EXHIBIT 2.2
AGREEMENT AND PLAN OF ORGANIZATION
dated as of the 18th day of March, 1997
by and among
COMFORT SYSTEMS USA, INC.
ATLAS AIR ACQUISITION I CORP.
(a subsidiary of Comfort Systems USA, Inc.)
ATLAS COMFORT SERVICES USA, INC.
(formerly Atlas Interest Inc.)
and
the STOCKHOLDERS named herein
TABLE OF CONTENTS
Page
1. THE MERGER.............................................................5
1.1 Delivery and Filing of Articles of Merger........................5
1.2 Effective Time of the Merger.....................................5
1.3 Certificate of Incorporation, By-laws and Board of
Directors of Surviving Corporation...............................6
1.4 Certain Information With Respect to the Capital Stock of the
COMPANY, CSI and NEWCO...........................................6
1.5 Effect of Merger.................................................7
2. CONVERSION OF STOCK....................................................8
2.1 Manner of Conversion.............................................8
3. DELIVERY OF MERGER CONSIDERATION.......................................9
4. CLOSING...............................................................10
5. REPRESENTATIONS AND WARRANTIES OF COMPANY
AND STOCKHOLDERS................................................11
(A) Representations and Warranties
of COMPANY and STOCKHOLDERS.........................11
5.1 Due Organization................................................12
5.2 Authorization...................................................12
5.3 Capital Stock of the COMPANY....................................13
5.4 Transactions in Capital Stock, Organization Accounting..........13
5.5 No Bonus Shares.................................................14
5.6 Subsidiaries....................................................14
5.7 Predecessor Status; etc.........................................14
5.8 Spin-off by the COMPANY.........................................15
5.9 Financial Statements............................................15
5.10 Liabilities and Obligations.....................................15
5.11 Accounts and Notes Receivable...................................16
5.12 Permits and Intangibles.........................................16
5.13 Environmental Matters...........................................17
5.14 Personal Property...............................................18
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5.15 Significant Customers; Material Contracts and Commitments.......19
5.16 Real Property...................................................20
5.17 Insurance.......................................................20
5.18 Compensation; Employment Agreements; Organized Labor Matters....20
5.19 Employee Plans..................................................21
5.20 Compliance with ERISA...........................................22
5.21 Conformity with Law; Litigation.................................24
5.22 Taxes...........................................................24
5.23 No Violations...................................................25
5.24 Government Contracts............................................26
5.25 Absence of Changes..............................................26
5.26 Deposit Accounts; Powers of Attorney............................27
5.27 Validity of Obligations.........................................28
5.28 Relations with Governments......................................28
5.29 Disclosure......................................................28
5.30 Prohibited Activities...........................................29
(B) Representations and Warranties of STOCKHOLDERS......29
5.31 Authority; Ownership............................................30
5.32 Preemptive Rights...............................................30
5.33 No Intention to Dispose of CSI Stock............................30
6. REPRESENTATIONS OF CSI and NEWCO......................................30
6.1 Due Organization................................................31
6.2 Authorization...................................................31
6.3 Capital Stock of CSI and NEWCO..................................31
6.4 Transactions in Capital Stock, Organization Accounting..........32
6.5 Subsidiaries....................................................32
6.6 Financial Statements............................................32
6.7 Liabilities and Obligations.....................................33
6.8 Conformity with Law; Litigation.................................33
6.9 No Violations...................................................33
6.10 Validity of Obligations.........................................34
6.11 CSI Stock.......................................................34
6.12 No Side Agreements..............................................34
6.13 Business; Real Property; Material Agreements....................35
6.14 Taxes...........................................................35
6.15 Absence of Changes..............................................35
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6.16 Validity of Obligations.........................................37
6.17 Disclosure......................................................37
7. COVENANTS PRIOR TO CLOSING............................................37
7.1 Access and Cooperation; Due Diligence...........................37
7.2 Conduct of Business Pending Closing.............................38
7.3 Prohibited Activities...........................................39
7.4 No Shop.........................................................41
7.5 Notice to Bargaining Agents.....................................41
7.6 Agreements......................................................41
7.7 Notification of Certain Matters.................................41
7.8 Amendment of Schedules..........................................42
7.9 Cooperation in Preparation of Registration Statement............43
7.10 Final Financial Statements......................................44
7.11 Further Assurances..............................................45
7.12 Authorized Capital..............................................45
7.13 Compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976 (the "Xxxx-Xxxxx Act").................45
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY...........................................................45
8.1 Representations and Warranties; Performance of Obligations......46
8.2 Satisfaction....................................................46
8.3 No Litigation...................................................47
8.4 Opinion of Counsel..............................................47
8.5 Registration Statement..........................................47
8.6 Consents and Approvals..........................................47
8.7 Good Standing Certificates......................................47
8.8 No Material Adverse Change......................................48
8.9 Closing of IPO..................................................48
8.10 Secretary's Certificate.........................................48
8.11 Employment Agreements...........................................48
8.12 Tax Matters.....................................................48
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO..................48
9.1 Representations and Warranties; Performance of Obligations......49
9.2 No Litigation...................................................49
9.3 Secretary's Certificate.........................................49
9.4 No Material Adverse Effect......................................50
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9.5 STOCKHOLDERS' Release...........................................50
9.6 Satisfaction....................................................50
9.7 Termination of Related Party Agreements.........................50
9.8 Opinion of Counsel..............................................50
9.9 Consents and Approvals..........................................50
9.10 Good Standing Certificates......................................51
9.11 Registration Statement..........................................51
9.12 Employment Agreements...........................................51
9.13 Closing of IPO..................................................51
9.14 FIRPTA Certificate..............................................51
10. COVENANTS OF CSI AND THE STOCKHOLDERS AFTER CLOSING...................51
10.1 Release From Guarantees; Repayment of Certain Obligations.......51
10.2 Preservation of Tax and Accounting Treatment....................52
10.3 Preparation and Filing of Tax Returns...........................52
10.4 Directors.......................................................53
10.5 Preservation of Employee Benefit Plans..........................53
10.6 Dividends.......................................................54
11. INDEMNIFICATION.......................................................54
11.1 General Indemnification by the STOCKHOLDERS.....................54
11.2 Indemnification by CSI..........................................55
11.3 Third Person Claims.............................................56
11.4 Exclusive Remedy................................................58
11.5 Limitations on Indemnification..................................58
12. TERMINATION OF AGREEMENT..............................................59
12.1 Termination.....................................................59
12.2 Liabilities in Event of Termination.............................60
13. NONCOMPETITION........................................................60
13.1 Prohibited Activities...........................................60
13.2 Damages.........................................................61
13.3 Reasonable Restraint............................................61
13.4 Severability; Reformation.......................................62
13.5 Independent Covenant............................................62
13.6 Materiality.....................................................62
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................62
14.1 STOCKHOLDERS....................................................62
14.2 CSI AND NEWCO...................................................63
14.3 Damages.........................................................64
14.4 Survival........................................................64
15. TRANSFER RESTRICTIONS.................................................65
15.1 Transfer Restrictions...........................................65
16. FEDERAL SECURITIES ACT REPRESENTATIONS................................65
16.1 Compliance with Law.............................................65
16.2 Economic Risk; Sophistication...................................66
17. REGISTRATION RIGHTS...................................................67
17.1 Piggyback Registration Rights...................................67
17.2 Demand Registration Rights......................................68
17.3 Registration Procedures.........................................69
17.4 Underwriting Agreement..........................................69
17.5 Availability of Rule 144........................................69
17.6 Rule 144 Reporting..............................................70
18. GENERAL...............................................................70
18.1 Cooperation.....................................................70
18.2 Successors and Assigns..........................................71
18.3 Entire Agreement................................................71
18.4 Counterparts....................................................71
18.5 Brokers and Agents..............................................71
18.6 Expenses........................................................72
18.7 Notices.........................................................72
18.8 Governing Law...................................................74
18.9 Survival of Representations and Warranties......................74
18.10 Exercise of Rights and Remedies.................................74
18.11 Time............................................................74
18.12 Reformation and Severability....................................74
18.13 Remedies Cumulative.............................................74
18.14 Captions........................................................74
18.15 Amendments and Waivers..........................................75
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ANNEXES
ANNEX I - FORM OF ARTICLES OF MERGER
ANNEX II - CERTIFICATE OF INCORPORATION AND BY-LAWS OF CSI AND NEWCO
ANNEX III - CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX IV - STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX V - STOCKHOLDERS AND STOCK OWNERSHIP OF CSI
ANNEX VI - FORM OF OPINION OF COUNSEL TO CSI
ANNEX VII - FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS
ANNEX VIII - FORM OF EMPLOYMENT AGREEMENT
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
the 18th day of March, 1997, by and among COMFORT SYSTEMS USA, Inc., a Delaware
corporation ("CSI"), ATLAS AIR ACQUISITION I CORP., a Delaware corporation
("NEWCO"), ATLAS COMFORT SERVICES USA, INC., a Texas corporation formerly named
Atlas Interest Inc. (the "COMPANY"), and XXXXX X. ATLAS and XXXXXXX X. ATLAS
(the "STOCKHOLDERS"). The STOCKHOLDERS are all the stockholders of the COMPANY.
WHEREAS, NEWCO is a corporation duly organized and existing under
the laws of the State of Delaware, having been incorporated on March 4,
1997, solely for the purpose of completing the transactions set forth
herein, and is a wholly-owned subsidiary of CSI, a corporation organized
and existing under the laws of the State of Delaware;
WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY
(which together are hereinafter collectively referred to as "Constituent
Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective stockholders that NEWCO
merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the States of Delaware and Texas;
WHEREAS, CSI is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each of
which is entitled "Agreement and Plan of Organization," with each of the
other Founding Companies (as defined herein) and their respective
stockholders in order to acquire additional heating, ventilating, air
conditioning and related services companies;
WHEREAS, this Agreement, the Other Agreements and the IPO of CSI
Stock constitute the "CSI Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of CSI, each of the Other Founding Companies and each of the
subsidiaries of
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CSI that are parties to the Other Agreements have approved and adopted the
CSI Plan of Organization as an integrated plan pursuant to which the
STOCKHOLDERS and the stockholders of each of the other Founding Companies
will transfer the capital stock of each of the Founding Companies to CSI
and the STOCKHOLDERS and the stockholders of each of the other Founding
Companies and the public will acquire the stock of CSI (but not cash or
other property) as a tax-free transfer of property under Section 351 of
the Internal Revenue Code of 1986, as amended;
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of the
COMPANY has approved this Agreement as part of the CSI Plan of
Organization in order to transfer the capital stock of the COMPANY to CSI;
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of
this Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary and any member of a
Relevant Group.
