after being sent by overnight courier and three business days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received, if earlier. Any
party may change the address for notice by notifying the other parties of such
change in accordance with this Section 9.6.
Section 9.7 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
35
<PAGE>
Section 9.8 No Waiver. No delay of or omission in the exercise of any
---------
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 9.9 Time of the Essence. Time is of the essence of this
-------------------
Agreement as well as all dates referred to herein and extensions thereof.
Section 9.10 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 9.11 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 9.12 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 including, without limitation.
Section 9.13 Extension or Waiver of Performance. Either the Seller or
----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Seller and the
Purchaser.
Section 9.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, legal representative and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any party to this Agreement, nor shall any provisions
give any third person any rights of subrogation or action over or against any
party to this Agreement.
Section 9.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
36
<PAGE>
Section 9.16 Publicity. Prior to the 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 prior consent with the other party, which shall not be
unreasonably withheld.
Section 9.17 Arbitration.
-----------
(a) Each and every controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in Wilmington,
Delaware, 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. 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.
(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
37
<PAGE>
of a confidential or financial nature of the party whose interests are adverse
to the party represented by such counsel in any such Proceedings.
38
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
BRAMBLES WASTE SERVICES, INC.
By: /s/ Robert J. Anderson
----------------------------
Name:Robert J. Anderson
---------------------------
Title:CEO
--------------------------
ATLANTIC WASTE DISPOSAL, INC.
By: /s/ Robert J. Anderson
----------------------------
Name:Robert J. Anderson
---------------------------
Title:CEO
--------------------------
ATLANTIC TRANSPORTATION
SERVICES, INC.
By: /s/ Robert J. Anderson
----------------------------
Name:Robert J. Anderson
---------------------------
Title:CEO
--------------------------
ATLANTIC COLLECTION, INC.
By: /s/ Robert J. Anderson
----------------------------
Name: Robert J. Anderson
--------------------------
Title:CEO
--------------------------
RESOURCE PRODUCTS, INC.
By: /s/ Robert J. Anderson
----------------------------
Name: Robert J. Anderson
--------------------------
Title:CEO
--------------------------
EASTERN ENVIRONMENTAL SERVICES,
INC.
By: /s/ Robert M. Kramer
------------------------------
Name: /s/ Robert M. Kramer
----------------------------
Title:Executive Vice-President
----------------------------
39
<PAGE>
Exhibit 10.2
------------
AGREEMENT FOR THE SALE AND PURCHASE
OF STOCK OF
ATLANTIC OF NEW YORK, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
ACQUISITION; CLOSING
Section 1.1 Incorporation of Recitals, Exhibits, and Schedules...................................... 2
Section 1.2 Time and Place for Closing.............................................................. 2
Section 1.3 Excluded Liabilities; Distribution of Atlantic New York Stock........................... 2
Section 1.4 Agreement to Sell Shares to Purchaser................................................... 2
Section 1.5 Consideration........................................................................... 2
Section 1.6 Deliveries by Purchaser................................................................. 4
Section 1.7 Deliveries by Seller.................................................................... 4
Section 1.8 Termination............................................................................. 5
Section 1.9 Tax Treatment........................................................................... 6
Section 1.10 Procedure for Termination; Effect of Termination........................................ 7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND ATLANTIC NEW YORK
Section 2.1 Organization, Standing, and Ownership................................................... 8
Section 2.2 Contracts, Permits and Material Documents............................................... 9
Section 2.3 Personal Property....................................................................... 10
Section 2.4 Customers............................................................................... 10
Section 2.5 The Property............................................................................ 11
Section 2.6 Sufficiency of Assets; Title; Consents.................................................. 12
Section 2.7 Financial Statements.................................................................... 12
Section 2.8 Liabilities; Accounts Receivable and Working Capital.................................... 13
Section 2.9 Fiscal Condition........................................................................ 14
Section 2.10 Tax Returns............................................................................. 14
Section 2.11 Employees, Pensions and ERISA........................................................... 15
Section 2.12 Legality of Operation................................................................... 16
Section 2.13 Corrupt Practices....................................................................... 18
Section 2.14 Authority............................................................................... 18
Section 2.15 Transaction Intermediaries.............................................................. 19
Section 2.16 Intellectual Property................................................................... 19
Section 2.17 Litigation.............................................................................. 19
Section 2.18 Management of Atlantic Disposal and Subsidiaries........................................ 19
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Section 3.1 Structure................................................................................ 20
Section 3.2 Authorization to Proceed with this Agreement............................................. 20
Section 3.3 Binding Effect........................................................................... 20
Section 3.4 Legality of Operation.................................................................... 20
Section 3.5 Financing................................................................................ 21
Section 3.6 Absence of Intermediaries................................................................ 21
Section 3.7 Commission Filings....................................................................... 21
ARTICLE IV
ADDITIONAL AGREEMENTS OF SELLER, PURCHASER AND ATLANTIC NEW YORK
Section 4.1 Seller's Access to Records and the Property.............................................. 21
Section 4.2 Access to Records and the Property....................................................... 22
Section 4.3 Continuation of Businesses............................................................... 22
Section 4.4 Continuation of Insurance................................................................ 24
Section 4.5 No Solicitation.......................................................................... 24
Section 4.6 FIRPTA Certificate....................................................................... 24
Section 4.7 Financial Statements..................................................................... 24
Section 4.8 Consents and Approvals; Other............................................................ 24
Section 4.9 Discharge of Excluded Liabilities........................................................ 25
Section 4.10 SEC Filings.............................................................................. 25
Section 4.11 Updated Information...................................................................... 25
ARTICLE V
ADDITIONAL AGREEMENTS OF PURCHASER AND SELLER
Section 5.1 Payment of Expenses...................................................................... 26
Section 5.2 Filing of Tax Returns and Payment of Taxes............................................... 26
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
Section 6.1 Compliance by Seller and Atlantic New York............................................... 27
Section 6.2 Litigation Affecting This Transaction.................................................... 27
Section 6.3 Governmental or Regulatory Consents...................................................... 28
Section 6.4 Other Consents........................................................................... 28
Section 6.5 Closing of Atlantic Disposal Agreement................................................... 28
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
Section 7.1 Compliance by Purchaser.................................................................. 28
Section 7.2 Litigation Affecting This Transaction.................................................... 28
Section 7.3 Governmental and Regulatory Consents..................................................... 29
Section 7.4 Other Consents........................................................................... 29
Section 7.5 Closing of Atlantic Disposal Agreement................................................... 29
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification by Seller................................................................ 29
Section 8.2 Indemnification by Purchaser............................................................. 31
Section 8.3 Procedure for Indemnification with Respect to Third Party Claims......................... 31
Section 8.4 Procedure for Non-Third Party Claims..................................................... 32
Section 8.5 Survival of Claims....................................................................... 33
Section 8.6 Prompt Payment........................................................................... 33
Section 8.7 Insurance................................................................................ 34
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nondisclosure by Seller.................................................................. 34
Section 9.2 Nondisclosure by Purchaser............................................................... 34
Section 9.3 Assignment; Binding Effect; Amendment.................................................... 35
Section 9.4 Entire Agreement......................................................................... 35
Section 9.5 Counterparts............................................................................. 35
Section 9.6 Notices.................................................................................. 36
Section 9.7 Governing Law............................................................................ 37
Section 9.8 No Waiver................................................................................ 37
Section 9.9 Time of the Essence...................................................................... 37
Section 9.10 Captions................................................................................. 37
Section 9.11 Severability............................................................................. 37
Section 9.12 Construction............................................................................. 37
Section 9.13 Extension or Waiver of Performance....................................................... 37
Section 9.14 Liabilities of Third Parties............................................................. 38
Section 9.15 Agreement Not Binding Until Fully Executed............................................... 38
Section 9.16 Publicity................................................................................ 38
Section 9.17 Arbitration.............................................................................. 38
</TABLE>
iii
<PAGE>
EXHIBITS AND SCHEDULES
Schedules
- ---------
1.9 Allocation of Assets
2.2 Material Documents
2.3(a)(i) Landfill Equipment
2.3(a)(ii) Rolling Stock
2.3(a)(iii) Containers
2.3(a)(iv) Boxcars
2.3(a)(v) Other Personal Property over $50,000
2.4 Customer List and Contracts
2.5(d) Wetlands
2.6(b) Permitted Encumbrances
2.6(c) Exceptions to Consents and Approvals
2.9 Fiscal Condition of Company
2.11(a) Employment Agreements
2.11(b) Employee Information
2.11(c) Employee Benefit Plans, Funds or Programs
2.11(e) Non-Qualified Plans
2.12(a) Exceptions to Company's operation in compliance with laws, etc.
2.12(b) Exceptions relating to environmental issues and liability
2.12(c) Other Interests in Landfills
2.12(d) Exceptions to Compliance with Environmental Laws
2.12(e) Notices of Violation
2.13(g) Exceptions to Approvals
2.14 Exceptions to right of Company to enter this
Agreement
2.17 List of Litigation and Summaries
3.4 Exceptions to Purchaser Compliance with Laws
6.4 Other Consents
Exhibits
- --------
A Legal Description of Landfill
B Guaranty
iv
<PAGE>
AGREEMENT FOR THE SALE AND PURCHASE OF
STOCK OF ATLANTIC OF NEW YORK, INC.
This Agreement ("Agreement") for the Sale and Purchase of Stock of
Atlantic of New York, Inc., a Delaware corporation ("Atlantic New York"), is
made as of March 25, 1998, by and among Atlantic Waste Disposal, Inc. ("Atlantic
Disposal"), Brambles Waste Services, Inc., a Delaware corporation (the
"Seller"), Atlantic New York and Eastern Environmental Services, Inc., a
Delaware corporation ("Purchaser").
RECITALS
WHEREAS, (i) Brambles USA, Inc. ("Brambles USA") is a wholly-owned
subsidiary of Brambles Industries Limited; (ii) the Seller is a wholly-owned
subsidiary of Brambles USA.; and (iii) Atlantic New York is a wholly-owned
subsidiary of Atlantic Disposal;
WHEREAS, Atlantic New York operates a municipal solid waste and
construction and demolition waste transfer station located at 110-120 50th
Street, Brooklyn, New York (the "Transfer Station") (a legal description of
which is attached hereto as Exhibit A) pursuant to a lease by and between
Atlantic New York and D.C. Properties, Inc., dated March 28, 1989 (the "Transfer
Station Lease"). The business and operations of Atlantic New York are sometimes
referred to herein as the "Business" and all of the tangible and intangible
assets and properties owned by Atlantic New York are sometimes referred to
herein as the "Assets";
WHEREAS, on the date hereof, Brambles Waste Services, Inc., Atlantic
Disposal, certain subsidiaries of Atlantic Disposal (the "Subsidiaries") and
Purchaser have entered into on an Agreement for the Sale and Purchase of Stock
of Atlantic Waste Disposal, Inc. (the "Atlantic Disposal Agreement"), pursuant
to which Purchaser will acquire all of the outstanding capital stock of Atlantic
Disposal;
WHEREAS, Purchaser, Seller and Atlantic Disposal wish to enter into
this Agreement pursuant to which Purchaser will, subject to the terms and
conditions hereof, acquire ownership of all of the outstanding shares of the
Company's capital stock, par value $1 per share (the "Shares"), subject to the
terms and conditions of this Agreement; and
WHEREAS, Brambles USA has on the date hereof entered into a Guaranty
in the form attached hereto as Exhibit A.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby do hereby covenant and agree as follows:
<PAGE>
ARTICLE I
ACQUISITION; CLOSING
Section 1.1 Incorporation of Recitals, Exhibits, and Schedules. The
--------------------------------------------------
recitals set forth above and each Exhibit and Schedule hereto are incorporated
herein by reference and are a part of this Agreement. This Agreement contains a
number of references to Schedules. In each case, the referenced Schedule has
been included in a separate disclosure letter, delivered to Purchaser and
specifically identified as such, prior to the execution hereof. The Schedules
contained in that disclosure letter are specifically incorporated by reference
herein as and if set forth herein.
