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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 22, 1998
WASTE SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4203626
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
0-25998
(Commission File Number)
420 Bedford Street, Suite 300
Lexington, Massachusetts 02173
(Address of principal executive offices) (zip code)
(781) 862-3000 Phone
(781) 862-2929 Fax
(Registrant's telephone number, including area code)
This document contains a total of 3 pages.
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Item 7 of the Form 8-K filed with the Securities and Exchange Commission on June
5, 1998 is hereby amended and restated in full by adding the following:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit 10.1 Stock Purchase Agreement dated March 3, 1998 between
WSI Pennsylvania Holdings, Inc. as Purchaser, Waste Systems International, Inc.
as Guarantor and Bestin H.S.A., Jacques Khordara and Harry K. Benjamin as
Sellers of the Stock of Eagle Recycling, Inc. and Horvath Sanitation, Inc.
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Exhibit Index
Exhibit No. Description
- ----------- -----------
Exhibit 10.1 Stock Purchase Agreement dated March 3, 1998 between
WSI Pennsylvania Holdings,Inc. as Purchaser, Waste
Systems International, Inc. as Guarantor and Bestin
H.S.A., Jacques Khordara and Harry K. Benjamin as
Sellers of the Stock of Eagle Recycling, Inc. and
Horvath Sanitation, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
WASTE SYSTEMS INTERNATIONAL, INC.
Date: June 12, 1998 By: /s/ Philip Strauss
------------- --------------------------------
Philip Strauss
Chairman, Chief Executive Officer
and President(Principal Executive
Officer)
Date: June 12, 1998 By: /s/ Robert Rivkin
------------ --------------------------------
Robert Rivkin
Executive Vice President -
Acquisitions, Chief Financial
Officer, Treasurer and Secretary
(Principal Financial and
Accounting Officer)
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Exhibit 10.1
STOCK PURCHASE AGREEMENT
Dated as of
March 3, 1998
Between
WSI Pennsylvania Holdings, Inc., as Purchaser
Waste Systems International Inc., as Guarantor
and
Bestin H.S.A., Jacques Khodara and Harry K. Benjamin,
as Sellers
of the Stock of
Eagle Recycling, Inc. and Horvath Sanitation, Inc.
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TABLE OF CONTENTS
Page
ARTICLE 1 PURCHASE AND SALE OF STOCK......................................... 1
1.1 Purchase and Sale of Stock......................................... 1
1.2 Calculation of Purchase Price...................................... 2
1.3 Estimated Purchase Price........................................... 3
1.4 Payment of Purchase Price.......................................... 3
1.5 Purchase Price Determination and Payment........................... 5
1.6 Closing............................................................ 6
1.7 Stockholders Representative........................................ 6
ARTICLE 2 SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS................................................ 6
2.1 Ownership of Stock................................................. 6
2.2 Existence and Good Standing........................................ 7
2.3 Capital Stock...................................................... 7
2.4 Subsidiaries and Investments....................................... 8
2.5 Financial Statements and No Material Changes....................... 8
2.6 Books and Records.................................................. 9
2.7 Title to Properties................................................ 9
2.8 Real Property...................................................... 9
2.9 Leases............................................................. 12
2.10 Material Contracts................................................. 12
2.11 Litigation......................................................... 14
2.12 Taxes.............................................................. 14
2.13 No Other Representations........................................... 15
2.14 Broker's or Finder's Fees.......................................... 16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE OPERATING STOCKHOLDER....................................... 16
3.1 Personal Property.................................................. 16
3.2 Inventory.......................................................... 16
3.3 Condition and Sufficiency of Assets................................ 16
3.4 Liabilities........................................................ 17
3.5 Insurance.......................................................... 17
3.6 Intellectual Properties............................................ 17
3.7 Compliance with Laws............................................... 18
3.8 Accounts Receivable................................................ 18
3.9 Employment Relations............................................... 19
3.10 Employee Benefit Plans............................................. 19
3.11 Environmental Laws and Regulations................................. 22
3.12 Interests in Clients, Suppliers, Etc............................... 23
3.13 Bank Accounts, Powers of Attorney and Employees.................... 23
3.14 No Changes Since Balance Sheet Date................................ 24
3.15 Customers and Suppliers............................................ 25
3.16 Government Contracts............................................... 25
3.17 Additional Information............................................. 25
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TABLE OF CONTENTS (cont.)
Page
ARTICLE 4 REPRESENTATIONS OF THE PURCHASER
AND THE GUARANTOR.................................................. 26
4.1 Existence and Good Standing;
Power and Authority................................................ 26
4.2 Restrictive Documents.............................................. 26
4.3 Purchase for Investment............................................ 26
4.4 Broker's or Finder's Fees.......................................... 27
4.5 Investigation...................................................... 27
ARTICLE 5 CONDUCT OF BUSINESS; EXCLUSIVE
DEALING; REVIEW; CONFIDENTIALITY................................... 27
5.1 Conduct of Business Pending Closing................................ 27
5.2 Prohibited Activities.............................................. 28
5.3 Exclusive Dealing.................................................. 30
5.4 Access and Cooperation; Due Diligence.............................. 30
5.5 Confidentiality.................................................... 31
5.6 Amendment of Schedules............................................. 31
ARTICLE 6 CONDITIONS TO THE PURCHASER'S OBLIGATIONS.......................... 32
6.1 Opinion of Counsel for Eagle, the Company
and the Stockholders............................................... 32
6.2 Good Standing and Other Certificates............................... 32
6.3 No Material Adverse Change......................................... 32
6.4 Truth of Representations and Warranties............................ 32
6.5 Performance of Agreements.......................................... 33
6.6 No Litigation Threatened........................................... 33
6.7 Employment Agreement............................................... 33
6.8 Approvals.......................................................... 33
6.9 Proceedings........................................................ 33
6.10 Deliveries......................................................... 33
6.11 Further Assistance................................................. 34
ARTICLE 7 CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS........................ 34
7.1 Opinion of the Purchaser's Counsel................................. 34
7.2 Truth of Representations and Warranties............................ 34
7.3 Governmental Approvals............................................. 35
7.4 Performance of Agreements.......................................... 35
7.5 Guaranty........................................................... 35
7.6 Proceedings........................................................ 35
7.7 Deliveries......................................................... 35
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ARTICLE 8 COVENANTS OF THE STOCKHOLDERS...................................... 35
8.1 Non-Competition; Non-Interference.................................. 35
8.2 Termination of Stockholders' Agreements............................ 37
ARTICLE 9 COVENANTS OF THE PURCHASER......................................... 37
9.1 Indemnification.................................................... 37
9.2 Employee Benefits.................................................. 37
9.3 Offer of Employment................................................ 37
9.4 Conduct of Business Post Closing................................... 37
9.5 Prohibited Activities.............................................. 38
ARTICLE 10 SURVIVAL OF REPRESENTATIONS;
INDEMNITY; SET-OFF................................................ 38
10.1 Survival of Representations........................................ 38
10.2 Indemnification by the Stockholders................................ 38
10.3 Indemnification by the Purchaser................................... 39
10.4 Threshold; Limitations............................................. 39
10.5 Time Limits; Notice and Payment of Claims.......................... 40
10.6 Matters Involving Third Parties.................................... 41
10.7 Remedies Exclusive................................................. 42
ARTICLE 11 TAX MATTERS....................................................... 42
11.1 Taxes.............................................................. 42
ARTICLE 12 TRANSACTIONS SUBSEQUENT HERETO.................................... 45
12.1 Preservation of Books and Records.................................. 45
12.2 Cooperation in Litigation.......................................... 45
ARTICLE 13 MISCELLANEOUS..................................................... 46
13.1 Knowledge of Stockholders; Materiality; Disclosure................ 46
13.2 Expenses.......................................................... 46
13.3 Governing Law..................................................... 46
13.4 Jurisdiction; Agents for Service of
Process; Legal Fees................................................46
13.5 Captions.......................................................... 46
13.6 Publicity......................................................... 46
13.7 Notices........................................................... 47
13.8 Assignment; Parties in Interest................................... 47
13.9 Counterparts...................................................... 47
13.10 Entire Agreement.................................................. 47
13.11 Amendments........................................................ 47
13.12 Severability...................................................... 47
13.13 Third Party Beneficiaries......................................... 48
13.14 Termination of Agreement.......................................... 48
13.15 Context of Words.................................................. 48
Signatures................................................................... 49
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("this Agreement") dated as of March 3,
1998 by and among WSI Pennsylvania Holdings, Inc., a Delaware corporation (the
"Purchaser"), Waste Systems International Inc., a Delaware corporation (the
"Guarantor"), Bestin H.S.A. ("Bestin") and Jacques Khodara ("Khodara"), as
shareholders of Eagle Recycling Inc., a Pennsylvania corporation ("Eagle") and
Harry K. Benjamin ("Benjamin") (with Khodara and Benjamin sometimes referred to
as the "Operating Stockholders" and with Bestin, Benjamin and Khodara sometimes
referred to as the "Stockholders").
W I T N E S S E T H:
WHEREAS, Bestin and Khodara collectively own 100 shares of the common
stock, no par value, of Eagle, and Eagle and Benjamin collectively own 100
shares of the common stock, no par value of Horvath Sanitation, Inc., a
Pennsylvania corporation (the "Company"), which in the aggregate constitute all
of the issued and outstanding shares of the capital stock of the Company and
Eagle, respectively (collectively, the "Stock"); and
WHEREAS, the Company is engaged in the waste hauling business
(the "Business"); and
WHEREAS, the Operating Stockholders have been running the
Business on a day-to-day basis since its inception; and
WHEREAS, the Stockholders desire to sell, and the Purchaser
desires to purchase all of the Stock pursuant to this Agreement; and
WHEREAS, the Stockholders require the guarantee of the Guarantor and
the Guarantor is willing to provide a Guaranty in the form of Exhibit 1;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser and the Stockholders
agree as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale of Stock. Subject to the terms and conditions
herein stated, the Stockholders agree to sell, assign, transfer and deliver to
the Purchaser on the Closing Date (as hereinafter defined), and the Purchaser
agrees to purchase from each Stockholder on the Closing Date, the number of
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shares of Stock of Eagle and the Company, as the case may be, set forth opposite
the name of such Stockholder on Exhibit 2 hereto. The certificates representing
the Stock shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Stockholder transferring the same with signatures
guaranteed by a domestic commercial bank or trust company (the "Stock
Certificates"). The Purchaser shall be responsible for any transfer tax or
revenue stamps required by the Commonwealth of Pennsylvania.
1.2 Calculation of Purchase Price. At the Closing (as hereinafter
defined), each Stockholder shall sell and deliver to the Purchaser, and the
Purchaser shall purchase, all of the Stock held by each such Stockholder, as set
forth on Exhibit 2 for an aggregate purchase price (the "Purchase Price") equal
to the sum of:
(a) the product obtained by multiplying 29 by the Company's average monthly
Gross Operating Revenue (defined as gross billings for sales of products and
services for the first three full calendar months after the Closing to customers
of the Company at or prior to Closing or to customers which have been solicited
by the Company prior to Closing or otherwise identified on Schedule 1.2) (the
"Determination Period"); provided, however, that, subject to the provisions of
Section 1.5 II (i) for purposes of the calculation of the Purchase Price, the
average monthly Gross Operating Revenue shall be $720,000 subject to adjustment
as hereinafter provided (the "Purchase Price Revenue Amount") and (ii) the
Determination Period may be extended by the Stockholders Representative, on
written notice to the Purchaser, on a month by month basis, for a maximum of
five (5) additional months, until such time that the Company's average monthly
Gross Operating Revenue for the original Determination Period, or any
Determination Period previously extended, is equal to $720,000; provided,
however, that on or before April 15, 1998, the Stockholders may deliver to the
Purchaser a proposed final determination of the Purchase Price Revenue Amount
which may exceed $720,000. In such event, subject to the provisions of Section
1.5 II (A) if the Purchaser agrees with such recalculation, such higher amount
shall be deemed the Purchase Price Revenue Amount for all purposes of this
Agreement; and (B) if the Purchaser disputes such recalculation, $720,000
shall be deemed the Purchase Price Revenue Amount until such time as the Actual
Revenue Amount is determined pursuant to the mechanism set forth in Section
1.5 I hereof; plus
(b) the appraised fair market value of the Real Estate (determined as it is
currently zoned and used) and the appraised used wholesale value of the
Equipment whose value will not be less than ninety percent (90%) of the book
value of the Equipment (defined as the list of equipment set forth on Exhibit 3
hereto, which Exhibit shall include, without limitation, all trucks and
containers owned by the Company) set forth on the Closing Balance Sheet (as such
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term is hereinafter defined), such appraised values to be determined at or prior
to Closing by the independent appraiser chosen by the Stockholders
Representative and the Purchaser acting in good faith; plus
(c) Eighty percent (80%) of the gross value of the Company's Accounts Receivable
(defined as all accounts receivable of the Company as set out in the Closing
Balance Sheet (as such term is hereinafter defined)); plus
(d) the value of all recyclables on hand at the Closing, as determined by
the Accountant(as hereinafter defined), based on the most recent sales prices
for such recyclables; minus
(e) all liabilities of the Company as shown in the Closing Balance Sheet
which shall survive the Closing.