"Acquisition Companies" shall mean NEWCO and each of the other Delaware
companies wholly-owned by CSI prior to the Funding and Consummation Date.
"Affiliates" has the meaning set forth in Section 5.8.
"Articles of Merger" shall mean those Articles or Certificates of Merger
with respect to the Merger substantially in the forms attached as Annex I hereto
or with such other changes therein as may be required by applicable state laws.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" has the meaning set forth in Section 4.
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"Closing Date" has the meaning set forth in Section 4.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" has the meaning set forth in Section 2.1.
"Constituent Corporations" has the meaning set forth in the second recital
of this Agreement.
"Effective Time of the Merger" shall mean the time as of which the Merger
becomes effective, which shall, in any case, occur on the Funding and
Consummation Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
Accurate Air Systems, Inc., a Texas corporation,
Atlas Comfort Services USA, Inc., a Texas corporation (formerly
Atlas Interest, Inc.),
Contract Service, Inc., a Utah corporation,
Eastern Heating & Cooling, Inc., a New York corporation, and
Eastern Refrigeration Co., Inc., a New York corporation,
Freeway Heating & Air Conditioning, Inc., a Utah corporation,
Quality Air Heating & Cooling, Inc., a Michigan corporation,
Seasonair, Inc., a Maryland corporation,
Standard Heating & Air Conditioning Company, Inc., an Alabama
corporation,
X.X. Xxxxxxxx Company, Inc., a Tennessee corporation, and
Xxxxxxxx Service, Inc., a Tennessee corporation,
Tech Heating and Air Conditioning, Inc., an Ohio corporation,
and Tech Mechanical, Inc., an Ohio corporation,
Tri-City Mechanical, Inc., an Arizona corporation, and
Western Building Services, Inc., a Colorado corporation.
"Funding and Consummation Date" has the meaning set forth in Section 4.
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"CSI" has the meaning set forth in the first paragraph of this Agreement.
"CSI Charter Documents" has the meaning set forth in Section 6.1.
"CSI Stock" means the common stock, par value $.01 per share, of CSI.
"IPO" means the initial public offering of CSI Stock pursuant to the
Registration Statement as referenced in Section 9.13.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Merger" means the merger of NEWCO with and into the COMPANY pursuant to
this Agreement and the applicable provisions of the laws of the State of
Delaware and other applicable state laws.
"NEWCO" has the meaning set forth in the first paragraph of this
Agreement.
"NEWCO STOCK" means the common stock, par value $.01 per share, of NEWCO.
"Other Founding Companies" means all of the Founding Companies other than
the Company.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by CSI and the Underwriters of
the public offering price of the shares of CSI Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on Form
S-1 to be filed with the SEC covering the shares of CSI Stock to be issued in
the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
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"Schedule" means each Schedule attached hereto, which shall reference the
relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" shall mean the COMPANY as the surviving party in
the Merger.
"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, or other taxes, assessments, duties,
fees, levies or other governmental charges of any nature whatever, whether
disputed or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"Underwriters" means the prospective underwriters identified in the
Registration Statement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause the Articles of Merger to be signed, verified and filed
with the Secretary of State of the State of Delaware and the Secretary of State
of the State of Texas and stamped receipt copies of each such filing to be
delivered to CSI on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
NEWCO shall be merged with and into the COMPANY in accordance with the Articles
of Merger, the separate existence of NEWCO shall cease, the COMPANY shall be the
surviving party in the Merger and the
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COMPANY is sometimes hereinafter referred to as the Surviving Corporation. The
Merger will be effected in a single transaction.
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Certificate of Incorporation of the COMPANY then in effect
shall be the Certificate of Incorporation of the Surviving Corporation
until changed as provided by law;
(ii) the By-laws of NEWCO then in effect shall become the By-laws of
the Surviving Corporation; and subsequent to the Effective Time of the
Merger, such By-laws shall be the By-laws of the Surviving Corporation
until they shall thereafter be duly amended;
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that
Xxxxxx Xxxxxxxxxxxxx shall be elected as a director of the Surviving
Corporation effective as of the Effective Time of the Merger; the Board of
Directors of the Surviving Corporation shall hold office subject to the
provisions of the laws of the State of Texas and of the Certificate of
Incorporation and By-laws of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the Effective
Time of the Merger shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, and effective upon the
Effective Time of the Merger Xxxxxx Xxxxxxxxxxxxx shall be appointed as a
vice president of the Surviving Corporation and Xxxxxxx X. Xxxxxxxxx shall
be appointed as an Assistant Secretary of the Surviving Corporation, each
of such officers to serve, subject to the provisions of the Certificate of
Incorporation and By-laws of the Surviving Corporation, until his or her
successor is duly elected and qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE COMPANY,
CSI AND NEWCO. The respective designations and numbers of outstanding shares and
voting rights of
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each class of outstanding capital stock of the COMPANY, CSI and NEWCO as of the
date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and outstanding
capital stock of the COMPANY is as set forth on Schedule 5.3 hereto;
(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of CSI will consist of 50,000,000 shares of CSI
Stock, of which the number of issued and outstanding shares will be set
forth in the Registration Statement, and 5,000,000 shares of preferred
stock, $.01 par value, of which no shares will be issued and outstanding,
and 2,969,912 shares of Restricted Voting Common Stock, $.01 par value,
all of which will be issued and outstanding except as otherwise set forth
in the Registration Statement; and
(iii) as of the date of this Agreement, the authorized capital stock
of NEWCO consists of 1,000 shares of NEWCO Stock, of which one hundred
(100) shares are issued and outstanding.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the General
Corporation Law of the State of Delaware (the "Delaware GCL") and the law of the
State of Texas. Except as herein specifically set forth, the identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of the COMPANY shall continue unaffected and unimpaired by the Merger
and the corporate franchises, existence and rights of NEWCO shall be merged with
and into the COMPANY, and the COMPANY, as the Surviving Corporation, shall be
fully vested therewith. At the Effective Time of the Merger, the separate
existence of NEWCO shall cease and, in accordance with the terms of this
Agreement, the Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, of a public, as well as of a private, nature, and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares, and all taxes, including those due and owing
and those accrued, and all other choses in action, and all and every other
interest of or belonging to or due to the COMPANY and NEWCO shall be taken and
deemed to be transferred
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to, and vested in, the Surviving Corporation without further act or deed; and
all property, rights and privileges, powers and franchises and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the COMPANY and NEWCO; and the title to any real
estate, or interest therein, whether by deed or otherwise, under the laws of the
state of incorporation vested in the COMPANY and NEWCO, shall not revert or be
in any way impaired by reason of the Merger. Except as otherwise provided
herein, the Surviving Corporation shall thenceforth be responsible and liable
for all the liabilities and obligations of the COMPANY and NEWCO and any claim
existing, or action or proceeding pending, by or against the COMPANY or NEWCO
may be prosecuted as if the Merger had not taken place, or the Surviving
Corporation may be substituted in their place. Neither the rights of creditors
nor any liens upon the property of the COMPANY or NEWCO shall be impaired by the
Merger, and all debts, liabilities and duties of the COMPANY and NEWCO shall
attach to the Surviving Corporation, and may be enforced against such Surviving
Corporation to the same extent as if said debts, liabilities and duties had been
incurred or contracted by such Surviving Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock,
issued and outstanding immediately prior to the Effective Time of the Merger,
respectively, into shares of (x) CSI Stock and (y) common stock of the Surviving
Corporation, respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Effective Time of the Merger, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically shall be deemed to represent (1) the right to receive the
number of shares of CSI Stock set forth on Annex III hereto with respect
to such
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holder and (2) the right to receive the amount of cash set forth on Annex
III hereto with respect to such holder;
(ii) all shares of COMPANY Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of CSI Stock or
other consideration shall be delivered or paid in exchange therefor; and
(iii) each share of NEWCO Stock issued and outstanding immediately
prior to the Effective Time of the Merger, shall, by virtue of the Merger
and without any action on the part of CSI, automatically be converted into
one fully paid and non-assessable share of common stock of the Surviving
Corporation which shall constitute all of the issued and outstanding
shares of common stock of the Surviving Corporation immediately after the
Effective Time of the Merger.
All CSI Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding CSI
Stock by reason of the provisions of the Certificate of Incorporation of CSI or
as otherwise provided by the Delaware GCL. All voting rights of such CSI Stock
received by the STOCKHOLDERS shall be fully exercisable by the STOCKHOLDERS and
the STOCKHOLDERS shall not be deprived nor restricted in exercising those
rights. At the Effective Time of the Merger, CSI shall have no class of capital
stock issued and outstanding other than the CSI Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 On the Funding and Consummation Date the STOCKHOLDERS, who are the
holders of all outstanding certificates representing shares of COMPANY Stock,
shall, upon surrender of such certificates, receive the respective number of
shares of CSI Stock and the amount of cash set forth on Annex III hereto, said
cash to be payable by certified check.