Section 1.2 Time and Place for Closing. The closing for the purchase and
--------------------------
sale of the Shares by the Purchaser under this Agreement shall take place on or
before the fifteenth day after the conditions to Closing set forth in Articles
VI and VII are satisfied, time being of the essence, or such other date as the
parties mutually agree, at the offices of Purchaser's counsel, Drinker Biddle &
Reath LLP, 1345 Chestnut Street, Philadelphia, PA 19107 or such other place as
the parties hereto may agree upon. The actual date of closing will be
established by the Purchaser and the Seller within ten days after the date on
which the conditions are satisfied. The date that closing occurs is referred to
hereinafter as the "Closing Date" and the act of closing as the "Closing."
Section 1.3 Excluded Liabilities; Distribution of Atlantic New York
-------------------------------------------------------
Stock. Prior to the Closing, Brambles Waste shall assume the Excluded
- -----
Liabilities (as defined below) and Atlantic Disposal shall distribute all of the
outstanding capital stock of Atlantic New York to Brambles Waste (the
"Distribution"). The term "Excluded Liabilities" means (i) all intercompany
obligations between Atlantic New York, on the one hand, and any of Brambles
Industries Limited, Brambles USA, Brambles Waste, Atlantic Disposal and any of
their respective direct or indirect subsidiaries, on the other hand, and (ii)
any Tax Liability (as defined in Section 2.10).
Section 1.4 Agreement to Sell Shares to Purchaser. At the Closing, the
-------------------------------------
Seller shall transfer to Purchaser (or, at the direction of Purchaser, its
assignee permitted under Section 9.3 of this Agreement) all of the Shares, free
and clear of any Encumbrance, in exchange for the Purchase Price (as defined
below).
Section 1.5 Consideration. (a) The aggregate purchase price (as
-------------
adjusted, the "Purchase Price") for the Shares shall be $5,000,000. The Purchase
Price shall be paid by federal wire transfer at Closing to the Seller pursuant
to instructions furnished by the Seller to the Purchaser in writing not fewer
than three business days prior to Closing, and shall be subject to adjustment as
and when provided for in Section 1.5(b).
2
<PAGE>
(b) The Purchase Price shall be increased by the amount by which,
at Closing, the Net Working Capital (as defined below) is greater than zero, and
the Purchase Price shall be decreased by the amount by which, at Closing, the
Net Working Capital (as defined below) is less than zero. Any such increase or
decrease in Purchase Price shall be paid by the Purchaser or the Seller, as
applicable, within five (5) business days following the conclusive determination
of Net Working Capital (such fifth business day, the "Due Date"). The
determination of Net Working Capital shall be made as set forth in Section
1.5(c) below.
(c)(i) Within sixty (60) days after the Closing Date, the Purchaser
shall prepare and deliver to Seller the consolidated balance sheet for Atlantic
New York as of the close of business on the Closing Date (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall set forth the
consolidated Net Working Capital (as defined below) of Atlantic New York.
Seller shall have the right to review all of the Purchaser's work papers and all
relevant records of the Purchaser and Atlantic New York relating to the Closing
Date Balance Sheet. For purposes of this Agreement, Net Working Capital of
Atlantic New York shall mean the current assets of Atlantic New York, less all
current liabilities in each case as determined in accordance with generally
accepted accounting principles, applied consistently with the accounting methods
and principles used to prepare the financial statements referred to in Section
2.7.
(ii) The Closing Date Balance Sheet delivered by the Purchaser
to Seller shall be deemed to be and shall be final, binding and conclusive on
the parties hereto, unless Seller disputes the Closing Date Balance Sheet in
accordance with this Section 1.5(c)(ii). Seller may dispute any amounts
reflected on the Closing Date Balance Sheet (any such disputed amounts, the
"Disputed Matters") by giving written notice to the Purchaser of each Disputed
Matter within forty-five (45) days of receipt of the Closing Date Balance Sheet.
Any Disputed Matters shall be subject to good faith negotiations between the
parties for up to fifteen (15) days prior to being referred to the Independent
Accounting Firm (as defined below). Any Disputed Matters not resolved by such
good faith negotiations shall be decided by an independent accounting firm
acceptable to both Seller and Purchaser (the "Independent Accounting Firm"). The
costs and expenses of the Independent Accounting Firm shall be shared equally by
the Seller and the Purchaser. The Independent Accounting Firm so chosen shall
consider only the Disputed Matters and the Purchaser and the Seller shall use
reasonable efforts to cause the Independent Accounting Firm to render a final
decision on the Disputed Matters by delivering a written report to Purchaser and
Sellers no later than thirty (30) days after having received the assignment with
respect thereto. The decision of the Independent Accounting Firm with respect to
all Disputed Matters shall be based solely on whether the Closing Date Balance
Sheet was prepared in accordance with the requirements of this Agreement, shall
be final and binding upon the parties hereto and shall not be subject to
challenge in any court.
3
<PAGE>
Section 1.6 Deliveries by Purchaser. At the Closing, the Purchaser
-----------------------
shall deliver to the Seller:
(a) The Purchase Price, as provided in Section 1.5 above;
(b) A certified copy of the resolutions of the Board of Directors of
Purchaser authorizing the execution and delivery of this Agreement and the other
agreements, documents and instruments referred to herein or required hereby (the
"Collateral Documents") and the consummation of the transactions contemplated
herein and therein;
(c) A certificate in form and substance reasonably satisfactory to
the Sellers executed by the Chief Executive and Chief of Financial Officers of
the Purchaser to the effect that the condition precedent to the obligation of
the Seller hereunder set forth in Section 7.1 is satisfied; provided that if
such condition is not satisfied and the Seller elects to close, the certificate
shall contain such exceptions as may be reasonably acceptable to Seller and
Purchaser;
(d) Such other certificates and writings as may be reasonably be
requested by the Seller to effectuate or evidence the completion of the
pertinent transactions contemplated hereby and the satisfaction by the Purchaser
of the pertinent terms and conditions hereof;
(e) A release from the Purchaser providing that the Purchaser is
releasing Atlantic New York from any and all claims, causes of action, debts,
and obligations whatsoever relating to events occurring at or prior to Closing,
except any and all obligations arising under this Agreement and the Collateral
Documents, in form and content satisfactory to Seller.
Section 1.7 Deliveries by Seller. At the Closing, the Seller shall
--------------------
deliver or cause to be delivered to the Purchaser:
(a) A certificate in form and substance reasonably satisfactory to
Purchaser executed by the Chief Executive and Chief Financial Officers of the
Seller and Atlantic New York and the Subsidiaries as Purchaser shall request to
the effect that the condition precedent to the obligations of Purchaser
hereunder set forth in Section 6.1 is satisfied; provided that if such condition
is not satisfied and the Purchaser elects to close, the certificate shall
contain such exceptions as may be reasonably acceptable to Purchaser and Seller.
(b) A release from the Seller in form and content satisfactory to
Purchaser, which provides that the Seller and its affiliates are releasing
Atlantic New York from any and all claims, causes of action, debts, and
obligations whatsoever, except any and all obligations arising under this
Agreement and the Collateral Documents, and from events occurring after the
Closing;
4
<PAGE>
(c) Current certificates of good standing for the Seller and Atlantic
New York from the Secretaries of State of their respective jurisdictions of
formation and each jurisdiction in which they are qualified as a foreign
corporation or other business entity;
(d) Such certified and authenticated copies of all documents,
agreements, and filings executed or made in connection with this Agreement and
the assumption of the Excluded Liabilities as the Purchaser may reasonably
request;
(e) Duly executed releases or terminations of financing statements,
or other evidence reasonably satisfactory to Purchaser and Purchaser's lenders
that all liens, mortgages on and security interests in the Assets and the Shares
(other than those comprising Permitted Encumbrances and Encumbrances which are
not, individually or in the aggregate, material) have been released and
terminated;
(f) At Purchaser's cost, a bring down endorsement of the title
insurance policy with respect to the real property subject to the Lease (the
"Property");
(g) Certificates representing all of the Shares, duly endorsed for
transfer or with stock powers affixed thereto executed in blank in proper form
for transfer, free and clear of any Encumbrance;
(h) Copies of the Certificates of Incorporation and Bylaws of
Atlantic New York, certified, as appropriate, by the Secretary of State of its
respective state of incorporation or the Secretary of the appropriate
corporation as appropriate;
(i) Such other assignments, certificates, bills of sale, deeds, title
policies, affidavits, indemnities, estoppels and other instruments of conveyance
and warranty (in proper recordable or fileable form, as appropriate) as may
reasonably be requested by Purchaser to effectuate or evidence the completion of
the pertinent transactions contemplated hereby and the satisfaction by the
Seller of the pertinent terms and conditions hereof; and
(j) Substantially all books and records of Atlantic New York.
Section 1.8 Termination. This Agreement may be terminated and the
-----------
transactions contemplated herein may be abandoned at any time prior to the
Closing:
(a) by mutual consent of Purchaser and Seller (it being understood
that Purchaser and Seller shall, if a condition to Closing contained in Article
VI or VII becomes impossible of fulfillment using the efforts required by this
Agreement, promptly terminate this Agreement pursuant to this Section 1.8(a));
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(b) by Purchaser or Seller, if a material breach of any provision of
this Agreement has been committed by the other and such breach has not been
waived or cured within ten (10) days after notice or if a Closing shall not have
occurred by 165 days from the execution of this Agreement; provided, however,
that neither Purchaser nor Seller shall be entitled to terminate this Agreement
if the other is ready, willing and able to close and has brought, prior to the
termination of this Agreement by any party under this Section 1.8 a claim for
specific performance of this Agreement, in which case this Agreement may not be
terminated until a final determination of such claim for specific performance
pursuant to Section 1.10 of this Agreement; or
(c) by Purchaser or Seller, if the Atlantic Disposal Agreement has
been terminated pursuant to its terms.
Section 1.9 Tax Treatment.
-------------
(a) Allocation of Purchase Price. The purchase price for the Shares
----------------------------
(including assumed liabilities of Atlantic New York) shall be allocated among
the assets of Atlantic New York in accordance with Schedule 1.9 which shall be
------------
prepared by Seller and delivered to Purchaser within 60 days after the Closing
Date. Seller shall prepare for Purchaser's review a schedule setting forth (i)
the modified aggregate deemed sales price (the "MADSP") at which the Company is
deemed to have sold its assets for tax purposes as a result of the Section
338(h)(10 Election, (ii) the adjusted grossed-up basis (the "AGUB") at which the
Company is deemed to have purchased its assets for tax purposes as a result of
such election, and (iii) the allocations of MADSP and AGUB among the assets of
the Company (collectively, the "Proposed Initial Allocation"). The Proposed
Initial Allocation shall be determined in accordance with Section 338 of the
Code and the applicable regulations thereunder, in a manner consistent with the
allocation set forth on Schedule 1.9 hereto. Unless Purchaser shall have
------------
objected in writing to the Proposed Initial Allocation within 30 days of the
receipt thereof, Seller will be deemed to have agreed to the Proposed Initial
Allocation, which shall become the Initial Allocation. The Initial Allocation
shall be set forth on a statement (the "Initial Allocation Statement") signed by
the president or any vice president of Seller. If any increase or decrease in
MADSP and/or AGUB occurs, the amount of such increase or decrease and the
allocation thereof among the assets of Atlantic New York (collectively, the
"Adjustment Allocation") shall be set forth on a statement (the "Adjustment
Allocation Statement") prepared by Seller and delivered to Purchaser in
accordance with Treas. Reg. (S)_1.338(b)-3(d) or Treas. Reg. (S)_1.338(b)-3(e),
whichever is applicable. The Adjustment Allocation Statement shall be subject
to the consent of Purchaser. Purchaser and Seller will, to the maximum extent
permitted under applicable law, (i) file, or cause to be filed, all Tax Returns
in a manner consistent with the Initial Allocation and any Adjustment
Allocations and (ii) not take any action inconsistent therewith.
