EXHIBIT 2.2
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
by and among
QUANTA SERVICES, INC.,
QUANTA II ACQUISITION, INC.
NORTHERN LINE LAYERS, INC.
XXXXXX X. XXXXXXXX
XXXXXX X. XXXXXXXX
XXXXX X. XXXXXXX
AND
XXXXXX X. XXXXXXX
Dated as of February 16, 1999
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Definitions......................................................... 1
1.2. Interpretation...................................................... 5
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger.......................................................... 5
2.2. Effective Time of the Merger........................................ 5
2.3. Articles of Incorporation, By-laws and Board of
Directors of Surviving Corporation.................................. 5
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Shares................................................ 6
3.2. Newco Shares........................................................ 6
3.3. Delivery of Merger Consideration.................................... 6
3.4. Qwest Contingent Payment Agreement.................................. 6
ARTICLE IV
CLOSING
4.1. Closing............................................................. 6
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
5.1. Due Organization and Qualification.................................. 7
5.2. Authorization; Non-Contravention; Approvals......................... 7
5.3. Capitalization and Ownership........................................ 8
5.4. Subsidiaries........................................................ 8
5.5. Financial Statements................................................ 8
5.6. Liabilities and Obligations......................................... 9
5.7. Accounts and Notes Receivable....................................... 9
5.8. Assets.............................................................. 9
5.9. Material Customers and Contracts.................................... 10
5.10. Permits............................................................. 11
5.11. Environmental Matters............................................... 11
5.12. Labor and Employee Relations........................................ 12
5.13. Insurance........................................................... 12
5.14. Compensation; Employment Agreements................................. 12
5.15. Noncompetition, Confidentiality and Nonsolicitation Agreements...... 12
5.16. Employee Benefit Plans.............................................. 13
5.17. Litigation and Compliance with Law.................................. 14
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5.18. Taxes............................................................... 15
5.19. Absence of Changes.................................................. 15
5.20. Accounts with Banks and Brokerages; Powers of Attorney.............. 16
5.21. Absence of Certain Business Practices............................... 17
5.22. Competing Lines of Business; Related-Party Transactions............. 17
5.23. Intangible Property................................................. 17
5.24. Tax Reorganization Representation................................... 17
5.25. No Implied Representations.......................................... 17
5.26. Disclosure.......................................................... 17
5.27. Year 2000 Compliance................................................ 18
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
6.1. Organization........................................................ 18
6.2. Authorization; Non-Contravention; Approvals......................... 18
6.3. Capitalization and Ownership........................................ 19
6.4. Quanta Common Stock................................................. 19
6.5. Tax Reorganization Representations.................................. 19
6.6. SEC Filings; Disclosure............................................. 20
6.7. No Implied Representations.......................................... 20
6.8. Disclosure.......................................................... 20
6.9. Financial Statements................................................ 20
6.10. Absence of Changes.................................................. 20
6.11. Litigation and Compliance with Law.................................. 21
ARTICLE VII
CERTAIN COVENANTS
7.1. Release From Guarantees............................................. 21
7.2. Future Cooperation; Tax Matters..................................... 21
7.3. Expenses............................................................ 22
7.4. Legal Opinion....................................................... 22
7.5. Employment Agreements............................................... 22
7.6. Repayment of Related Party Indebtedness............................. 22
7.7. Stock Options....................................................... 22
7.8. Payment of Interest Bearing Indebtedness............................ 22
7.9. Pre-Closing Distributions........................................... 22
ARTICLE VIII
INDEMNIFICATION
8.1. General Indemnification by the Stockholders......................... 23
8.2. Indemnification by Quanta........................................... 23
8.3. Third Person Claims................................................. 23
8.4. Non-Third Person Claims............................................. 24
8.5. Indemnification Deductible.......................................... 24
8.6. Indemnification Limitation.......................................... 24
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8.7. Exclusive Remedy.................................................... 24
ARTICLE IX
NONCOMPETITION COVENANTS
9.1. Prohibited Activities............................................... 25
9.2. Equitable Relief.................................................... 25
9.3. Reasonable Restraint................................................ 26
9.4. Severability; Reformation........................................... 26
9.5. Material and Independent Covenant................................... 26
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. General............................................................. 26
10.2. Equitable Relief.................................................... 26
ARTICLE XI
INTENDED TAX TREATMENT
11.1. Tax-Free Reorganization............................................. 27
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS
ON QUANTA COMMON STOCK
12.1. Compliance with Law................................................. 27
12.2. Economic Risk; Sophistication....................................... 27
12.3. Rule 144 Reporting.................................................. 28
12.4. Restriction on Sale or Other Transfer of Restricted Shares.......... 28
12.5. Satisfaction of Indemnification Obligations......................... 28
ARTICLE XIII
MISCELLANEOUS
13.1. Successors and Assigns.............................................. 29
13.2. Entire Agreement.................................................... 29
13.3. Counterparts........................................................ 29
13.4. Brokers and Agents.................................................. 29
13.5. Notices............................................................. 29
13.6. Survival of Representations and Warranties.......................... 30
13.7. Exercise of Rights and Remedies..................................... 30
13.8. Reformation and Severability........................................ 30
13.9. Governing Law....................................................... 30
13.10. Dispute Resolution.................................................. 30
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ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of February 16, 1999, by and among Quanta Services, Inc., a Delaware
corporation ("Quanta"), Quanta II Acquisition, Inc., a Delaware corporation that
is a subsidiary of Quanta ("Newco"), Northern Line Layers, Inc., a Montana
corporation ("the Company"), Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxx X.
Xxxxxxx and Xxxxxx X. Xxxxxxx (such individuals being collectively referred to
herein as the "Stockholders"), with the Stockholders being the Company's only
holders of capital stock.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively referred to as "Constituent Corporations") deem it advisable and
in the best interests of the Constituent Corporations and their respective
stockholders that the Company merge with and into Newco (the "Merger"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the stockholders of the Constituent Corporations have approved the
Merger in accordance with the GCL and the MBCA;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants contained
herein, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Capitalized terms used in this Agreement shall have the
following meanings:
"Affiliate" of, or "Affiliated" with, a specified person or entity means a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified person or entity.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Balance Sheet Date" has the meaning set forth in Section 5.5.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" has the meaning set forth in the third paragraph of this Agreement.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
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"Company Stock" has the meaning set forth in Section 3.1.
"Competitive Business" means any business that competes with the Company in
providing specialty electrical contracting services and highway construction
services.
"Constituent Corporations" has the meaning set forth in the second
paragraph of this Agreement.
"Effective Time" has the meaning set forth in Section 2.2.
"Employment Agreement" has the meaning set forth in Section 7.5.
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, preemptive rights,
rights of first refusal, reservations, restrictions or other encumbrances or
defects in title.
"Employee benefit plan" has the meaning set forth in Section 5.16.
"Employee pension benefit plan" has the meaning set forth in Section 5.16.
"Environmental Laws" means any Law or agreement with any Governmental
Authority relating to (a) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance, in each case as amended and as in effect on the Closing Date.
The term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any substance.
"ERISA" has the meaning set forth in Section 5.16.
"ERISA Affiliate" has the meaning set forth in Section 5.16.
"Expiration Date" has the meaning set forth in Section 13.6.
"Financial Statements" has the meaning set forth in Section 5.5.
"GAAP" means generally accepted accounting principles as currently applied
by the respective party on a basis consistent with preceding years and
throughout the periods involved.
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"Governmental Authority" means any federal, state, local or foreign
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"GCL" means General Corporation Law of the State of Delaware, as amended.
"Hazardous Substances" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law. The term "Hazardous
Substances" includes, without limitation, any substance to which exposure is
regulated by any Governmental Authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"Interim Balance Sheets" has the meaning set forth in Section 5.5.
"Interim Financial Statements" has the meaning set forth in Section 5.5.
"JAMS" has the meaning set forth in Section 13.10.
"Judge List" has the meaning set forth in Section 13.10.
"Knowledge" means actual knowledge.
"Law" or "Laws" means any and all federal, state, local or foreign
statutes, laws, ordinances, proclamations, code, regulations, licenses, permits,
authorizations, approvals, consents, legal doctrine, published requirements,
orders, decrees, judgments, injunctions and rules of any Governmental Authority,
including, without limitation, those covering environmental, Tax, energy,
safety, health, transportation, bribery, record keeping, zoning, discrimination,
antitrust and wage and hour matters, in each case as amended and in effect from
time to time.
"Lockup Period" shall have the meaning set forth in Section 12.4.
"Loss" or "Losses" means all liabilities, losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, fees, costs and
expenses (including specifically, but without limitation, reasonable attorneys'
fees and costs, net of income tax effects with respect thereto (including,
without limitation, income tax benefits recognized in connection therewith and
income taxes upon any indemnification recovery thereof), and net of any
insurance recovery thereon.
"Material Customers" has the meaning set forth in Section 5.9.
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"MBCA" means the Montana Business Corporation Act, as amended.
"Merger" has the meaning set forth in the second paragraph of this
Agreement.
"Merger Consideration" has the meaning set forth in Section 3.1.