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3.2 The STOCKHOLDERS shall deliver to CSI at the Closing the certificates
representing COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or
accompanied by blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The
STOCKHOLDERS agree promptly to cure any deficiencies with respect to the
endorsement of the stock certificates or other documents of conveyance with
respect to such COMPANY Stock or with respect to the stock powers accompanying
any COMPANY Stock.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of Merger
which shall become effective at the Effective Time of the Merger) and (ii)
effect the conversion and delivery of shares referred to in Section 3 hereof;
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares and certified check(s)
referred to in Section 3 hereof, each of which actions shall only be taken upon
the Funding and Consummation Date as herein provided. In the event that there is
no Funding and Consummation Date and this Agreement terminates, CSI hereby
covenants and agrees to do all things required by Delaware law and all things
which counsel for the COMPANY advise CSI are required by applicable laws of the
State of Texas in order to rescind the merger effected by the filing of the
Articles of Merger as described in this Section. The taking of the actions
described in clauses (i) and (ii) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Bracewell & Xxxxxxxxx,
L.L.P., South Tower Pennzoil Place, 000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000. On the Funding and Consummation Date (x) the Articles of Merger shall be
or shall have been filed with the appropriate state authorities so that they
shall be or, as of 8:00 a.m. EASTERN STANDARD TIME on the Funding and
Consummation Date, shall become effective and the Merger shall thereby be
effected, (y) all transactions contemplated
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by this Agreement, including the conversion and delivery of shares, the delivery
of a certified check or checks in an amount equal to the cash portion of the
consideration which the STOCKHOLDERS shall be entitled to receive pursuant to
the Merger referred to in Section 3 hereof and (z) the closing with respect to
the IPO shall occur and be deemed to be completed. The date on which the actions
described in the preceding clauses (x), (y) and (z) occurs shall be referred to
as the "Funding and Consummation Date." Except as otherwise provided in Section
12 hereof, during the period from the Closing Date to the Funding and
Consummation Date, this Agreement may only be terminated by the parties if the
underwriting agreement in respect of the IPO is terminated pursuant to the terms
of such agreement. This Agreement shall in any event terminate if the Funding
and Consummation Date has not occurred within 15 business days of the Closing
Date. Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally represent
and warrant that all of the following representations and warranties in this
Section 5(A) are true at the date of this Agreement and, subject to Section 7.8
hereof, shall be true at the time of Closing and the Funding and Consummation
Date, and that such representations and warranties shall survive the Funding and
Consummation Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that (i) the warranties and representations
set forth in Section 5.22 hereof shall survive until such time as the
limitations period has run for all tax periods ended on or prior to the Funding
and Consummation Date, which shall be deemed to be the Expiration Date for
Section 5.22 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.1(iii) hereof has been made on a timely basis,
and solely to the extent that in connection with the IPO, CSI actually incurs
liability under the 1933 Act, the 1934 Act, or any other Federal or state
securities laws, the representations and warranties set forth herein shall
survive until the
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expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes. For purposes of this Section 5, the term
COMPANY shall mean and refer to the COMPANY and all of its subsidiaries,
including without limitation Atlas Air Conditioning Company, a Texas corporation
(the "SUBSIDIARY").
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has the requisite power and authority to carry on its business as it is now
being conducted. The COMPANY is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
except (i) as set forth on Schedule 5.1 or (ii) where the failure to be so
authorized or qualified would not have a material adverse effect on the
business, operations, properties, assets or condition (financial or otherwise),
of the COMPANY taken as a whole (as used herein with respect to the COMPANY, or
with respect to any other person, a "Material Adverse Effect"). Schedule 5.1
sets forth the jurisdiction in which the COMPANY is incorporated and contains a
list of all jurisdictions in which the COMPANY is authorized or qualified to do
business. True, complete and correct copies of the Certificate of Incorporation
and By-laws, each as amended, of the COMPANY (the "Charter Documents") are all
attached hereto as Schedule 5.1. The stock records of the COMPANY, as heretofore
made available to CSI, are correct and complete in all material respects. There
are no minutes in the possession of the COMPANY or the STOCKHOLDERS which have
not been made available to CSI, and all of such minutes are correct and complete
in all respects. The most recent minutes of the COMPANY, which are dated no
earlier than ten business days prior to the date hereof, affirm and ratify all
prior acts of the COMPANY, and of its officers and directors on behalf of the
COMPANY.
5.2 AUTHORIZATION. (i) The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into this Agreement and the
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Merger, subject to any required approval of the shareholders and the Board of
Directors of the Company described on Schedule 5.2, executed copies of which are
attached thereto.
5.3 CAPITAL STOCK OF THE COMPANY.
(a) The authorized capital stock of Atlas Comfort Services USA, Inc.
(the "PARENT") is as set forth on Schedule 5.3. All of the issued and
outstanding shares of the capital stock of the PARENT are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set
forth on Schedule 5.3, are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of the capital
stock of the PARENT have been duly authorized and validly issued, are fully paid
and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and
further, such shares were offered, issued, sold and delivered by the PARENT in
compliance with all applicable state and Federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of any
preemptive rights of any past or present stockholder.
(b) The authorized capital stock of (the SUBSIDIARY) is as set forth
on Schedule 5.3. All of the issued and outstanding shares of the capital stock
of the SUBSIDIARY owned by the PARENT and are owned free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of the
capital stock of the SUBSIDIARY have been duly authorized and validly issued,
are fully paid and nonassessable, are owned of record and beneficially by the
PARENT and further, such shares were offered, issued, sold and delivered by the
SUBSIDIARY in compliance with all applicable state and Federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of any preemptive rights of any person.
5.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except as set
forth on Schedule 5.4, the COMPANY has not acquired any COMPANY Stock since
January 1, 1995. Except as set forth on Schedule 5.4, (i) no option, warrant,
call, conversion right or commitment of
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any kind exists which obligates the COMPANY to issue any of its authorized but
unissued capital stock; (ii) the COMPANY has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof; and (iii) neither the voting stock structure of the COMPANY nor
the relative ownership of shares among any of its respective stockholders has
been altered or changed in contemplation of the Merger and/or the CSI Plan of
Organization. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses in
contemplation of the Merger or the CSI Plan of Organization.
5.6 SUBSIDIARIES. Except for the SUBSIDIARY or as set forth on Schedule
5.6, the PARENT has no subsidiaries, and the SUBSIDIARY has no subsidiaries.
Except as set forth in Schedule 5.6 and except for any corporations or entities
with respect to which the COMPANY owns less than 1% of the issued and
outstanding stock, the COMPANY does not presently own, of record or
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity nor is the COMPANY, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 5.7 is a listing of all
names of all predecessor companies of the COMPANY, including the names of any
entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets, in any case, from the earliest date upon which any STOCKHOLDER acquired
his or her stock in any COMPANY. Except as disclosed on Schedule 5.7, the
COMPANY has not been, within such period of time, a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
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5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1995.
5.9 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's audited consolidated Balance Sheets as of December 31,
1996, June 30, 1996 and June 30, 1995 and Statements of Operations,
Shareholders' Equity and Cash Flows for each of the three years in the period
ended June 30, 1996 and the six-month period ended December 31, 1996 (December
31, 1996 being hereinafter referred to as the "Balance Sheet Date"). Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted thereon or on Schedule 5.9). Except as set forth on
Schedule 5.9, such Balance Sheets present fairly in all material aspects the
financial position of the COMPANY as of the dates indicated thereon, and such
Statements of Operations, Shareholders Equity and Cash Flows present fairly in
all material aspects the results of operations for the periods indicated
thereon.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all material liabilities of the COMPANY which are not reflected on the
balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in
the COMPANY Financial Statements at the Balance Sheet Date which by their nature
would be required in accordance with GAAP to be reflected in the balance sheet,
and (ii) all loan agreements, indemnity or guaranty agreements, bonds,
mortgages, liens, pledges or other security agreements. Except as set forth on
Schedule 5.10, since the Balance Sheet Date the COMPANY has not incurred any
material liabilities of any kind, character and description, whether accrued,
absolute, secured or unsecured, contingent or otherwise, other than liabilities
incurred in the ordinary course of business. The COMPANY has also delivered to
CSI on Schedule 5.10, in the
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case of those contingent liabilities related to pending or threatened
litigation, or other liabilities which are not fixed or otherwise accrued or
reserved, a good faith and reasonable estimate of the maximum amount which the
COMPANY reasonably expects will be payable. For each such contingent liability
or liability for which the amount is not fixed or is contested, the COMPANY has
provided to CSI the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit
or proceeding;
(ii) the name of each court or agency before which such claim, suit
or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the estimate shall for purposes of
this Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to CSI an
accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. Except to the extent reflected on Schedule 5.11, such accounts,
notes and other receivables are collectible in the amounts shown on Schedule
5.11, net of reserves reflected in the balance sheet as of the Balance Sheet
Date.
5.12 PERMITS AND INTANGIBLES. The COMPANY and its employees hold all
licenses, franchises, permits and other governmental authorizations the absence
of any of which could have a Material Adverse Effect on the Company's business
and the COMPANY has delivered to CSI an accurate list and summary description
(which is set forth on Schedule 5.12) of all such licenses,
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franchises, permits and other governmental authorizations, including permits,
titles (including motor vehicle titles and current registrations), fuel permits,
licenses, franchises, certificates, trademarks, trade names, patents, patent
applications and copyrights owned or held by the COMPANY or any of its employees
(including interests in software or other technology systems, programs and
intellectual property) (it being understood and agreed that a list of all
environmental permits and other environmental approvals is set forth on Schedule
5.13). To the knowledge of the COMPANY, the licenses, franchises, permits and
other governmental authorizations listed on Schedules 5.12 and 5.13 are valid,
and the COMPANY has not received any notice that any governmental authority
intends to cancel, terminate or not renew any such license, franchise, permit or
other governmental authorization. The COMPANY has conducted and is conducting
its business in compliance with the requirements, standards, criteria and
conditions set forth in the licenses, franchises, permits and other governmental
authorizations listed on Schedules 5.12 and 5.13 and is not in violation of any
of the foregoing except where such non-compliance or violation would not have a
Material Adverse Effect on the COMPANY. Except as specifically provided in
Schedule 5.12, 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 such licenses, franchises, permits
or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, and
except where any failure to comply or action would not have a Material Adverse
Effect, (i) the COMPANY has complied with and is in compliance with all Federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to any of them or any of their respective properties, assets, operations and
businesses relating to environmental protection (collectively "Environmental
Laws") including, without limitation, Environmental Laws relating to air, water,
land and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances including petroleum and
petroleum products (as such terms are defined in any applicable Environmental
Law);
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(ii) the COMPANY has obtained and adhered to all necessary permits and other
approvals necessary to treat, transport, store, dispose of and otherwise handle
Hazardous Wastes and Hazardous Substances, a list of all of which permits and
approvals is set forth on Schedule 5.13, and have reported to the appropriate
authorities, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the COMPANY where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows of no
on-site or off-site location to which the COMPANY has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which is reasonably likely to lead to any claim against the COMPANY, CSI or
NEWCO for any clean-up cost, remedial work, damage to natural resources,
property damage or personal injury, including, but not limited to, any claim
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended; and (v) to the knowledge of the COMPANY, the COMPANY has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY. The COMPANY has delivered to CSI an accurate list
(which is set forth on Schedule 5.14) of (x) all personal property included (or
that will be included) in "depreciable plant, property and equipment" on the
balance sheet of the COMPANY, (y) all other personal property owned by the
COMPANY with a value an individual excess of $50,000 (i) as of the Balance Sheet
Date and (ii) acquired since the Balance Sheet Date and (z) all leases and
agreements in respect of personal property, including, in the case of each of
(x), (y) and (z), (1) true, complete and correct copies of all such leases and
(2) an indication as to which assets are currently owned, or were formerly
owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY.