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(b) Any dispute regarding the Proposed Initial Allocation or any
Adjustment Allocation shall be subject to good faith negotiations between the
parties for up to sixty (60) days prior to being referred to the Tax Dispute
Accountants (as defined below). At the end of such sixty day period, any
remaining dispute regarding the Proposed Initial Allocation or any Adjustment
Allocation shall be submitted for resolution to independent accountants of
nationally recognized standing reasonably satisfactory to Purchaser and Seller
(the "Tax Dispute Accountants"). The decision of the Tax Dispute Accountants
shall be final, conclusive and binding on the parties. The fees and expenses of
the Tax Dispute Accountants in resolving a dispute will be borne equally by
Purchaser and Seller except that the Tax Dispute Accountants may, if justice
requires, allocate such expenses and fees in any other manner they may determine
between the Purchaser, one the one hand, and Seller on the other.
(c) Section 338(h)(10) Election. The parties intend the purchase of
---------------------------
Shares to be a "qualified stock purchase" for purposes of Section 338(d)(3) of
the Code, Seller and Purchaser shall join in making an election under Section
338(h)(10) of the Code with respect to the purchase of the Shares (the
"338(h)(10) Election"). Seller shall deliver to Purchaser at the Closing (1)
Internal Revenue Service Form 8023 and any applicable similar forms required by
state or local law fully completed with respect to the purchase of the Shares
and executed by a duly authorized officer of Brambles USA, and (2) all
additional data and materials required to be attached to such Form 8023 and any
applicable similar forms required by state or local law pursuant to Treas. Reg.
(S)_1.338-1T or otherwise. Brambles USA shall attach a copy of such Form 8023
to the consolidated Federal income tax return for the affiliated group of
corporations of which it is the common parent for its taxable period which
includes the Closing Date and otherwise shall cooperate fully with Purchaser in
making the 338(h)(10) Election.
(d) Federal and State Tax Treatment. The parties hereto acknowledge
-------------------------------
that for Federal income tax purposes (and for state tax purposes for those
states that use a taxpayer's Federal income tax liability or Federal taxable
income as a base for computing such taxpayer's state tax liability, or whose
income tax provisions are otherwise similar to the Federal income tax in this
respect) the purchase of the Shares and the 338(h)(10) Election will be treated
in all respects as a sale of assets by Atlantic New York to a newly-formed
subsidiary of Purchaser followed by a complete liquidation of Atlantic New York
into Seller, and the parties agree to report the transaction in a manner
consistent with this treatment. The parties also agree that neither Purchaser
nor Atlantic New York shall be liable for any taxes, including income, transfer,
franchise, sales or use taxes resulting from the purchase of the Shares and the
338(h)(10) Election.
Section 1.10 Procedure for Termination; Effect of Termination. A party
------------------------------------------------
terminating this Agreement pursuant to Section 1.8 shall give written notice
thereof to each other party hereto, whereupon this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
and all further obligations of the parties under this Agreement
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will terminate; provided, however, that no termination shall limit or impair any
party's right to pursue all legal remedies or limit any party's responsibility
for any breach of or failure to perform under this Agreement by another party.
In addition to any other remedy that the Purchaser or the Seller may have under
this Agreement or at law or in equity, the Purchaser shall be entitled to
require the Seller to specifically perform its obligations under this Agreement,
and the Seller shall be entitled to require the Purchaser to specifically
perform its obligations under this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
AND ATLANTIC NEW YORK
With knowledge that Purchaser is relying upon the representations and
warranties herein contained, the Seller and Atlantic New York each individually,
severally and jointly represent and warrant to Purchaser, as of the date hereof,
and, as updated pursuant to Section 4.11, as of the Closing Date, as follows.
Certain of the following representations and warranties are made to the
knowledge of the Seller and Atlantic New York. When so used, "knowledge" shall
mean the actual knowledge of Jeffrey Cooper, Jerry Johnson, Andrew Dondero,
Robert J. Anderson, T. Michael Phelan, William Ziegler and David Webster.
Section 2.1 Organization, Standing, and Ownership.
-------------------------------------
(a) Each of the Seller and Atlantic New York is a corporation, duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of formation and has all necessary corporate power and authority to
carry on its business as presently conducted, to own and lease the assets and
properties which it owns and leases and to perform all of its obligations under
each agreement and instrument by which it is bound. Each of the Seller and
Atlantic New York is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction in which it is required
to qualify to do business, except where the failure to be so qualified and in
good standing would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise) or operations of Atlantic New York or the Business, or on the Assets
after taking into consideration the liabilities of Atlantic New York (a
"Material Adverse Effect").
(b) All of the capital stock of Seller is owned of record by Brambles
USA, free and clear of any Encumbrance. No individual, trust, corporation,
partnership, limited liability, joint venture, governmental body, tribunal,
agency, or instrumentality (individually a "Person" and collectively "Persons")
has any right (contractual, equitable, statutory or otherwise) option or warrant
to acquire any capital stock, indebtedness or obligation of
8
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Atlantic New York and Atlantic New York does not hold beneficially or of record
any equity or other interest (or has any obligation, option, warrant, agreement
or right to acquire) any equity interest in any entity.
(c) All of the capital stock of Atlantic New York is owned of record
by Atlantic Disposal, and, prior to the Closing will be owned of record by the
Seller free and clear of any Encumbrance. No Person (other than Purchaser) has
any statutory, equitable, contractual or other right of any kind to acquire
additional securities, interests, capital stock, indebtedness or obligation of
any kind in or from Atlantic New York nor has any Person claimed any such
rights. The Shares constitute all of the authorized capital stock of Atlantic
New York. The Shares have been duly authorized and validly issued, and are free
and clear of any Encumbrance.
Section 2.2 Contracts, Permits and Material Documents.
-----------------------------------------
(a) The items listed in Schedule 2.2 are all of the following that
are used by, in or for the benefit of the Business, in each case as and at the
date hereof ("Material Documents"): (i) leases for real and personal property;
(ii) licenses; (iii) franchises; (iv) promissory notes, guarantees, bonds,
letters of credit, mortgages, liens, pledges, and security agreements; (v)
collective bargaining agreements; (vi) patents, trademarks, trade names,
copyrights, trade secrets, trademarks, proprietary rights, symbols, service
marks, logos and all other intellectual property; (vii) permits, licenses,
consents and other approvals from governments, governmental agencies (federal,
state and local) and/or third parties relating to, used in or required for the
operation of the Business ("Government Authorizations"); and (viii) all other
contracts, agreements (whether oral or written) and instruments not listed on
another Schedule attached to this Agreement (such as the customer contracts
listed on Schedule 2.4), in each such case, which are binding on Atlantic New
York and pursuant to which it derives any material benefit or has imposed upon
it any material detriment. The Material Documents listed on Schedule 2.2
represent all of the items listed in subclauses (i) through (viii) of the
preceding sentence of Atlantic New York, including, without limitation,
interests in leases for real property, agreements and permits and licenses,
except for documents under which the aggregate liability and obligations of
Atlantic New York does not and after the Closing will not exceed $100,000.
(b) Neither the Seller or Atlantic New York nor, to their knowledge,
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 no act or
event has occurred which with notice or lapse of time, or both, would constitute
such a default, and the Transfer Station Lease is in full force and effect and
not in default in any respect. The Assets include all rights necessary to enable
Atlantic New York to conduct the Business as it is now being conducted. Except
as disclosed on Schedule 2.2 the Seller and Atlantic New York have
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performed all of their obligations required to be performed by them under each
Material Document.
(c) Each Material Document is in full force and effect, and is valid,
binding and enforceable against the parties thereto in accordance with its
terms.
Section 2.3 Personal Property.
-----------------
(a) The Assets include all items of tangible personal property owned,
leased or otherwise held for use by or in the Business (the "Personal Property")
and include, without limitation, the following:
(i) Transfer station equipment, including, without limitation,
scales, compactors and extractors used in Atlantic New York's operations, all of
which are listed on Schedule 2.3(a)(i);
(ii) Rolling stock, including motor vehicles, trucks, front and
rear end loaders, and compactors and accessories and attachments to the rolling
stock together with information as to the make, description of body and chassis,
model number, serial number and year of each such vehicle all of which are
listed on Schedule 2.3(a)(ii);
(iii) Containers together with information as to container size
and year of manufacture, all of which are listed on Schedule 2.3(a)(iii);
(iv) Railroad boxcars, all of which are listed on Schedule
2.3(a)(iv);
(v) Inventory of parts, tires and accessories;
(vi) Shop tools;
(vii) Furniture and office or other equipment; and
(viii) Other tangible personal property having a book value or
original acquisition price in excess of $50,000, all of which are listed on
Schedule 2.3(a)(viii).
(b) At the Closing the Personal Property shall be in good operating
condition, normal wear and tear excepted.
Section 2.4 Customers. Schedule 2.4 attached hereto lists the name and
---------
address of each customer that provides or has provided within the past two years
prior to the date hereof more than 3% of the gross revenues of the Business for
any fiscal year, together with copies (or, in the
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case of oral contracts, summaries), of all customer contracts with such
customers, and the information supplied thereon is true, correct and complete,
in all material aspects. As of the date hereof, neither the Seller or Atlantic
New York nor, to their knowledge, any Person or party to any of the customer
contracts with such customers 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. As of the date hereof,
neither the Seller nor Atlantic Disposal has received any notice that any such
customer intends not to renew any contract or otherwise cease or curtail doing
business with either of them and, no such customer is currently renegotiating
any material term of any contract or any material contract. Except as would not
reasonably be expected to have a Material Adverse Effect, each such customer
contract is in full force and effect, and valid, binding and enforceable against
the parties thereto in accordance with its terms. Except as disclosed on
Schedule 2.4, each such customer contract is assignable without the consent,
approval by or authorization of any Person.
Section 2.5 The Property. (a) Atlantic New York has never owned, leased
------------
or otherwise occupied, had an interest in or operated any real property other
than the Property. Atlantic New York has, and at the Closing will have, a good
and marketable leasehold interest in full force and effect in the Property, and
that interest is insurable at regular standard rates by a reputable title
company.
(b) Seller and Atlantic New York have made available to Purchaser all
engineering, geologic and other similar reports, documentation, surveys, title
reports and maps relating to the Property in the possession or control of Seller
or Atlantic Disposal or their consultants or employed professional firms.
(c) No person, other than Atlantic New York, has a present or future
right to possession of all or any part of the Property, except for any right
defined in, under or by any of the Permitted Encumbrances.