1.3 Estimated Purchase Price. Two business days prior to the Closing
Date, Harry K. Sickler Associates, the independent certified public accountant
now employed by the Company (the "Accountant") shall deliver a balance sheet of
the Company as of the last day of the month prior to the Closing Date (the
"Closing Balance Sheet") and the statement of income for the month then ended
(the "Closing Income Statement"), which may include, on a proforma basis, the
full month's income and expense of any company acquired during such month. The
Purchaser shall have the right to examine the books and records of the Company
relating to the Closing Balance Sheet and Closing Income Statement prior to the
Closing. The parties hereto agree that, subject to the provisions of Section 1.5
II, the estimated purchase price revenue amount (the "Estimated Purchase Price
Revenue Amount") shall equal the product of $720,000 multiplied by 29. For
purposes of this Agreement, the Estimated Purchase Price shall be equal to the
sum of the Estimated Purchase Price Revenue Amount plus the amounts set out in
Sections 1.2(b), (c) and (d) less the amount set forth in Section 1.2(e).
1.4 Payment of Purchase Price. The Purchase Price shall be paid to the
Stockholders in accordance with their respective net ownership percentages set
forth on Exhibit 1 hereto (the "Ownership Percentages") and shall be payable as
follows:
(a) The Purchaser shall pay a deposit (the "Deposit") to the
Stockholders in the following manner:
(i) On the date of the execution of this Agreement, the
Purchaser shall (A) pay $100,000 to the Stockholders in
accordance with their respective Ownership Percentages, which
payment shall be absolutely non-refundable under any and all
circumstances and (B) remit $120,000 to Faust, Rabbach and
Oppenheim, LLP (the "Escrow Agent") to be held in escrow by
the Escrow Agent pursuant to an escrow agreement
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in the form Exhibit 4 hereto (the "Escrow Agreement").
(ii) Subject to the provisions of Section 5.4(b)
of this Agreement, the Purchaser may notify the
Stockholders in writing on or before noon on March 23, 1998
(time being of the essence) that it wishes to terminate this
Agreement. In the event that Purchaser so notifies the
Stockholders that it wishes to terminate this Agreement then
the terms and provisions of this Agreement shall be deemed
terminated and the obligations of the parties hereunder shall
be cancelled. If no such notice is given on or before noon on
March 23, 1998, then two (2) business days after notice from
the Stockholders Representative of the Stockholders' election
to close on the basis of monthly Gross Operating Revenue of
either $720,000 (or more) or $650,000 (in which case the
provisions of Section 1.5 II shall apply) the Purchaser shall
pay an additional $2,180,000(or $2,000,000 if the
Stockholders' election is to close on the basis of monthly
Gross Operating Revenue of $650,000) to the Escrow Agent, to
be held by it pursuant to the Excrow Agreement (time being of
the essence).
(b) The remainder of the Estimated Purchase Price shall be paid at
Closing in the following manner:
(i) ninety percent (90%) of the Estimated Purchase Price,
minus the deposit shall be paid to the Stockholders in cash
by official bank checks, cashier's checks, or, at the option
of the Stockholders, wire transfers in the respective amounts
and to the bank accounts designated by each of them on the
Closing Date; and
(ii) ten percent (10%) of the Estimated Purchase Price (which,
together with any interest earned thereon is referred to as
the "Holdback Amount") shall be paid into an interest bearing
account held by the Escrow Agent pursuant to the Escrow
Agreement.
(c) The Purchase Price shall be determined and the balance of the
Purchase Price shall be paid, in accordance with the provisions of
Section 1.5 below.
(d) Notwithstanding the foregoing, in the event that the Closing does
not occur because of the willful breach of the provisions of this
Agreement by any of the Stockholders, the Escrow Agent shall return all
amounts then held in escrow under this Agreement to the Purchaser.
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1.5 Purchase Price Determination and Payment. I (a) On or before the
fifteenth (15th) day of the fourth full month after the Closing and on or before
the tenth (10th) day of the month following each extension of the Determination
Period, if any, KPMG Peat Marwick LLP shall deliver a special report (the "Audit
Report") to the Purchaser and each of the Stockholders. The Audit Report shall
set forth the average monthly Gross Operating Revenues for the Determination
Period (including any extensions thereof) which shall include, without
limitation, the value of recycling material produced during each month
regardless of whether or not such material has been sold (the "Actual Revenue
Amount"). Unless the Purchaser or the Stockholders Representative notifies the
other party within fifteen (15) days after receipt of the Audit Report that he
or it objects to the computation of the Actual Revenue Amount set forth therein,
the Audit Report shall be non-appealable, binding and conclusive on the
Purchaser and the Stockholders. The Stockholders Representative and the
Purchaser and their respective attorneys, accountants and agents shall have
access to the books and accounts of the Company as may be necessary to verify
such computation as well as the books, accounts and work papers of the
accountants preparing the Audit Report. In the event of an objection to such
computation, the Actual Revenue Amount shall be determined by agreement of the
Purchaser and the Stockholders Representative working together in good faith;
provided, however, that if the Purchaser and the Stockholders Representative are
unable to reach agreement within ten (10) days after such notification, the
determination of such amount shall be submitted to the American Arbitration
Association in New York, New York in accordance with its commercial rules before
a panel of three arbitrators, consisting of one selected by the Purchaser, one
selected by the Stockholders Representative, and the third selected by the
American Arbitration Association. The determination of such panel shall be
non-appealable, binding and conclusive on the Purchaser and the Stockholders.
(b) Pursuant to the Escrow Agreement, the Escrow Agent shall distribute
the Holdback Amount within five (5) days of the final
determination of the Actual Revenue Amount as determined above
(the "Release Date").
(i) If the Purchase Price is equal to the Estimated Purchase
Price, then on the Release Date, the Escrow Agent shall
deliver the Holdback Amount to the Stockholders.
(ii) If the Purchase Price is less than the Estimated Purchase
Price, on the Release Date the Escrow Agent shall deliver (a)
to the Purchaser all or that portion of the Holdback Amount as
shall equal such shortfall; and (b) to the Stockholders, the
balance, if any, of the Holdback Amount. In no event shall the
Stockholders be obligated to the Purchaser for more than the
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Holdback Amount if the Actual Revenue Amount is less than the
Estimated Revenue Amount.
(iii) If the Purchase Price is more than the Estimated
Purchase Price pursuant to Section 1.2(a)(B), then the Escrow
Agent shall deliver the Holdback Amount to the Stockholders
and the Purchaser shall pay the balance to the Stockholders in
immediately available funds.
Distribution and payments, if any, to the Stockholders and/or the
Purchaser pursuant to this Section 1.5(b) shall be made by official bank checks,
cashier's checks or at the option of each of the Stockholders and/or the
Purchaser, wire transfer(s) to bank accounts designated by each of them on the
date of the signing of this Agreement.
1.5 II Anything herein to the contrary, notwithstanding if or before
April 15, 1998 the Stockholders' Representative does not confirm to the
Purchaser, in writing, that the Company has monthly Gross Operating Revenue in
excess of $720,000 (which may include, for this purpose, the full anticipated
monthly Gross Operating Revenues of companies acquired and owned in April,
1998), then the Purchase Price Revenue Amount to be used at Closing shall be
$650,000 but for the purposes of determining the final Purchase Price
Revenue Amount determined in accordance with Section 1.5 I, the Purchase Price
Revenue Amount shall be adjusted if, but only if, and only to the extent that
the monthly Gross Operating Revenue for the Determination Period (including
any extensions thereof) is less than $600,000.
1.6 Closing. Subject to the provisions of Section 5.4(b) of this
Agreement, the Closing of the sale of Stock referred to in Section 1.1 (the
"Closing") shall take place at 10:00 a.m. at the offices of Faust Rabbach &
Oppenheim, LLP, 488 Madison Avenue, 10th Floor, New York, New York 10022 on May
8, 1998 or at such other time and date as the parties hereto shall by written
instrument designate but in no event later than June 8, 1998 (the "Closing
Date").
1.7 Stockholders Representative. Each of the Stockholders hereby
appoint Khodara to act as their representative (the "Stockholders
Representative") in connection with all negotiations, requests, calculations and
any and all other communications required in under this Agreement or in
connection with the transactions contemplated hereby.
ARTICLE 2
SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders, severally, in accordance with their respective
Ownership Percentages, and not jointly, hereby make the following
representations and warranties to the Purchaser:
2.1 Ownership of Stock. Each Stockholder represents with respect to
himself or itself that he or it is the lawful owner, record and beneficially, of
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the number of shares of Stock listed opposite the name of such Stockholder on
Exhibit 1 hereto, free and clear of all liens, encumbrances, restrictions and
claims of every kind. Each Stockholder represents with respect to himself or
itself that he or it has full legal right, power and authority to enter into
this Agreement and the transactions contemplated hereby and to sell, assign,
transfer and convey the shares of Stock owned by such Stockholder pursuant to
this Agreement. The delivery to the Purchaser of the Stock pursuant to the
provisions of this Agreement will transfer to the Purchaser valid title thereto,
free and clear of all liens, encumbrances, restrictions and claims of every
kind.
The representations and warranties in this Section 2.1 are the
individual responsibility of each Stockholder with respect to his or its
ownership of Stock only.
2.2 Existence and Good Standing. Each of Eagle and the Company is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. Each of Eagle and the Company has the power
and authority to own or lease, and to operate, its property and to carry on its
business as now being conducted. Each of Eagle and the Company is duly qualified
to do business and is in good standing in the Commonwealth of Pennsylvania which
is the only jurisdiction in which the character or location of its properties
owned or leased or the nature of its business conducted by the Company makes
such qualification necessary and holds all permits and licenses necessary to
conduct its business as now being conducted. Neither Eagle nor the Company is
subject to any charter, by-law, mortgage, lien, lease, agreement, instrument,
order, law, rule, regulation, judgment or decree, or any other restriction of
any kind or character, which would prevent consummation of the transactions
contemplated by this Agreement.
2.3 Capital Stock. Eagle has an authorized capitalization consisting of
1,000 shares of common stock, no par value per share, of which 100 shares are
issued and outstanding. The Company has an authorized capitalization consisting
of 1,000 shares of common stock, no par value per share, of which 100 shares are
issued and outstanding. All such outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable and were not issued in
violation of the terms of any agreement or other understanding binding on the
Company or, as the case may be, Eagle, and were issued in compliance with all
applicable charter documents of the Company and, as the case may be, Eagle, and
all applicable federal, state and local laws and regulations. Except as set
forth on Schedule 2.3 hereto, there are no outstanding options, warrants, rights
(including, without limitation, pre-emptive rights), calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for, or otherwise relating to, the purchase, issuance or
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sale of any shares of the capital stock of Eagle or the Company, other than as
contemplated by this Agreement.
2.4 Subsidiaries and Investments. Eagle has no assets or operations
other than its interest in Horvath and has no liabilities which will survive the
Closing. The Company has no subsidiaries. Neither Eagle nor the Company owns,
directly or indirectly, more than one percent (1%) of the capital stock or other
equity or ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity except as set forth on
Schedule 2.4.
2.5 Financial Statements and No Material Changes. The Stockholders
shall furnish the Purchaser with the balance sheets of the Company and Eagle as
of December 31, 1997 and as of the end of each of the two preceding fiscal
years, inclusive, and the related consolidated statements of income,
stockholders' equity and changes in cash flow for the years then ended, all
certified by the Accountant (the "Financial Statements"; the balance sheets of
the Company and Eagle as at December 31, 1997 are referred to as the "Balance
Sheets"). Such Financial Statements are listed on Schedule 2.5 hereto. True and
complete copies of the Financial Statements will be delivered to the Purchaser
and are deemed a part of Schedule 2.5. Such Financial Statements, including the
footnotes thereto, except as indicated therein, shall be prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods indicated. The Balance Sheets shall fairly present, in all material
respects, the financial position of the Company and Eagle as of the date thereof
and, except as indicated therein, shall reflect all material claims against, and
all material debts and liabilities of, the Company and Eagle, fixed or
contingent, as required by generally accepted accounting principles as of the
date thereof and the related statements of income, stockholders' equity and
changes in cash flow shall fairly present, in all material respects, the results
of the operations of the Company and Eagle and the changes in their respective
cash flow for the periods indicated to the extent required to be included in the
Financial Statements under generally accepted accounting principles. Such other
balance sheets shall fairly present, in all material respects, the financial
position of the Company and Eagle at the respective dates thereof and, except as
indicated therein, shall reflect all material claims against, and all material
debts and liabilities of, the Company and Eagle, fixed or contingent, as
required by generally accepted accounting principles, as at the respective dates
thereof and the related statements of income, stockholders' equity and changes
in cash flow shall fairly present, in all material respects, the results of the
operations of the Company and Eagle and the changes in their respective cash
flow for the periods indicated to the extent required to be included in the
Financial Statements under generally accepted accounting principles. Since
December 31, 1997 (the "Balance Sheet Date") there has been no material adverse
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change in the assets or liabilities, or in the business or financial condition,
or in the results of operations, of the Company and Eagle except in the ordinary
course of business.