Except as set forth on Schedule 5.14, (i) all material personal property
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used by the COMPANY in its business is either owned by the COMPANY or leased by
the COMPANY pursuant to a lease included on Schedule 5.14, (ii) all of the
personal property listed on Schedule 5.14 is in good working order and
condition, ordinary wear and tear excepted and (iii) all leases and agreements
included on Schedule 5.14 are in full force and effect and constitute valid and
binding agreements of the parties (and their successors) thereto in accordance
with their respective terms.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers have canceled or substantially reduced or,
to the knowledge of the COMPANY, are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, (a) in existence as
of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and
in each case has delivered true, complete and correct copies of such agreements
to CSI. The COMPANY has complied with all material commitments and obligations
pertaining to it, and is not in default under any contracts or agreements listed
on Schedule 5.15 and no notice of default under any such contract or agreement
has been received. The COMPANY has also indicated on Schedule 5.15 a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, the acquisition
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of any personal property, business or assets requiring, in any event, the
payment of more than $50,000 by the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY at the date hereof and all other real property,
if any, used by the COMPANY in the conduct of its business. Any such real
property owned by the COMPANY will be sold by the COMPANY and leased back by the
COMPANY on terms no less favorable to the COMPANY than those available from an
unaffiliated party and otherwise reasonably acceptable to CSI at or prior to the
Closing Date.
True, complete and correct copies of all leases and agreements in respect
of such real property leased by the COMPANY are attached to Schedule 5.16, and
an indication as to which such properties, if any, are currently owned, or were
formerly owned, by STOCKHOLDERS or affiliates of the COMPANY or STOCKHOLDERS is
included in Schedule 5.16. Except as set forth on Schedule 5.16, all of such
leases included on Schedule 5.16 are in full force and effect and constitute
valid and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms.
5.17 INSURANCE. The COMPANY has delivered to CSI (i) an accurate list as
of the Balance Sheet Date of all insurance policies carried by the COMPANY, (ii)
an accurate list of all insurance loss runs or workers compensation claims
received for the past three (3) policy years and (iii) true, complete and
correct copies of all insurance policies currently in effect. Such insurance
policies evidence all of the insurance that the COMPANY is required to carry
pursuant to all of its contracts and other agreements and pursuant to all
applicable laws. All of such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Funding and
Consummation Date. Since January 1, 1994, no insurance carried by the COMPANY
has been canceled by the insurer and the COMPANY has not been denied coverage.
5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to CSI an accurate list (which is set forth on Schedule
5.18) showing all
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officers, directors and key employees of the COMPANY, listing all employment
agreements with such officers, directors and key employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of (i) the Balance Sheet
Date and (ii) the date hereof. The COMPANY has provided to CSI true, complete
and correct copies of any employment agreements for persons listed on Schedule
5.18. Since the Balance Sheet Date, there have been no increases in the
compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary increases implemented on a
basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not bound
by or subject to (and none of its respective assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the COMPANY, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the COMPANY's knowledge, threatened labor dispute involving the
COMPANY and any group of its employees nor has the COMPANY experienced any labor
interruptions over the past three years. The COMPANY believes its relationship
with employees to be good.
5.19 EMPLOYEE PLANS. The STOCKHOLDERS have delivered to CSI an accurate
schedule (Schedule 5.19) showing all employee benefit plans of COMPANY
(including COMPANY's Subsidiaries), including all employment agreements and
other agreements or arrangements containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true, complete
and correct copies of such plans, agreements and any trusts related thereto, and
classifications of employees covered thereby as of the Balance Sheet Date.
Except for the employee benefit plans, if any, described on Schedule 5.19,
COMPANY (including the COMPANY's Subsidiaries) does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan," nor has COMPANY or any Subsidiary any
obligation to contribute to or accrue or pay any benefits under any deferred
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compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the meaning of
Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any non-qualified deferred compensation arrangement). For the
purposes of this Agreement, the term "employee pension benefit plan" shall have
the same meaning as is given that term in Section 3(2) of ERISA. Neither COMPANY
nor any Subsidiary has sponsored, maintained or contributed to any employee
pension benefit plan other than the plans set forth on Schedule 5.19, nor is
COMPANY or any Subsidiary required to contribute to any retirement plan pursuant
to the provisions of any collective bargaining agreement establishing the terms
and conditions or employment of any of COMPANY's or any Subsidiary's employees.
Neither the COMPANY nor any Subsidiary is now, or can as a result of its
past activities become, liable to the Pension Benefit Guaranty Corporation or to
any multiemployer employee pension benefit plan under the provisions of Title IV
of ERISA.
All employee benefit plans listed on Schedule 5.19 and the administration
thereof are in substantial compliance with their terms and all applicable
provisions of ERISA and the regulations issued thereunder, as well as with all
other applicable federal, state and local statutes, ordinances and regulations.
All accrued contribution obligations of COMPANY or any Subsidiary with
respect to any plan listed on Schedule 5.19 have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the COMPANY as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All such plans listed on Schedule 5.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.19 hereof. Except as disclosed on Schedule 5.20,
all reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including, but not
limited to, actuarial reports, audits
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or tax returns) have been timely filed or distributed, and copies thereof are
included as part of Schedule 5.19 hereof. Neither STOCKHOLDERS, any such plan
listed in Schedule 5.19, nor COMPANY (including the COMPANY's Subsidiaries) has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such Plan listed in Schedule 5.19 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and COMPANY (including the COMPANY's
Subsidiaries) has not incurred any liability for excise tax or penalty due to
the Internal Revenue Service nor any liability to the Pension Benefit Guaranty
Corporation. The STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval by
the Internal Revenue Service;
(ii) no such plan listed in Schedule 5.19 subject to the provisions
of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed in
Schedule 5.19;
(iv) COMPANY (including the COMPANY's Subsidiaries) has not incurred
liability under Section 4062 of ERISA; and
(v) No circumstances exist pursuant to which the COMPANY could have
any direct or indirect liability whatsoever (including, but not limited
to, any liability to any multiemployer plan or the PBGC under Title IV of
ERISA or to the Internal Revenue Service for any excise tax or penalty, or
being subject to any statutory lien to secure payment of any such
liability) with respect to any plan now or heretofore maintained or
contributed to by any entity other than the COMPANY that is, or at any
time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the COMPANY.
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5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, the COMPANY is not in violation of any law or regulation
or any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over any of them which would have a Material Adverse Effect; and
except to the extent set forth on Schedule 5.10 or 5.13, there are no material
claims, actions, suits or proceedings, pending or, to the knowledge of the
COMPANY, threatened against or affecting, the COMPANY, at law or in equity, or
before or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over
any of them and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The COMPANY has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 5.12 and 5.13, and is not in
violation of any of the foregoing which would have a Material Adverse Effect.
5.22 TAXES. COMPANY (including the COMPANY's Subsidiaries) has timely
filed all requisite federal, state and other tax returns or extension requests
for all fiscal periods ended on or before the Balance Sheet Date; and except as
set forth on Schedule 5.22, there are no examinations in progress or claims
against any of them for federal, state and other taxes (including penalties and
interest) for any period or periods prior to and including the Balance Sheet
Date and no notice of any claim for taxes, whether pending or threatened, has
been received. All tax, including interest and penalties (whether or not shown
on any tax return) owed by the COMPANY, any of the COMPANY's Subsidiaries, any
member of an affiliated or consolidated group which includes or included the
COMPANY or any of the COMPANY's Subsidiaries, or with respect to any payment
made or deemed made by the COMPANY or any of the COMPANY's Subsidiaries herein
been paid. The amounts shown as accruals for taxes on the COMPANY Financial
Statements are sufficient for
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the payment of all taxes of the kinds indicated (including penalties and
interest) for all fiscal periods ended on or before that date. Copies of (i) any
tax examinations, (ii) extensions of statutory limitations and (iii) the federal
and local income tax returns and franchise tax returns of COMPANY (including the
COMPANY Subsidiaries) for their last three (3) fiscal years, or such shorter
period of time as any of them shall have existed, are attached hereto as
Schedule 5.22. The COMPANY has a taxable year ended June 30. The COMPANY's
methods of accounting have not changed in the past five years other than as
approved by the Internal Revenue Service with respect to accounting for
long-term construction contracts. The COMPANY is not an investment company as
defined in Section 351(e)(1) of the Code.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in material default under any lease, instrument, agreement,
license, or permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or 5.16, or any
other material agreement to which it is a party or by which its properties are
bound (the "Material Documents"); and, except as set forth in Schedule 5.23, (a)
the rights and benefits of the COMPANY under the Material Documents will not be
materially adversely affected by the transactions contemplated hereby and (b)
the execution of this Agreement and the performance of the obligations hereunder
and the consummation of the transactions contemplated hereby will not result in
any material violation or breach or constitute a default under, any of the terms
or provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the COMPANY, CSI or NEWCO
of the name of any other party to such Material Document, and none of the
Material Documents prohibits or restricts the COMPANY from freely
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providing services to any other customer or potential customer of the COMPANY,
CSI, NEWCO or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contracts subject to price
redetermination or renegotiation.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set forth
on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or 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 for dividends which COMPANY may declare and pay pursuant to
Section 10.6 hereof);
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of COMPANY to any person,
including, without limitation, the STOCKHOLDERS and their affiliates;
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(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of any STOCKHOLDERS or any affiliate thereof;
(ix) 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;
(x) 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;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any amendment or termination of any material contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii)any transaction by the COMPANY outside the ordinary course of
its respective businesses;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY
other than in the ordinary course of business.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to
CSI an accurate schedule (which is set forth on Schedule 5.26) as of the date of
the Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
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Schedule 5.26 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 of such power.
5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of the COMPANY.
5.28 RELATIONS WITH GOVERNMENTS. Except for political contributions made
in a lawful manner which, in the aggregate, do not exceed $10,000 per year for
each year in which any STOCKHOLDER has been a stockholder of the COMPANY, the
COMPANY has not made, offered or agreed to offer anything of value to any
governmental official, political party or candidate for government office nor
has it otherwise taken any action which would cause the COMPANY to be in
violation of the Foreign Corrupt Practices Act of 1977, as amended or any law of
similar effect. If political contributions made by the COMPANY have exceeded
$10,000 per year for each year in which any STOCKHOLDER has been a stockholder
of the COMPANY, each contribution in the amount of $5,000 or more shall be
described on Schedule 5.28.