(d) No portion of the Property contains any areas that could be
characterized as disturbed, undisturbed or man-made wetlands or as "waters of
the United States" pursuant to any Applicable Laws or the procedural manuals of
the Environmental Protection Agency, U.S. Army Corps of Engineers or the New
York Department of Environmental Conservation ("DEC") whether such
characterization reflects current conditions or historic conditions which have
been altered without the necessary permits or approvals, except as listed on
Schedule 2.5(d).
(e) There are no levied or pending special assessments affecting all
or any part of the Property owed to any governmental entity and, to the
knowledge of Seller and Atlantic New York, none is threatened.
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(f) There are no proceedings or amendments pending and brought by or,
to the knowledge of the Seller or Atlantic New York 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 Atlantic New York to use the Property for a
solid waste landfill after the Closing Date.
Section 2.6 Sufficiency of Assets; Title; Consents.
--------------------------------------
(a) The Assets will include all of the assets and properties used by
Atlantic New York in the conduct of the Business as of the date hereof together
with all assets and properties acquired by Atlantic New York from and after the
date hereof, except, in each case, for assets that have been disposed of not in
breach of this Agreement. Such assets are sufficient to carry on the Business
after the Closing as previously conducted by the Sellers, Atlantic Disposal and
Atlantic New York.
(b) Except as noted on Schedule 2.6(b), each Asset is presently owned
by Atlantic New York, free and clear of any security interests, liens,
mortgages, rights of third parties, title retention agreements, options,
equities and other restrictions on transfer or disposition (individually, an
"Encumbrance") and collectively "Encumbrances") other than (i) liens for taxes
that have not yet become delinquent and (ii) the Encumbrances listed on Schedule
2.6(b), (collectively, the "Permitted Encumbrances"). Upon the consummation of
the Closing all of the Assets will be owned by Atlantic New York free and clear
of any Encumbrance, except for Permitted Encumbrances. Atlantic New York has
upon the consummation of the Closing will have good and marketable title to all
of the Assets, except for assets held under lease or license. Schedule 2.6(b)
identifies or specifically references another Schedule identifying all liens and
leases by amount affecting any of Assets and the document, instrument or law
under which it arises.
(c) Except as set forth on Schedule 2.6(c), no consent, approval,
ratification, waiver or other authorization of any Person (including, without
limitation, Government Authorizations) is necessary or appropriate for the
consummation of the transactions contemplated hereby (including, without
limitation, for the continuation of the Businesses by Atlantic New York without
interruption as of the Closing).
Section 2.7 Financial Statements.
--------------------
(a) To the knowledge of the Seller and Atlantic New York, there is no
material inaccuracy in the audited, consolidated balance sheets for Brambles USA
as of June 30, 1996 and June 30, 1997, heretofore provided to Purchaser and
audited consolidated statements of income, cash flow, and retained earnings for
the twelve months then ended or the unaudited, consolidated balance sheet for
Brambles USA at December 31, 1997 and unaudited consolidated statements of
income, cash flow, and retained earnings for the six-months then ended.
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(b) The Seller and Atlantic New York have heretofore provided to
Purchaser true and correct copies of unaudited consolidated balance sheets for
Atlantic New York as of June 30, 1996 and June 30, 1997, and unaudited
consolidated statements of income, cash flow and retained earnings for the
twelve months then ended, all prepared on an accrual basis.
(c) The Seller and Atlantic New York have heretofore provided to
Purchaser true and correct copies of an unaudited consolidated balance sheet for
Atlantic New York as of December 31, 1997 ("Most Recent Balance Sheet"), and
unaudited consolidated statements of income, cash flow and retained earnings for
the six months then ended ("Most Recent Income Statement"), both prepared on an
accrual basis and consistently with the unaudited financial statements referred
to in Section 2.7(b). The Most Recent Balance Sheet and Most Recent Income
Statement are hereafter referred to as the "Most Recent Financial Statements."
Together, the financial statements referred to in Sections 2.7(b) and (c) are
hereinafter referred to as the "Seller's Financial Statements."
The Seller's Financial Statements have been prepared in accordance with
Australian generally accepted accounting principles consistently applied as in
effect on the date hereof ("GAAP"), except in the case of the interim Seller's
Financial Statements, for the absence of footnotes. All notes and contingent
liabilities required to be stated and reflected under GAAP are stated and
reflected on the Seller's Financial Statements. Each of the Seller's Financial
Statements (including all footnotes thereto) is true, complete and correct in
all material respects. The consolidated balance sheets included in Seller's
Financial Statements present fairly and accurately in all material respects the
consolidated financial condition of Atlantic New York as of the dates indicated
thereon and the statements of income included in Seller's Financial Statements
present fairly and accurately in all material respects on an accrual basis the
results of the operations of such Atlantic New York for the periods indicated
thereon. Since the respective dates of the Seller's Financial Statements,
Atlantic New York has not (i) made any material change in accounting policies or
(ii) effected any prior period adjustment to, or other restatement of, any
Seller's Financial Statements for any period.
Section 2.8 Liabilities; Accounts Receivable and Working Capital.
----------------------------------------------------
(a) Atlantic New York, on a consolidated basis, has no liabilities
other than (i) liabilities fully reflected or reserved for in the Most Recent
Financial Statements, (ii) liabilities incurred in the ordinary course of the
Business since the date of the Most Recent Financial Statements, and (iii)
liabilities, the existence of which are reflected on any Schedule to this
Agreement.
(b) All accounts receivable have been generated in the ordinary
course of the Business and all services required to be rendered for such
accounts receivable to be due have
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been rendered. To the knowledge of Seller and Atlantic New York, there are no
valid defenses or set-offs to any of the accounts receivable.
Section 2.9 Fiscal Condition. Since the date of the Most Recent Balance
----------------
Sheet, except as set forth on Schedule 2.9, there has not been and, at the
Closing, there shall not have been:
(a) Any material adverse change in the condition (financial or
otherwise) and operations of Atlantic New York, the Business or the Assets after
taking into consideration the liabilities of Atlantic New York (a "Material
Adverse Change"), or any event, condition or contingency that is reasonably
likely to result in such a Material Adverse Change;
(b) Any disposition by Atlantic New York 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 Atlantic New York 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, property or right
owned by Atlantic New York at the close of business on the date of the Most
Recent Balance Sheet, or acquired by them since that date, other than in the
ordinary course of business and not exceeding $100,000 in value in the
aggregate;
(d) Any expenditure or commitment by or on behalf of Atlantic
Disposal or any Subsidiary for the acquisition of any asset having an
acquisition price of $100,000 or more or assets having aggregate acquisition
prices of $100,000 or more;
(e) Any increase in excess of ten percent (10%) in the compensation
payable or to become payable by Atlantic New York to any officer or key
employee.
(f) any event which would be prohibited or would require the consent
of Purchaser under Section 4.3.
Section 2.10 Tax Returns. Atlantic New York has filed or will file all
-----------
Federal and other tax returns, including without limitation, income tax,
franchise tax, corporate shell tax, sales tax, and use tax, for all periods
ending on or before the Closing Date, on or before the due date of such return
(as may have been extended by any valid extension of time) and have paid or will
pay all taxes owed by Atlantic New York for the periods covered by the said
returns, except for such failures to file or pay as could not result in a
liability of Atlantic New York (a "Tax Liability") for such taxes or give rise
to a lien on the Assets or the capital stock of Atlantic New York.
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Section 2.11 Employees, Pensions and ERISA.
-----------------------------
(a) Atlantic New York does not have any contract of employment with
an officer or other employee that is not terminable without penalty or payment
other than accrued salary and benefits on notice of two weeks or less, except as
listed on Schedule 2.11(a).
(b) No employee of Atlantic New York is represented by any union and
there have been no organizing or other campaigns within the past three years
seeking such representation. The name, social security number and current rate
of compensation of each of the employees of the Business and the department in
which each person is employed is listed on Schedule 2.11(b) attached hereto.
There is no pending or threatened dispute between (i) the Seller and Atlantic
Disposal and (ii) any of these employees which might materially and adversely
affect the continuance of the Business.
(c) Schedule 2.11(c) lists all employee benefit plans (as defined in
Section 2(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), funds or programs and any other employee benefit programs or
policies which are currently maintained by the Seller or Atlantic Disposal for
the benefit of any employee of Atlantic New York or to which either of them
currently contributes or has an obligation to contribute for the benefit of any
employee of Atlantic New York (collectively, the "Plans"), including, without
limitation, agreements containing "golden parachute" provisions, whether or not
the Plans are or are intended to be (i) covered or qualified under the Internal
Revenue Code of 1986, as amended (the "Code"), ERISA or any other applicable
law, (ii) written or oral, or (iii) funded or unfunded.
(d) The Seller and Atlantic New York have delivered to the Purchaser
(i) true and complete copies of all Plan documents and other instruments
relating thereto as currently in effect, (ii) accurate and complete detailed
summaries of all oral Plans, (iii) true and complete copies of the most recent
financial statements with respect to the Plans, (iv) true and complete copies of
all annual reports for any Plan prepared within the past three years, and (v)
all filings submitted to and any correspondence received from any government
agency relating to any Plan within the past three years.
(e) Each Plan which is intended to be qualified under Section 401(a)
and exempt from tax under Section 501(a) of the Code has received a favorable
determination letter from the IRS and no such letter relating to any Plan has
been revoked. To the knowledge of the Seller and Atlantic New York, nothing has
occurred since the date of any such determination letter which may adversely
affect such qualification or exemption, or result in the imposition of excise
taxes or tax on unrelated business income under the Code or ERISA except as set
forth on Schedule 2.11(e).
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(f) No Plan is subject to Title IV of ERISA. All Plans have been
administered, operated and managed in substantial compliance with the governing
documents of the Plan and the applicable requirements of ERISA and the Code and
other applicable laws and regulations.
(g) There is no material matter, action, audit, suit or claim pending
(other than routine claims for benefits) or, to the knowledge of the Seller and
Atlantic New York, threatened relating to any Plan, fiduciary of any Plan or
assets of any Plan, before any court, tribunal or government agency.
(h) The transactions contemplated herein will not accelerate any
liability under any Plan because of an acceleration of any rights or benefits to
which any employee may be entitled thereunder.
(i) Each most recent Plan audit report, and annual report, certified
by the Plan's auditors, fairly presents the actuarial status and the financial
condition of the Plan as at the date thereof and the results of operations of
the Plan for the plan year reflected therein and, subject to changes in amounts
attributable to investment performance and normal employee turnover, there has
been no material adverse change in the condition of the Plan since the date of
the most recent Form 5500 or audited annual financial statement.
(j) The Seller and Atlantic New York have not had, at any time, any
obligations with respect to, and does not make and has not made at any time
contributions to, any multi-employer plan (as defined in Section 3(37) of
ERISA).
Section 2.12 Legality of Operation.
---------------------
(a) Except as disclosed in Schedule 2.12(a) the Seller and Atlantic
New York and the Property is and, upon the consummation of the Closing will be,
in compliance with all Federal, state and local laws, rules and regulations,
orders, decrees, directives, permits, franchises, and consents applicable to it,
the Business or the Assets including, without limitation, the following laws:
land use laws, zoning, 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, but
excluding all Environmental Laws (as defined below) which are addressed in (b)
below, ("Law"). The Property at all times during the operation of the transfer
station and Business has been licensed, permitted, and authorized as a landfill
accepting municipal solid waste in accordance with all applicable Laws. Except
as disclosed in Schedule 2.12(a) the Seller Atlantic New York is, and upon
consummation of the Closing, will be, in compliance with all Government
Authorizations. Except as disclosed in Schedule 2.12(a), neither Seller nor
Atlantic New York has received notification of any past or
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present failure by Atlantic Disposal to comply with any Law applicable to it or
its assets or to the Businesses or the Assets.