"Merger Filings" has the meaning set forth in Section 2.2.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Noncompete Term" has the meaning set forth in Section 9.1(a).
"Quanta" has the meaning set forth in the first paragraph of this
Agreement.
"Quanta Common Stock" means Quanta's Common Stock, par value $.00001 per
share.
"Permits" has the meaning set forth in Section 5.10.
"Permitted Encumbrances" means (a) any Encumbrances reserved against in the
Interim Balance Sheets, (b) Encumbrances for property and ad valorem Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Company's books in accordance with GAAP, and (c) obligations under
operating and capital leases described in Schedule 5.9.
"Plan" has the meaning set forth in Section 5.16.
"Qualified Plan" has the meaning set forth in Section 5.16.
"Restricted Shares" has the meaning set forth in Section 12.1.
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Taxes" has the meaning set forth in Section 5.18.
"Territory" has the meaning set forth in Section 9.1.
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"Third Person" has the meaning set forth in Section 8.3.
"Year-End Financial Statements" has the meaning set forth in Section 5.5.
1.2. Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this Agreement
include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings ascribed to them in accordance with GAAP; and
(c) the words "herein," "hereof," and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time in accordance with the GCL and the MBCA, the
Company shall be merged with and into Newco and the separate existence of the
Company shall thereupon cease. Newco shall be the surviving corporation in the
Merger (hereinafter sometimes referred to as the "Surviving Corporation").
2.2. Effective Time of the Merger. The Merger shall become effective at
such time (the "Effective Time") as (a) holders of two-thirds of the Company
Common Stock approve the Merger, and (b) certificates of merger or articles of
merger, as appropriate, in forms mutually acceptable to Quanta and the Company;
are filed with the Secretaries of State of the States of Delaware and Montana,
respectively (the "Merger Filings"). The Merger Filings shall be made
simultaneously with or as soon as practicable after the execution of this
Agreement and the Closing.
2.3. Articles of Incorporation, By-laws and Board of Directors of Surviving
Corporation. As a result of the Merger and at the Effective Time:
(a) the Articles of Incorporation of Newco in effect immediately prior
to the Effective Time shall become the Articles of Incorporation of the
Surviving Corporation, except that such Articles of Incorporation shall be
amended as of the Effective Time to change the name of the Surviving
Corporation to "Northern Line Layers, Inc.". After the Effective Time, the
Articles of Incorporation of the Surviving Corporation may be amended in
accordance with their terms and as provided in the GCL;
(b) the Bylaws of Newco in effect immediately prior to the Effective
Time shall become the Bylaws of the Surviving Corporation, and thereafter
may be amended in accordance with their terms and as provided by the
Articles of Incorporation of the Surviving Corporation and the GCL; and
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(c) the Board of Directors of Newco as constituted immediately prior
to the Effective Time shall be the Board of Directors of the Surviving
Corporation.
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Shares. At the Effective Time, by virtue of the Merger,
and without any action on the part of any holder of any capital stock of the
Company, the issued and outstanding shares of common stock, no par value, of
the Company as of the Effective Time (the "Company Stock") shall be converted
into the right to receive, and become exchangeable for, an aggregate of 666,948
shares of Quanta Common Stock and $22,384,436.00, in cash, which shares of
Quanta Common Stock and cash shall be exchangeable for all the Company Stock at
the Effective Time and issued to the Stockholders as set forth in Schedule 3.1
(the cash and Quanta Common Stock paid in exchange for the Company Stock being
herein collectively referred to as the "Merger Consideration").
3.2. Newco Shares. The outstanding shares of common stock, par value $.01
per share, of Newco shall remain outstanding following the Merger.
3.3. Delivery of Merger Consideration. At the Closing, (a) each
Stockholder shall furnish to Quanta the certificates representing his or her
Company Stock, duly endorsed in blank by such Stockholder or accompanied by duly
executed blank stock powers, and (b) Quanta shall deliver to each Stockholder
cash (by wire transfer in accordance with the wiring instructions for each
Stockholder set forth on Schedule 3.1) and a copy of an irrevocable instruction
letter to Quanta's transfer agent directing that certificates representing the
shares of Quanta Common Stock be delivered to such Stockholder pursuant to
Section 3.1. Each Stockholder agrees promptly to cure any deficiencies with
respect to the endorsement of the certificates or other documents of conveyance
with respect to the Company Stock or with respect to the stock powers
accompanying such stock.
3.4. Qwest Contingent Payment Agreement. In addition to the Merger
Consideration, at the Closing, Stockholders shall receive the Qwest Contingent
Payment Agreement, executed by the Surviving Corporation, in the form attached
hereto as Schedule 3.4.
ARTICLE IV
CLOSING
4.1. Closing. The consummation of the Merger and delivery of the
consideration described in Section 33 hereof and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Company's counsel, Creekside Suite 301, 1001 South 00/xx/ Xxxxxx Xxxx,
Xxxxxxxx, Xxxxxxx 00000, concurrently with the execution of this Agreement or
at such other time and date as Quanta, the Company and the Stockholders may
mutually agree, which date is herein referred to as the "Closing Date."
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to Quanta as
follows:
5.1. Due Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Montana and the Company is duly authorized and qualified to do business under
all applicable Laws and to carry on its business in the places and in the manner
as now conducted. The Company has the requisite power and authority to own,
lease and operate its assets and properties and to carry on its business as such
business is currently being conducted. Schedule 5.1 contains a list of all
jurisdictions in which the Company is authorized or qualified to do business.
True, complete and correct copies of the Articles of Incorporation and By-laws,
each as amended, of the Company are attached hereto as Schedule 5.1. Correct and
complete copies of all stock records and minute books of the Company have been
provided to Quanta, and correct and complete copies of all other stock records
and minute books of the Company have been made available to Quanta and are
correct and complete in all material respects.
5.2. Authorization; Non-Contravention; Approvals.
(a) The Company has the requisite power and authority to enter into
this Agreement and to effect the Merger. Each Stockholder has the full
legal right, power and authority to enter into this Agreement. The
execution, delivery and performance of this Agreement have been approved by
the board of directors of the Company and by the Stockholders. No
additional corporate or other proceedings on the part of the Company is
necessary to authorize the execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company
and the Stockholders, and, assuming the due authorization, execution and
delivery hereof by Quanta and Newco, constitutes a valid and binding
agreement of the Company and each Stockholder, enforceable against each of
them in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company and
the Stockholders do not, and the consummation by the Company and the
Stockholders of the transactions contemplated hereby will not, violate or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of the Company under any of the terms,
conditions or provisions of, (i) the Articles of Incorporation or Bylaws of
the Company, (ii) any Laws applicable to the Stockholders or the Company or
any of its properties or assets, or (iii) except as set forth in Schedule
5.2, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, lease or other instrument, obligation or
agreement of any kind to which any Stockholder or the Company is now a
party or by which the Company or any of its properties or assets is bound
or affected.
(c) Except for the Merger Filings and as set forth in Schedule 5.2, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental
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Authority or third party is necessary for the execution and delivery of
this Agreement by the Company and the Stockholders or the consummation by
the Company and the Stockholders of the transactions contemplated hereby.
Except as set forth in Schedule 5.2, none of the contracts or agreements
with Material Customers or contracts providing for purchases or services
individually in excess of $100,000, or in the aggregate in excess of
$200,000, or other material agreements, licenses or permits to which the
Company is a party requires notice to, or the consent or approval of, any
third party for the execution and delivery of this Agreement by the Company
and the Stockholders and the consummation of the transactions contemplated
hereby.
5.3. Capitalization and Ownership. The authorized capital stock of the
Company consists solely of 50,000 shares of Company Stock, of which 16,700
shares are issued and outstanding. All of the issued and outstanding shares of
the Company Stock are owned beneficially and of record by the Stockholders as
set forth in Schedule 5.3. All of the issued and outstanding shares of Company
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the Company in
compliance with all applicable Laws, including, without limitation, those Laws
concerning the issuance of securities. None of the shares of Company Stock were
issued in violation of the preemptive rights of any past or present stockholder.
At the Effective Time, by virtue of the Merger Filings in Montana, the Merger
will become effective in Montana. Except as set forth in Schedule 5.3, no
subscription, option, warrant, call, convertible or exchangeable security, other
conversion right or commitment of any kind exists which obligates the Company to
issue any of its Capital Stock or the Stockholders to transfer any of the
Capital Stock of the Company.
5.4. Subsidiaries. Except as set forth in Schedule 5.4, the Company owns,
of record or beneficially, or controls, directly or indirectly, no capital
stock, securities convertible into or exchangeable for capital stock or any
other equity interest in any corporation, association or other business entity.