5.29 DISCLOSURE. (a) No statement made herein is or would be rendered
untrue in any material respect by, any other document to which the COMPANY is a
party, or to which its properties are subject, or by any other fact or
circumstance regarding the COMPANY (which fact or circumstance was, or should
reasonably, after due inquiry, have been known to the COMPANY) that is not
disclosed pursuant hereto. If, prior to the 25th day after the date of the final
prospectus of CSI utilized in connection with the IPO, the COMPANY or the
STOCKHOLDERS become aware of any fact or circumstance which would affect the
accuracy of a representation or warranty of COMPANY or STOCKHOLDERS in this
Agreement in any material respect, the COMPANY and the STOCKHOLDERS shall
immediately give notice of such fact or circumstance to CSI.
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However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of CSI, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Closing Date and on the Funding and
Consummation Date, shall be a precondition to the consummation of this
transaction.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i)
that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; (ii) that neither CSI or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all;
and (iii) that the decision of STOCKHOLDERS to enter into this Agreement, or to
vote in favor of or consent to the proposed Merger, has been or will be made
independent of, and without reliance upon, any statements, opinions or other
communications, or due diligence investigations which have been or will be made
or performed by any prospective Underwriter, relative to CSI or the prospective
IPO.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of
Closing and on the Funding and Consummation Date, and that the
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representations and warranties set forth in Sections 5.31 and 5.32 shall survive
until the first anniversary of the Funding and Consummation Date, which shall be
the Expiration Date for purposes of Sections 5.31 and 5.32.
5.31 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.31, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.32 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby waives,
any preemptive or other right to acquire shares of COMPANY Stock or CSI Stock
that such STOCKHOLDER has or may have had other than rights of any STOCKHOLDER
to acquire CSI Stock pursuant to (i) this Agreement or (ii) any option granted
by CSI.
5.33 NO INTENTION TO DISPOSE OF CSI STOCK. No STOCKHOLDER is under any
binding commitment or contract to sell, exchange or otherwise dispose of shares
of CSI Stock received as described in Section 3.1.
6. REPRESENTATIONS OF CSI AND NEWCO
CSI and NEWCO jointly and severally represent and warrant that all
of the following representations and warranties in this Section 6 are true at
the date of this Agreement and, subject to Section 7.8 hereof, shall be true at
the time of Closing and the Funding and Consummation Date, and that such
representations and warranties shall survive the Funding and Consummation Date
for a period of twelve months (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
6.14 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 6.14 and (ii) solely for
purposes of determining whether a claim for indemnification under Section
11.2(iv) hereof has been made on
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a timely basis, and solely to the extent that in connection with the IPO, any of
the STOCKHOLDERS actually incurs liability under the 1933 Act, the 1934 Act, or
any other Federal or state securities laws, the representations and warranties
set forth herein shall survive until the expiration of any applicable
limitations period, which shall be deemed to be the Expiration Date for such
purposes.
6.1 DUE ORGANIZATION. CSI and NEWCO are each corporations duly organized,
validly existing and in good standing under the laws of the state of Delaware,
and each has the requisite power and authority to carry on its business as it is
now being conducted. CSI and NEWCO are each qualified to do business and are
each in good standing in each jurisdiction in which the nature of its business
makes such qualification necessary, except where the failure to be so authorized
or qualified would not have a Material Adverse Effect. True, complete and
correct copies of the Certificate of Incorporation and By-laws, each as amended,
of CSI and NEWCO (the "CSI Charter Documents") are all attached hereto as Annex
II.
6.2 AUTHORIZATION. (i) The respective representatives of CSI and NEWCO
executing this Agreement have the authority to enter into and bind CSI and NEWCO
to the terms of this Agreement and (ii) CSI and NEWCO have the full legal right,
power and authority to enter into this Agreement and the Merger.
6.3 CAPITAL STOCK OF CSI AND NEWCO. The authorized capital stock of CSI
and NEWCO is as set forth in Sections 1.4(ii) and (iii), respectively. All of
the issued and outstanding shares of the capital stock of NEWCO are owned by CSI
and all of the issued and outstanding shares of the capital stock of CSI are
owned by the persons set forth on Annex V hereof, in each case, free and clear
of all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the capital stock of CSI and NEWCO have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by CSI and the persons set forth on Annex V, respectively, and further, such
shares were offered, issued, sold and delivered by CSI and NEWCO in compliance
with all
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applicable state and Federal laws concerning the issuance of securities.
Further, none of such shares were issued in violation of the preemptive rights
of any past or present stockholder of CSI or NEWCO.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for the
Other Agreements and except as set forth on Schedule 6.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
CSI or NEWCO to issue any of their respective authorized but unissued capital
stock; and (ii) neither CSI nor NEWCO has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. Schedule 6.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list, accurate as of the date
hereof, of all outstanding options, warrants or other rights to acquire shares
of the stock of CSI.
6.5 SUBSIDIARIES. NEWCO has no subsidiaries. CSI has no subsidiaries
except for NEWCO and each of the companies identified as "NEWCO" in each of the
Other Agreements. Except as set forth in the preceding sentence, neither CSI nor
NEWCO presently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity, and
neither CSI nor NEWCO, directly or indirectly, is a participant in any joint
venture, partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "CSI Financial Statements") of CSI,
which reflect the results of its operations from inception in December 1996:
CSI's audited Balance Sheet as of December 31, 1996 and Statements of Income,
Cash Flows and Retained Earnings for the period from December 12, 1996 through
December 31, 1996. Such CSI Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
6.6). Except as set forth on Schedule 6.6, such
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Balance Sheet as of December 31, 1996 presents fairly the financial position of
CSI as of such date, and such Statements of Income, Cash Flows and Retained
Earnings present fairly the results of operations for the period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7, CSI
and NEWCO have no material liabilities, contingent or otherwise, except as set
forth in or contemplated by this Agreement and the Other Agreements and except
for fees incurred in connection with the transactions contemplated hereby and
thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither CSI nor NEWCO is in violation of any law or regulation or
any order of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them which would have a Material Adverse Effect; and
except to the extent set forth in Schedule 6.8, there are no material claims,
actions, suits or proceedings, pending or, to the knowledge of CSI or NEWCO,
threatened against or affecting, CSI or NEWCO, at law or in equity, or before or
by any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over either of them
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. CSI and NEWCO have conducted and are conducting
their respective businesses in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and are not in violation of any of the foregoing which
would have a Material Adverse Effect.
6.9 NO VIOLATIONS. Neither CSI nor NEWCO is in violation of any CSI
Charter Document. None of CSI, NEWCO, or, to the knowledge of CSI and NEWCO, any
other party thereto, is in default under any lease, instrument, agreement,
license, or permit to which CSI or NEWCO is a party, or by which CSI or NEWCO,
or any of their respective properties, are bound (collectively, the "CSI
Documents"); and (a) the rights and benefits of CSI and NEWCO under the
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CSI Documents will not be adversely affected by the transactions contemplated
hereby and (b) the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any material violation or breach or constitute a
default under, any of the terms or provisions of the CSI Documents or the CSI
Charter Documents. Except as set forth on Schedule 6.9, none of the CSI
Documents requires notice to, or the consent or approval of, any governmental
agency or other third party with respect to any of the transactions contemplated
hereby in order to remain in full force and effect and consummation of the
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by CSI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the respective Boards of Directors of
CSI and NEWCO and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of CSI
and NEWCO.
6.11 CSI STOCK. At the time of issuance thereof, the CSI Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of CSI, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all substantive respects (which do not include the form of
certificate upon which it is printed or the presence or absence of a CUSIP
number on any such certificate) to the CSI Stock issued and outstanding as of
the date hereof by reason of the provisions of the Delaware GCL. The shares of
CSI Stock to be issued to the STOCKHOLDERS pursuant to this Agreement will not
be registered under the 1933 Act, except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither CSI nor NEWCO has entered or will enter
into any agreement with any of the Founding Companies or any of the stockholders
of the Founding Companies or CSI other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements and leases referred to therein.
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6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. CSI was formed in
December 1996 and has conducted limited operations since that time. Neither CSI
nor NEWCO has conducted any material business since the date of its inception,
except in connection with this Agreement, the Other Agreements and the IPO.
Neither CSI nor NEWCO owns or has at any time owned any real property or any
material personal property or is a party to any other agreement, except as
listed on Schedule 6.13 and except that CSI is a party to the Other Agreements
and the agreements contemplated thereby and to such agreements as will be filed
as Exhibits to the Registration Statement.
6.14 TAXES. CSI has timely filed all requisite federal, state and other
tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 6.14, there are no
examinations in progress or claims against CSI for federal, state and other
taxes (including penalties and interest) for any period or periods prior to and
including the Balance Sheet Date and no notice of any claim for taxes, whether
pending or threatened, has been received. All tax, including interest and
penalties (whether or not shown on any tax return) owed by CSI, any member of an
affiliated or consolidated group which includes or included CSI, or with respect
to any payment made or deemed made by CSI herein has been paid. The amounts
shown as accruals for taxes on CSI Financial Statements are sufficient for the
payment of all taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date. Copies of any (i) tax
examinations, (ii) extensions of statutory limitations and (iii) federal and
local income tax returns and franchise tax returns of CSI for the year ended
December 31, 1996, are attached hereto as Schedule 6.14. CSI is not an
investment company as defined in Section 351(e)(1) of the Code.
6.15 ABSENCE OF CHANGES. Since December 31, 1996, except as set forth in
the drafts of the Registration Statement delivered to the Stockholders, and
except as contemplated by this Agreement and the Other Agreements, there has not
been:
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(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of CSI;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
CSI;
(iii) any change in the authorized capital of CSI or its outstanding
securities or any change in its ownership interests or any grant of any
options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of CSI;
(v) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of CSI;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of CSI to any person;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to CSI;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of CSI or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(ix) any waiver of any material rights or claims of CSI;
(x) any amendment or termination of any material contract,
agreement, license, permit or other right to which CSI is a party;
(xi) any transaction by CSI outside the ordinary course of its
business;
(xii) any other distribution of property or assets by CSI other than
in the ordinary course of business.