(b) Except as disclosed in Schedule 2.12(b) to this Agreement,
Atlantic New York is in compliance with all Federal, state and local laws, rules
and regulations relating to environmental issues of any kind and/or the receipt,
transport or disposal of any hazardous or non-hazardous waste materials from any
source ("Environmental Law"). Except as disclosed in Schedule 2.12(b), with
respect to any Environmental Law, Atlantic New York is in compliance with all
permits, licenses, and orders related thereto or issued thereunder with respect
to Environmental Laws, as are applicable to 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. Except as set forth on
Schedule 2.12(b), Atlantic New York has not transported, stored, treated or
disposed, or allowed any third persons, on its behalf, to transport, store,
treat or dispose waste to or at (i) any location other than a site lawfully
permitted to receive such waste for such purpose or, (ii) any location currently
designated for remedial action pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") or any similar federal or
state statute; nor has it performed, arranged for or allowed by any method or
procedure such transportation or disposal in contravention of state or federal
laws and regulations or in any other manner which may result in liability for
contamination of the environment; and it has not disposed, or knowingly allowed
third parties to dispose of waste upon property owned or leased by it other than
as permitted by, and in conformity with, applicable Environmental Laws. Without
limiting the generality of the foregoing, Atlantic New York has not received any
notification (including requests for information from any governmental agency
asserting that the Business is or may be a "potentially responsible person" for
a remedial action at a waste storage, treatment or disposal facility) pursuant
to the provisions of CERCLA, or any similar federal or state statute assigning
responsibility for the costs of investigating or remediating releases of
contaminants into the environment. Atlantic New York has not received hazardous
waste as defined in the Resource Conservation and Recovery Act, 42 USCA Section
6901 et seq., or in any similar federal or state statute in quantities which
-- ---
would require remediation.
(c) Except as listed in Schedule 2.12(c), Atlantic New York has not
ever owned, operated, had an interest in, and/or leased a waste transfer,
recycling, treatment, storage, landfill or other disposal facility, except for
the facility located at the Property. Atlantic New York and the Subsidiaries
have obtained and maintained, when required to do so under applicable Laws, trip
tickets, signed by the applicable waste generators demonstrating the nature of
all waste deposited and or transported by any of them. To the knowledge of the
Seller and Atlantic New York, no employee, contractor or agent of Atlantic New
York has, in the course and scope of employment therewith, been harmed by
exposure to hazardous materials, as defined under the Environmental Laws. No
liens with respect to environmental liability have been imposed against
17
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Atlantic New York under CERCLA or any comparable state statute or other
applicable Law, and no facts or circumstances exist which would give rise to the
same.
(d) Except as disclosed in Schedule 2.12(d), Atlantic New York has
not received notification of any past or present failure by any of them to
comply with any Environmental Law applicable to it or its operations or its
assets.
(e) Schedule 2.12(e) is a list of all notices of violations of
Environmental Law issued to Atlantic New York pertaining to the Assets or the
Business by any federal, state or local regulatory agency. There are no notices
of violation of Environmental Law either from a federal, state or local
authority received by it or outstanding, except as listed in Schedule 2.12(e).
(f) To the knowledge of Seller and Atlantic New York, neither the
Seller nor Atlantic New York is under investigation by any District Attorney or
similar state or local official or agency or the Justice Department of the
United States of America for the violation of any Laws, including, without
limitation, racketeering, unfair competition or anti-trust. No facts or
circumstances exist which would cause any of them to be liable for the violation
of any Laws including, without limitation, racketeering, unfair competition, or
anti-trust Laws.
(g) Except as set forth in Schedule 2.12(g), all licenses, approvals,
permits, certificates and other Government Authorizations needed or required for
the operation of the Business are set forth on Schedule 2.3. All such
Government Authorizations are in full force and effect, each of the Atlantic New
York is in compliance with all such Government Authorizations, and all such
Government Authorizations have been validly and legally obtained.
Section 2.13 Corrupt Practices. To the knowledge of Seller and Atlantic
-----------------
New York, Atlantic New York has not made, offered or agreed to offer anything of
value to any employees of its customers for the purpose of attracting business
or any foreign or domestic governmental official, political party or candidate
for government office or any of its employees or representatives, nor has it
otherwise taken any action which would cause it to be in violation of the
Foreign Corrupt Practices Act of 1977, as amended, or any law applicable to
United States or foreign election campaign contributions.
Section 2.14 Authority. Except as listed in Schedule 2.14, each of the
---------
Seller and Atlantic New York has the right, power, legal capacity and authority
to enter into, and, if a signatory thereto, perform their respective obligations
in respect of the transactions under this Agreement, the Collateral Documents
and the Atlantic New York Agreement. The execution, delivery and performance of
this Agreement and the Atlantic New York Agreement have been duly authorized by
all necessary action of the Seller and Atlantic New York. Except as set forth
on Schedule 2.14, the execution, delivery and performance of this Agreement, the
Collateral
18
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Documents and the Atlantic New York Agreement will not result in a breach of or
constitute a default or result in the loss of any material right or benefit
under:
(a) Any certificate, by-law, agreement or other document to which
Seller or Atlantic New York is a party or by which the Seller or any of its
property is bound; or
(b) Any decree, order or rule of any court of governmental authority
which is binding on the Seller or Atlantic New York or on the property of either
of them.
Section 2.15 Transaction Intermediaries. No agent or broker or other
--------------------------
person acting pursuant to the authority of the Seller or Atlantic New York is
entitled to any commission or finder's fee in connection with the transactions
contemplated by this Agreement.
Section 2.16 Intellectual Property. To the knowledge of the Seller and
---------------------
Atlantic New York, Atlantic New York has not infringed and is not infringing, on
any trade name, trademark, service mark, copyright, trade secret or patent
belonging to any person, firm or corporation ("Intellectual Property") and no
one has or is infringing any Intellectual Property right of any of them.
Section 2.17 Litigation. All pending or, to the knowledge of the Seller
----------
and Atlantic New York threatened litigation, claims, administrative or judicial
proceedings or investigations by any governmental agency or officials involving
or potentially involving any of Atlantic New York, the Business, the Property,
the Assets, the Shares, this Agreement or any of the transactions contemplated
hereby, as of the date hereof, together with a description of each such
proceeding, is set forth on Schedule 2.17. As of the date hereof, there is no
pending or, to the knowledge of the Seller or Atlantic New York, threatened
litigation, administrative or judicial proceedings or investigation involving
any of Atlantic New York, the Business, the Assets, the Shares except as listed
on Schedule 2.17, which could affect Atlantic New York, the Business, the Assets
or the Shares.
Section 2.18 Management of Atlantic Disposal and Subsidiaries. As of the
------------------------------------------------
date hereof, the persons listed in the preamble to this Article II include the
principal members of the current management of Atlantic New York and hold the
positions set forth next to their respective names below:
Name position
-------------
Jeffrey Cooper President and General Manager, Atlantic Disposal
Jerry Johnson Director of Operations, Atlantic Disposal
Andrew Dondero Controller, Atlantic Disposal
Robert J. Anderson President, Chief Executive Officer, Brambles USA
19
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T. Michael Phelan Vice President, Corporate Development and Acquisitions,
Brambles USA
William Ziegler Vice President, Health, Safety and Environmental
Affairs, ENSCO
David Webster Chief Financial Officer, Brambles USA and Vice
President, Treasurer and Secretary, Atlantic Disposal
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Seller that the representations
and warranties contained in this Article III are true on the date hereof.
Section 3.1 Structure. Purchaser is a corporation duly organized and
---------
legally existing in good standing under the laws of Delaware.
Section 3.2 Authorization to Proceed with this Agreement. Purchaser has
--------------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and the Atlantic Disposal Agreement and to perform its obligations
hereunder and thereunder. Purchaser has, by proper corporate proceedings, duly
authorized the execution, delivery and performance of this Agreement.
Section 3.3 Binding Effect. This Agreement has been, and on the Closing
--------------
Date the Atlantic Disposal Agreement will be, legal, valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms.
Section 3.4 Legality of Operation. Except as disclosed in Public
---------------------
Reports, and except as would not reasonably be expected to have a material
adverse effect on the ability of Purchaser to consummate the transactions
contemplated hereby (a "Purchaser Material Adverse Effect"), Purchaser is, and
upon the consummation of the Closing will be, in compliance with all Laws.
Except as disclosed in Schedule 3.4, and except as would not reasonably be
expected to have a Purchaser Material Adverse Effect, Purchaser is and upon the
consummation of the Closing will be, in compliance with all Government
Authorizations. Except as set forth on Schedule 3.4 and except as would not
reasonably be expected to have a Purchaser Material Adverse Effect or which
would invalidate this Agreement or any action taken or to be taken in connection
with this Agreement, with respect to any Law, there are no claims, actions,
suits, or proceedings pending, or, to the knowledge of Purchaser, threatened
against or affecting the Purchaser at law or in equity, or before or by any
federal, state,
20
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municipal or other governmental department, commission board, bureau, agency or
instrumentality, wherever located.
Section 3.5 Financing. Purchaser has available to it, as of the date of
---------
this Agreement and as of the Closing, sufficient funds to enable it to
consummate the transactions contemplated by this Agreement, including, without
limitation, the Closing.
Section 3.6 Absence of Intermediaries. No agent, broker, or other person
-------------------------
acting pursuant to Purchaser's authority will be entitled to make any claim
against Seller or Atlantic New York for any commission or finder's fee in
connection with the transactions contemplated by this Agreement.
Section 3.7 Commission Filings. Purchaser has delivered to Seller its
------------------
Form 10-Q for the quarter ending December 31, 1997, its Form 10-K for the fiscal
year ending June 30, 1997, all Form 8-K's, if applicable, filed by it since
December 31, 1997 through the date hereof, and any Proxy Statements or
Registration Statements, if applicable, filed by it since December 31, 1997 (the
"Public Reports").
ARTICLE IV
ADDITIONAL AGREEMENTS OF SELLER, PURCHASER AND ATLANTIC NEW YORK
The Seller covenants and agrees with Purchaser as follows:
Section 4.1 Seller's Access to Records and the Property. The Seller will
-------------------------------------------
give to Purchaser and its representatives, experts and advisors, from and after
the date of execution of this Agreement and up until Closing, such access during
regular business hours and upon reasonable notice, to the properties of Atlantic
New York (including the Property), and to assets, books, contracts, documents,
records, contracts and customer lists relating to the Business as Purchaser may
reasonably request, and to make available to Purchaser and its representatives,
experts and advisors all additional financial statements of and all information
with respect to the Business that Purchaser may reasonably request, except where
Seller or Atlantic New York reasonably believes that such access may be
prohibited by applicable law. Any such access shall be coordinated exclusively
through Brambles USA's management in Chicago, Illinois. Notwithstanding the
foregoing, Purchaser shall not contact any customer of the Businesses, nor shall
Purchaser contact any counter party to any Material Document, for any reason,
without the prior written consent of Brambles USA. Purchaser and its
representatives shall have the right to copy any information or documentation
the Purchaser is entitled to inspect under this Section 4.1, except as is
reasonably objected to by Seller, Atlantic Disposal and the Subsidiaries.