Except as set forth in Schedule 5.4, the Company is not directly or indirectly,
a participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
5.5. Financial Statements.
(a) The Company has delivered to Quanta complete and correct copies of
the following financial statements:
(i) the audited balance sheets of the Company as of January 31,
1995, 1996 and 1997 and December 31, 1997 and the related
audited statements of operations, stockholders' equity and
cash flows for the three-year period ended December 31,
1997, together with the related notes, schedules and audit
report of the Company's independent accountants (such
balance sheets and the related income statements and the
related notes and schedules are referred to herein as the
"Year-End Financial Statements"); and
(ii) the unaudited balance sheet (the "Interim Balance Sheet") of
the Company as of December 31, 1998 (the "Balance Sheet
Date") and the related unaudited statement of operations for
the interim period ended on the Balance Sheet Date, together
with the related schedules (such balance sheet, the related
statements of operations and the related schedules are
referred to
8
herein as the "Interim Financial Statements"). The Year-End
Financial Statements and the Interim Financial Statements
(collectively, the "Financial Statements") are attached as
Schedule 5.5 to this Agreement.
(b) Except as set forth in Schedule 5.5, the Financial Statements have
been prepared from the books and records of the Company in conformity with
GAAP (except for the absence of notes in the Interim Financial Statements)
and present fairly the financial position and results of operations of the
Company as of the dates of such statements and for the periods covered
thereby, and the books of account of the Company have been kept accurately
in all material respects in the ordinary course of business, the
transactions entered therein represent bona fide transactions, and the
revenues, expenses, assets and liabilities of the Company have been
properly recorded therein in all material respects.
5.6. Liabilities and Obligations. Except as set forth in Schedule 5.6, as
of the Balance Sheet Date, the Company did not have, nor has it incurred since
that date, any liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) that are accrued or reserved against in the Financial
Statements or reflected in the notes thereto or (ii) that were incurred after
the Balance Sheet Date and were incurred in the ordinary course of business,
consistent with past practices, and (b) liabilities and obligations that are of
a nature not required to be reflected in the Financial Statements prepared in
accordance with GAAP and that were incurred in the normal course of business and
are described in Schedule 5.6. Schedule 5.6 sets forth the Company's outstanding
principal amount of indebtedness for borrowed money (including overdrafts) as of
the date hereof.
5.7. Accounts and Notes Receivable. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of the Company as of the Balance Sheet
Date and of those invoiced between the Balance Sheet Date and the third business
day preceding the Closing Date, including any such amounts which are not
reflected in the Interim Balance Sheets. Receivables from and advances to
employees, the Stockholders and any entities or persons related to or Affiliates
of the Stockholders are separately identified in Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging of all accounts and notes receivable as of the
Balance Sheet Date, showing amounts due in 30-day aging categories. The trade
and other accounts receivable of the Company, including without limitation those
classified as current assets on the Interim Balance Sheets, are bona fide
receivables, were acquired in the ordinary course of business, are stated in
accordance with GAAP and should be collectible in the amounts shown on Schedule
5.7, net of reserves reflected in the Interim Financial Statements with respect
to the accounts receivable as of the Balance Sheet Date, and net of reserves
reflected in the books and records of the Company (consistent with the methods
used in the Interim Financial Statements) with respect to receivables of the
Company after the Balance Sheet Date. The preceding sentence shall not be deemed
or construed as a guarantee by the Company or the Stockholders of the
collectability of any particular trade account or any particular note receivable
of the Company.
5.8. Assets.
(a) Schedule 5.8 sets forth an accurate list of all real and personal
property included in "property and equipment" on the Interim Balance Sheet
and all other tangible assets of the Company with a book value in excess of
$10,000 (i) owned by the Company as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, including in each case true,
complete and correct copies of leases for significant equipment and for all
real property leased by the Company and descriptions
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of all real property on which buildings, warehouses, workshops, garages and
other structures used in the operation of the business of the Company are
situated. Schedule 5.8 indicates which assets used in the operation of the
businesses of the Company are currently owned by the Stockholders or
Affiliates of the Company or the Stockholders. Except as specifically
identified on Schedule 5.8, all of the tangible assets, vehicles and other
significant machinery and equipment of the Company listed in Schedule 5.8
are in good working order and condition, ordinary wear and tear excepted,
to the best of Company's Knowledge and Stockholders' Knowledge. Except as
specifically described in Schedule 5.8, all fixed assets used by the
Company in its business are either owned by such Company or leased under
agreements identified in Schedule 5.8. All leases set forth in Schedule 5.8
are in full force and effect and constitute valid and binding agreements of
the Company that is a party thereto, and to the Knowledge of such Company
and the Stockholders, the other parties thereto in accordance with their
respective terms. Schedule 5.8 contains true, complete and correct copies
of all title reports and title insurance policies received or owned by the
Company. Schedule 5.8 includes a summary description of all contractual
commitments of the Company involving the opening of new operations,
expansion of existing operations, or the acquisition of any real property
or existing business, to which management of the Company is currently
devoting any significant effort or expenditure, and which (i) are currently
being implemented by the Company, or (ii) involves purchases of capital
equipment in connection with existing operations in amounts of excess of
$10,000.00, individually, or $25,000.00 in the aggregate.
(b) The Company has good and indefeasible title to the tangible and
intangible personal property and the real property owned and used in its
business, including the properties identified in Schedule 5.8 as owned real
property, free and clear of all Encumbrances other than Permitted
Encumbrances and those set forth in Schedule 5.8.
(c) Except as specifically described in Schedule 5.8, the tangible and
intangible assets of the Company include all material assets used in the
operation of the business of the Company as conducted at the Balance Sheet
Date, except for dispositions of such assets since such date in the
ordinary course of business.
5.9. Material Customers and Contracts.
(a) Schedule 5.9 sets forth an accurate list of (i) all customers
representing 5% of the Company's revenues for the fiscal year ended in
1998 or the interim period ended on the Balance Sheet Date (the "Material
Customers"), and (ii) all material executory contracts, warranties,
commitments and similar agreements to which the Company is currently a
party or by which it or any of its properties is bound, including, but not
limited to, (A) all customer contracts in excess of $10,000, individually,
or $25,000 in the aggregate, including, without limitation, consignment
contracts, (B) contracts with any labor organizations, (C) leases providing
for annual rental payments in excess of $20,000, individually, or $50,000
in the aggregate, (D) loan agreements, (E) pledge and security agreements,
(F) indemnity or guaranty agreements or obligations , (G) bonds, (H) notes,
(I) mortgages, (J) joint venture or partnership agreements, (K) options to
purchase real or personal property, and (L) agreements relating to the
purchase or sale by the Company of assets (other than oral agreements
relating to sales of inventory or services in the ordinary course of
business, consistent with past practices) or securities for more than
$5,000, individually, or $10,000 in the aggregate. Prior to the date
hereof, the Company has made available to Quanta complete and correct
10
copies of all such agreements. To the extent applicable, the contracts and
agreements set forth in Schedule 5.9 are separately identified as lump sum,
unit price, cost plus or maintenance agreements.
(b) Except to the extent set forth in Schedule 5.9, since December 31,
1997, (i) no Material Customer has canceled or substantially reduced or, to
the Knowledge of the Company and the Stockholders, is threatening to cancel
or substantially reduce its purchases of the Company's products or
services, and (ii) to the Knowledge of the Company and Stockholders the
Company is in compliance with all material commitments and obligations
pertaining to it under such agreements and is not in default under any of
the agreements described in subsection (a), no notice of default has been
received by the Company, and the Stockholders and the Company are aware of
no basis therefor.
(c) Except to the extent set forth in Schedule 5.9, the Company is not
a party to any governmental contracts subject to price redetermination or
renegotiation. Except to the extent set forth in Schedule 5.9, the Company
is not required to provide any bonding or other financial security
arrangements in any material amount in connection with any transactions
with any of its customers or suppliers.
(d) Schedule 5.9 sets forth a summary of each outstanding bid or
proposal by the Company that, if awarded to the Company, contemplates
payments to the Company in excess of $100,000 and that is subject to
acceptance or award by a third party.
(e) Schedule 5.9 sets forth a summary of the Company's open jobs and a
job cost schedule supporting the Interim Balance Sheets, which Schedule 5.9
includes the Company's good faith estimate of each such job's profit or
loss as of the Balance Sheet Date.
5.10. Permits. Schedule 5.10 contains an accurate list of all material
licenses, franchises, permits, transportation authorities and other governmental
authorizations and intangible assets held by the Company, including, without
limitation, permits, licenses and operating authorizations, titles (including
motor vehicle titles and current registrations), fuel permits, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by the Company (the "Permits"). The Permits are valid,
and the Company has not received any written notice that any Governmental
Authority intends to cancel, terminate or not renew any such license, operating
authorization, franchise, permit or other governmental authorization. The
Permits are all the permits that are required by Law for the operation of the
business of the Company as conducted at the Balance Sheet Date and the ownership
of the assets of the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in the Permits, as well as the applicable orders,
approvals and variances related thereto, and is not in violation of any of the
foregoing. Except as specifically provided in Schedule 5.10, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
Company by any Permits.