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6.16 VALIDITY OF OBLIGATIONS. The execution and delivery of this Agreement
by CSI and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the Boards of Directors of CSI and
NEWCO and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of CSI and NEWCO.
6.17 DISCLOSURE. The most recent draft of the Registration Statement
delivered to the COMPANY and the STOCKHOLDERS, together with this Agreement and
the information furnished to the COMPANY and the STOCKHOLDERS in connection
herewith, does not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished by the
COMPANY or the STOCKHOLDERS.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of CSI and the Other Founding Companies
access to all of the COMPANY's sites, properties, books and records and will
furnish CSI with such additional financial and operating data and other
information as to the business and properties of the COMPANY as CSI or the Other
Founding Companies may from time to time reasonably request. The COMPANY will
cooperate with CSI and the Other Founding Companies, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by this
Agreement. CSI, NEWCO, the STOCKHOLDERS and the COMPANY will treat all
information obtained in connection with the negotiation and performance of this
Agreement or the due diligence investigations conducted with respect to the
Other Founding
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Companies as confidential in accordance with the provisions of Section 14
hereof. In addition, CSI will cause each of the Other Founding Companies to
enter into a provision similar to this Section 7.1 requiring each such Other
Founding Company, its stockholders, directors, officers, representatives,
employees and agents to keep confidential any information obtained by such Other
Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, CSI will afford to the officers and authorized representatives of the
COMPANY access to all of CSI's and NEWCO's sites, properties, books and records
and will furnish the COMPANY with such additional financial and operating data
and other information as to the business and properties of CSI and NEWCO as the
COMPANY may from time to time reasonably request. CSI and NEWCO will cooperate
with the COMPANY, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as set
forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects all of its respective
obligations under agreements relating to or affecting its respective
assets, properties or rights;
(iv) use all reasonable efforts to keep in full force and effect
present insurance policies or other comparable insurance coverage;
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(v) use its reasonable efforts to maintain and preserve its business
organization intact, retain its respective present key employees and
maintain its respective relationships with suppliers, customers and others
having business relations with the COMPANY;
(vi) maintain compliance with all material permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments except as permitted by Section
10.6, without the knowledge and consent of CSI (which consent shall not be
unreasonably withheld), provided that debt and/or lease instruments may be
replaced without the consent of CSI if such replacement instruments are on
terms at least as favorable to the COMPANY as the instruments being
replaced; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents except for ordinary and
customary bonus and salary increases for employees in accordance with past
practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the COMPANY will not,
without prior written consent of CSI:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed in Schedule
5.4;
(iii) except as permitted by Section 10.6, declare or pay any
dividend, or make any distribution in respect of its stock whether now or
hereafter outstanding, or purchase, redeem or otherwise acquire or retire
for value any shares of its stock (provided that the COMPANY may declare
and pay dividends pursuant to Section 10.6 hereof);
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(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or involves
an amount not in excess of $100,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $50,000 necessary or desirable for the conduct of
the businesses of the COMPANY, (2) (A) liens for taxes either not yet due
or being contested in good faith and by appropriate proceedings (and for
which contested taxes adequate reserves have been established and are
being maintained) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedule 5.10 and/or 5.15 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY; or
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(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, nor any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than CSI or its
authorized agents relating to, any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide CSI on Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. The STOCKHOLDERS and the COMPANY shall terminate (i) any
stockholders agreements, voting agreements, voting trusts, options, warrants and
employment agreements between the COMPANY and any employee listed on Schedule
9.12 hereto and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER, on or prior to the Funding and Consummation Date. Such termination
agreements are listed on Schedule 7.6 and copies thereof shall be attached
thereto.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY
shall give prompt notice to CSI of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or
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prior to the Closing and (ii) any material failure of any STOCKHOLDER or the
COMPANY to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder. CSI and NEWCO shall give
prompt notice to the COMPANY of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of CSI or NEWCO contained herein to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of CSI or NEWCO to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
delivery of any notice pursuant to this Section 7.7 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect to
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until 24 hours prior to the
anticipated effectiveness of the Registration Statement to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless CSI and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a Schedule prepared by CSI or NEWCO that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of
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the Founding Companies consent to such amendment or supplement. For all purposes
of this Agreement, including without limitation for purposes of determining
whether the conditions set forth in Sections 8.1 and 9.1 have been fulfilled,
the Schedules hereto shall be deemed to be the Schedules as amended or
supplemented pursuant to this Section 7.8. In the event that one of the Other
Founding Companies seeks to amend or supplement a Schedule pursuant to Section
7.8 of one of the Other Agreements, and such amendment or supplement constitutes
or reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, CSI shall give the COMPANY notice promptly after it
has knowledge thereof. If CSI and a majority of the Founding Companies consent
to such amendment or supplement, which consent shall have been deemed given by
CSI or any Founding Company if no response is received within 24 hours following
receipt of notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested), but the COMPANY does not
give its consent, the COMPANY may terminate this Agreement pursuant to Section
12.1(iv) hereof. In the event that the COMPANY seeks to amend or supplement a
Schedule pursuant to this Section 7.8, and CSI and a majority of the Other
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. In the event that CSI or NEWCO seeks to amend or supplement a
Schedule pursuant to this Section 7.8 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY and
STOCKHOLDERS shall furnish or cause to be furnished to CSI and the Underwriters
all of the information concerning the COMPANY and the STOCKHOLDERS required for
inclusion in, and will cooperate with CSI and the Underwriters in the
preparation of, the Registration Statement and
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the prospectus included therein (including audited and unaudited financial
statements, prepared in accordance with generally accepted accounting
principles, in form suitable for inclusion in the Registration Statement). The
COMPANY and the STOCKHOLDERS agree promptly to advise CSI if at any time during
the period in which a prospectus relating to the offering is required to be
delivered under the Securities Act, any information contained in the prospectus
concerning the COMPANY or the STOCKHOLDERS becomes incorrect or incomplete in
any material respect, and to provide the information needed to correct such
inaccuracy. Insofar as the information relates solely to the COMPANY or the
STOCKHOLDERS, the COMPANY represents and warrants as to such information with
respect to itself, and each Stockholder represents and warrants, as to such
information with respect to the COMPANY and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Funding and Consummation Date, and CSI shall have had sufficient time to review
the unaudited consolidated balance sheets of the COMPANY as of the end of all
fiscal quarters following the Balance Sheet Date, and the unaudited consolidated
statement of income, cash flows and retained earnings of the COMPANY for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANY or the results of its
operations from the financial statements as of the Balance Sheet Date. Such
financial statements shall have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted therein). Except as noted in such financial
statements, all of such financial statements will present fairly the results of
operations of the COMPANY for the periods indicated therein.
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7.11 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry out
the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. CSI shall maintain its authorized capital stock
as set forth in the Registration Statement filed with the SEC except for such
changes in authorized capital stock as are made to respond to comments made by
the SEC or requirements of any exchange or automated trading system for which
application is made to register the CSI Stock.
7.13 COMPLIANCE WITH THE XXXX-XXXXX-XXXXXX ANTITRUST IMPROVEMENTS ACT OF
1976 (THE "XXXX-XXXXX ACT"). All parties to this Agreement hereby recognize that
one or more filings under the Xxxx-Xxxxx Act may be required in connection with
the transactions contemplated herein. If it is determined by the parties to this
Agreement that filings under the Xxxx-Xxxxx Act are required, then: (i) each of
the parties hereto agrees to cooperate and use its best efforts to comply with
the Xxxx-Xxxxx Act, (ii) such compliance by the STOCKHOLDERS and the COMPANY
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 9 of this Agreement, and such compliance by CSI and NEWCO
shall be deemed a condition precedent in addition to the conditions precedent
set forth in Section 8 of this Agreement, and (iii) the parties agree to
cooperate and use their best efforts to cause all filings required under the
Xxxx-Xxxxx Act to be made. If filings under the Xxxx-Xxxxx Act are required, the
costs and expenses thereof (including filing fees) shall be borne by CSI.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions to
be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the
Funding and Consummation Date are subject to the
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satisfaction or waiver on or prior to the Funding and Consummation Date of the
conditions set forth in Sections 8.1, 8.5, 8.8, 8.9 and 8.12. As of the Closing
Date or, with respect to the conditions set forth in Sections 8.1, 8.5, 8.8, 8.9
and 8.12, as of the Funding and Consummation Date, if any such conditions has
not been satisfied, the Stockholders (acting in unison) shall have the right to
terminate this Agreement, or in the alternative, waive any condition not so
satisfied. Any act or action of the Stockholders in consummating the Closing or
delivering certificates representing COMPANY Stock as of the Funding and
Consummation Date shall constitute a waiver of any conditions not so satisfied.
However, no such waiver shall be deemed to affect the survival of the
representations and warranties of CSI and NEWCO contained in Section 6 hereof.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of CSI and NEWCO contained in Section 6 shall be
true and correct in all material respects as of the Closing Date and the Funding
and Consummation Date as though such representations and warranties had been
made as of that time; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by CSI and NEWCO on or before the
Closing Date and the Funding and Consummation Date shall have been duly complied
with and performed in all material respects; and certificates to the foregoing
effect dated the Closing Date and the Funding and Consummation Date,
respectively, and signed by the President or any Vice President of CSI shall
have been delivered to the STOCKHOLDERS.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be reasonably satisfactory to the COMPANY and its counsel.
The STOCKHOLDERS and the COMPANY shall be satisfied that the Registration
Statement and the prospectus forming a part thereof, including any amendments
thereof or supplements thereto, shall not contain any untrue statement of a
material fact, or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that the condition contained in this sentence shall be deemed satisfied if the
COMPANY or STOCKHOLDERS shall have failed to inform CSI in writing
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prior to the effectiveness of the Registration Statement of the existence of an
untrue statement of a material fact or the omission of such a statement of a
material fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the COMPANY as a result of which
the management of the COMPANY deems it inadvisable to proceed with the
transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for CSI, dated the Funding and Consummation Date, in the form annexed
hereto as Annex VI.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of CSI Stock to be received by the
STOCKHOLDERS is not less than the Minimum Value set forth on Annex III.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the transaction
contemplated herein shall have been obtained and made and no action or
proceeding shall have been instituted or threatened to restrain or prohibit the
Merger and no governmental agency or body shall have taken any other action or
made any request of COMPANY as a result of which COMPANY deems it inadvisable to
proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. CSI and NEWCO each shall have delivered to
the COMPANY a certificate, dated as of a date no later than ten days prior to
the Closing Date, duly issued by the Delaware Secretary of State and in each
state in which CSI or NEWCO is authorized to do business, showing that each of
CSI and NEWCO is in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for CSI and NEWCO,
respectively, for all periods prior to the Closing have been filed and paid.