2.6 Books and Records. The minute books of Eagle and the Company which
will be made available to the Purchaser and its representatives, contain records
which are accurate in all material respects of all meetings of, and corporate
action taken by (including action taken by written consent) their respective
stockholders and Boards of Directors.
2.7 Title to Properties; Encumbrances. (a) Except as set forth on
Schedule 2.7 hereto and except for properties and assets reflected in the
Balance Sheet or acquired since the Balance Sheet Date which have been sold or
otherwise disposed of in the ordinary course of business, the Company and Eagle
have good, valid and marketable title to (a) all of their material properties
and assets (real and personal, tangible and intangible), including, without
limitation, all of the properties and assets reflected in the Balance Sheet,
except as indicated in the notes thereto, and (b) all of the properties and
assets purchased by the Company since the Balance Sheet Date; in each case
subject to no encumbrance, lien, charge or other restriction of any kind or
character, except for (i) liens reflected on the Balance Sheet, (ii) liens
consisting of zoning or planning restrictions, easements, permits and other
restrictions or limitations on the use of real property or irregularities in
title thereto which do not materially detract from the value of, or impair the
use of, such property by the Company in the operation of its business, (iii)
liens for current taxes, assessments or governmental charges or levies on
property not yet due and delinquent, and (iv) liens described on Schedule 2.7
(liens of the type described in clauses (i), (ii) and (iii) above are
hereinafter sometimes referred to as "Permitted Liens").
(b) The facilities, buildings, vehicles, equipment, furniture and
fixtures, leasehold improvements and other material items of tangible personal
property owned or used by the Company and Eagle, taken as a whole, are in good
operating condition and repair, subject to normal wear and maintenance, are
useable in the regular and ordinary course of their businesses and conform in
all material respects to all applicable laws, ordinances, codes, rules and
regulations relating thereto and to the construction, use, operation and
maintenance thereof.
2.8 Real Property. (a) Schedule 2.8 hereto contains an accurate and
complete list of all real property owned in whole or in part by the Company,
including the Company Plant, and includes a list of all indebtedness secured by
a lien, mortgage or deed of trust thereon. To the best knowledge of the
Stockholders, the Company has good and marketable title in fee simple to all the
real property owned by it. To the best knowledge of the Stockholders, except as
set forth in Schedule 2.8, the Company has not created or suffered to exist any
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encumbrances, liens, charges or other restrictions of any kind or character,
except for Permitted Liens. Except as set forth in Schedule 2.8 and for items
requiring repair as a result of ordinary wear and tear, to the best knowledge of
the Stockholders, all of the buildings, structures and appurtenances situated on
the real property owned in whole or in part by the Company are in reasonably
good operating condition and in a state of reasonably good maintenance and
repair, are adequate and suitable for the purposes for which they are presently
being used and, with respect to each, the Company has adequate rights of ingress
and egress for operation of the business of the Company in the ordinary course.
To the best knowledge of the Stockholders, none of such buildings, structures or
appurtenances (or any equipment therein), nor the operation or maintenance
thereof, violates any restrictive covenant or any provision of any federal,
state or local law, ordinance, rule or regulation, or encroaches on any property
owned by others in any material manner. Except as set forth on Schedule 2.8, no
condemnation proceeding is pending or, to the best knowledge of the
Stockholders, threatened which would preclude or impair the use of any such
property by the Company for the purposes for which it is currently used.
(b) Each of the Company and Eagle has good and valid rights of ingress
and egress to and from all Real Property from and to the public street systems
for all usual street, road and utility purposes;
(c) The structures and all structural, mechanical and other physical
systems thereof that constitute part of the Real Property, including without
limitation the walls, roofs and structural elements thereof and the heating,
ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste
water, storm water, paving and parking equipment, systems and facilities
included therein, and other material items at the Real Property (collectively,
the "Tangible Real Assets"), taken as a whole, are free of material defects and
in good operating condition and repair. For purposes of this Section 2.8(b)(iv),
a material defect shall mean a condition relating to the Structures or any
structural, mechanical or physical system which materially, adversely affects
the use of the subject property for its intended purposes, thereby materially
adversely affecting the operations of the Company or Eagle. There is no known
material water, chemical or gaseous seepage, diffusion or other intrusion into
said Real Property, including any subterranean portions, that would materially,
adversely impair beneficial use of the Real Property, Structure or Tangible Real
Asset;
(d) All water, sewer, gas, electric, telephone and drainage facilities,
and all other utilities required by any applicable law or by the use and
operation of the Real Property in the conduct of the businesses of the Company
and Eagle as theretofore conducted are installed to the property lines of the
Real Property, are connected pursuant to valid permits to municipal or public
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utility services or proper drainage facilities, are operable and are adequate to
service the Real Property in the operation of the businesses of the Company and
Eagle as theretofore conducted and to permit compliance with the requirements of
all laws in the operation of such businesses.
(e) The Real Property and all present uses and operations of the Real
Property comply in all material respects with all applicable statutes, rules,
regulations, ordinances, orders, writs, injunctions, judgments, decrees, awards
or restrictions of any government entity having jurisdiction over any portion of
the Real Property (including without limitation applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Law"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company and Eagle have obtained all approvals of governmental authorities
(including, without limitation, certificates of use and occupancy, licenses and
permits) required in connection with the use, occupation and operation of the
Real Property;
(f) Neither the Company, Eagle nor any Stockholder has received written
notice of any pending or threatened condemnation, fire health, safety, building,
zoning or other land use regulatory proceedings, lawsuits or administrative
actions relating to any portion of the Real Property which do or may materially
adversely affect the current use, occupancy or value thereof, nor has the
Company, Eagle or any Stockholder received written notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property;
(g) There are no parties other than the Company and Eagle in possession
of any of the Real Property or any portion thereof, and there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of the Real
Property or any portion thereof;
(h) There are no outstanding options or rights of first refusal
to purchase the Real Property, or any portion thereof or interest therein.
Neither the Company nor Eagle has transferred any air rights or development
rights relating to the Real Property;
(i) All real property taxes and assessments that are due and payable
with respect to the Real Property have been paid or will be paid at or prior to
Closing;
(j) All leases, licenses, permits and authorizations in any manner
related to the Real Property and all other instruments, documents and agreements
pursuant to which the Company or Eagle has obtained the right to use any Real
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Property are in good standing, valid and effective in accordance with their
respective terms, and there is not under any of such leases, licenses, permits,
authorizations, instruments, documents or agreements any existing material
default or event which with the giving of notice or lapse of time, or both,
would constitute a material default; and
(k) Except as set forth on Schedule 2.8, none of the leases of Real
Property requires the consent or approval of any party thereto in connection
with the consummation of the transactions contemplated hereby.
2.9 Leases. Schedule 2.9 hereto contains an accurate and complete list
and description of the terms of all leases to which the Company or Eagle is a
party (as lessee or lessor) providing for annual lease payments of $5,000 or
more. Each lease set forth on Schedule 2.9 (each, a "Lease") is in full force
and effect. All rents and additional rents due to date on each Lease have been
paid. With respect to each Lease, the lessee has been in peaceful possession
since the commencement of the original term of such Lease and is not in material
default thereunder and no waiver, indulgence or postponement of the lessee's
obligations thereunder has been granted by the lessor; and, to the best
knowledge of the Stockholders, there exists no event of default or event,
occurrence, condition or act (including the purchase of the Stock hereunder)
which, with the giving of notice, the lapse of time or the happening of any
further event or condition, would become a default under such Lease. To the best
knowledge of the Stockholders, neither the Company nor Eagle has violated any of
the terms or conditions under any such Lease in any material respect, and, to
the best knowledge of the Stockholders, all of the covenants to be performed by
any other party under any such Lease have been fully performed in all material
respects.
2.10 Material Contracts. Schedule 2.10 hereto sets forth a true and
complete list of each partially or totally executory contract, agreement,
commitment, option or understanding, of the following types, to which the
Company is a party or, to the best knowledge of the Stockholders, by which it or
any of its properties, assets or employees is bound (collectively, the
"Contracts"):
(a) warrants, stock options, "put" or "call" agreements and other
agreements or commitments to sell, purchase, issue, convert or exchange shares
of the capital stock of the Company or Eagle;
(b) voting agreements or arrangements, restrictive share transfer
agreements, stockholders agreements, preferred stock agreements, stock escrow
agreements, and any agreement, indenture or other instrument which relates to
the Stock contains restrictions with respect to payment of dividends or any
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other distribution in respect of its capital stock by which the Purchaser, Eagle
or the Company would be bound after the Closing;
(c) collective bargaining agreements;
(d) employment, consulting, advisory and other similar agreements or
arrangements, management agreements, management information services agreements
or arrangements and agreements or arrangements with current or former
stockholders, directors, officers, and employees other than employment
agreements;
(e) any bonus, deferred compensation, pension, profit sharing,
stock option, employee stock purchase, retirement or other employee benefit
plan;
(f) production, supply or purchase contracts or contracts for capital
expenditures involving payments in excess of $5,000 each, and sales orders in
excess of $5,000 each, or with terms in excess of one year as of the Balance
Sheet Date;
(g) advertising contracts over $5,000;
(h) installment sales agreements providing for annual payments of
$15,000 or more;
(i) confidentiality or secrecy agreements or arrangements;
(j) joint venture or partnership agreements or arrangements;
(k) gas and electric power supply contracts or arrangements;
(l) government contracts or arrangements, other than those
for the purchase of goods in the ordinary course of business;
(m) license or royalty agreements or arrangements;
(n) powers of attorney for any purpose whatsoever;
(o) agreements which materially limit or restrict the Company from
competing in any line of business or carrying on or expanding the nature or
geographical scope of its business anywhere in the world;
(p) options, contracts or understandings relating to the purchase
of any assets, properties or rights of the Company other than for the sale of
goods in the ordinary course of business;
(q) loan or financing agreements, trust agreements, promissory notes,
bonds, indentures, mortgages, security agreements, guarantees and other
agreements, commitments or instruments of the Company (or binding upon or
relating to the Company) evidencing, creating or relating to the borrowing or
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lending of money, or any other indebtedness (other than trade payables incurred
in the ordinary course of business) by which the Purchaser, Eagle or the Company
would be bound after the Closing;
(r) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any individual, partnership, joint venture,
corporation, trust, limited liability company, unincorporated organization,
government or other entity (each, a "Person") other than the endorsement of
negotiable instruments for collection in the ordinary course of business; or
(s) Contracts to acquire all or substantially all of the business
or assets of another company.
(t) any other agreement, contract or commitment not entered into in the
ordinary course of business which involves $5,000 or more and is not cancellable
without penalty within 90 days.
Except as indicated on Schedule 2.10, each Contract is in full force and effect
and there exists no material default or event of default or event, occurrence,
condition or act (including the purchase of the Stock hereunder) which, with the
giving of notice, the lapse of time or the happening of any other event or
condition, would become a material default or event of default thereunder the
consequences of which would be materially adverse to the Company. The Company
has not violated in any material way any of the terms or conditions of any
Contract which would have a material adverse effect on the Company and, to the
best knowledge of the Stockholders, all of the covenants to be performed by any
other party thereto have been fully performed in all material respects.
2.11 Litigation. Except as set forth on Schedule 2.11 hereto, there is
no dispute, claim, action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge of the
Stockholders any investigation by) any governmental or other instrumentality or
agency, pending, or, to the best knowledge of the Stockholders, threatened,
against or affecting Eagle or the Company or any of their respective properties
or rights which is reasonably likely to materially and adversely affect the
right or ability of the Company or Eagle to carry on its business as now
conducted, or which is reasonably likely to materially and adversely affect the
condition, whether financial or otherwise, or properties of the Company or
Eagle. Neither Eagle nor the Company is subject to any judgment, order or decree
entered in any lawsuit or proceeding which is reasonably likely to have a
material adverse effect on any of the operations or business practices of the
Company.
2.12 Taxes. (a) Except as described on Schedule 2.12, Eagle and the
Company have filed or caused to be filed, within the times and within the manner
prescribed by law, all federal, state, local and foreign tax returns and tax
reports which are required to be filed by them. Such returns and reports reflect
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accurately all liability for taxes of Eagle and the Company for the periods
covered thereby. All federal, state, local and foreign income, profits,
franchise, sales, use, occupancy, excise and other taxes and assessments
(including interest and penalties) payable by, or due from, Eagle or the Company
as of the Balance Sheet Date have been fully paid or adequately disclosed and
fully provided for in Balance Sheet, to the extent required by generally
accepted accounting principles. Except as set forth on Schedule 2.12, no
examination of any federal, state, local or foreign tax return of Eagle or the
Company is currently in progress or, to the best knowledge of the Stockholders,
is threatened. Except as set forth on Schedule 2.12, there are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any tax return of Eagle or the Company.