5.11. Environmental Matters. Except as set forth in Schedule 5.11, (a)
the Company has complied with and is in compliance, in all material respects,
with all Environmental Laws, including, without limitation, Environmental Laws
relating to air, water, land and the generation, storage, use, handling,
transportation, treatment or disposal of Hazardous Substances; (b) the Company
has obtained and complied, in all material respects, with all necessary permits
and other approvals necessary to treat, transport, store,
11
dispose of and otherwise handle Hazardous Substances and has reported, to the
extent required by all Environmental Laws, all past and present sites owned or
operated by the Company where Hazardous Substances have been treated, stored,
disposed of or otherwise handled; (c) there have been no "releases" or threats
of "releases" (as defined in any Environmental Laws) at, from, in or on any
property owned or operated by the Company; (d) there is no on-site or off-site
location to which the Company has transported or disposed of Hazardous
Substances or arranged for the transportation or disposal Hazardous Substances
which is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the Surviving
Corporation, Quanta or Newco for any clean-up cost, remedial work, damage to
natural resources or personal injury, including, but not limited to, any claim
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, (iii)
the Hazardous Materials Transportation Act, or (iv) comparable state and local
statutes and regulations; and (e) the Company does not have contingent liability
in connection with any release or disposal of any Hazardous Substance into the
environment. None of the past or present sites owned or operated by the Company
is currently or has ever been designated as a treatment, storage and/or disposal
facility, nor has any such facility ever applied for a Permit designating it as
a treatment, storage and/or disposal facility, under any Environmental Law.
5.12. Labor and Employee Relations. Except as set forth in Schedule 5.12,
the Company is not bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 5.12, no employees of the Company are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Company's or the Stockholders' Knowledge, is any campaign to
establish such representation in progress. There is no pending or, to the
Company's or the Stockholders' Knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any
significant labor interruptions over the past five years. Neither the Company
nor any Stockholder has any knowledge of any significant issues or problems in
connection with the relationship of the Company and its employees.
5.13. Insurance. Schedule 5.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies carried by the Company and of all
insurance loss runs or workmen's compensation claims received for the past five
policy years. Except as set forth in Schedule 5.13, none of such policies are
"claims made" policies. The policies described in such Schedule 5.13 for the
current policy year are currently in full force and effect. As of the Closing
Date, any open claims and any losses subject to insurance coverage for which a
claim has not been made are recoverable under such policies, except to the
extent of any applicable deductible or loss retention as set forth on Schedule
5.13.
5.14. Compensation; Employment Agreements. Schedule 5.14 sets forth an
accurate schedule of all officers, directors and Stockholder employees of the
Company with annual salaries of $50,000 or more as of (a) the Balance Sheet Date
and (b) the date hereof. Attached to Schedule 5.14 are true, complete and
correct copies of each employment or consulting agreement with any employee of
the Company or any Stockholder.
5.15. Noncompetition, Confidentiality and Nonsolicitation Agreements.
Schedule 5.15 sets forth all agreements containing covenants not to compete or
solicit employees or to maintain the confidentiality of information to which the
Company is bound or under which the Company has any rights or obligations.
12
5.16. Employee Benefit Plans.
(a) Schedule 5.16 sets forth an accurate schedule of each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all nonqualified deferred
compensation arrangements, whether formal or informal and whether legally
binding or not, under which the Company or any ERISA Affiliate has any
current or future obligation or liability or under which any present or
former employee of the Company or an ERISA Affiliate, or such present or
former employee's dependents or beneficiaries, has any current or future
right to benefits (each such plan and arrangement referred to hereinafter
as a "Plan"), together with true and complete copies of such Plans,
arrangements and any trusts related thereto, and classifications of
employees covered thereby as of the Balance Sheet Date. Except as set
forth in Schedule 5.16, neither the Company nor any ERISA Affiliate
sponsors, maintains or contributes currently, or at any time during the
preceding five years, to any plan, program, fund or arrangement that
constitutes an employee pension benefit plan. Each Plan may be terminated
by the Company, or if applicable, by an ERISA Affiliate at any time without
any liability, cost or expense, other than costs and expenses that are
customary in connection with the termination of a Plan. For purposes of
this Agreement, the term "employee pension benefit plan" shall have the
meaning given that term in Section 3(2) of ERISA, and the term "ERISA
Affiliate" means any corporation or trade or business under common control
with the Company as determined under Section 414(b), (c), (m) or (o) of the
Code.
(b) Each Plan listed in Schedule 5.16 is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and any other
applicable Law. Except as set forth in Schedule 5.16, with respect to each
Plan of the Company and each ERISA Affiliate (other than a "multiemployer
plan," as defined in Section 4001(a)(3) of ERISA), all reports and other
documents required under ERISA or other applicable Law to be filed with any
Governmental Authority, the failure of which to file could reasonably be
expected to result in a material liability to the Company or any ERISA
Affiliate, or required to be distributed to participants or beneficiaries,
have been duly filed or distributed. True and complete copies of all such
reports and other documents with respect to the past five years for each
Plan have been provided to Quanta. No "accumulated funding deficiency" (as
defined in Section 412(a) of the Code) with respect to any Plan has been
incurred (without regard to any waiver granted under Section 412 of the
Code), nor has any funding waiver from the Internal Revenue Service been
received or requested. Except as set forth in Schedule 5.16, each Plan that
is intended to be "qualified" within the meaning of Section 401(a) of the
Code (a "Qualified Plan") is, and has been during the period from its
adoption to the date hereof, so qualified, both as to form and operation
and all necessary approvals of Governmental Authorities, including a
favorable determination as to the qualification under the Code of each of
such Qualified Plans and each amendment thereto, have been timely obtained.
Except as set forth in Schedule 5.16, all accrued contribution obligations
of the Company with respect to any Plan have either been fulfilled in their
entirety or are fully reflected in the Financial Statements.
(c) No Plan has incurred, and neither the Company nor any ERISA
Affiliate has incurred, any liability for excise tax or penalty due to the
Internal Revenue Service. There have been no terminations, partial
terminations or discontinuances of contributions to any Qualified Plan
during the preceding five years without notice to and approval by the
Internal Revenue Service and payment of all obligations and liabilities
attributable to such Qualified Plan.
13
(d) Except as set forth in Schedule 5.16, neither the Company nor any
ERISA Affiliate has made any promises of retirement or other benefits to
employees, except as set forth in the Plans, and no Company nor any ERISA
Affiliate maintains or has established any Plan that is a "welfare benefit
plan" within the meaning of Section 3(1) of ERISA that provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant after such participant's termination of employment, except as
may be required by Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code and similar state Law provisions, and at the expense of
the participant or the beneficiary of the participant, or retiree medical
liabilities. Neither the Company nor any ERISA Affiliate maintains, has
established or has ever participated in a multiple employer welfare benefit
arrangement as described in Section 3(40)(A) of ERISA. Except as set forth
in Schedule 5.16, neither the Company nor any ERISA Affiliate has any
current or future obligation or liability with respect to a Plan pursuant
to the provisions of a collective bargaining agreement.
(e) Neither the Company nor any ERISA Affiliate has incurred any
material liability to the Pension Benefit Guaranty Corporation in
connection with any Plan. The assets of each Plan that are subject to
Title IV of ERISA are sufficient to provide the benefits under such Plan,
the payment of which the Pension Benefit Guaranty Corporation would
guarantee if such Plan were terminated, and such assets are also sufficient
to provide all other "benefits liabilities" (as defined in ERISA Section
4001(a)(16)) due under such Plan upon termination.
(f) No "reportable event" (as defined in Section 4043 of ERISA) has
occurred and is continuing with respect to any Plan. There are no pending,
or to the Company's and the Stockholders' Knowledge, threatened claims,
lawsuits or actions (other than routine claims for benefits in the ordinary
course) asserted or instituted against, and neither the Company nor any
ERISA Affiliate has knowledge of any threatened litigation or claims
against, the assets of any Plan or its related trust or against any
fiduciary of a Plan with respect to the operation of such Plan. To the
Company's and the Stockholders' Knowledge, there are no investigations or
audits of any Plan by any Governmental Authority currently pending and
there have been no such investigations or audits that have been concluded
that resulted in any liability to any Company or any ERISA Affiliate that
has not been fully discharged. Neither the Company nor any ERISA Affiliate
has participated in any voluntary compliance or closing agreement programs
established with respect to the form or operation of a Plan.
(g) Neither the Company nor any ERISA Affiliate has engaged in any
prohibited transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, in connection with any Plan for which exemption
was not available. Except as set forth in Schedule 5.16, neither the
Company nor any ERISA Affiliate is, or ever has been, a participant in or
is obligated to make any payment to a multiemployer plan. No person or
entity that was engaged by the Company or an ERISA Affiliate as an
independent contractor within the last five years reasonably can or will be
characterized or deemed to be an employee of the Company or an ERISA
Affiliate under applicable Laws for any purpose whatsoever, including,
without limitation, for purposes of federal, state and local income
taxation, workers' compensation and unemployment insurance and Plan
eligibility.
5.17. Litigation and Compliance with Law. Except as set forth in Schedule
5.17, to the Knowledge of Company and Stockholders, there are no claims,
actions, suits or proceedings, pending or,
14
to the Knowledge of the Company and the Stockholders, threatened against or
affecting the Company, at law or in equity, or before or by any Governmental
Authority having jurisdiction over the Company. No written notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received by
the Company and, to the Stockholders' and the Company's Knowledge, there is no
reasonable basis therefor. Except to the extent set forth in Schedule 5.17, the
Company has conducted and is conducting its business in compliance with all Laws
applicable to such Company, its assets or the operation of its business.