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8.8 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to CSI or NEWCO which would constitute a Material Adverse
Effect.
8.9 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of CSI and of NEWCO, certifying the truth and correctness of attached copies of
the CSI's and NEWCO's respective Certificates of Incorporation (including
amendments thereto), By-Laws (including amendments thereto), and resolutions of
the boards of directors and, if required, the stockholders of CSI and NEWCO
approving CSI's and NEWCO's entering into this Agreement and the consummation of
the transactions contemplated hereby.
8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 TAX MATTERS. The STOCKHOLDERS shall have received an opinion of
Xxxxxx Xxxxxxxx LLP or another tax advisor reasonably acceptable to the
STOCKHOLDERS that the CSI Plan of Organization should qualify as a tax-free
transfer of property under Section 351 of the Code and that the STOCKHOLDERS
will not recognize gain to the extent the STOCKHOLDERS exchange stock of the
COMPANY for CSI stock (but not cash or other property) pursuant to the CSI Plan
of Organization.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF CSI AND NEWCO
The obligations of CSI and NEWCO with respect to actions to be taken on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of CSI and
NEWCO with respect to actions to be taken on the Funding and Consummation Date
are subject to the satisfaction or waiver on or prior to the Funding and
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Consummation Date of the conditions set forth in Sections 9.1, 9.4 and 9.13. As
of the Closing Date or, with respect to the conditions set forth in Sections
9.1, 9.4 and 9.13, as of the Funding and Consummation Date, all conditions not
satisfied shall be deemed to have been waived, except that no such waiver shall
be deemed to affect the survival of the representations and warranties of the
COMPANY contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Funding and Consummation Date with the same effect as
though such representations and warranties had been made on and as of such date;
all of the terms, covenants and conditions of this Agreement to be complied with
or performed by the STOCKHOLDERS and the COMPANY on or before the Closing Date
or the Funding and Consummation Date, as the case may be, shall have been duly
performed or complied with in all material respects; and the STOCKHOLDERS shall
have delivered to CSI certificates dated the Closing Date and the Funding and
Consummation Date, respectively, and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of CSI as a result of which the
management of CSI deems it inadvisable to proceed with the transactions
hereunder.
9.3 SECRETARY'S CERTIFICATE. CSI shall have received a certificate, dated
the Closing Date and signed by the secretary of the COMPANY, certifying the
truth and correctness of attached copies of the COMPANY's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby.
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9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to CSI an
instrument dated the Closing Date releasing the COMPANY from (i) any and all
claims of the STOCKHOLDERS against the COMPANY and CSI and (ii) obligations of
the COMPANY and CSI to the STOCKHOLDERS, except for (x) items specifically
identified on Schedules 5.10 and 5.15 as being claims of or obligations to the
STOCKHOLDERS, (y) continuing obligations to STOCKHOLDERS relating to their
employment by the COMPANY and (z) obligations arising under this Agreement or
the transactions contemplated hereby.
9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to CSI.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
shall have been canceled effective prior to or as of the Funding and
Consummation Date.
9.8 OPINION OF COUNSEL. CSI shall have received an opinion from Counsel to
the COMPANY and the STOCKHOLDERS, dated the Closing Date, substantially in the
form annexed hereto as Annex VII.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with any
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken
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any other action or made any request of CSI as a result of which CSI deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to CSI a
certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in the COMPANY's
state of incorporation and, unless waived by CSI, in each state in which the
COMPANY is authorized to do business, showing the COMPANY is in good standing
and authorized to do business and that all state franchise and/or income tax
returns and taxes for the COMPANY for all periods prior to the Closing have been
filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall enter into an employment agreement substantially in the form of Annex VIII
hereto.
9.13 CLOSING OF IPO. The closing of the sale of the CSI Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA CERTIFICATE. Each STOCKHOLDER shall have delivered to CSI a
certificate to the effect that he is not a foreign person pursuant to Section
1.1445-2(b) of the Treasury regulations.
10. COVENANTS OF CSI AND THE STOCKHOLDERS AFTER CLOSING
10.1 RELEASE FROM GUARANTEES; REPAYMENT OF CERTAIN OBLIGATIONS. CSI shall
use its best efforts to have the STOCKHOLDERS released from any and all
guarantees on any indebtedness that they personally guaranteed and from any and
all pledges of assets that they pledged to secure such indebtedness for the
benefit of the COMPANY, with all such guarantees on indebtedness being assumed
by CSI. In the event that CSI cannot obtain such releases from the lenders of
any such guaranteed indebtedness on or prior to 120 days subsequent to the
Funding and Consummation Date,
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CSI shall pay off or otherwise refinance or retire such indebtedness. From and
after the Funding and Consummation Date and until such time as all of such
indebtedness is paid off, refinanced or retired, CSI shall maintain unencumbered
funds in amounts sufficient to provide for such pay off, refinancing or
retirement, provided that CSI may use such funds for other purposes, in its sole
discretion, with the prior written consent of each STOCKHOLDER who has not as of
that time been released from his or her guarantee as described above and whose
indebtedness as described above has not as of that time been paid off,
refinanced or retired.
10.2 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement or the Registration Statement, after the Funding and
Consummation Date, CSI shall not and shall not permit any of its subsidiaries to
undertake any act that would jeopardize the tax-free status of the organization,
including without limitation:
(a) the retirement or reacquisition, directly or indirectly, of all
or part of the CSI Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of
the STOCKHOLDERS.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end on
or before the Funding and Consummation Date. Notwithstanding the
foregoing, the STOCKHOLDERS shall file or cause to be filed all separate
federal income Tax Returns of any Acquired Party for all taxable periods
that end on or before the Funding and Consummation Date. Each STOCKHOLDER
shall pay or cause to be paid all Tax liabilities (in excess of all
amounts already paid with respect thereto or properly accrued or reserved
with respect thereto on the COMPANY Financial Statements) shown by such
Returns to be due.
(ii) CSI shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Funding and Consummation Date.
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(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings or other
determinations by Taxing Authorities and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each
party shall make its employees reasonably available on a mutually
convenient basis at its cost to provide explanation of any documents or
information so provided. Subject to the preceding sentence, each party
required to file Returns pursuant to this Agreement shall bear all costs
of filing such Returns.
(iv) Each of the COMPANY, NEWCO, CSI and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the transaction
as a tax-free contribution under Section 351(a) of the Code subject to
gain, if any, recognized on the receipt of cash or other property under
Section 351(b) of the Code subject to gain, if any, recognized on the
receipt of cash or other property under Section 351(b) of the Code.
10.4 DIRECTORS. The persons named in the draft of the Registration
Statement shall be appointed as directors and elected as officers of CSI, as and
to the extent set forth in the draft of the Registration Statement, promptly
following the Funding and Consummation Date. This provision shall not imply that
the STOCKHOLDERS have any power or duty to elect officers of CSI.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Funding and
Consummation Date, CSI shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as CSI is able to
replace such plan with a plan that is
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applicable to CSI and all of its then existing subsidiaries, provided that CSI
shall have no obligation to provide replacement plans that have the same terms
and provisions as the existing plans, provided, further, that any new health
insurance plan shall provide for coverage for preexisting conditions. On the
Funding and Consummation Date, the employees of the COMPANY will be the
employees of the Surviving Corporation (provided that this provision is for
purposes of clarifying that the Merger, in and of itself, will not have any
impact on the employment status of any employee and provided, further that this
provision shall not in any way limit the management rights of the Surviving
Corporation or CSI to assess workforce needs and make appropriate adjustments as
necessary or desirable within their discretion subject to applicable laws and
collective bargaining agreements).
10.6 DIVIDENDS. [Intentionally omitted.]
11. INDEMNIFICATION
The STOCKHOLDERS, CSI and NEWCO each make the following covenants that are
applicable to them, respectively:
11.1 GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS
covenant and agree that they, jointly and severally, will indemnify, defend,
protect and hold harmless CSI, NEWCO, the COMPANY and the Surviving Corporation
at all times, from and after the date of this Agreement until the Expiration
Date, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by CSI, NEWCO, the COMPANY or the Surviving Corporation
as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the STOCKHOLDERS or the COMPANY under this
Agreement, or (iii) any liability under the 1933 Act, the 1934 Act or other
Federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
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fact relating to the COMPANY or the STOCKHOLDERS, and provided to CSI or its
counsel by the COMPANY or the STOCKHOLDERS (but in the case of the STOCKHOLDERS,
only if such statement was provided in writing) contained in the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the COMPANY or the
STOCKHOLDERS required to be stated therein or necessary to make the statements
therein not misleading, provided, however, that such indemnity shall not inure
to the benefit of CSI, NEWCO, the COMPANY or the Surviving Corporation to the
extent that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to CSI counsel and to
CSI for inclusion in the final prospectus, and such information was not so
included or properly delivered, and provided further, that no STOCKHOLDER shall
be liable for any indemnification obligation pursuant to this Section 11.1 to
the extent attributable to a breach of any representation, warranty or agreement
made herein individually by any other STOCKHOLDER.