(b) Neither Eagle nor the Company has filed a consent under section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code") concerning
collapsible corporations. Neither Eagle nor the Company has made any payments,
is required to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments, or is a party to
any agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under section 280G of the Code. Neither
Eagle nor the Company has ever been a United States real property holding
corporation within the meaning of section 897 of the Code. Eagle and the Company
have each disclosed on their respective federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of federal
income Tax within the meaning of section 6662 of the Code. Neither Eagle nor the
Company is a party to any Tax allocation or sharing agreement. Neither Eagle nor
the Company is a member of an affiliated group filing a consolidated federal
income Tax Return,
(c) The unpaid Taxes of Eagle and the Company, if any, related to the
Tax Returns (i) do not exceed by any material amount the reserve for tax
liability (including any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the Closing Balance
Sheet and (ii) will not exceed by any material amount that reserve as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of Eagle and the Company in filing their Tax Returns.
2.13 No Other Representations. Notwithstanding anything to the contrary
contained herein, each of the Stockholders makes no representations or
warranties whatsoever, express or implied, with respect to the Company or the
condition of its assets and properties, the transactions contemplated hereby or
any related matter, except for those representations and warranties contained
herein or in any Exhibit or Schedule and, in the case of the Operating
Stockholder, the representations and warranties contained in Article 3. Without
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limitation as to the foregoing, the Purchaser acknowledges that the Stockholders
make no representations or warranties with respect to (a) any financial
projection or forecast or (b) any other information provided to the Purchaser or
its representatives except to the extent set forth in this Agreement (including
the Exhibits and Schedules hereto or in any document required to be delivered at
Closing to the Purchaser). With respect to any projection or forecast delivered
by or on behalf of the Stockholders to the Purchaser, the Purchaser acknowledges
that (i) there are uncertainties inherent in attempting to make such
projections, (ii) it is taking full responsibility for making its own evaluation
of the adequacy and accuracy of all such projections and forecasts furnished to
it, and (iii) it shall have no claim against the Stockholders or their
representatives or affiliates with respect thereto.
2.14 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Stockholders or the Company is, or will be, entitled to any
commission or broker's or finder's fees from the parties hereto, or from any
Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated by this
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE OPERATING STOCKHOLDERS
The Operating Stockholders, severally and not jointly, hereby make the
following representations and warranties to the Purchaser (with Benjamin
representing and warranting solely as to the Company and not Eagle):
3.1 Personal Property. Schedule 3.1 hereto contains an accurate and
complete list of all tangible personal property (other than inventory and the
Company Equipment) owned or leased by the Company or used in the Company's
business. With respect to any property included on Schedule 3.1 which is not
owned by the Company and for which annual lease payments are $5,000 or more,
Schedule 3.1 names the owner thereof and describes or refers to any agreement
relating to the use thereof.
3.2 Inventory. Schedule 3.2 hereto contains a listing of the inventory
of the Company and/or Eagle as of the Balance Sheet Date. The inventory
classified as such in the Balance Sheet consists of items of a quantity and
quality usable or saleable in the ordinary course of business at prevailing
market prices without discount other than in the ordinary course of business,
net of applicable reserves.
3.3 Condition and Sufficiency of Assets. All machinery, equipment,
vehicles, furniture, fixtures, plants, buildings, facilities and other tangible
assets, including, without limitation, the Company Plant and the Company
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Equipment, are, without material exception in any individual case, in reasonably
good operating condition and repair, ordinary wear and tear excepted, and are
adequate for the uses to which they are being put by the Company in the ordinary
course of its business, taken as a whole. Neither the Company nor either of the
Operating Stockholders has received any notice that any of such assets or
facilities is in need of substantial maintenance or repair, except in the
ordinary course of business. To the best knowledge of the Operating
Stockholders, the assets owned by the Company are sufficient and adequate to
conduct its business as now being conducted.
3.4 Liabilities. Neither the Company nor Eagle has any material
outstanding claims, liabilities or indebtedness, contingent or otherwise, of the
type required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles except as set forth in the Balance
Sheets or referred to in the footnotes thereto, other than liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business by the
Company or Eagle. Neither the Company nor Eagle is in material default in
respect of the material terms or conditions of any indebtedness (other than
defaults under provisions relating to change of management or control of the
Company arising as a result of the transactions contemplated by this Agreement).
3.5 Insurance. Set forth on Schedule 3.5 is a complete list of
insurance policies which the Company maintains with respect to its business,
properties or employees. Such policies are in full force and effect and the
Operating Stockholder have no reason to believe that any of them will be
terminated. There are no outstanding and unpaid premiums, and there are no
provisions in any insurance coverage of the Company or Eagle for retroactive
premium adjustments. No notice of cancellation or nonrenewal with respect to any
such coverage has been received by the Company or Eagle. All products liability
and general liability insurance policies maintained by the Company or Eagle are
and historically have been occurrence policies and not claims made policies.
Except as set forth in Schedule 3.5, there are no outstanding performance bonds
or other surety arrangements covering or issued for the benefit of the Company
or Eagle or their businesses or as to which the Company or Eagle has or may
incur any liability.
3.6 Intellectual Properties. To the best knowledge of the Operating
Stockholders, the operation of the business of the Company and Eagle require no
rights under Intellectual Property (as hereinafter defined) other than rights
under Intellectual Property listed on Schedule 3.6 and rights granted to the
Company or Eagle pursuant to agreements listed on Schedule 3.6. Except as
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otherwise set forth on Schedule 3.6, the Company or Eagle owns all right, title
and interest in the Intellectual Property listed on Schedule 3.6 and has granted
no rights or licenses to others with respect to the same. Each item of
Intellectual Property listed on Schedule 3.6 has been duly registered with,
filed in, or issued by the appropriate United States of America governmental
agency, to the extent required, and each such registration, filing and issuance
remains in full force and effect. Except as set forth on Schedule 3.6, no claim
adverse to the interests of the Company or Eagle in the Intellectual Property or
agreements listed on Schedule 3.6 has been made in litigation. To the best
knowledge of the Operating Stockholders, no such claim has been threatened or
asserted in writing, and no Person has infringed or otherwise violated the
rights of the Company or Eagle in any of the Intellectual Property or agreements
listed on Schedule 3.6. Except as set forth on Schedule 3.6, no litigation is
pending wherein the Company or Eagle is accused of infringing or otherwise
violating the Intellectual Property right of another, or of breaching a contract
conveying rights under Intellectual Property. To the best knowledge of the
Operating Stockholders, no such claim has been asserted or threatened against
the Company or Eagle in writing. For purposes of this Section 3.6, "Intellectual
Property" means domestic and foreign patents, patent applications, registered
trade marks and service marks and registered copyrights.
3.7 Compliance with Laws. To the best knowledge of the Operating
Stockholders, the Company and Eagle are in material compliance with all
applicable laws, regulations, orders, judgments and decrees to which they or
their respective operations, assets or properties are subject and have complied
in all material respects with the requirements of all licenses and permits
applicable to their respective businesses including, without limitation, all
requirements imposed by the United States Occupational Safety and Health
Administration and the United States Food and Drug Administration, the breach of
which would have a material adverse effect on the Company or Eagle.
3.8 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the respective records and
books of account of the Company as being due to the Company as at the Closing
Date (less the amount of any provision or reserve therefor made in the records
and books of account of the Company) (a) arose from bona-fide sales to, the
provision of services to, or the bona-fide transactions with, third parties in
the ordinary course of business and are valid and genuine; (b) consist only of
obligations of third parties in connection with the sale of goods and/or
services; (c) represent the full invoice value of all accounts included therein;
(d) are not subject to any bona fide defenses, counterclaims or set-offs (except
as reflected in reserves shown on the Financial Statements); and (e) except as
set forth in the Financial Statements, have not been encumbered or sold. There
has been no material adverse change since the Balance Sheet Date in the amount
of accounts receivable or other debts due the Company or the allowances with
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respect thereto, from that reflected in the Balance Sheet, other than in the
ordinary course of business.
3.9 Employment Relations. To the best knowledge of the Operating
Stockholders, (a) the Company and Eagle are in substantial compliance with all
federal, state or other applicable laws, domestic or foreign, respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and has not and is not engaged in any unfair labor practice;
(b) no unfair labor practice complaint against the Company or Eagle is pending
before the National Labor Relations Board; (c) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
involving the Company or Eagle; (d) no representation question exists respecting
the employees of the Company or Eagle; (e) no grievance which might have a
material adverse effect upon the Company or Eagle or the conduct of their
respective businesses as exists, no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and no claim therefor has
been asserted; (f) no collective bargaining agreement is currently being
negotiated by the Company or Eagle; and (g) neither the Company nor Eagle has
not experienced any material labor difficulty during the last three years.
3.10 Employee Benefit Plans.
(a)List of Plans. Set forth on Schedule 3.10 hereto is an accurate and
complete list of all employee benefit plans ("Employee Benefit Plans") within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder ("ERISA"), whether or
not any such Employee Benefit Plans are otherwise exempt from the provisions of
ERISA, established, maintained or contributed to by the Company (including, for
this purpose and for the purpose of all of the representations in this Section
3.10, all employers (whether or not incorporated) which by reason of common
control are treated together with the Company and/or the Stockholders as a
single employer within the meaning of Section 414(b)(c)(m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code") ["ERISA Affiliates"]).
(b) Status of Plans. To the best knowledge of the Operating
Stockholders, except as set forth in Schedule 3.10, the Company does not
maintain or contribute to any Employee Benefit Plan subject to ERISA which is
not, or in the past has not been, in substantial compliance with ERISA, or which
has incurred any accumulated funding deficiency within the meaning of Section
412 or 418B of the Code, or which has applied for or obtained a waiver from the
Internal Revenue Service of any minimum funding requirement under Section 412 of
the Code. The Company has not incurred any liability to the Pension Benefit
Guaranty Corporation ("PBGC") (other than for premiums not yet due) in
connection with any Employee Benefit Plan covering any employees of the Company,
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including any liability under Section 4069 of ERISA and any penalty imposed
under Section 4071 of ERISA, or ceased operations at any facility or withdrawn
from any such Plan in a manner which could subject it to liability under Section
4063, 4064 or 4068(f) of ERISA, and knows of no facts or circumstances which
might give rise to any liability of the Company to the PBGC under Title IV of
ERISA which could reasonably be anticipated to result in any claims being made
against the Purchaser by the PBGC. The Company has not maintained or contributed
to any Employee Benefit Plan which is a "Multiemployer Plan" (as such term is
defined in Section 4001(a)(3) of ERISA).
The Company does not maintain any Employee Benefit Plan which is "Group
Health Plan" (as such term is defined in Section 4980B(g)(2) of the Code) that
has not been administered and operated in all material respects in substantial
compliance with the applicable requirements of Section 601 of ERISA and Section
4980B of the Code and the Company is not subject to any liability, including,
but not limited to, additional contributions, fines, penalties or loss of tax
deduction as a result of such administration and operation. The Company does not
maintain any Employee Benefit Plan (whether qualified or nonqualified within the
meaning of Section 401(a) of the Code) providing for retiree health and/or life
benefits and having unfunded liabilities other than as required by applicable
federal or state law. The Company does not maintain any Employee Benefit Plan
which is an "Employee Welfare Benefit Plan" (as such term is defined in Section
3(1) of ERISA) that has provided any benefit which is a "Disqualified Benefit"
(as such term is defined in Section 4976(b) of the Code) for which an excise tax
would be imposed.
(c) Contributions. Full payment has been made of all amounts which the
Company is required, under applicable law or under any Employee Benefit Plan or
any agreement relating to any Employee Benefit Plan to which it is a party, to
have paid as contributions thereto as of the last day of the most recent fiscal
year of such Employee Benefit Plan ended prior to the date hereof. The Company
has made adequate provision for reserves to meet contributions that have not
been made because they are not yet due under the terms of any Employee Benefit
Plan or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided. All monies withheld from employees with respect to
Employee Benefit Plans have been remitted to the appropriate Employee Benefit
Plan in a timely manner.
(d) Tax Qualifications. Except as indicated on Schedule 3.10, each
Employee Benefit Plan intended to be qualified under Section 401(a) of the Code
has been determined to be so qualified by the Internal Revenue Service and
nothing has occurred since the date of the last such determination which
resulted or is likely to result in the revocation of such determination.
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(e) Transactions. Except as set forth on Schedule 3.10, no "Reportable
Event" (as such term is defined in Section 4043 of ERISA) for which the 30-day
notice requirement has not been waived by the PBGC has occurred with respect to
any Employee Benefit Plan and the Company has not engaged in any transaction
with respect to the Employee Benefit Plans which would subject it to a tax,
penalty or liability for prohibited transactions under ERISA or the Code nor
have any of its directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
which would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(f) Triggering Events. Except as indicated on Schedule 3.10, the
execution of, and consummation of the transactions contemplated by, this
Agreement do not constitute a triggering event under any Employee Benefit Plan,
policy, arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company.
(g) Other Plans. The Company does not presently maintain any employee
benefit plans or any other foreign pension, welfare or retirement benefit plans
other than those listed on Schedule 3.10. Any foreign pension, welfare or
retirement benefit plans listed on Schedule 3.10 are in substantial compliance
with applicable law.
(h) Documents. The Operating Stockholders have delivered or will cause
to be delivered to the Purchaser and its counsel true and complete copies of (i)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401(a) or tax-exempt under Section 501(a)
of the Code and (ii) Form 5500 for the most recent completed fiscal year for
each Employee Benefit Plan required to file such form.