5.18. Taxes. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. The Company has timely filed all
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing, and has duly paid in full or made adequate
provision in the Financial Statements for the payment of all Taxes for all
periods ending at or prior to the Closing Date. The Company has duly withheld
and paid or remitted all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other person or entity that required withholding under
any applicable Law, including, without limitation, any amounts required to be
withheld or collected with respect to social security, unemployment
compensation, sales or use taxes or workers' compensation. Except as set forth
in Schedule 5.18, there are no examinations in progress or claims against the
Company relating to Taxes for any period or periods prior to and including the
Balance Sheet Date and no written notice of any claim for Taxes, whether pending
or threatened, has been received. The Company has not granted or been requested
to grant any extension of the limitation period applicable to any claim for
Taxes or assessments with respect to Taxes. The Company is not a party to any
Tax allocation or sharing agreement and is not otherwise liable or obligated to
indemnify any person or entity with respect to any Taxes. The amounts shown as
accruals for Taxes on the Interim Financial Statements as of the Balance Sheet
Date are sufficient for the payment of all Taxes for all fiscal periods ended on
or before that date. True and complete copies of (a) any tax examinations, (b)
extensions of statutory limitations and (c) the federal, state and local Tax
returns of the Company for the last three fiscal years have been previously
provided to Quanta. There are no requests for ruling in respect of any Tax
pending between the Company and any Taxing authority. The Company has been
taxed under the provisions of Subchapter S of the Code since February 1, 1997.
The Company currently utilizes the accrual method of accounting for income tax
purposes. Such method of accounting has not changed in the past five years.
5.19. Absence of Changes. Since the Balance Sheet Date, except as set forth
in Schedule 5.19, the Company has conducted its operations in the ordinary
course and there has not been:
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities (contingent
or otherwise), or results of operations of the Company, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company, taken as a whole;
15
(c) any change in the authorized capital stock of the Company or in
its outstanding securities or any change in the respective Stockholders'
ownership interests in the Company or any grant of any options, warrants,
calls, conversion rights or commitments;
(d) any declaration or payment of any distribution in respect of the
capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company, except as set forth
on Schedule 5.19;
(e) any increase in the compensation payable or to become payable by
the Company to the Stockholders or any of their officers, directors,
employees, consultants or agents, except for ordinary and customary bonuses
and salary increases for employees in accordance with past practice, which
bonuses and salary increases are set forth in Schedule 5.19, and except for
extraordinary bonuses paid to certain non-Stockholder employees of Company,
as set forth on Schedule 5.19;
(f) any significant work interruptions, significant labor grievances
or material claims filed;
(g) except for the Merger, any sale or transfer, or any agreement to
sell or transfer, any material assets, properties or rights of the Company
to any person, as set forth on Schedule 5.19;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company;
(i) any increase in the indebtedness of the Company, other than
accounts payable incurred in the ordinary course of business, consistent
with past practices or incurred in connection with the transactions
contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(k) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the Company's business;
(l) any waiver of any material rights or claims of the Company;
(m) any material breach, amendment or termination of any material
contract, agreement, Permit or other right to which the Company is a party
or any of its property is subject; or
(n) any other material transaction by the Company outside the ordinary
course of business.
5.20. Accounts with Banks and Brokerages; Powers of Attorney. Schedule 5.20
sets forth an accurate schedule, as of the date of this Agreement, of (a) the
name of each financial institution or brokerage firm in which the Company has
accounts or safe deposit boxes; (b) the names in which the accounts or boxes are
held; (c) the type of account; and (d) the name of each person authorized to
draw thereon or have access
16
thereto. Schedule 5.20 also sets forth the name of each person, corporation,
firm or other entity holding a general or special power of attorney from the
Company and a description of the terms thereof.
5.21. Absence of Certain Business Practices. Neither the Company nor any of
its affiliates has given or offered to give anything of value to any
governmental official, political party or candidate for government office that
was illegal to so give or offer to give, nor has it otherwise taken any action
which would constitute a violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any similar Law.
5.22. Competing Lines of Business; Related-Party Transactions. Except as
set forth in Schedule 5.22, neither the Stockholders nor any other Affiliate of
the Company or the Stockholders owns, directly or indirectly, any interest in,
or is an officer, director, employee or consultant of or otherwise receives
remuneration from, any business which is in a Competitive Business or is a
competitor, lessor, lessee, customer or supplier of the Company. Except as set
forth in Schedule 5.22, no officer or director of the Company nor any
Stockholder has any interest in any property, real or personal, tangible or
intangible, used in or pertaining to the business of the Company.
5.23. Intangible Property. Schedule 5.23 sets forth an accurate list of all
patents, patent applications, trademarks, service marks, technology, licenses,
trade names, copyrights and other intellectual property or proprietary property
rights owned or used by the Company. The Company owns or possesses, and the
assets of the Company include, sufficient legal rights to use all of such items
without conflict with or infringement of the rights of others.
5.24. Tax Reorganization Representation. The Surviving Corporation will
acquire substantially all of the properties of the Company within the meaning of
Section 368(a)(2)(D) of the Code.
5.25. No Implied Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of the Stockholders
and the Company that Quanta and Newco are not making any representation or
warranty whatsoever, express or implied, other than those representations and
warranties of Quanta and Newco expressly set forth in this Agreement.
5.26. Disclosure. The Stockholders and the Company have fully provided
Quanta or its representatives with all the information that Quanta has requested
in analyzing whether to consummate the Merger and the other transactions
contemplated by this Agreement. None of the information so provided nor any
representation or warranty of the Stockholders to Quanta or Newco in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein, in light of the
circumstances under which they were made, not misleading. It is understood by
the parties hereto that any estimates, projections or other predictions that may
have been provided to Quanta are not and shall not be deemed to be
representations or warranties of the Company or the Stockholders, but shall be
deemed to be good faith estimates and assumptions of the Company and the
Stockholders, which are intended to be reasonable at the time made concerning
the most likely course of the Company and its business. Notwithstanding the
foregoing or anything to the contrary contained herein, nothing in this
Agreement shall be deemed or construed to imply that the Company or the
Stockholders have provided Quanta with any projections or other predictions
regarding the Company or its business on which Quanta has relied, and Quanta and
Newco expressly waive any right to make any claim based on any such projections
or predictions.
17
5.27. Year 2000 Compliance. Except as set forth on Schedule 5.27, all
devices, machinery, information, technology, computer software and hardware, and
other date sensitive technology (jointly and severally its "systems") necessary
for the Company's business as presently conducted will be Year 2000 compliant
within a period of time calculated to result in no material disruption of any of
its business operations. For purposes hereof, "Year 2000 Compliant" means that
such systems are designed to be used prior to, during and after the Gregorian
calendar year 2000 A.D., and will operate during such time period without error
relating to date data, specifically including any error relating to, or the
product of date data which represents or references different centuries or more
than one century.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
Quanta and Newco jointly and severally represent and warrant to the
Stockholders as follows:
6.1. Organization. Each of Quanta and Newco is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and is duly authorized and qualified under all applicable Laws to
carry on its business in the places and in the manner now conducted. Each of
Quanta and Newco has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as such business is
currently being conducted.
6.2. Authorization; Non-Contravention; Approvals.
(a) Each of Quanta and Newco has the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement has been approved by the boards of directors of Quanta and Newco
and Quanta, as the sole stockholder of Newco. No additional corporate
proceedings on the part of Quanta or Newco are necessary to authorize the
execution and delivery of this Agreement and the consummation by Quanta and
Newco of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by Quanta and Newco, and, assuming
the due authorization, execution and delivery by the Company and the
Stockholders, constitutes valid and binding agreements of Quanta and Newco,
enforceable against Quanta and Newco in accordance with its terms.
(b) The execution and delivery of this Agreement by Quanta and Newco
do not, and the consummation by Quanta and Newco of the transactions
contemplated hereby will not, violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under any of the terms, conditions or
provisions of (i) the Certificate of Incorporation or By-Laws of Quanta or
Newco, (ii) any Law applicable to either Quanta or Newco or any of its
properties or assets or (iii) any material note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which Quanta or
Newco is now a party or by which either Quanta or Newco or any of its
properties or assets may be bound or affected.
18
(c) Except for the Merger Filings and such filings as may be required
under federal or state securities Laws, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of,
any Governmental Authority is necessary for the execution and delivery of
this Agreement by Quanta and Newco or the consummation by Quanta and Newco
of the transactions contemplated hereby.
6.3. Capitalization and Ownership. The authorized capital stock of Newco
consists solely of 1,000 shares of Newco common stock, of which 1,000 shares are
issued and outstanding. All of the issued and outstanding shares of Newco
stock are owned beneficially and of record by Quanta. All of the issued and
outstanding shares of Newco stock have been duly authorized and validly issued,
are fully paid and nonassessable, and were offered, issued, sold and delivered
by Newco in compliance with all applicable Laws, including, without limitation,
those Laws concerning the issuance of securities. None of the shares of Newco
stock were issued in violation of the preemptive rights of any past or present
stockholder. At the Effective Time, by virtue of the Merger Filings in
Delaware, the Merger will become effective in Delaware. No subscription,
option, warrant, call, convertible or exchangeable security, other conversion
right or commitment of any kind exists which obligates Newco to issue any of its
capital stock or Quanta to transfer any of the capital stock of Newco.