21
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Section 4.2 Access to Records and the Property. The Purchaser will give
----------------------------------
to Seller and its representatives, experts and advisors, from and after the date
of Closing, such access during regular business hours and upon reasonable
notice, to the Property, and to the assets, books, contracts, documents,
records, contracts and customer lists relating to the Businesses for the period
prior to the Closing Date as Seller may reasonably request, and to make
available to Seller and its representatives, experts and advisors all additional
financial statements of and all information with respect to the Business that
Seller may reasonably request. If Seller's request causes Purchaser to incur
additional costs, Seller shall reimburse Purchaser for the reasonable costs
incurred in meeting Seller's request.
Section 4.3 Continuation of Businesses. (a) Seller and Atlantic New
--------------------------
York will operate the Business until the time of Closing using prudent business
judgment so as to preserve the business organization of Atlantic New York.
Atlantic New York shall carry on its business in, and only in, the usual,
regular and ordinary course, consistent with past practice and in substantially
the same manner as heretofore conducted and, to the extent consistent with such
business, use its best efforts to preserve intact its present business
organization, keep available the services of its present officers and employees,
and preserve its relationships with customers, contractors, and others having
business dealings with it to the end that its goodwill and going business shall
be unimpaired at the Closing. The Parties acknowledge the obligations of Seller
under the Atlantic Disposal Agreement.
(b) Prior to the Closing, Seller and Atlantic New York shall not,
without the prior consent of Purchaser, do, cause or permit to occur any one or
more of the following with respect to Atlantic New York:
(i) Enter into or assume any contract or agreement which would
be a Material Document as defined in Section 2.2(a) had the contract or
agreement existed on the date this Agreement was executed, or amend any contract
or agreement which is a Material Document (as defined in Section 2.2(a)) or
forfeit or amend any license or permit or other qualification necessary or
useful to conduct the Business;
(ii) Borrow or agree to borrow any funds or voluntarily incur,
assume or become subject to whether directly or by way of guarantee, capital
lease or otherwise, any obligation for borrowed money or any obligation which
would be treated as long-term debt in accordance with GAAP;
(iii) Make any distribution of assets to its stockholders,
including without limitation cash and cash equivalents; provided, however, that
Atlantic New York may distribute to Seller cash and cash equivalents to the
extent it would not result in negative Net Working Capital;
22
<PAGE>
(iv) Make any change in any profit-sharing, bonus, deferred
compensation, insurance, pension, retirement or other employee benefit plan;
(v) Enter into any collective bargaining agreement or enter
into any employment contracts or increase the compensation payable to or to
become payable by Atlantic New York after the Closing to any person to be
employed by Atlantic New York after the Closing, except, upon notice, in the
ordinary course of the Businesses upon compensation anniversary dates;
(vi) Fail to pay or discharge when due any material
obligations, liabilities or debts;
(vii) Create or permit the creation of any Encumbrance of any
nature whatsoever (other than Permitted Encumbrances) on any of the Assets or
the Shares;
(viii) Take any action that would be required to be disclosed on
Schedule 2.9 pursuant to Sections 2.9(b), (c), (d), or (e) had it occurred prior
to the date hereof;
(ix) Make any change in its authorized or issued capital stock;
grant any stock option or other right to purchase shares of its capital stock or
other securities; issue or make any commitment to issue any security, including
any security convertible into capital stock; grant any registration rights or
purchase, redeem, retire or make any other acquisition of any shares of its
capital stock or other securities;
(x) Amend its certificate or articles of incorporation or
bylaws (or equivalent governing documents);
(xi) Execute, modify, amend or extend the term of any contract,
agreement or arrangement with any customer in the ordinary course of business
and pursuant to which Atlantic New York would be obligated to make payments or
provide goods or services after the Closing Date in an aggregate amount, or
having an aggregate value, in excess of $100,000;
(xii) Make any modification to any permit applicable to the
Property;
(xiii) Enter into any agreement relating to any merger,
consolidation, combination, spinoff or other similar transaction involving
Atlantic New or otherwise take any action prohibited by Section 4.5.
23
<PAGE>
Section 4.4 Continuation of Insurance. The Seller will cause Atlantic
-------------------------
New York to have at the Closing all policies of insurance presently maintained
and insuring any of the Assets against liability and property damage, fire and
other casualty.
Section 4.5 No Solicitation. Unless and until this Agreement is
---------------
terminated without the Closing having taken place neither Seller nor Atlantic
New York will directly or indirectly solicit offers for acquisitions or sales of
Shares or other stock or assets of Atlantic New York or for a merger or
consolidation involving Atlantic New York 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 by merger, consolidation or other combination the Businesses or any
assets or properties of Atlantic New York.
Section 4.6 FIRPTA Certificate. Purchaser and the 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 the Seller furnishes Purchaser with a certificate stating their
U.S. Taxpayer Identification Numbers and that they are not foreign persons
within the meaning of the Code. Accordingly, Seller shall provide to Purchaser
at Closing such certificate as is reasonably necessary to insure that such
withholding is not required under FIRPTA.
Section 4.7 Financial Statements. Prior to the Closing, Seller shall
--------------------
deliver (or cause to be delivered) to the Purchaser consolidated financial
statements for Atlantic New York (including consolidated balance sheets for
Atlantic New York and consolidated statements of income, cash flow and retained
earnings) in accordance with GAAP covering each and every full (as of the
Closing) fiscal quarter of Atlantic New York through the Closing.
Section 4.8 Consents and Approvals; Other. As promptly as practicable
-----------------------------
after the date of this Agreement, the Seller and Atlantic New York will make all
filings required to be made by them in order to consummate the transactions
contemplated herein. The Seller and Purchaser shall use all commercially
reasonable efforts to cause the conditions to Closing in Article VI and VII
(including, without limitation, the obtaining of consent to the acquisition by
Purchaser through its acquisition of the Shares of the rights of New York under
the Transfer Station Lease), to be satisfied and to obtain all requisite
approvals, authorizations, and consents to the transactions contemplated hereby,
including the obtaining of all Government Authorizations and other consents
necessary and appropriate to effect the Closing; provided, however, that Seller
and Atlantic New York shall not (except as they may otherwise agree in writing)
be required to pay money other than the reasonable expenses and costs of Seller
and Atlantic New York and third parties to obtain any such consent nor will they
be required to modify or amend any contractual arrangements in a manner adverse
to them to obtain any such consent.
24
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Section 4.9 Discharge of Excluded Liabilities. At or prior to the
---------------------------------
Closing, Seller, Atlantic Disposal and the Subsidiaries will cause to be
discharged all intercompany obligations between Atlantic New York, on one hand,
and any of Brambles Industries Limited, Brambles USA, Seller, Atlantic Disposal
and any of their respective direct or indirect subsidiaries, on the other hand.
Following the Closing, Seller shall promptly discharge, as they become due, all
remaining Excluded Liabilities, if any, and shall take all steps necessary to
ensure that no Excluded Liability shall become an obligation or liability of
Atlantic Disposal or any Subsidiary.
Section 4.10 SEC Filings. Seller and Atlantic Disposal shall cooperate
-----------
and shall use all reasonable efforts to cause their auditors to cooperate with
all reasonable requests of Purchaser and its auditors necessary to audit or
reaudit all prior periods for activities of Atlantic New York to the extent
necessary to enable Purchaser and/or any affiliate of Purchaser to make periodic
reports pursuant to the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), to make a public offering of its securities under
the Securities Act of 1933, as amended (the "Securities Act"), or to make a
private placement of its securities, and Seller and Atlantic New York hereby
consent to the use of historical financial information, to be included (if
required by the rules and regulations of the Securities and Exchange Commission
(the "Commission") or any applicable state securities law) in any of Purchaser's
or Purchaser's affiliate's filing with the Commission or any state securities
commission under either the Securities Exchange Act or the Securities Act and in
any prospectus or memorandum used in connection with any offering of their
securities. The cooperation of Seller shall include, without limitation, the
execution of any audit representation letters reasonably requested by
Purchaser's auditors. Purchaser shall indemnify and hold harmless Seller and
Atlantic New York against any and all fees and expenses incurred or to be
incurred at any time in the future to comply with the foregoing. Purchaser
acknowledges that neither Seller nor Atlantic New York shall have any
responsibility to any purchaser of securities in Purchaser for any information
provided pursuant to this Section 4.10 and Purchaser shall indemnify and hold
harmless Seller and Atlantic New York and their respective, officers, directors,
employees or representatives in connection with any information provided
pursuant to this Section 4.10 against claims made by any such purchaser of
securities.
Section 4.11 Updated Information. Not less than three days prior to
-------------------
the Closing, the Sellers shall provide the Purchaser with a Schedule or
Schedules listing all events and matters occurring after the date hereof which
would have been required to be disclosed on a Schedule to this Agreement if they
had occurred prior to the date hereof, together with a certificate of Sellers to
the effect that, each representation and warranty as supplemented is true and
correct as of the date of the certificate.
25
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ARTICLE V
ADDITIONAL AGREEMENTS OF PURCHASER AND SELLER
Section 5.1 Payment of Expenses. Purchaser will pay all expenses
-------------------
(including legal and accounting fees) incurred by it in connection with the
negotiation, execution and performance of this Agreement and the Collateral
Documents. Except as otherwise specified herein, the Seller and Atlantic New
York will pay all expenses incurred by Seller and Atlantic New York (including
legal and accounting fees) in connection with the negotiation, execution and
performance of this Agreement and the Collateral Documents and the consummation
of the transactions hereunder and thereunder. Additionally, the Purchaser shall
bear the following expenses: (i) filing and other fees payable under the Hart-
Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, (ii) the costs of
auditing any period requested by Purchaser pursuant to Section 4.10 and (iii)
the cost of the title policies and surveys, if any, with respect to the Property
required by Purchaser as a condition of the Closing.
Section 5.2 Filing of Tax Returns and Payment of Taxes.
------------------------------------------
(a) As soon as practicable after the Closing Date, the Seller will
prepare and file or cause to be prepared and filed all appropriate tax returns
that are required to be filed for the operations of Atlantic New York for the
Pre-Closing Tax Period (as defined in Section 5.2(b)) and will timely pay or
cause to be paid the amount of taxes shown to be due on such tax returns. The
books and records of the Seller and Atlantic New York will be maintained, and
the Federal, state and other income tax returns of the "affiliated group" (as
defined in Section 1504(a) of the Code) of which the Seller and Atlantic New
York is a member (the "Seller Group") will be filed, so as to accurately reflect
the operations of Atlantic New York for the Pre-Closing Tax Period. Purchaser
shall prepare and file or cause to be prepared and filed all appropriate tax
returns for the operations of Atlantic New York and its subsidiaries for all
taxable periods after the Pre-Closing Tax Period and will timely pay or cause to
be paid the amount of taxes shown to be due on such tax returns.
(b) For purposes of this Agreement, "Pre-Closing Tax Period" means
----------------------
the period (including all prior taxable years) ending on and including the
Closing Date. In the case of jurisdictions with respect to which a taxable
period of Atlantic New York does not end on the Closing Date, there shall be a
deemed short taxable period ending on and including the Closing Date and a
second deemed short taxable period beginning on and including the day after the
Closing Date. For purposes of allocating gross income and deductions between
deemed short taxable periods, all amounts of income and deduction shall be
deemed to have accrued pro rata during Atlantic New York's actual taxable
period, except for items of income or loss arising from an extraordinary event,
which shall be reflected in the period in which such event occurred, and
26
<PAGE>
all taxes other than income taxes shall be deemed to have accrued pro-rata
during Atlantic New York's actual tax period.