(i) The Company has no liability with respect to any benefit plan or
arrangement other than the Employee Benefit Plans. All Employee Benefit Plan
conforms conform (and have at all times conformed) to the requirements of ERISA,
the Code and all applicable laws in all material respects. Each Employee Benefit
Plan has been maintained in all material respects in accordance with its
documents and with all applicable provisions of the Code, ERISA and other
applicable laws, including federal and state securities laws; and all reporting,
disclosure, and notice requirements of ERISA, the Code and other applicable laws
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have been satisfied in all material respects with respect to each Employee
Benefit Plan.
(j) With respect to each Employee Benefit Plan, there has occurred no
non-exempt "prohibited transaction" (within the meaning of Section 4975 of the
Code or Section 406 of ERISA) or breach of any fiduciary duty described in
Section 404 of ERISA that could, if successful, result in any material
liability, direct or indirect, for the Company or any stockholder, officer,
director, or employee of the Company.
(k) The Company has made no plan or commitment, whether or not legally
binding, to create any additional Employee Benefit Plans or to modify or change
any existing Employee Benefit Plan. No statement, either written or oral, has
been made by the Company to any person with regard to any Employee Benefit Plan
that was not in accordance with the Employee Benefit Plan and that could have a
material adverse economic consequence to the Company. All Employee Benefit Plans
may be amended or terminated without penalty by the Company at any time on or
after the Closing.
(l) To the best knowledge of the Operating Stockholders, all persons
classified by the Company as independent contractors satisfy and have at all
times satisfied the requirements of applicable law to be so classified; the
Company has fully and accurately reported their compensation on IRS Forms 1099
when required to do so; and the Company has no obligations to provide benefits
with respect to such persons under Employee Benefit Plans or otherwise. The
Company does not employ and has not employed any "leased employees" as defined
in Section 414(n) of the Code.
3.11 Environmental Laws and Regulations.
(a)Except as described on Schedule 3.11, to the best knowledge of the
Operating Stockholders, the Company is in compliance in all material respects
with all applicable federal, state and local laws, regulations and ordinances
relating to the registration of Hazardous Material, pollution control and
environmental contamination including, but not limited to, all laws and
regulations governing the generation, use, collection, storage, transportation,
discharge, or disposal of Hazardous Materials and all laws and regulations with
regard to licensing, recordkeeping, notification and reporting requirements
respecting Hazardous Materials;
(b)the Company has received no written notice of a violation of, or has
been subject to any administrative or judicial proceeding pursuant to, such laws
or regulations either now or any time during the past two years; and
(c)to the best knowledge of the Operating Stockholders, there are no
facts or circumstances which could reasonably form the basis for the assertion
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of any Claim (as defined below) against the Company. under current law and
practice, relating to environmental matters including, but not limited to, any
Claim arising from past or present environmental practices asserted under CERCLA
(as defined below) and RCRA (as defined below), or any other federal, state or
local environmental statute, which the Stockholders believe would have a
material adverse effect on the business, results of operations or financial
condition of the Company.
For purposes of this Section 3.11, the following terms shall have the
following meanings: (A) "Hazardous Materials" shall mean materials defined as
"hazardous substances", "hazardous wastes" or "solid wastes" in (i) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. " 9601-9657, and any amendments thereto ("CERCLA"), (ii) the Resource
Conservation and Recovery Act, 42 U.S.C. "6901-6987 and any amendments thereto
("RCRA"), (iii) any similar federal, state or local environmental statute, and
(iv) pollutants or contaminants under any federal, state or local environmental
laws, regulations or ordinances and (B) "Claim" shall mean any and all claims,
demands, causes of actions, suits, proceedings, administrative proceedings,
losses, judgments, decrees, debts, damages, liabilities, court costs, attorneys'
fees and any other expenses incurred, assessed or sustained by or against the
Company or the Subsidiary.
3.12 Interests in Clients, Suppliers, Etc. Except as set forth in
Schedule 3.12, neither any Stockholder nor any officer or director of the
Company or Eagle possesses, directly or indirectly, any financial interest in,
or is a director, officer or employee of, any Person which is a client,
supplier, customer, lessor, lessee, or competitor or potential competitor of the
Company or Eagle. Ownership of securities of a company whose securities are
registered under the Securities Exchange Act of 1934 not in excess of 1% of any
class of such securities shall not be deemed to be a financial interest for
purposes of this Section 3.12.
3.13 Bank Accounts, Powers of Attorney and Employees. Set forth on
Schedule 3.13 hereto is an accurate and complete list showing (a) the name and
address of each bank in which the Company or Eagle has an account or safe
deposit box, the number of any such account or any such box and the names of all
persons authorized to draw thereon or have access thereto, (b) the names of all
persons, if any, holding powers of attorney from the Company or Eagle and a
summary statement of the terms thereof, and (c) the names of all persons
receiving compensation on a regular basis as officers, directors, employees,
consultants or otherwise from the Company or Eagle as of the Balance Sheet Date,
together with a statement of the rate of compensation payable to each such
person.
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3.14 No Changes Since Balance Sheet Date.
Since the Balance Sheet Date, except as expressly contemplated hereby
or disclosed in Schedule 3.14, neither the Company nor Eagle has (i) incurred
any liability or obligation of any nature (whether accrued, absolute, contingent
or otherwise), except in the ordinary course of business, (ii) permitted any of
its assets to be subjected to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind (other than Permitted Liens),
(iii) sold, transferred or otherwise disposed of any assets except in the
ordinary course of business, (iv) made any capital expenditure or commitment
therefor, except in the ordinary course of business, (v) made any acquisition of
assets or properties except in the ordinary course of business, (vi) declared or
paid any dividend or made any distribution on any shares of its capital stock,
or redeemed, purchased, issued, sold or otherwise acquired or disposed of any
shares of its capital stock or granted any option, warrant or other right to
purchase or acquire any such shares, (vii) made any bonus or profit sharing
distribution or payment of any kind, (viii) increased its indebtedness for
borrowed money, except current borrowings from banks in the ordinary course of
business, or made any loan to any Person or guaranteed any indebtedness for
borrowed money, (ix) written off as uncollectible any notes or accounts
receivable, except write-offs in the ordinary course of business charged to
applicable reserves, none of which individually or in the aggregate is material
to the Company or Eagle, (x) granted any increase in the rate of wages,
salaries, bonuses or other remuneration of any director, officer, employee or
consultant, (xi) cancelled or waived any claims or rights of substantial value,
(xii) made any change in any method of accounting or auditing practice, (xiii)
suffered any damage, destruction or loss, whether covered by insurance or not,
having a material adverse effect, (xiv) introduced any material change with
respect to the operation of its business, (xv) entered into any material
commitment or transaction (including, without limitation, any borrowing or
capital expenditure) not in the ordinary course of the conduct of its business,
(xvi) paid, discharged or satisfied any liability or other expense other than in
the ordinary course of the conduct of its business, (xvii) disposed of or
permitted to lapse any rights to the use of any Intellectual Property right
which would have a material adverse effect on the Company or Eagle, (xviii)
paid, loaned or advanced any amount to, or transferred or leased any properties
or assets (real, personal or mixed, tangible or intangible) to, or entered into
any agreement or arrangement with, any of its officers, directors, consultants,
employees or stockholders, (xx) otherwise conducted its business or entered into
any transaction, except in the usual and ordinary manner and in the ordinary
course of business, (xxi) suffered revocation of any license or right to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force which had a
material adverse effect on the business or financial condition of the Company or
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Eagle or (xxii) agreed, whether or not in writing, to do any of the foregoing.
3.15 Customers and Suppliers. Schedule 3.15 hereto sets forth a true
and complete list of the names and addresses of the 15 suppliers from which the
Company purchased the largest amount of supplies or services during the fiscal
year ended December 31, 1997 and a true and complete list of the names and
addresses of the 25 customers to which the Company sold the largest amount of
products, goods or services during the fiscal year ended December 31, 1997. To
the best knowledge of the Operating Stockholders, no supplier or customer listed
on Schedule 3.15 expects to reduce its business with the Company by reason of
the transactions contemplated by this Agreement.
3.16 Government Contracts. Since its formation in 1992, the Company has
not been suspended or disbarred from bidding on contracts or subcontracts for
any agency or instrumentality of the United States government, the Commonwealth
of Pennsylvania or any other governmental authority, nor, to the best knowledge
of the Operating Stockholder, has any such suspension or disbarment been
threatened in writing. The Company has not been, and is not now being, audited
or investigated by the United States Government Accounting Office (the "GAO"),
the Defense Contract Audit Agency (the "DCAA"), the inspector general of any
agency of the United States government, the Commonwealth of Pennsylvania nor, to
the best knowledge of the Operating Stockholders, has any such audit or
investigation been threatened. To the best knowledge of the Operating
Stockholders, there are no facts or circumstances which could reasonably form
the basis for the suspension or disbarment of the Company under current law and
practice, from bidding on contracts or subcontracts for any agency or
instrumentality of the United States government or for a claim pursuant to an
audit or investigation by the GAO, the DCAA or the inspector general of any
agency of the United States government or the Commonwealth of Pennsylvania,
which could have a material adverse effect on the Company.
3.17 Additional Information. Schedule 3.17 hereto contains, to
the extent not included in some other Schedule hereto, a list and summary
description of the following:
(a)all vehicles, equipment, furniture and fixtures, leasehold
improvements and other material items of personal property owned or leased by
the Company or Eagle, specifying which are owned and which are leased and, with
respect to leased property, specifying the identity of the lessor, the rental
rate and the unexpired term of the lease, and also specifying serial numbers
(where appropriate) and location;
(b)the names and current annual salary or hourly rates of all
present officers and employees of the Company and Eagle together with a
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statement of the full amount of any bonuses, profit sharing or other
remuneration paid to each such person and to any director during the current or
the last fiscal year or payable to each suuch person in the future and the basis
therefor;
(c) a listing and description of all cash equivalent
items held by the Company or Eagle;
(d) a list of all of licenses, permits and authorizations
of the Company or Eagle;
(e) the names of all persons authorized to borrow money
or incur or guarantee indebtedness on behalf of the Company or Eagle;
(f) the names of all persons holding powers of attorney
from the Company or Eagle and a summary statement of the terms thereof; and
(g) a listing of all current liabilities of the Company or
Eagle.
ARTICLE 4
REPRESENTATIONS OF THE PURCHASER AND THE GUARANTOR
The Purchaser and the Guarantor, jointly and severally, hereby
represent, warrant and agree with each of the Stockholders as follows:
4.1 Existence and Good Standing; Power and Authority. The Purchaser and
the Guarantor are a corporations duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Purchaser has qualified as
a foreign corporation authorized to do business in the Commonwealth of
Pennsylvania. The Purchaser and the Guarantor have the corporate power and
authority to make, execute, deliver and perform this Agreement, and this
Agreement has been duly authorized and approved by all required corporate action
of the Purchaser and the Guarantor.
4.2 Restrictive Documents. Neither the Purchaser nor the Guarantor is
subject to any charter, by-law, mortgage, lien, lease, agreement, instrument,
order, law, rule, regulation, judgment or decree, or any other restriction of
any kind or character, which would prevent consummation of the transactions
contemplated by this Agreement.
4.3 Purchase for Investment. The Purchaser will acquire the Stock for
its own account for investment and not with a view toward any resale or
distribution thereof within the meaning of Section 2(11) of the Securities Act
of 1933, as amended; provided, however, that the disposition of the Purchaser's
property shall at all times remain within the sole control of the Purchaser.
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4.4 Broker's or Finder's Fees. No agent, broker, person or firm acting
on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
4.5 Investigation. The Purchaser acknowledges that it is knowledgeable
about, and experienced in, the Business. In entering into the Closing and in
purchasing the Stock, the Purchaser will rely solely upon its own investigation
and analysis (and that of its representatives and advisors), its own knowledge
of the industry in which the Company conducts its business operations and the
representations and warranties of the Company and the Stockholders expressly set
forth in this Agreement, and not upon any other representations, warranties or
statements of any kind. Without limiting the generality of the foregoing, the
Purchaser accepts the assets of the Company "as is - where is" on the date
hereof, reasonable wear and tear excepted.
ARTICLE 5
CONDUCT OF BUSINESS; EXCLUSIVE
DEALING; REVIEW; CONFIDENTIALITY
5.1 Conduct of Business Pending Closing. (a) Between the date
hereof and the Closing Date, the Company and Eagle will:
(i) carry on their respective businesses in
substantially the same manner as it has heretofore and not introduce
any material new method of management, operation or accounting;
(ii) maintain their respective properties and facilities,
including those held under leases, in as good working order and
condition as at present, ordinary wear and tear excepted;
(iii) perform all of their respective obligations under
agreements relating to or affecting their respective assets, properties
or rights in all material respects;
(iv) keep in full force and effect present insurance
policies or other comparable insurance coverage;
(v) use reasonable efforts to maintain and preserve their
business organization intact, retain their respective present employees
and maintain their respective relationships with suppliers, customers
and others having business relations with the Company or Eagle;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
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regulatory agencies and similar governmental authorities in all
material respects;
(vii) maintain present material debt and lease instruments and
not enter into new or amended debt or lease instruments which will
survive the Closing, without the knowledge and consent of the Purchaser
(which consent shall not be unreasonably withheld or delayed); and
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents, except for
ordinary and customary bonuses and salary increases in accordance with
past practice.