6.4. Quanta Common Stock. The shares of Quanta Common Stock to be issued
to the Stockholders pursuant to the Merger are duly authorized and, when issued
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable. The issuance of Quanta Common Stock pursuant to the
Merger will transfer to the Stockholders valid title to such shares of Quanta
Common Stock, free and clear of all Encumbrances, except for any Encumbrances
created by the Stockholders.
6.5. Tax Reorganization Representations.
(a) Prior to the Merger, Quanta will be in control of Newco within the
meaning of Section 368(c) of the Code.
(b) Quanta has no plan or intention to cause the Surviving Corporation
to issue additional shares of its stock that would result in Quanta losing
control of the Surviving Corporation within the meaning of Section 368(c)
of the Code.
(c) Quanta has no plan or intention to reacquire any of its stock
issued in the Merger.
(d) Quanta has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to another corporation controlled
by Quanta; or to cause the Surviving Corporation to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled by
Quanta.
(e) Following the Closing, Quanta's intention is that the Surviving
Corporation will continue the historic business of the Company or use a
significant portion of the historic business assets of the Company in a
business, all as required to satisfy the "continuity of business
enterprise" requirement under Section 368 of the Code.
19
(f) Quanta does not own, nor has it owned during the past five years,
any shares of the stock of the Company.
(g) Each of Quanta and Newco is undertaking the Merger for a bona fide
business purpose and not merely for the avoidance of federal income tax.
(h) Neither Quanta nor Newco is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(i) As of the Closing Date, the fair market value of the assets of
Newco will exceed the sum of Newco's liabilities plus the amount of other
liabilities, if any, to which Newco's assets are subject.
6.6. SEC Filings; Disclosure. Quanta has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents required to be filed by it prior to the date hereof under each of the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the respective rules and regulations
thereunder, (a) all of which, as amended, if applicable, complied when filed in
all material respects with all applicable requirements of the appropriate Act
and the rules and regulations thereunder, and (b) none of which, as amended, if
applicable, contains any untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
6.7. No Implied Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of Quanta and Newco
that the Stockholders are not making any representation or warranty whatsoever,
express or implied, other than those representations and warranties of the
Stockholders expressly set forth in this Agreement.
6.8. Disclosure. Quanta has fully provided the Stockholders or their
representatives with all the information that the Stockholders have requested in
analyzing whether to consummate the Merger. None of the information so provided
nor any representation or warranty of Quanta contained in this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
6.9. Financial Statements. All financial statements of Quanta have been
prepared from the books and records of Quanta in conformity with GAAP and
present fairly the financial position and results of operations of Quanta as of
the dates of such statements and for the periods covered thereby, and the books
of account of Quanta have been kept accurately in all material respects in the
ordinary course of business, the transactions entered therein represent bona
fide transactions, and the revenues, expenses, assets, and liabilities of Quanta
have been properly recorded therein in all material respects.
6.10. Absence of Changes. Since January 1, 1999, Quanta has conducted
its operations in the ordinary course and there has not been:
20
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities (contingent
or otherwise), results of operations or prospects of Quanta, taken as a
whole;
(b) any damage, destruction or loss (whether of not covered by
insurance) materially adversely affecting the properties or business of
Quanta;
(c) any waiver of any material rights or claims of Quanta; or
(d) any material breach, amendment, or termination of any material
contract, agreement, or other right or obligation to which Quanta is a
party or any of its property is subject.
6.11. Litigation and Compliance with Law. There are no material claims,
actions, suits or proceedings, pending or, to the Knowledge of Quanta,
threatened against or affecting Quanta, at law or in equity, or before or by any
Governmental Authority having jurisdiction over Quanta. No written notice of
any material claim, action, suit or proceeding, whether pending or threatened,
has been received by Quanta and, to Quanta's knowledge, there is no reasonable
basis therefor. To the Knowledge of Quanta, Quanta has conducted and is
conducting its business in compliance with all laws applicable to Quanta, its
assets or the operation of its business.
ARTICLE VII
CERTAIN COVENANTS
7.1. Release From Guarantees. Quanta shall use its commercially reasonable
best efforts to have the Stockholders released from the personal guarantees of
the Company indebtedness identified in Schedule 7.1 within 90 days after the
Closing Date. Quanta hereby agrees to indemnify and defend each Stockholder and
hold such Stockholder harmless for any amounts that such Stockholder is required
to pay in connection with the enforcement of any obligations under such personal
guarantees after the Closing, including without limitation any reasonable
attorneys' fees and expenses incurred in connection therewith.
7.2. Future Cooperation; Tax Matters. The Stockholders, Newco and Quanta
shall each deliver or cause to be delivered to the other parties following the
Closing such additional instruments as the other parties may reasonably request
for the purpose of fully carrying out this Agreement. The Stockholders will
cooperate and use their commercially reasonable best efforts to have the present
officers, directors and employees of the Company cooperate with Quanta and the
Surviving Corporation at and after the Closing in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing. The Stockholders and the
Surviving Corporation will cooperate with each other in the preparation of all
tax returns covering the period from the beginning of the Company's current Tax
year through the Closing. In addition, Quanta and Newco will provide the
Stockholders with access to such of their books and records as may be
reasonably requested by the Stockholders in connection with federal, state and
local tax matters. The party requesting cooperation, information or actions
under this Section 7.2 shall reimburse the other party or parties for all
reasonable out-of-pocket costs and expenses paid or incurred in connection
therewith, which costs and expenses shall not, however, include per diem charges
for employees or allocations of overhead charges.
21
7.3. Expenses. Quanta will pay the fees, expenses and disbursements of
Quanta and its agents, representatives, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments thereto. The Surviving Corporation following the Closing will pay
the expenses of the audit or audit related procedures in connection with the
transactions contemplated hereby. The Stockholders will pay their fees,
expenses and disburse ments and those of their and the Company's agents,
representatives, financial advisors, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments hereto and the consummation of the transactions contemplated
hereby, including, without limitation, accounting fees and related expenses
incurred by them which are attributable to the final Tax returns of the Company
and the Stockholders through the Closing.
7.4. Legal Opinions. At the Closing, the Company and the Stockholders
shall cause their legal counsel, Xxxxxxx, Xxxxxxx & Xxxxxxxxx, P.C., to deliver
to Quanta a legal opinion in form and substance acceptable to Quanta. At the
Closing, Quanta and Newco shall cause their legal counsel, Xxxx Xxxxxxx, to
deliver to Company and the Stockholders a legal opinion in form and substance
acceptable to Company and the Stockholders.
7.5. Employment Agreements. Concurrently with the execution of this
Agreement, the Surviving Corporation shall enter into a mutually acceptable
Employment Agreement with each of the individuals identified on Schedule 7.5,
(collectively, the "Employment Agreements").
7.6. Repayment of Related Party Indebtedness. Concurrently with the
execution of this Agreement, (a) the Stockholders shall repay to the Company all
amounts outstanding as advances to or receivables from the Stockholders, each of
which advances or receivables is specifically reflected in Schedule 5.7, and (b)
the Company shall repay all amounts outstanding under loans to the Company from
any Stockholder, each of which loans to the Company is specifically reflected in
Schedule 5.6.
7.7. Stock Options. Quanta shall grant nonqualified options to purchase an
aggregate of 120,000 shares of Quanta Common Stock as of the Closing Date
under Quanta's 1997 Stock Option Plan to employees of the Company (other than
Stockholders) as set forth on Schedule 7.7, which options, in each case, shall
vest in equal annual increments for four years, commencing one year after the
Closing.
7.8. Payment of Interest Bearing Indebtedness. At the Closing, Quanta or
Newco will pay in full the amount of Company's interest bearing indebtedness, as
set forth on Schedule 7.8.
7.9. Closing Agreement. At the Closing, Stockholders, and Quanta will
execute a Closing Agreement summarizing all pre-Closing and Closing adjustments.
ARTICLE VIII
INDEMNIFICATION
The Stockholders, Quanta and Newco each make the following covenants:
8.1. General Indemnification by the Stockholders. Subject to Sections 8.5
and 8.6, the Stockholders covenant and agree that they will jointly and
severally (without any right of indemnification or contribution from the
Company) indemnify, defend, protect and hold harmless Quanta, Newco and the
22
Surviving Corporation, and their respective officers, directors, employees,
stockholders, agents, representatives and Affiliates, at all times from and
after the date of this Agreement from and against all Losses incurred by any of
such indemnified persons as a result of or arising from (a) until the Expiration
Date, any breach of the representations and warranties of the Stockholders set
forth herein or in the Schedules or certificates delivered in connection
herewith, (b) any breach or nonfulfillment of any covenant or agreement on the
part of the Stockholders or the Company under this Agreement, (c) all Taxes
payable by the Company for all periods prior to and including the Closing Date,
(d) all transfer and other Taxes payable by Stockholders arising from the
transactions contemplated by this Agreement, or (e) as a result of the breach of
or non-compliance by the Company with any Environmental Law prior to the
Closing.