(c) Purchaser and Seller will cooperate fully with each other in
connection with (i) the preparation and filing of any Federal, state or local
tax returns that include the business and operations of Atlantic New York with
respect to any tax return that includes operations of Atlantic New York within
the Pre-Closing Tax Period, and (ii) any audit examination by any government
taxing authority of the tax returns referred to in clause (i). Such cooperation
shall include, without limitation, the furnishing or making available of
records, books of account or other materials of Atlantic New York necessary or
helpful for the defense against assertions of any taxing authority as to any tax
returns which include operations of Atlantic New York within the Pre-Closing Tax
Period.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to purchase the Shares shall be subject to the
fulfillment or waiver by the Purchaser at or prior to the time of the Closing of
each of the following items:
Section 6.1 Compliance by Seller and Atlantic New York. The Seller and
------------------------------------------
Atlantic New York shall (a) have performed and complied with all of the
obligations and conditions required by this Agreement to be performed or
complied with by them at or prior to the Closing Date; (b) there shall not have
occurred any Material Adverse Change, and (c) all representations and warranties
of Seller and Atlantic New York contained in this Agreement shall have been true
and correct when made, and (d) each representation and warranty made in this
Agreement by Seller and Atlantic New York, shall be true and correct as of the
Closing Date; provided, however, that where the failure to perform such
obligations and/or the failure of representations and warranties to be true and
correct, taken in the aggregate (and including any changes reflected as
supplemental disclosures provided pursuant to Section 4.11), would not have a
Material Adverse Effect, the condition to Closing set forth in subpart 6.1(d)
shall be deemed waived. Purchaser shall have received a Certificate of the
Seller, Atlantic Disposal and the Subsidiaries duly executed by the Chief
Executive and Chief Financial Officers of each Seller, Atlantic Disposal and the
Subsidiaries to such effect.
Section 6.2 Litigation Affecting This Transaction. No order, statute,
-------------------------------------
rule, regulation, executive order, injunction, stay, decree or restraining order
shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions to be
consummated at the Closing; no action, suit, investigation or proceeding by any
governmental or
27
<PAGE>
regulatory authority or instrumentality shall be pending which seeks to
restrain, prohibit or declare illegal the transactions to be consummated at the
Closing.
Section 6.3 Governmental or Regulatory Consents. All governmental or
-----------------------------------
regulatory consents, approval, permits, and authorizations necessary for the
performance by Purchaser and the Seller and Atlantic New York of their
respective obligations at the Closing, including termination of the waiting
period under the HSR Act, if applicable, shall have been obtained, shall
unconditionally permit the consummation of the transactions contemplated to be
effected at the Closing and shall be satisfactory to Purchaser in its sole
discretion.
Section 6.4 Other Consents. The consents set forth on Schedule 6.4
--------------
shall have been obtained, shall unconditionally permit the consummation of the
transactions contemplated to be effected at the Closing and shall be
satisfactory to Purchaser in its sole discretion.
Section 6.5 Closing of Atlantic Disposal Agreement. The closing of
--------------------------------------
the transactions contemplated by the Atlantic Disposal Agreement shall have
occurred or shall be occurring concurrently.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of the Seller to transfer the Shares in accordance with
this Agreement shall be subject to the fulfillment or waiver in writing by the
Seller at or prior to the time of the Closing of each of the following
conditions:
Section 7.1 Compliance by Purchaser. The Purchaser shall have
-----------------------
performed and complied in all material respects with all of the obligations and
conditions required by this Agreement to be performed or complied with by it at
or prior to or at the Closing Date. All representations and warranties of
Purchaser contained in this Agreement shall be true and correct 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.
Section 7.2 Litigation Affecting This Transaction. No order, statute,
-------------------------------------
rule, regulation, executive order, injunction, stay, decree or restraining order
shall have been enacted, entered, promulgated or enforced by any court of
competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions to be
consummated at the Closing, and no action, suit, investigation or proceeding by
any governmental or regulatory authority or instrumentality shall be pending
which seeks to restrain, prohibit or declare illegal the transactions to be
consummated at the Closing.
28
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Section 7.3 Governmental and Regulatory Consents. All governmental or
------------------------------------
regulatory consents, approval, permits and authorizations necessary for the
performance by Purchaser and the Seller, Atlantic Disposal and the Subsidiaries
of their respective obligations at the Closing, including, if applicable,
termination of the waiting period under the HSR Act, shall have been obtained,
shall unconditionally permit the consummation of the transactions contemplated
to be effected at the Closing and shall be satisfactory to Seller in its sole
discretion.
Section 7.4 Other Consents. The consents identified in Schedule 7.4
--------------
shall have been obtained, shall unconditionally permit the consummation of the
transactions contemplated to be effected at the Closing and shall be
satisfactory to Seller in its sole discretion.
Section 7.5 Closing of Atlantic Disposal Agreement. The closing of
--------------------------------------
the transactions contemplated by the Atlantic Disposal Agreement shall have
occurred or shall be occurring concurrently.
ARTICLE VII
INDEMNIFICATION
Section 8.1 Indemnification by Seller.
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(a) Seller shall indemnify, defend, protect and hold harmless
Purchaser, its officers, directors, affiliates, subsidiaries, agents, employees,
legal representatives, successors and assigns and Atlantic New York 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) ("Damages"),
from: (i) any breach of, misrepresentation in, untruth in or inaccuracy in the
representations and warranties by Seller and Atlantic New York set forth in this
Agreement or in any representation or warranty brought current by the
certificates described in Sections 4.11 and 6.1 (without regard to whether such
breaches or failures of representations or warranties had a Material Adverse
Effect); (ii) all events and matters occurring after the date hereof which are
set forth in any updated schedules delivered under Section 4.11 to the extent
that the matter or event reflects a detrimental change to the Business or
Assets, of Atlantic New York or the Shares from the schedules delivered at
execution; however changes which occurred in the ordinary course of business and
not as a result of the Seller's breach of this Agreement shall not be the basis
of an indemnification claim; (iii) nonfulfillment or nonperformance of any
agreement or covenant on the part of Seller or Atlantic New York made in this
Agreement and to be performed by any of them before or after the Closing Date
including potential assessment under paragraph 1.1502-6(b) of the Internal
Revenue Code; and (iv) violation of the requirements of any governmental
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authority relating to the reporting and payment of federal, state, local or
other income, sales, use, franchise, excise or property tax liabilities of the
Seller or Atlantic New York (to the extent such taxes result in a lien on the
Shares or the Assets or Atlantic New York becomes liable for such taxes) or
arising or accrued prior to the Closing Date; and (v) any Excluded Liability.
The Purchaser and the Seller have agreed, for the purposes of determining
whether or not the conditions to the obligations of the Purchaser to close have
been satisfied, pursuant to 6.1(d), that the Purchaser will be obligated to
close notwithstanding breaches of representations or warranties contained in
this Agreement or brought current by the certificate described in 4.11, if such
breaches do not result in a Material Adverse Effect. For the purposes of
indemnification, however, Purchaser shall be entitled to claim, subject to the
limitations set forth in Section 8.1(c), for breaches of representations and
warranties contained in this Agreement or brought current by the certificate
described in Section 4.10, notwithstanding the immateriality of any such breach.
(b) The indemnification provided for in this Section 8.1 shall be
Purchaser's sole and exclusive remedy for any Damages arising out of or relating
to the transactions contemplated by this Agreement, except as set forth in the
next sentence and except insofar as any such Damages are caused by the
fraudulent misconduct of any Seller. The limitations set forth in the
immediately preceding sentence and Section 8.1(c) below shall not apply to any
Damages arising out of any breach of or failure to perform obligations under the
Atlantic Disposal Agreement, Section 4.9 of Article IV hereof, or any failure to
perform covenants required to be performed prior to Closing. This Section is
not intended to limit the remedy of specific performance provided for in Section
1.10.
Without limiting the generality of the first sentence of this
Section 8.1(b), each of Purchaser and Atlantic New York expressly waives and
releases any claim that it may have, now or in the future, against Seller or any
of its affiliates pursuant to CERCLA or any similar state or local law;
provided, however, that nothing in this sentence shall limit any right that the
Purchaser may have under this Agreement, the Atlantic Disposal Agreement or any
Collateral Document, including any right in respect of a breach of a
representation and warranty relating to CERCLA.
(c) Notwithstanding the foregoing, in no event shall the Seller be
liable for any Damages pursuant to Sections 8.1(a)(i) or for a breach of any of
the covenants to be performed after Closing, except for the covenant in Section
4.9 (to which the limitation of liability does not apply) unless the aggregate
amount of such Damages exceeds $150,000, in which case the Seller shall only be
liable for the amount of such Damages in excess of $150,000. Likewise, except as
otherwise provided in Section 8.1(c) Seller shall not be liable for Damages
under Section 8.1(a)(i) or for covenants to be performed after Closing, except
for the covenant in Section 4.9 (to which the limitation of liability does not
apply) in excess of an amount equal to seventy-five percent (75%) of the
Purchase Price.
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Section 8.2 Indemnification by Purchaser. (a) Purchaser agrees that
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it will indemnify, defend, protect and hold harmless Seller, and its officers,
shareholders, directors, affiliates, subsidiaries, parents, agents, employees,
heirs, legal representatives, successors and assigns, as applicable, from and
against all Damages incurred by it, as a result of or incident to: (i) any
breach of, misrepresentation in, untruth in or inaccuracy in the representations
and warranties of Purchaser set forth in this Agreement; and (ii) nonfulfillment
or nonperformance of any agreement or covenant on the part of Purchaser made in
this Agreement and to be performed by Purchaser before or after the Closing
Date.
(b) The indemnification provided for in this Section 8.2 shall be the
Seller's sole and exclusive remedy for any Damages arising out of or relating to
the transactions contemplated by this Agreement, except as set forth in the next
sentence and except insofar as any such Damages are caused by the fraudulent
misconduct of Purchaser. The limitations set forth in the immediately preceding
sentence and Section 8.2(c) below shall not apply to any Damages arising out of
any breach of or any failure to perform obligations under the Atlantic Disposal
Agreement or any failure to perform covenants required to be performed prior to
Closing. This Section is not intended to limit the remedy of specific
performance provided for in Section 1.10.
(c) Notwithstanding the foregoing, in no event shall the Purchaser be
liable for any Damages under Section 8.2(a)(i) or for covenants to be performed
after Closing unless the aggregate amount of such Damages exceeds $150,000, in
which case the Purchaser shall only be liable for the amount of such Damages in
excess of $150,000. Likewise, Purchaser shall not be liable for Damages under
Section 8.2(a)(i) or for covenants to be performed after Closing in excess of an
amount equal to seventy-five percent (75%) of the Purchase Price.
Section 8.3 Procedure for Indemnification with Respect to Third Party
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Claims.
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(a) If any third party shall notify a party to this Agreement (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") that may
give rise to a claim for indemnification against any other party to this
Agreement (the "Indemnifying Party") under this Article VIII, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent) the Indemnifying
Party is thereby prejudiced. Such notice shall state the amount of the claim and
the relevant details thereof.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within ten days after
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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 this Article VIII, as applicable, from and against the entirety of
any adverse consequences (which will include, without limitation, all losses,
claims, liens, and attorneys' fees and related expenses) the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (ii) the Third Party Claim involves only
monetary damages and does not seek an injunction or equitable relief, (iii)
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 (iv) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 8.3(b) above, 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. 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 Indemnified Party from all liability in connection therewith.
(d) If any condition set forth in Section 8.3(b) above is or becomes
unsatisfied, (i) the Indemnified Party may defend against the Third Party Claim
with counsel of its choice and the Indemnifying Party shall have the right to
participate in (but not control) such defense, and (ii) 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, (iii) 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 (iv) the Indemnifying Party
will remain responsible for any adverse consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim to the fullest extent provided in this Article VIII.