(b) During the period from the date of this Agreement to the Closing
Date, at the request of the Purchaser the Operating Stockholder shall confer on
a regular and frequent basis with one or more designated representatives of the
Purchaser to report material operational matters and to report the general
status of ongoing operations. The Operating Stockholder shall cause the Company
to notify the Purchaser of any unexpected emergency or other change in the
normal course of its business or in the operation of its properties and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) adjudicatory proceedings, budget
meetings or submissions involving any material property of the Company, and to
keep the Purchaser fully informed of such events and permit its representatives
prompt access to all materials prepared in connection therewith. It is expressly
understood and agreed that a breach of this paragraph shall not be the basis of
a claim for indemnification, but this sentence shall not preclude Purchaser from
pursuing a claim for indemnification under any other Section hereof.
5.2 Prohibited Activities. Between the Balance Sheet Date and the
Closing Date, the Company and Eagle have not and from the date hereof, without
prior written consent of the Purchaser, will not:
(i) make any change in its Articles of Incorporation
or By-laws without the written consent of the Purchaser;
(ii) issue any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of any
kind;
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its
stock;
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(iv) enter into any contract or commitment or incur or agree
to incur any liability or make any capital expenditures, except if it
is in the normal course of business, consistent with past practice,
which includes making and financing acquisitions;
(v) increase the compensation payable or to become payable to
any officer, director, Stockholder, employee or agent, or make any
bonus or management fee payment to any such person except ordinary and
customary bonuses and periodic salary increases to employees;
(vi) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now
owned or hereafter acquired, except (1) with respect to any of the
foregoing incurred in the ordinary course of business consistent with
past practice, (2) with respect to purchase money liens incurred in
connection with the acquisition of equipment and other transactions in
the ordinary course, with respect to equipment necessary or desirable
for the conduct of the businesses of the Company or Eagle, (3) (A)
liens for taxes either not yet due or being contested in good faith and
by appropriate proceedings (and for which contested taxes adequate
reserves have been established and are being maintained) or (B)
materialmen's, mechanics', workers', repairmen's, employees' or other
like liens arising in the ordinary course of business, or (4) liens set
forth on Schedule 5.2 hereto;
(vii) sell, assign, lease or otherwise transfer or dispose
of any property or equipment except in the normal course of business;
(x) waive any material rights or claims of the Company or
Eagle, provided that the Company and Eagle may negotiate and adjust
bills in the course of good faith disputes with customers in a manner
consistent with past practice;
(xi) commit a material breach or amend or terminate any
material agreement, permit, license or other right of the Company or
Eagle;
(xii) enter into any other transaction (1) that is not
negotiated at arm's length with a third party not affiliated with the
Company, Eagle or any officer, director or Stockholder of the Company
or Eagle or (2) outside the ordinary course of the Company's or Eagle's
business or prohibited hereunder; or
(xiii) merge or consolidate, or agree to merge or consolidate,
with any other corporation.
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5.3 Exclusive Dealing. During the period from the date of this
Agreement to the Closing Date, the Stockholders shall not, and shall cause each
of the Company and Eagle to refrain from taking any action to, directly or
indirectly, solicit, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person, other than the
Purchaser, concerning any purchase of the Stock or any merger, sale of all or
substantially all of its assets or similar transaction involving the Company and
the Purchaser shall not, directly or indirectly, solicit, encourage, initiate or
engage in discussions or negotiations with, any companies in the Business in the
Commonwealth of Pennsylvania with a view to acquiring the stock or assets of any
such companies.
5.4 Access and Cooperation; Due Diligence. (a) Between the date of this
Agreement and the Closing Date, the Purchaser will be afforded access to all of
the sites, properties, books and records of the Company and Eagle and will
furnish the Purchaser with such additional financial and operating data and
other information as to the business and properties of the Company and Eagle as
the Purchaser may from time to time reasonably request, provided, however, that,
(i) unless and until the payment contemplated by Section 1.4(a)(ii) is made, all
such activities shall be limited to a review of documents, books and records at
the Accountant's offices and no representative of the Purchaser shall visit any
Company facility or contact any Company's officer, employee, customer or
supplier and (ii) after said payment is made, all site visits and contacts with
Company's customers, suppliers, officers and employees shall be made only in
full coordination with the Operating Stockholder. Without limiting the
generality of the foregoing, as promptly as practicable, but in no event later
than March 6, 1998 (the "Due Diligence Date"), the Operating Stockholders shall
deliver to the Purchaser copies of (A) the most recent available financial
statements and tax returns of the Company and Eagle, and (B) the Schedules
provided for in this Agreement which shall be substantially complete in all
material respects (subject to acquisitions which may be made thereafter);
provided, however, that (I) Schedules 1.2 and 3.2 will not be provided until the
Closing; (II) Schedule 2.10 will be provided at the Closing, except that all
disposal contracts, solid waste disposal contracts and acquisition contracts
will be provided by the Due Diligence Date and if the Company is not a party to
any of the types of contracts set forth in subsections (a) through (t) of
Section 2.10, it will so advise the Purchaser by the Due Diligence Date; and
(III) the completed Schedule 3.17 will be provided by the Due Diligence Date,
except that with regard to the information required by Section 3.17(a), a list
of vehicles and an estimate of the number of containers, sorted by type, will be
provided by the Due Diligence Date and the remainder of the information required
by Section 3.17(a) will be provided at the Closing.
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(b) In the event that the Purchaser has not received complete copies of
the information referred to in Sections 5.4(a)(i) and 5.4(a)(ii) above (the "Due
Diligence Information") by March 6, 1998, then each of the dates set out in
Sections 1.4(a)(ii), 1.6 and 13.14 of this Agreement shall, automatically and
without any act of any party hereto, be revised by adding to such dates the
number of days between the Due Diligence Date and the date that complete copies
of the Due Diligence Information is finally received by the Purchaser.
5.5 Confidentiality. In the event of termination of this Agreement, the
Purchaser shall keep confidential any material information obtained from the
Stockholders, Eagle or the Company concerning the properties, operations and
businesses (unless readily ascertainable from public or published information or
trade sources) until the same ceases to be material (or becomes so
ascertainable) of the Company and, at the request of the Stockholders, shall
return to the Company all copies of any schedules, statements, documents or
other written information obtained in connection therewith.
5.6 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Closing to supplement
or amend promptly the Schedules hereto with respect to any matter hereafter
arising or discovered which, if known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided that no
amendment or supplement to a Schedule that constitutes or reflects a material
adverse change may be made unless the Purchaser, in the case of an amendment or
supplement by any Stockholder, or the Stockholders Representative, in the case
of an amendment or supplement by the Purchaser, consents to such amendment or
supplement by the Purchaser, and, provided, further, that the acceptance of any
amendment or supplement to any schedule shall operate as a waiver of any claim
under Article 10 or otherwise by the consenting party solely with respect to the
item or items set forth in such amendment or supplement. For all purposes of
this Agreement the Schedules hereto shall be deemed to be the Schedules as
amended or supplemented pursuant to this Section 5.6. In the event that the
Purchaser or any Stockholder seeks to amend or supplement a Schedule pursuant to
the first sentence of this Section 5.6, and the Purchaser or the Company does
not consent to such amendment or supplement as required by this Section 5.6,
either party may terminate this Agreement pursuant to the provisions of Section
13.14 hereof. No party to this Agreement shall be liable to any other party if
this Agreement shall be terminated pursuant to the provisions of this Section
5.6.
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ARTICLE 6
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
The purchase of the Stock by the Purchaser on the Closing Date is
conditioned upon satisfaction, on or prior to such date, of the following
conditions:
6.1 Opinion of Counsel for Eagle, the Company and the Stockholders. The
Stockholders shall have furnished the Purchaser with an opinion, dated the
Closing Date, of Faust Rabbach & Oppenheim, LLP ("Stockholders' Counsel") in
form and substance reasonably satisfactory to the Purchaser and its counsel, to
the effect set forth on Exhibit 5 hereto.
6.2 Good Standing and Other Certificates. The Stockholders shall have
delivered to the Purchaser (a) copies of the charters of Eagle and the Company,
certified by the Secretary of the Commonwealth of Pennsylvania, (b) certificates
from the Secretary of the Commonwealth of Pennsylvania to the effect that each
of Eagle and the Company are in good standing or subsisting in such
jurisdiction, (c) a certificate from the Secretary of State or other appropriate
official in each state in which Eagle or the Company is qualified to do business
to the effect that such company is in good standing in such state, (d)
certificates as to the tax status of each of Eagle and the Company from the
appropriate official in the Commonwealth of Pennsylvania and (e) copies of the
By-Laws of Eagle and the Company, certified by their respective Secretaries as
being true and correct and in effect on the Closing Date.
6.3 No Material Adverse Change. Prior to the Closing Date, there shall
be no (a) material adverse change in the assets or liabilities, the business or
financial condition, the results of operations, except for seasonal fluctuations
in the ordinary course of business of the Company, whether as a result of any
legislative or regulatory change, revocation of any license or right to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation or act of God or other public force or otherwise, (b)
no material loss or damage to Company property, whether or not covered by
insurance, and (c) the Stockholders shall have delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
6.4 Truth of Representations and Warranties. The representations and
warranties of the Stockholders contained in this Agreement or in any Exhibit or
Schedule hereto shall be true, complete and correct in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of such date, and the Stockholders shall
have delivered to the Purchaser a certificate, dated the Closing Date, to such
effect.
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6.5 Performance of Agreements. All of the agreements of the
Stockholders to be performed on or before the Closing Date pursuant to the terms
hereof shall have been duly performed.
6.6 No Litigation Threatened. No action or proceedings shall have been
instituted or, to the best knowledge of each of the Stockholders, threatened
before a court or other government body or by any public authority to restrain
or prohibit any of the transactions contemplated hereby.
6.7 Employment Agreement. The Company shall have entered into an
employment agreement with the Operating Stockholder substantially in the form of
Exhibit 6 hereto (the "Employment Agreement").
6.8 Approvals. All governmental and other consents and approvals
including, without limitation, those from landlords, and lenders and
counterparties to Contracts, if any, necessary to permit the consummation of the
transactions contemplated by this Agreement (including, without limitation,
consents required in connection with licenses, permits and recycling permits due
to a change in control of the company) shall have been received. Without
limiting the generality of the foregoing, the Purchaser and the Company shall
have filed Premerger Notification and Report Forms with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
(collectively, the "HSR Act Filings") and the waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act shall
have expired or have been waived by such Commission and Division and no
objection to this Agreement or any of the transactions contemplated hereby shall
have been made by such Commission or Division (or, if made, shall have been
withdrawn in writing).
6.9 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser shall have received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.10 Deliveries.
(a) Documents. At or prior to the Closing, the Company shall
have delivered the following items to the Purchaser:
(i) the certificates and other items contemplated by Sections
6.1, 6.2, 6.3, 6.4, 6.7, 6.8 and 6.9 and hereof, which shall
be in form and substance reasonably satisfactory to the
Purchaser and its counsel;
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(ii) resignations of each of the officers and directors of the
Company who are Stockholders, and the release of any and all
obligations of Eagle and the Company to such Persons under any
and all employment contracts, consulting agreements or bonus
arrangements (other than the Employment Agreement);
(iii) the minute books, stock transfer books and similar
corporate records of Eagle and the Company; and
(iv) such other documents or certificates as may be
reasonably requested by the Purchaser or its counsel.
(b) Stock Certificates. At the Closing, the Stockholders shall deliver
to the Purchaser, the Stock Certificates duly endorsed for transfer or
accompanied by such stock powers or other documents or instruments of conveyance
or assignment, duly executed by each of the Stockholders, as are sufficient or
reasonably requested by the Purchaser to vest in the Purchaser good, valid and
indefeasible title in and to all of the Stock.
6.11 Further Assistance. Subject to the terms and conditions of this
Agreement, after the Closing the parties will each use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Stock without material additional
costs being incurred by the Stockholders.
ARTICLE 7
CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS
The sale of the Stock by the Stockholders on the Closing Date is
conditioned upon satisfaction by the Purchaser, on or prior to such date, of the
following conditions:
7.1 Opinion of the Purchaser's Counsel. The Purchaser shall have
furnished the Stockholders with an opinion, dated the Closing Date, of Morgan,
Lewis & Bockius LLP in form and substance reasonably satisfactory to the
Stockholders and their counsel, to the effect set forth in Exhibit 7 hereto.
7.2 Truth of Representations and Warranties. The representations and
warranties of the Purchaser contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date, and the Purchaser shall have delivered to the Stockholders a
certificate, dated the Closing Date, to such effect.
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7.3 Governmental Approvals. All governmental consents and approvals, if
any, necessary to permit the consummation of the transactions contemplated by
this Agreement shall have been received. Without limiting the generality of the
foregoing, the Purchaser and the Company shall have filed Premerger Notification
and Report Forms with the Federal Trade Commission and the Antitrust Division of
the United States Department of Justice (collectively, the "HSR Act Filings")
which filings are true and complete in all respects and the waiting periods (and
any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act
shall have expired or have been waived by such Commission and Division and no
objection to this Agreement or any of the transactions contemplated hereby shall
have been made by such Commission or Division (or, if made, shall have been
withdrawn in writing).