8.2. Indemnification by Quanta. Subject to Sections 8.5 and 8.6. Quanta
covenants and agrees that it will indemnify, defend, protect and hold harmless
the Stockholders and their respective agents, representatives, Affiliates,
beneficiaries and heirs and employees at all times from and after the date of
this Agreement until the Expiration Date from and against all Losses incurred by
any of such indemnified persons as a result of or arising from (a) any breach of
the representations and warranties of Quanta or Newco set forth herein or in the
Schedules or certificates attached hereto, or (b) any breach or nonfulfillment
of any covenant or agreement on the part of Quanta or Newco under this
Agreement.
8.3. Third Person Claims. Promptly after any party provided
indemnification pursuant to Section 8.1 or 8.2 of this Agreement (hereinafter
the "Indemnified Party") has received notice of or has Knowledge of any claim by
a person not a party to this Agreement ("Third Person"), of the commencement of
any action or proceeding by a Third Person, which the Indemnified Party believes
in good faith is an indemnifiable claim under this Agreement, the Indemnified
Party shall give to the party obligated to provide indemnification pursuant to
Section 8.1, or 8.2 hereof (hereinafter the "Indemnifying Party") written notice
of such claim or the commencement of such action or proceeding. Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same diligently and in good faith. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in all commercially
reasonable respects in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party's possession or
control. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability; provided, however, that the Indemnified Party shall
be entitled, at its expense, to participate in the defense of such asserted
liability and the negotiations of the settlement thereof. The Indemnifying
Party shall not settle any such Third Person claim without the consent of the
Indemnified Party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete release from liability of, the
Indemnified Party. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person; provided, however,
that notwithstanding the foregoing, the Indemnified Party shall be entitled to
refuse to consent to any such proposed settlement and the Indemnifying Party's
liability hereunder shall not be limited by the amount of
23
the proposed settlement if such settlement does not provide for the complete
release of the Indemnified Party. If, upon receiving notice, the Indemnifying
Party does not timely undertake to defend such matter to which the Indemnified
Party is entitled to indemnification hereunder, or fails diligently to pursue
such defense, the Indemnified Party may undertake such defense through counsel
of its choice, at the cost and expense of the Indemnifying Party, and the
Indemnified Party may settle such matter, in its discretion, and the
Indemnifying Party shall reimburse the Indemnified Party for the amount paid in
such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith.
8.4. Non-Third Person Claims. In the event that any Indemnified Party
asserts the existence of a claim giving rise to losses (but excluding claims
resulting from the assertion of liability by Third Persons), such party shall
give written notice to the Indemnifying Party. Such written notice shall state
that it is being given pursuant to this Section 8.4, specify the nature and
amount of the claim asserted, and indicate the date on which such assertion
shall be deemed accepted and the amount of the claim deemed a valid claim (such
date to be established in accordance with the next sentence). If such
Indemnifying Party, within 60 days after the mailing of notice by such
Indemnified Party shall not give written notice to such Indemnified Party
announcing such Indemnifying Party's intent to contest such assertion of such
Indemnified Party, such assertion shall be deemed accepted and the amount of
such claim shall be deemed a valid claim. In the event, however, that such
Indemnifying Party contests such assertion of a claim by giving such written
notice to the Indemnified Party within said period, the parties shall act in
good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including reasonable attorney's fees, if the parties
hereto, acting in good faith cannot reach agreement with respect to such claim
within 60 days after the notice provided by the Indemnified Party.
8.5. Indemnification Deductible. Neither the Stockholders, on the one hand,
nor Quanta, Newco and the Surviving Corporation, on the other hand, shall be
entitled to indemnification from the other under the provisions of Section 8.1
or Section 8.2, as the case may be, until such time as, and only to the extent
that, the claims subject to indemnification by such other party exceed, in the
aggregate, $400,000.00. Notwithstanding the foregoing, the limitations set forth
in this Section 8.5 shall not apply to fraudulent misrepresentations.
8.6. Indemnification Limitation. Subject to Section 8.5, the aggregate
indemnification obligation of the Stockholders under Section 8.1 and Quanta,
Newco and the Surviving Corporation under Section 8.2 shall be limited to
$39,265,000.00. Notwithstanding the foregoing, the limitations set forth in this
Section 8.6 shall not apply to fraudulent misrepresentations.
8.7. Exclusive Remedy. Subject to Section 8.5, and in the absence of fraud,
the exclusive remedy of Quanta, Newco and the Surviving Corporation for losses
under Section 8.1 shall be pursuant to this Article VIII.
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ARTICLE IX
NONCOMPETITION COVENANTS
9.1. Prohibited Activities.
(a) For no additional consideration, the Stockholders will not for
five years following the Closing Date and, as to Stockholders who are
parties to Employment Agreements, if longer, one year following such
Stockholder's voluntary termination of his or her employment agreement with
the Surviving Corporation or it's Affiliates or the termination of such
individual's employment with the Surviving Corporation or its Affiliates
"for cause," in each case as determined in accordance with such
individual's Employment Agreement, in each case as determined in accordance
with such individual's Employment Agreement (with the applicable period
being herein referred to as the "Noncompete Term"), directly or indirectly,
for himself or herself or on behalf of or in conjunction with any other
person, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or advisory
capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative, in a
Competitive Business within 150 miles of (A) where the
Company or any of its subsidiaries conducts business, or has
conducted business within the past three years (B) where
Quanta or the Surviving Corporation or an Affiliate of
Quanta or the Surviving Corporation conducts business after
the Closing that is, within six months prior to the date of
termination of such Stockholder's employment, under such
Stockholder's supervision or managerial authority (the
counties and other areas included within clause (A) and (B)
being herein referred to as the "Territory");
(ii) call upon any person who, at that time, is an employee or
consultant of Quanta or the Surviving Corporation or any of
their respective subsidiaries for the purpose or with the
intent or effect of enticing such employee or consultant
away from or out of the employ or contract with Quanta or
the Surviving Corporation or any of their respective
subsidiaries; or
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a
customer of any Company, Quanta or the Surviving Corporation
or any of the Affiliates of such parties within the
Territory for the purpose, or with the effect, of soliciting
or selling services or products in a Competitive Business
within the Territory.
(b) Notwithstanding the above, (i) if the employment of a Stockholder
identified in Section 9.1(a) is terminated by the Surviving Corporation
other than "for cause," as determined under such individual's Employment
Agreement, if applicable, then the Noncompete Term shall be five years
following the Closing Date, and (ii) Section 9.1(a) shall not be deemed to
prohibit any such Stockholder from acquiring, as a passive investor with no
involvement in the operations of the business, not more than one percent of
the capital stock of a Competitive Business whose stock is publicly traded
on a national securities exchange, The Nasdaq Stock Market or over-the-
counter.
9.2. Equitable Relief. Because of the difficulty of measuring economic
losses to Quanta and the Surviving Corporation as a result of a breach of the
foregoing covenant, because a breach of such covenant would diminish the value
of the assets and business of the Company being sold pursuant to this Agreement,
and because of the immediate and irreparable damage that could be caused to
Quanta and the Surviving
25
Corporation for which it would have no other adequate remedy, each Stockholder
agrees that the foregoing covenant may be enforced against such individual by
injunctions, restraining orders and other equitable actions.
9.3. Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this ARTICLE IX are necessary in terms of time, activity
and territory to protect Quanta's and the Surviving Corporation's interest in
the assets and business being acquired pursuant to the terms of this Agreement
and impose a reasonable restraint on each Stockholder in light of the activities
and businesses of the Company on the date of the execution of this Agreement and
the current plans of the Company.
9.4. Severability; Reformation. The covenants in this ARTICLE IX are
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. In
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in this ARTICLE IX are unreasonable
and therefore unenforceable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and this Agreement shall thereby be reformed.
9.5. Material and Independent Covenant. Each Stockholder acknowledges that
his or her agreements and the covenants set forth in this ARTICLE IX are
material conditions to Quanta's and Newco's agreements to execute and deliver
this Agreement and to consummate the transactions contemplated hereby and that
Quanta and Newco would not have entered into this Agreement without such
covenants. All of the covenants in this ARTICLE IX shall be construed as an
agreement independent of any other provision in this Agreement.
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 General. Each Stockholder recognizes and acknowledges that he or she
had in the past, currently has, and in the future will have, access to certain
confidential information relating to the business of the Company, such as lists
of customers, operational policies, and pricing and cost policies that are, and
following the Closing will be, valuable, special and unique assets of the
Surviving Corporation. Each Stockholder agrees that he will not use or disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose whatsoever, except as is required in the course of
performing his or her duties, if any, to the Surviving Corporation and/or
Quanta, unless (a) such information becomes known to the public generally
through no fault of such Stockholder, or (b) disclosure is required by Law,
provided that prior to disclosing any information pursuant to this clause (b)
such Stockholder shall, if possible, give prior written notice thereof to Quanta
and the Surviving Corporation and provide Quanta with the opportunity to contest
such disclosure. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section, Quanta shall be entitled to an
injunction restraining such Stockholder from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
Quanta from pursuing any other available remedy for such breach or threatened
breach, including, without limitation, the recovery of damages.