Notwithstanding the above, if the only item in Section 8.3(b) which was not
satisfied is item 8.3(b)(iii), the Indemnified Party will consult with the
Indemnifying Party prior to settling a Third Party Claim.
Section 8.4 Procedure for Non-Third Party Claims. If Purchaser, Seller
------------------------------------
or Atlantic Disposal wishes to make a claim for indemnity under Section 8.1 or
Section 8.2, as applicable, and the claim does not arise out of a third party
notification which makes the provisions of
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Section 8.3 applicable, the party desiring indemnification ("Indemnified Party")
shall deliver to the party from which indemnification is sought ("Indemnifying
Party") a written demand for indemnification ("Indemnification Demand"). The
Indemnification Demand shall state: (a) the amount of losses, damages or
expenses to which the Indemnified Party has incurred or has suffered or is
expected to incur or suffer to which the Indemnified Party is entitled to
indemnification pursuant to Section 8.1 or Section 8.2, as applicable; and (b)
the nature of the event or occurrence which entitles the Indemnified Party to
receive payment under Section 8.1 or Section 8.2, as applicable. If the
Indemnifying Party wishes to object to an Indemnification Demand, the
Indemnifying Party must send written notice to the Indemnified Party stating the
objections and the grounds for the objections ("Indemnification Objection"). If
no Indemnification Objection is sent within 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 8.5 Survival of Claims. The respective representations and
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warranties 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 Excluded Liabilities shall survive until after the
expiration of the applicable statute of limitations on any claim which can be
brought against Atlantic New York by tax authorities or governmental agencies or
governmental units and (ii) all representations and warranties other than those
set forth in (i) above shall survive until the date which is 18 months after 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. No investigation made by
Purchaser shall limit in any way Purchaser's rights to recover damages. The
covenants and agreements of the parties set forth in this Agreement to be
performed after Closing shall survive Closing in accordance with their terms.
Section 8.6 Prompt Payment. In the event that any party is required
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to make any payment under this Article VIII, such party shall promptly pay the
Indemnified 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 VIII, the Indemnifying Party shall, nevertheless, pay
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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.
Section 8.7 Insurance. If Seller pays an Indemnification Demand,
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Purchaser agrees to provide Seller upon Seller's request information concerning
any insurance coverages Purchaser has that could result in an insurance recovery
relating to the event which resulted in the indemnity payment ("Insured
Indemnity Event"). Upon Seller's request, Purchaser shall make a claim with its
insurers for the Insured Indemnity Event. If Purchaser receives any insurance
proceeds from the submitted claim, purchaser shall retain from the insurance
proceeds the amount of Damages from the Insured Indemnity Event not paid to it
by Seller due to the provision in Section 8.1(a) which provides that Seller is
not liable for the first $150,000 of Damages and Purchaser shall pay to Seller
the balance of the insurance proceeds. This Section 8.7 does not impose any
requirement on Purchaser to commence litigation against its insurers, unless
Seller pays all costs and expenses of such litigation.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Nondisclosure by Seller. Seller and Atlantic New York
-----------------------
recognize and acknowledge that they have in the past, currently have, and in the
future will have certain confidential information of Purchaser such as lists of
customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of Purchaser. Seller and Atlantic New York
agree that for a period of ten (10) years from the date hereof they will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of Purchaser, unless (i) such information becomes
known to the public generally through no fault of Seller or Atlantic New York,
or (ii) Seller or Atlantic New York is compelled to disclose such information by
a governmental entity or pursuant to a court proceeding. In the event of a
breach or threatened breach by Seller or Atlantic New York of the provisions of
this Section, Purchaser shall be entitled to an injunction against such
disclosure, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Purchaser from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.2 Nondisclosure by Purchaser. Purchaser 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 Seller and
Atlantic New York, such as lists of customers,
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operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Seller and Atlantic New York. Purchaser agrees that it
will not utilize such information in the business or operation of Purchaser or
any of its affiliates or for ten (10) years from the date hereof disclose such
confidential information to any person, firm, corporation, association, or other
entity for any purpose or reason whatsoever, unless (i) such information becomes
known to the public generally through no fault of Purchaser or any of its
affiliates, (ii) Purchaser is compelled to disclose such information by a
governmental entity or pursuant to a court proceeding, or (iii) Closing takes
place. In the event of a breach or threatened breach by Purchaser of the
provisions of this Section, Seller and Atlantic New York shall be entitled to an
injunction restraining Purchaser from utilizing or disclosing, in whole or in
part, such confidential information. Nothing contained herein shall be construed
as prohibiting Seller or Atlantic New York from pursuing any other available
remedy for such breach or threatened breach, including, without limitation, the
recovery of damages.
Section 9.3 Assignment; Binding Effect; Amendment. This Agreement and
-------------------------------------
the rights of the parties hereunder may not be assigned (except by operation of
law) and shall be binding upon and shall inure to the benefit of the parties
hereto, and their respective successors, personal representatives and assigns.
This Agreement, upon execution and delivery, constitutes a valid and binding
agreement of the parties hereto enforceable in accordance with its terms and may
be modified or amended only by a written instrument executed by all parties
hereto. Notwithstanding the foregoing, the Purchaser may assign this Agreement
and all of its rights and obligations hereunder to any directly or indirectly
wholly-owned subsidiary of the Purchaser; provided that, in connection with any
such assignment, the Purchaser shall execute an guarantee and suretyship
agreement, in form and substance reasonably satisfactory to the Seller, pursuant
to which the Purchaser shall guarantee and stand surety for all of the
obligations of its assignee hereunder.
Section 9.4 Entire Agreement. This Agreement together with the
----------------
Collateral Documents is the final, complete and exclusive statement and
expression of the agreement among the parties hereto with relation to the
subject matter of this Agreement, it being understood that there are no oral
representations, understandings or agreements covering the same subject matter
as the Agreement. The Agreement supersedes, and cannot be varied, contradicted
or supplemented by evidence of any prior to contemporaneous discussions,
correspondence, or oral or written agreements of any kind, including, without
limitation, the Letter of Intent, dated November 20, 1997 by and among Purchaser
and Brambles USA. The parties to this Agreement have relied on their own
advisors for all legal, accounting, tax or other advice whatsoever with respect
to the Agreement and the transactions contemplated hereby.
Section 9.5 Counterparts. This Agreement may be executed simultaneously
------------
in two or more counterparts, each of which shall be deemed an original and all
of which together shall constitute but one and the same instrument.
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Section 9.6 Notices. All notices or other communications required or
-------
permitted hereunder shall be in writing and may be given by depositing the same
in United States mail, addressed to the party to be notified, postage prepaid
and registered or certified with return receipt requested, by overnight courier
or by delivering the same in person to such party.
(a) If to Purchaser, addressed to it at:
Eastern Environmental Services, Inc.
1000 Crawford Place, Suite 101
Mount Laurel, New Jersey 08054
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street, Suite 1100
Philadelphia, PA 19107-3496
Attention: H. John Michel, Jr.
(b) If to Seller or Atlantic Disposal:
Brambles USA, Inc.
The Wrigley Building
400 North Michigan Avenue
Suite 610
Chicago, Illinois 60611
Attention: Chief Financial Officer
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, IL 60603-3441
Attention: Scott J. Davis
Notice shall be deemed given and effective the day personally delivered,
the day after being sent by overnight courier and three business days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received, if
earlier. Any party may change the address for notice by notifying the other
parties of such change in accordance with this Section 9.6.
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Section 9.7 Governing Law. This Agreement shall be governed by and
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construed in accordance with the internal laws of the State of Delaware, without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
Section 9.8 No Waiver. No delay of or omission in the exercise of any
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right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of or in any similar breach or default occurring
later; nor shall any waiver of any single breach or default be deemed a waiver
of any other breach of default occurring before or after that waiver.
Section 9.9 Time of the Essence. Time is of the essence of this
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Agreement as well as all dates referred to herein and extensions thereof.
Section 9.10 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 9.11 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 9.12 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 including, without limitation.
Section 9.13 Extension or Waiver of Performance. Either the Seller or
----------------------------------
Purchaser may extend the time for or waive the performance of any of the
obligations of the other, waive any inaccuracies in the representations or
warranties by the other, or waive compliance by the other with any of the
covenants or conditions contained in this Agreement, provided that any such
extension or waiver shall be in writing and signed by the Seller and the
Purchaser.
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Section 9.14 Liabilities of Third Parties. Nothing in this Agreement,
----------------------------
whether expressed or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties to it and
their respective successors, legal representative and assigns, nor is anything
in this Agreement intended to relieve or discharge the obligation or liability
of any third persons to any party to this Agreement, nor shall any provisions
give any third person any rights of subrogation or action over or against any
party to this Agreement.
Section 9.15 Agreement Not Binding Until Fully Executed. This Agreement
------------------------------------------
shall not be binding on any party hereto until the Agreement has been fully
executed.
Section 9.16 Publicity. Prior to the 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 prior consent from the other party, which shall not be
unreasonably withheld.
Section 9.17 Arbitration.
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(a) Each and every controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in Wilmington,
Delaware, 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. 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
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in the arbitration proceeding. After a preliminary hearing, the arbitrators
shall fix the scope and content of each party's discovery plan as the
arbitrators deem appropriate. The arbitrators shall have the authority to
modify, amend or change the discovery plans of the parties upon application by
either party, if good cause appears for doing so.
(d) The award pursuant to such arbitration will be final,
binding and conclusive.
(e) Counsel to 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
ATLANTIC OF NEW YORK, INC.
By: /s/ Robert J. Anderson
---------------------------------------
Name: Robert J. Anderson
Title: CEO
BRAMBLES USA, INC.
By: /s/ Robert J. Anderson
---------------------------------------
Name: Robert J. Anderson
Title: CEO
ATLANTIC WASTE DISPOSAL, INC.
By: /s/ Robert J. Anderson
---------------------------------------
Name: Robert J. Anderson
Title: CEO
EASTERN ENVIRONMENTAL SERVICES, INC.
By: /s/ Robert M. Kramer
---------------------------------------
Name: Robert M. kramer
Title: Executive Vice-President
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EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements of
Eastern Environmental Services, Inc.:
<TABLE>
<CAPTION>
<S> <C>
(i) on Form S-8 (Registration Statement No. 33-25155),
(ii) on Form S-8 (Post-Effective Amendment No.2 to Registration Statement No. 33-21251),
(iii) on Form S-8 (Registration Statement No. 33-37374),
(iv) on Form S-8 (Registration Statement No. 33-45250),
(v) on Form S-3 (Amendment No. 1 to Registration Statement No. 333-00283),
(vi) on Form S-8 (Post-Effective Amendment No. 1 to Registration Statement No. 333-28627),
(vii) on Form S-3 (Post-Effective Amendment No. 2 to Registration Statement No. 333-32361),
(viii) on Form S-3 (Registration Statement No. 333-47089),
(ix) on Form S-4 (Amendment No. 1 to Registration Statement No. 333-37845), and
(x) on Form S-8 (Registration Statement No. 333-48265)
</TABLE>
of our report dated April 29, 1998, with respect to the consolidated financial
statements of Atlantic Waste Disposal, Inc. and subsidiaries as of and for the
years ended June 30, 1997 and 1996 appearing in Eastern Environmental Services,
Inc.'s Current Report on Form 8-K dated on or about April 29, 1998.
/s/ Deloitte & Touche LLP
_________________________
Richmond, Virginia
April 29, 1998