7.4 Performance of Agreements. All of the agreements of the Purchaser
to be performed on or before the Closing Date pursuant to the terms hereof shall
have been duly performed.
7.5 Guaranty. The Guarantor shall have delivered to the
Stockholders a Guaranty in the form of Exhibit 1.
7.6 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Stockholders and
Stockholders' Counsel, and the Stockholders shall have received copies of all
such documents and other evidences as they or Stockholders' Counsel may
reasonably request in order to establish the consummation of such transactions
and the taking of all proceedings in connection therewith.
7.7 Deliveries.
(a) Documents. At or prior to the Closing, the Purchaser shall have
delivered to the Stockholders the certificates and other items contemplated by
Sections 7.1, 7.2, 7.3, 7.5 and 7.6 hereof, which shall be in form and substance
reasonably satisfactory to the Stockholders and the Stockholders' Counsel; and
(b) Purchase Price. The Purchaser shall have delivered the
Purchase Price to the Stockholders and the Escrow Agent in accordance with
Section 1.3 hereof.
ARTICLE 8
COVENANTS OF THE STOCKHOLDERS
8.1 Non-Competition; Non-Interference. In consideration of the payment
by the Purchaser of $250,000 to each of Khodara, Bestin and Benjamin as part of
the Purchase Price, each Stockholder agrees that from the date of this Agreement
until the earlier of December 31, 2000 or, in the case of the Operating
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Stockholder, such date as is provided in the Employment Agreement, such
Stockholder will not:
(a) within any jurisdiction or marketing area in which the Company is
currently doing business, directly or indirectly own, manage, operate, control,
be employed by or participate in the ownership, management, operation or control
of, or be connected in any manner with, any business competitive with the
Business. For these purposes, ownership of securities of not in excess of 5% of
any class of securities of a public company shall not be considered to be
competition with the Business; or
(b) solicit for himself or itself, or any Person other than the
Company, the business of any company which, to the best knowledge of such
Stockholder, is currently a customer or client of the Company which is
competitive with the Business; or
(c) disclose or use any confidential or secret information
relating to the Company or its clients and customers.
No Stockholder other than the Stockholder(s) alleged to have violated
this Section 8.1 shall have any liability under this Section 8.1.
The parties hereto expressly agree and recognize that the amounts paid
to each Stockholder pursuant to this Section 8.1 are not in addition to the
Purchase Price but are included therein.
It is the desire and intent of the parties to this Agreement that the
provisions of this Section 8.1 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. If any particular provisions or portion of this
Section 8.1 shall be adjudicated to be invalid or unenforceable, this Section
shall be deemed amended to delete therefrom such provision or portion
adjudicated to be invalid or unenforceable, such amendment to apply only with
respect to the operation of such Section in the particular jurisdiction in which
such adjudication is made.
The parties recognize that the performance of the obligations under
this Section 8.1 by each of the Stockholders is special, unique and
extraordinary in character, and that in the event of the breach by any such
Stockholder of the terms and conditions of this Section 8.1 to be performed, the
Company shall be entitled, if it so elects, to institute and prosecute
proceedings in any court of competent jurisdiction, either in law or in equity,
to obtain damages for any breach of this Section 8.1, or to enforce the specific
performance thereof by such Stockholder or to enjoin such Stockholder from
performing services for any such other person, firm or corporation.
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8.2 Termination of Stockholders' Agreements. Each of the Stockholders
hereby agrees that, effective as of the Closing of the transactions contemplated
hereby, each of the Stockholders' Agreements to which he or it is a party with
the Company and other Stockholders, if applicable, as described in Schedule
2.10, shall be terminated and of no further force or effect. To the extent
applicable, each of the Stockholders waives any rights of refusal or other
rights he may have under any such Stockholders' Agreements with respect to the
transactions contemplated hereby.
ARTICLE 9
COVENANTS OF THE PURCHASER
9.1 Indemnification. The Purchaser agrees that all rights to
indemnification now existing in favor of the officers, directors, employees and
agents of Eagle and the Company provided in their charters or by-law or
otherwise in effect on the date of this Agreement with respect to actions or
omissions prior to the Closing shall survive the Closing and shall continue in
full force and effect for a period of three (3) years from the Closing. The
Purchaser shall comply with, or cause Eagle and the Company to comply with, all
such indemnification rights.
9.2 Employee Benefits. The Purchaser shall provide employee benefits to
the employees of the Company substantially no less beneficial than the benefits
available to the employees at the Closing for a period of at least one (1) year
after the Closing.
9.3 Offer of Employment. The Purchaser shall offer employment to the
employees of the Business who were employed by the Company as of the Closing
("Employees"), so that no liability will arise under the WARN Act or any similar
federal, state or local law as a result of the transactions contemplated hereby.
The Purchaser's employment of any such Employee who accepts such offer will
commence at the close of business on the Closing Date.
9.4 Conduct of Business Post Closing. (a) Between the Closing
Date and the final determination and payment of all sums due under
Section 1.5(b), the Company and Eagle will:
(i) carry on their respective businesses in substantially the
same manner as it has heretofore and not introduce any material new
method of management, operation or accounting that would adversely
impact the Company's ability to achieve the Purchase Price Revenue
Amount; and
(ii) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities in all
material respects.
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(b) During the period from the Closing Date to the determinations and
payments contemplated in Section 1.4, the Purchaser shall confer on a regular
and frequent basis with Benjamin to report material operational matters and to
report the general status of ongoing operations. It is expressly understood and
agreed that a breach of this paragraph shall not be the basis of a claim for
indemnification, but this sentence shall not preclude the Stockholders from
pursuing a claim for indemnification under any other Section hereof.
9.5 Insurance. Until the expiration of the indemnification provided in
Section 10.2, the Purchaser shall maintain full force and effect, at its sole
cost and expense, all insurance in effect at the Closing by or for the benefit
of the Company or its directors and officers.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS; INDEMNITY; SET-OFF
10.1 Survival of Representations. Except as otherwise provided herein,
the respective representations and warranties of the Stockholders and the
Purchaser contained in this Agreement or in any Schedule attached hereto shall
survive the purchase and sale of the Stock contemplated hereby.
10.2 Indemnification by the Stockholders. The Stockholders agree,
severally and not jointly, in proportion to their respective Ownership
Percentages, subject to the provisions of Sections 10.5, 10.6 and 10.7, to
indemnify and hold the Purchaser and its officers, directors and agents harmless
from and against any and all compensatory damages, losses or expenses
(including, without limitation, reasonable counsel fees and expenses) required
to be paid by the Purchaser, Eagle or the Company to third parties ("Damages")
based on, arising out of, resulting from, or relating to:
(i) any and all compensatory damages, losses, settlement
payments, deficiencies, liabilities and reasonable costs and expenses
suffered, sustained, incurred or required to be paid by the Purchaser
because of or that result from, relate to or arise out of the untruth,
inaccuracy or breach of any representation or warranty made by him or
it in this Agreement; provided, however, that the representations and
warranties of Benjamin are made solely as to the Company and not Eagle;
(ii) any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs
and other expenses (including without limitation reasonable legal fees
and expenses) incident to any of the foregoing or to the enforcement of
this Section 10.2;
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(iii) the failure to fulfill any agreement or covenant of
any Stockholder contained in this Agreement;
(iv) any claim by any former stockholder of the Company or
Eagle involving the transactions contemplated hereby or any prior
transaction involving any shares of capital stock of the Company, Eagle
or any predecessor corporation; or
(v) any liability or obligation relating to or arising out of
the business, operations or assets of the Company or Eagle prior to the
Closing Date or the actions or omissions of the Company's or Eagle's
directors, officers, shareholders, employees or agents prior to the
Closing Date, including without limitation any liability or obligation
relating to, and any claim which arises out of or is based upon, (1)
negligence, (2) strict liability, (3) any Environmental Law (as defined
in herein), or (4) other statute, rule or regulation.
10.3 Indemnification by the Purchaser. The Purchaser agrees to
indemnify and hold the Stockholders harmless from and against any and all
Damages based on, arising out of, resulting from, or relating to:
(a) any breach or violation of, or failure to properly perform, any
covenant, agreement or obligation, or any breach of any of the representations
or warranties, made by the Purchaser in this Agreement, unless such breach or
violation is waived in writing by both of the Stockholders; and
(b) any action, claim or litigation initiated by or on behalf of any
third party against the Company and/or either or both of the Stockholders.
The Purchaser shall not be responsible, by way of indemnification or
otherwise, for claims, actions, suits, proceedings or other disputes occurring
solely between the Stockholders.
10.4 Threshold; Limitations. Anything contained in this Agreement to
the contrary notwithstanding, (a) the Stockholders, or, in the case of an
alleged breach or violation of Article 3, the Operating Stockholder, shall not
be liable for any amounts for which the Purchaser is otherwise entitled to
indemnification hereof until the aggregate amount for which the Purchaser is
entitled to indemnification under all such claims for indemnification under this
Agreement in the aggregate exceed Fifty Thousand Dollars ($50,000.00) (the
"Threshold"), at which time the Stockholders, or the Operating Stockholders, as
the case may be, shall be liable for such amounts, if any, in excess of the
Threshold; and (b) except for claims for fraud, each Stockholder shall not be
required to make indemnification payments pursuant to this Article 10 to the
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extent indemnification thereunder and hereunder would exceed his or its
Ownership Percentage of thirty-five percent (35%) of the Purchase Price Revenue
Amount. In determining the foregoing Threshold and in otherwise determining the
amount to which Purchaser is entitled to assert a claim for indemnification in
connection with an alleged breach of the Stockholders' representations,
warranties and covenants under this Agreement, (i) Purchaser's Damages shall be
determined separately for violations of Articles 2 and 3 hereof, (ii)
Purchaser's Damages shall be net of all reserves established in the relevant
Financial Statements in connection with the type of item or contingency giving
rise to such Damages (with the express understanding that (A) the reserve for
taxes shall be deemed applicable to all taxes (including penalties and interest)
and (B) the reserve for taxes shall be deemed increased by the amounts, if any,
of any refunds and credits for federal income taxes actually received by Eagle
or the Company reflecting refunds or credits for federal income taxes paid by
the Company for fiscal years prior to the Closing), (iii) Damages shall be
determined net of any tax benefits available to Eagle or the Company in the year
in which such Damage was incurred, which tax benefits are related to such
Damage, (iv) Damages shall be determined net of any insurance proceeds actually
received by Eagle or the Company under insurance coverage paid for on or prior
to the Closing Date in the ordinary course of business and (v) no item of Damage
shall be included in such determination if the gross amount thereof is less than
Two Thousand Five Hundred Dollars ($2,500).
10.5 Time Limits; Notice and Payment of Claims.
(a) The obligations of indemnification set forth in Sections 10.2 and
10.3 hereof shall be subject to the limitation that all claims asserted pursuant
to such obligations be asserted in writing on or prior December 31, 2000, except
with regard to tax claims which shall be asserted in writing within the
applicable statute of limitations period.
(b) The party seeking indemnification (the "Indemnified Party") shall
notify the party from whom indemnification is sought (the "Indemnifying Party")
within 45 days after becoming aware of, and shall provide to the Indemnifying
Party as soon as practicable thereafter all information and documentation
necessary to support and verify, any damages that the Indemnified Party shall
have determined have given or could give rise to a claim for indemnification
hereunder, and the Indemnifying Party shall be given access to all books and
records in the possession or under the control of the Indemnified Party which
the Indemnifying Party reasonably determines to be related to such claim.
(c) Any actions for indemnification under this Article 10 shall be paid
by the Indemnifying Party on demand in immediately available funds in U.S.
dollars after such action and the liability for damages thereunder shall have
been finally determined. An action and the liability for damages thereunder
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shall be deemed to be "finally determined" for purposes of this Article 10 when
the parties to such action shall have so determined by mutual agreement or, if
disputed, when a non-appealable order of a court having competent jurisdiction
shall have been entered.
10.6 Matters Involving Third Parties.
(a) If any third party shall commence an action against any Indemnified
Party with respect to any matter (a "Third Party Claim") which may give rise to
a claim for indemnification against any Indemnifying Party under this Article
10, the Indemnified Party shall notify the Indemnifying Party thereof in writing
within ten (10) business days after receipt of notice of the commencement of
such action; provided, however, that no delay on the part of the Indemnified
Party in notifying the Indemnifying Party shall relieve the Indemnifying Party
from any obligation hereunder unless (and then solely to the extent that) the
Indemnifying Party is thereby prejudiced.