10.2. Equitable Relief. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, because a breach of
such covenant would diminish the value of the assets
26
and business of the Company being sold pursuant to this Agreement, and because
of the immediate and irreparable damage that would be caused for which the
Surviving Corporation and/or Quanta would have no other adequate remedy, each
Stockholder agrees that the foregoing covenants may be enforced against him or
her by injunctions, restraining orders and other equitable actions.
ARTICLE XI
INTENDED TAX TREATMENT
11.1. Tax-Free Reorganization. Quanta and the Stockholders are entering
into this Agreement with the intention that the Merger qualify as a tax-free
reorganizations for federal income tax purposes, except to the extent of any
"boot" received, and neither Quanta nor the Stockholders will take any actions
after the Closing that disqualify the Merger for such treatment.
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS
ON QUANTA COMMON STOCK
12.1. Compliance with Law. The Stockholders acknowledge the shares of
Quanta Common Stock issued at the Closing in accordance with the terms of this
Agreement (the "Restricted Shares") will not be registered under the 1933 Act
and therefore may not be resold without compliance with the 1933 Act. The
Restricted Shares are being or will be acquired by Stockholders solely for their
own accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of them in connection with a
distribution. The Stockholders covenant, warrant and represent that none of the
Restricted Shares will be, directly or indirectly, offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the 1933 Act and the rules
and regulations of the SEC. Certificates representing the Restricted Shares
shall bear the following legend:
The shares represented by this certificate were not issued in a transaction
registered under the Securities Act of 1933, as amended ("Securities Act"),
or any applicable state securities laws. The shares represented hereby
have been acquired for investment and may not be sold or transferred unless
such sale or transfer is covered by an effective registration statement
under the Securities Act and applicable state securities laws or, in the
opinion of counsel to the issuer, or other recognized counsel reasonably
acceptable to the issuer, is exempt from the registration requirements of
the Securities Act and such laws.
12.2. Economic Risk; Sophistication; Accredited Investors. Each Stockholder
is able to bear the economic risk of an investment in the Restricted Shares and
can afford to sustain a total loss of such investment. Each Stockholder has such
Knowledge and experience in financial and business matters that she or he is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect her or his own interests in connection
with the acquisition of the Restricted Shares pursuant hereto. Each Stockholder
or her or his representatives have had an adequate opportunity to ask questions
and receive answers from the officers of Quanta concerning, among other matters,
Quanta, its management, its plans for the operation of its business and
potential additional acquisitions.
27
12.3. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Quanta
Common Stock to the public without registration, for a period of one year after
the Closing, Quanta agrees to use its commercially reasonable efforts to:
(a) make and keep public information (as such terms are defined in
Rule 144) regarding Quanta available;
(b) file with the SEC in a timely manner all reports and other
documents required of Quanta under the 1933 Act and the 1934 Act; and
(c) furnish to each Stockholder upon written request a written
statement by Quanta as to its compliance with the reporting requirements of
Rule 144, the 1933 Act and the 1934 Act, a copy of the most recent annual
or quarterly report of Quanta, and such other reports and documents so
filed as such Stockholder may reasonably request in availing himself or
herself of any rule or regulation of the SEC allowing such Stockholder to
sell any such shares without registration.
12.4. Restriction on Sale or Other Transfer of Restricted Shares. Each
Stockholder covenants, warrants and represents that none of the Restricted
Shares will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of, directly or indirectly, during the one-year period
commencing on the Closing Date (the "Lockup Period") and, thereafter, only after
full compliance with all of the applicable provisions of the 1933 Act and the
rules and regulations of the SEC; and, during the Lockup Period, the
Stockholders shall not engage in put, call, short-sale, hedge, straddle or
similar transactions intended to reduce the Stockholders' risk of owning the
Restricted Shares. Certificates representing the Restricted Shares shall bear
the following legend in addition to the legend under Section 12.1:
The shares represented by this certificate are subject to a
contractual restriction on transfer that expires on [_____ ___, 2000]
and may not be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of during the period of such
contractual restriction without the prior written consent of Quanta
Services, Inc.
12.5. Satisfaction of Indemnification Obligations. Subject to the
compliance with all applicable laws, rules and regulations, and notwithstanding
the provisions of Section 12.4, each Stockholder shall have the right to (i)
tender his or her Restricted Shares in a tender offer to all holders of Quanta
Common Stock in accordance with Regulation 14D under the 1934 Act; and (ii)
transfer the Restricted Shares during the Lockup Period for the purpose of
satisfying his or her indemnification obligations and liabilities for Losses
under Article VIII; provided, however, that prior to any such transfer of
Restricted Shares, each Stockholder shall notify Quanta in writing of his or her
intention to make such a transfer, and for five business days thereafter, Quanta
shall have the option of acquiring Restricted Shares from such Stockholder (free
and clear of all liens, claims and encumbrances) in satisfaction of all or any
part of such Losses. If Quanta exercises such option of acquiring Restricted
Shares, then such Stockholder's liability for Losses shall be deemed to be
satisfied to the extent of (A) such number of Restricted Shares transferred to
Quanta, multiplied by (B) the average closing price per share of Quanta Common
Stock for thirty (30) trading days, with the last such trading day being the
third trading day before the date such Losses become payable by such Stockholder
(either by agreement or pursuant to a judgment or binding determination by an
arbitrator), as reported on The
28
New York Stock Exchange or such other national securities exchange on which the
Quanta Common Stock is principally traded.
ARTICLE XIII
MISCELLANEOUS
13.1. Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned and shall be binding upon and shall inure to the
benefit of the parties hereto, the successors of Quanta, Newco, the Surviving
Corporation and the Company, and the heirs and legal representatives of the
Stockholders.
13.2. Entire Agreement. This Agreement (including the Schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Company, Newco and Quanta and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement may be
modified or amended only by a written instrument executed by the Stockholders,
the Company, Newco and Quanta, acting through their respective officers, duly
authorized by their respective Boards of Directors.
13.3. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.4. Brokers and Agents. Each party hereto represents and warrants that it
employed no broker or agent in connection with the transactions contemplated by
this Agreement. Except as specifically provided in Section 7.3, each party
agrees to indemnify each other party against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party.
13.5. Notices. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person or by facsimile transmission to such party or to an officer or agent
of such party, as follows:
(a) If to Quanta, Newco or the Surviving Corporation, addressed to
them at:
Quanta Services, Inc.
0000 Xxxx Xxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President and General Counsel
(b) If to any Stockholder, respectively addressed as follows:
Xxxxxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
29
Xxxxxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Xxxxx X. Xxxxxxx
0000 Xxxxxxxx Xx.
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxx
2014 LaBrea
Xxxxxxxx, XX 00000
or such other address as any party hereto shall specify pursuant to this Section
13.5 from time to time.
13.6. Survival of Representations and Warranties. The representations and
warranties set forth in ARTICLE V and ARTICLE VI shall survive the Closing for a
period of one year from the Closing Date (the "Expiration Date"), except that
the representations and warranties set forth in Section 5.18 hereof shall
survive until such time as the limitations period has run for all tax periods
ended prior to the Closing Date, which shall be deemed to be the Expiration Date
for Section 5.18.
13.7. Exercise of Rights and Remedies. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.8. Reformation and Severability. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable, but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case, the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
13.9 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of Montana applicable to agreements entered into and fully
to be performed in the State of Montana by residents of Montana.
13.10. Dispute Resolution.
(a) Except with respect to injunctive relief as provided in Section
9.2 and Section 10.2 (which relief may be sought from any court or
administrative agency with jurisdiction with respect thereto), any
unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with
the commercial rules of the American Arbitration Association then in
effect. The arbitration shall be conducted by a retired judge employed
30
by the Denver, Colorado Regional Office of the Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). The arbitration shall be held in JAMS'
Denver, Colorado office.
(b) The parties shall obtain from JAMS a list of the retired judges
available to conduct the arbitration. The parties shall use their
reasonable efforts to agree upon a judge to conduct the arbitration. If
the parties cannot agree upon a judge to conduct the arbitration within 10
days after receipt of the list of available judges, the parties shall ask
JAMS to provide the parties a list of three available judges (the "Judge
List"). Within five days after receipt of the Judge List, each party shall
31
strike one of the names of the available judges from the Judge List and return a
copy of such list to JAMS and the other party. If two different judges are
stricken from the Judge List, the remaining judge shall conduct the arbitration.
If only one judge is stricken from the Judge List, JAMS shall select a judge
from the remaining two judges on the Judge List to conduct the arbitration.
(c) The arbitrator shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrator shall have the authority to order payment of
damages, reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
a material breach of this Agreement has occurred. A decision by the
arbitrator shall be final and binding. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
QUANTA SERVICES, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------------
Its: Vice President and General Counsel
--------------------------------------
QUANTA II ACQUISITION, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------------
Its: President
--------------------------------------
NORTHERN LINE LAYERS, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Its: President
--------------------------------------
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxx, Individually
/s/ Xxxxxx X. Xxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxx, Individually
32
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx, Individually
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx, Individually
33