(b) The Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of the Indemnifying
Party's choice reasonably satisfactory to the Indemnified Party so long as (i)
the Indemnifying Party notifies the Indemnified Party in writing within 10 days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party shall indemnify the Indemnified Party from and against the
entirety of any damages the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim,
subject to the limitations provided in Section 10.4, (ii) the Indemnifying Party
provides the Indemnified Party with evidence acceptable to the Indemnified
Party, in the Indemnified Party's reasonable judgment, that the Indemnifying
Party (as a group if more than one) will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations
hereunder, (iii) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief which, if granted, is reasonably
likely to have a material adverse effect on the Company, and (iv) settlement of,
or an 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 materially adverse to the continuing business interests of
the Indemnified Party.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 10.5(b) above, (i) the Indemnified
Party may retain separate co-counsel at the Indemnified Party's sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Party shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
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consent of the Indemnifying Party, which consent shall not be unreasonably
withheld, and (iii) the Indemnifying Party shall 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 consent shall
not be unreasonably withheld or delayed; provided, however, that, in the event
such consent is withheld, the Indemnifying Party shall not be liable for any
amount of any eventual judgment or settlement in excess of the amount for which
the matter could have been settled if consent was granted.
(d) In the event that any of the conditions set forth in Section
10.5(b) above is or becomes unsatisfied, however, (i) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner the Indemnified
Party may deem appropriate, in the Indemnified Party's sole discretion (and the
Indemnified Party shall consult in good faith with, but need not obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Party shall reimburse the Indemnified Party promptly and
periodically for the cost of defending against the Third Party Claim (including,
without limitation, all attorney's fees and expenses), (iii) the Indemnifying
Party shall remain fully liable for any damages 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 10, and (iv)
the Indemnifying Party shall cooperate fully with the Indemnified Party in the
Indemnified Party's defense of the Third Party Claim.
10.7 Remedies Exclusive. Except as otherwise provided in the last
paragraph of Section 8.1 as to a breach of Article 8, the remedies provided in
this Article 10 shall be the exclusive remedies of the parties hereto from and
after the Closing in connection with any breach of a representation or warranty,
or non-performance, partial or total, of any covenant or agreement contained
herein. The provisions of this Article 10 shall apply to claims for
indemnification asserted as between the parties hereto as well as to third-party
claims.
ARTICLE 11
TAX MATTERS
11.1 Taxes
(a) The Stockholders shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and Eagle for all Tax periods
ending on or prior to the Closing date which are filed after the Closing Date
and shall pay, or reimburse the Purchaser for all such taxes in excess of the
amounts accrued as at the Closing Date (including any reserve for deferred Taxes
established to reflect timing differences between book and Tax incomes) shown on
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the face of the Closing Balance Sheet. The Stockholders shall permit the
Purchaser to review and comment on such Tax Returns prior to filing and shall
make such revisions to such Tax Returns as are reasonably requested by the
Purchaser.
(b) The Purchaser shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and Eagle for all Tax periods
beginning after the Closing Date. Any credits relating to a Taxable period that
begins before and ends after the Closing Date shall be taken into account as
though the relevant Taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with the prior practice of the Company and Eagle.
(c) Any Tax refunds that are received by the Purchaser or the Company
or Eagle, and any amounts credited against Tax to which the Purchaser or the
Company or Eagle become entitled, that relate to Tax periods or portions of Tax
periods ending on or before the Closing Date shall be for the account of the
Stockholders, and the Purchaser shall pay over to the Stockholders any such
refund or credit within fifteen days after receipt or entitlement thereto. In
addition, to the extent that a claim or refund or a proceeding results in a
payment of or credit against Tax by a taxing authority to the Purchaser or the
Company or Eagle, of any amount accrued on the Closing Balance Sheet, the
Purchaser shall pay such amount to the Stockholders within fifteen days after
receipt or entitlement thereto.
(d) The Purchaser and the Stockholders shall cooperate fully, to the
extent reasonably requested by the other party, in connection with the filing of
any Tax Returns pursuant to this Section and any audit, litigation, or other
proceeding with respect to Taxes. Such cooperation shall include the retention
of records and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation, or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and expansion of any material provided
hereunder.
(e) The Purchaser and the Stockholders further agree, upon request, to
use reasonable efforts to obtain any certificate or other document from any
governmental authority or any person as the case may be necessary to mitigate,
reduce, or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby.)
(f) The Purchaser and the Stockholders further agree, upon request, to
provide the other party with all the information that either party may be
required to report pursuant to section 6043 of the Code.
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(g) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement, shall be paid by the Purchaser when due, and the
Purchaser will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes, and if required by applicable law.
(h) Upon receipt of notification from a governmental entity of any
audit, proceeding or adjustment ("Proposed Audit") with respect to taxes for
which Stockholders would be liable under Section 10.2 above, the Purchaser or
the Company shall promptly, but in all events within twenty (20) days after such
notification, notify the Stockholders in writing. The Stockholders shall have
the right but not the obligation to participate in any such Proposed Audit at
their expense. If any such Proposed Audit results in a proposed adjustment
pertaining to taxes which might result in an additional amount of taxes due for
which the Stockholders may be liable (an "Adjustment"), the Purchaser or the
Company shall notify the Stockholders in writing within twenty (20) days of
receipt of notice of such Adjustment. The Stockholders shall notify the
Purchaser within twenty (20) days of receiving notice from the Purchaser or the
Company of any Proposed Audit of the Stockholders' intention to undertake the
defense and handling of such Proposed Audit at their expense. If the
Stockholders do not timely notify the Purchaser or the Company of their
intention to contest such Proposed Audit, their right is thereafter forfeited.
Neither the Purchaser nor the Company shall then be required to contest such
Proposed Audit or defend against any proceeding to collect any deficiency in
Taxes. If the Stockholders does not timely elect to contest any Proposed Audit,
such Adjustment resulting therefrom shall be considered a final determination
unless otherwise contested by the Purchaser or the Company at their own expense.
If timely notice is received by the Purchaser or the Company of the
Stockholders' intention to contest such Proposed Audit, the Purchaser and the
Company will not concede the correctness of any part of such Proposed Audit and
will not enter into any closing or compromise agreement with respect to any of
the issues which form the basis for such Proposed Audit, absent the written
consent of the Stockholders, which consent shall not be unreasonably withheld or
delayed. The Stockholders, with the cooperation of the Company to the extent
necessary to contest effectively such Proposed Audits, shall contest such
Proposed Audits through the appropriate administrative channels and in a court
of initial jurisdiction, and, if necessary, in a court of appellate
jurisdiction. The Stockholders shall advise the Purchaser or the Company of all
meetings with representatives of any audit authority, grant the Purchaser or the
Company or its designated representatives the right to attend thereat, and shall
deliver to the Purchaser copies of all correspondence pertaining to any Proposed
Audit. The Purchaser and the Company agree to authorize representatives of the
Stockholders, reasonably acceptable to the Purchaser to represent the Company in
connection with such Proposed Audit. Nothing contained herein shall require the
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Purchaser or the Company to contest or refrain from settling a claim which it
otherwise would be required to contest or not settle pursuant hereto if the
Purchaser shall waive the payment by the Stockholders or any amount that might
be payable by the Stockholders hereunder by way of indemnity with respect to
such claim. In connection with a Proposed Audit, the Stockholders may in good
faith pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authorities in respect of such audit and it may
either pay the tax claimed and sue for a refund (where applicable law permits
such refund suits) or contest the audit in any permissible manner. If any
Proposed Audit results in a final determination that additional taxes (including
any related interest or penalties) are due for which the Stockholders are liable
under Section 10.2, the Stockholders shall pay such amount within thirty (30)
days of receiving written notice from the Purchaser or the governmental entity
of such final determination.
ARTICLE 12
TRANSACTIONS SUBSEQUENT HERETO
12.1 Preservation of Books and Records. At all reasonable times after
the Closing, the Purchaser shall make available without cost, for inspection
and/or copying by the Stockholders the books and records of Eagle and the
Company for periods prior to the Closing if required by the Stockholders for any
purpose related to this Agreement or the transactions or obigations contemplated
hereby. In the case of all books and records relating to Taxes for any period
prior to the Closing, the Purchaser shall maintain such books and records until
the expiration of the statute of limitations of the taxable periods to which
such books and records relate, including extensions. All other books and records
of Eagle and the Company shall be retained for such period, not exceeding six
(6) years, during which the Stockholders have liabilities under Article 10.
12.2 Cooperation in Litigation. Each party shall provide the other with
cooperation as may reasonably be requested, at the expense of the requesting
party (unless the requesting party is to be indemnified with respect thereto, in
which case such cooperation shall be given at the expense of the indemnifying
party), in connection with the defense of any claims whether existing on the
Closing Date or arising thereafter out of, or relating to, an occurrence or
event happening before, on or after the Closing Date, including without
limitation by making available all books and records relating thereto and all
employees having knowledge of the matters in controversy.
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ARTICLE 13
MISCELLANEOUS
13.1 Knowledge of Stockholders; Materiality; Disclosure.
(a) Where any representation or warranty contained in this Agreement is
expressly qualified by reference to the best knowledge of the Stockholders or
the Operating Stockholder, as the case may be, such references shall be
understood to be to actual knowledge.
(b) Except as may be expressly stated to the contrary, a representation
or warranty shall be considered to be accurate if it is accurate in all material
respects. A matter shall be deemed "material" if it substantially, adversely
affects the Company and Eagle, or their business or assets, taken as a whole.
(c) Disclosure of any information in any Schedule shall be
deemed to be disclosure in all relevant Schedules.
13.2 Expenses. The parties hereto shall pay all of their own expenses,
costs and taxes relating to the transactions contemplated by this Agreement,
including, without limitation, the fees and expenses of their respective counsel
and financial advisers.
13.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State.
13.4 Jurisdiction; Agents for Service of Process; Legal Fees.
Any judicial proceeding brought against any of the parties to this Agreement on
any dispute arising out of this Agreement or any matter related hereto may be
brought in the courts of the State of New York, or in the United States District
Court for the Southern District of New York, and, by execution and delivery of
this Agreement, each of the parties to this Agreement accepts the exclusive
jurisdiction of such courts and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement.
13.5 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
13.6 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public statement,
in each case relating to, connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of the Purchaser
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and the Company to the contents and the manner of presentation and publication
thereof.
13.7 Notices. Any notice or other communication required or permitted
hereunder shall be sufficiently given if delivered in person or sent by telex,
telecopy or by registered or certified mail, postage prepaid, addressed as
follows: if to the Purchaser or Guarantor, 10 Fawcett Street, Cambridge, MA
02138, Attention: Robert Rivkind, with a copy to its counsel, Morgan, Lewis &
Bockius LLP, 101 Park Avenue, New York, New York 10178, Telecopier No. (212)
309-6273, Attention: Eric Rothenberg, Esq.; and if to any Stockholder, to such
Stockholder at the address indicated on Exhibit 2, with a copy to his or its
counsel, Faust Rabbach & Oppenheim, LLP, 488 Madison Avenue, New York, New York
10022, Telecopier No. (212) 371-8410, Attention: David I. Faust, Esq., or such
other address or number as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered, sent by telecopier, telex or mailed.
13.8 Assignment; Parties in Interest. This Agreement may not be
transferred, assigned, pledged or hypothecated by any party hereto, other than
by operation of law; provided, however, that the rights and obligations of the
Purchaser hereunder may be transferred, pledged or assigned to another
subsidiary or affiliate of the Guarantor so long as the Guarantor reaffirms its
Guarantee in form and substance satisfactory to the Stockholders. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, executors, administrators and permitted successors and
assigns.
13.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
13.10 Entire Agreement. This Agreement, including the other documents
referred to herein which form a part hereof, contains the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. Any disclosure in any
Schedule is deemed to be made for the purposes of all the Schedules.
13.11 Amendments. This Agreement may not be changed orally, but only by
an agreement in writing signed by the Purchaser and both of the Stockholders.
Any provision of this Agreement can be waived, amended, supplemented or modified
by agreement of the Purchaser and both of the Stockholders.
13.12 Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
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enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
13.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
13.14 Termination of Agreement. All parties hereto agree to use their
best efforts to fulfill the requirements of Articles 6 and 7 as soon as
practicable. If, subject to the provisions of Section 5.4(b) of this Agreement,
any precondition to the completion of the transactions contemplated hereby is
not fulfilled on or prior to June 8, 1998, this Agreement shall be null and void
and have no further effect; provided, however, that such termination shall not
affect any rights of any party to proceed against any other party for wrongful
failure to complete such transactions.
13.15 Context of Words. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein: words used in this
Agreement shall be used interchangeably in singular or plural form; the words
"this Agreement" shall mean "this Agreement and any and all schedules, exhibits
or riders annexed hereto and any and all amendments, modifications and
supplements hereof"; any pronouns used herein shall include the corresponding
masculine, feminine or neuter forms; the words "include", "including", and "such
as" shall each be construed as if followed by the phrase "without being limited
to"; and the words "herein", "hereof", "hereunder" and words of similar import
shall be construed to refer to this Agreement as a whole and not to any
particular paragraph or section of this Agreement.
[REST OF PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement, as of the
day and year first above written.
PURCHASER:
WSI Pennsylvania Holdings, Inc.
By:______________________________
GUARANTOR:
Waste Systems International, Inc.
By:______________________________
STOCKHOLDERS:
Bestin H.S.A.
By:___________________________
-------------------------------
Jacques Khodara
-------------------------------
Harry K. Benjamin
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