11.2 INDEMNIFICATION BY CSI. CSI covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by CSI or NEWCO of
their representations and warranties set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of CSI or NEWCO under this Agreement, (iii) any liabilities which the
STOCKHOLDERS may incur due to CSI's or NEWCO's failure to be responsible for the
liabilities and obligations of the COMPANY as provided in Section 1 hereof
(except to the extent that CSI or NEWCO has claims against the STOCKHOLDERS by
reason of such liabilities); or (iv) any liability under the 1933 Act, the 1934
Act or other Federal or state law
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or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to CSI,
NEWCO or any of the Other Founding Companies contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact relating to
CSI or NEWCO or any of the Other Founding Companies required to be stated
therein or necessary to make the statements therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (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"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give 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 in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. 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 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 or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest that prevents counsel
for the Indemnifying Party from representing Indemnified Party,
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Indemnified Party shall have the right to participate in such matter through
counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the reasonable expenses of its counsel. 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, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the Indemnifying Party, in which event
the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses. 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. Upon agreement as to such settlement between
said Third Person and the Indemnifying Party, the Indemnifying Party shall, in
exchange for a complete release from the Indemnified Party, promptly pay to the
Indemnified Party the amount agreed to in such settlement and the Indemnified
Party shall, from that moment on, bear full responsibility for any additional
costs of defense which it subsequently incurs with respect to such claim and all
additional costs of settlement or judgment. If the Indemnifying Party does not
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, 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, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. All
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settlements hereunder shall effect a complete release of the Indemnified Party,
unless the Indemnified Party otherwise agrees in writing. The parties hereto
will make appropriate adjustments for insurance proceeds in determining the
amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section 11
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. CSI, NEWCO, the Surviving Corporation
and the other persons or entities indemnified pursuant to Section 11.1 or 11.2
shall not assert any claim for indemnification hereunder against the
STOCKHOLDERS until such time as, and solely to the extent that, the aggregate of
all claims which such persons may have against such the STOCKHOLDERS shall
exceed the greater of (a) 1.0% of the sum of the cash paid to STOCKHOLDERS plus
the value of the CSI Stock delivered to STOCKHOLDERS (calculated as provided in
this Section 11.5) or (b) $50,000 (the "Indemnification Threshold").
STOCKHOLDERS shall not assert any claim for indemnification hereunder against
CSI or NEWCO until such time as, and solely to the extent that, the aggregate of
all claims which STOCKHOLDERS may have against CSI or NEWCO shall exceed
$50,000.
No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, no STOCKHOLDER shall be
liable under this Section 11 for an amount which exceeds the amount of proceeds
received by such STOCKHOLDER in connection with the Merger. For purposes of
calculating the value of the CSI Stock received by a STOCKHOLDER, CSI Stock
shall be valued at its initial public offering price
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as set forth in the Registration Statement. It is hereby understood and agreed
that a STOCKHOLDER may satisfy an indemnification obligation through payment of
a combination of stock and cash in proportion equal to the proportion of stock
and cash received by such STOCKHOLDER in connection with the Merger, valued as
described immediately above.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION.This Agreement may be terminated at any time prior to the
Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of CSI and the COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by CSI (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by September 30, 1997,
unless the failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by CSI, on the
other hand, if a material breach or default shall be made by the other party in
the observance or in the due and timely performance of any of the covenants or
agreements contained herein, and the curing of such default shall not have been
made on or before the Funding and Consummation Date or by the STOCKHOLDERS or
the COMPANY, if the conditions set forth in Section 8 hereof have not been
satisfied or waived as of the Closing Date or the Funding and Consummation Date,
as applicable, or by CSI, if the conditions set forth in Section 9 hereof have
not been satisfied or waived as of the Closing Date or the Funding and
Consummation Date, as applicable;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
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12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period of
five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any heating,
ventilating or air conditioning services business in direct competition with CSI
or any of the subsidiaries thereof, within 100 miles of where the COMPANY or any
of its subsidiaries conducted business prior to the effectiveness of the Merger
(the "Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of CSI (including the subsidiaries thereof) in a sales representative
or managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of CSI (including the subsidiaries
thereof), provided that each STOCKHOLDER shall be permitted to call upon and
hire any member of his or her immediate family;
(iii) call upon any person or entity which is, at that time, or which has
been, within one (1) year prior to the Funding and Consummation Date, a customer
of CSI (including the subsidiaries thereof), of the COMPANY or of any of the
Other Founding Companies within the Territory for the
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purpose of soliciting or selling products or services in direct competition with
CSI within the Territory;
(iv) call upon any prospective acquisition candidate, on any STOCKHOLDER's
own behalf or on behalf of any competitor in the heating, ventilation or air
conditioning services business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by CSI (including the
subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER
after due inquiry, CSI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of the COMPANY
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever except to the extent that the COMPANY has in the past
disclosed such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
CSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to CSI for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by CSI in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of CSI (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of CSI.
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13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against CSI (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by CSI
of such covenants. It is specifically agreed that the period of five (5) years
stated at the beginning of this Section 13, during which the agreements and
covenants of each STOCKHOLDER made in this Section 13 shall be effective, shall
be computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall not be affected by any breach of any other
provision hereof by any party hereto and shall have no effect if the
transactions contemplated by this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that this
covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or CSI, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or CSI's respective businesses. The
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STOCKHOLDERS agree that they will not disclose such confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except (a) to authorized representatives of CSI, (b)
following the Closing, such information may be disclosed by the STOCKHOLDERS as
is required in the course of performing their duties for CSI or the Surviving
Corporation and (c) to counsel and other advisers, provided that such advisers
(other than counsel) agree to the confidentiality provisions of this Section
14.1, unless (i) such information becomes known to the public generally through
no fault of the STOCKHOLDERS, (ii) disclosure is required by law or the order of
any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall,
if possible, give prior written notice thereof to CSI and provide CSI with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes that such disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or threatened
breach by any of the STOCKHOLDERS of the provisions of this Section, CSI shall
be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting CSI from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, STOCKHOLDERS
shall have none of the above-mentioned restrictions on their ability to
disseminate confidential information with respect to the COMPANY.
14.2 CSI AND NEWCO. CSI and NEWCO recognize and acknowledge that they had
in the past and currently have access to certain confidential information of the
COMPANY, such as operational policies, and pricing and cost policies that are
valuable, special and unique assets of the COMPANY's business. CSI and NEWCO
agree that, prior to the Closing, or if the Transactions contemplated by this
Agreement are not consummated, they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to authorized representatives of
the COMPANY, (b) to counsel and other
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advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 14.1, (c) to the Other Founding
Companies and their representatives pursuant to Section 7.1(a), unless (i) such
information becomes known to the public generally through no fault of CSI or
NEWCO, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), CSI and NEWCO shall, if possible, give prior
written notice thereof to the COMPANY and the STOCKHOLDERS and provide the
COMPANY and the STOCKHOLDERS with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, and
(d) to the public to the extent necessary or advisable in connection with the
filing of the Registration Statement and the IPO and the securities laws
applicable thereto and to the operation of CSI as a publicly held entity after
the IPO. In the event of a breach or threatened breach by CSI or NEWCO of the
provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining CSI and NEWCO from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14 shall
survive the termination of this Agreement for a period of five years from the
Funding and Consummation Date.
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15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year from the Closing, except pursuant
to Section 17 hereof, none of the STOCKHOLDERS shall sell, assign, exchange,
transfer, encumber, pledge, distribute, appoint, or otherwise dispose of any
shares of CSI Stock as described in Section 3.1 received by the STOCKHOLDERS in
the Merger. The certificates evidencing the CSI Stock delivered to the
STOCKHOLDERS pursuant to Section 3 of this Agreement will bear a legend
substantially in the form set forth below and containing such other information
as CSI may deem necessary or appropriate: THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION
PRIOR TO THE FIRST ANNIVERSARY OF CLOSING DATE. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED
ABOVE.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS acknowledge that the shares of
CSI Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have
not been and will not be registered under the Act (except as provided in Section
17 hereof) and therefore may not be resold without compliance with the Act. The
CSI Stock to be acquired by such STOCKHOLDERS
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pursuant to this Agreement is being acquired solely for their own respective
accounts, for investment purposes only, and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution. The STOCKHOLDERS covenant, warrant and represent that none of the
shares of CSI Stock issued to such STOCKHOLDERS will be offered, sold, assigned,
pledged, hypothecated, transferred or otherwise disposed of except after full
compliance with all of the applicable provisions of the Act and the rules and
regulations of the SEC. All the CSI Stock shall bear the following legend in
addition to the legend required under Section 15 of this Agreement: THE SHARES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
(THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF
COMPLIES WITH THE ACT AND APPLICABLE SECURITIES LAW.
16.2 ECONOMIC RISK; SOPHISTICATION. The STOCKHOLDERS are able to bear the
economic risk of an investment in the CSI Stock to be acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the proposed investment in the CSI
Stock. The STOCKHOLDERS party hereto have had an adequate opportunity to ask
questions and receive answers from the officers of CSI concerning any and all
matters relating to the transactions described herein including, without
limitation, the background and experience of the current and proposed officers
and directors of CSI, the plans for the operations of the business of CSI, the
business, operations and financial condition of the Founding Companies other
than the COMPANY, and any plans for additional acquisitions and the like. The
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
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17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing,
whenever CSI proposes to register any CSI Stock for its own or others account
under the 1933 Act for a public offering, other than (i) any shelf registration
of shares to be used as consideration for acquisitions of additional businesses
by CSI and (ii) registrations relating to employee benefit plans, CSI shall give
each of the STOCKHOLDERS prompt written notice of its intent to do so. Upon the
written request of any of the STOCKHOLDERS given within 30 days after receipt of
such notice, CSI shall cause to be included in such registration all of the CSI
Stock issued to the STOCKHOLDERS pursuant to this Agreement (including any stock
issued as (or issuable upon the conversion or exchange of any convertible
security, warrant, right or other security which is issued by CSI as) a dividend
or other distribution with respect to, or in exchange for, or in replacement of
such CSI Stock) which any such STOCKHOLDER requests, provided that CSI shall
have the right to reduce the number of shares included in such registration to
the extent that inclusion of such shares could, in the opinion of tax counsel to
CSI or its independent auditors, jeopardize the status of the transactions
contemplated hereby and by the Registration Statement as a tax-free
organization. In addition, if CSI is advised in writing in good faith by any
managing underwriter of an underwritten offering of the securities being offered
pursuant to any registration statement under this Section 17.1 that the number
of shares to be sold by persons other than CSI is greater than the number of
such shares which can be offered without adversely affecting the offering, CSI
may reduce pro rata the number of shares offered for the accounts of such
persons (based upon the number of shares held by such person) to a number deemed
satisfactory by such managing underwriter, provided, that, for each such
offering made by CSI after the IPO, such reduction shall be made first by
reducing the number of shares to be sold by persons other than CSI, the
STOCKHOLDERS and the stockholders of the Other Founding Companies (collectively,
the STOCKHOLDERS and the stockholders of the other Founding Companies being
referred to herein as the "Founding Stockholders"), and thereafter, if a
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further reduction is required, by reducing the number of shares to be sold by
the Founding Stockholders.
17.2 DEMAND REGISTRATION RIGHTS. At any time after the date one year after
the Closing and prior to the date three years after the Closing, the holders of
a majority of the shares of CSI Stock issued to the Founding Stockholders
pursuant to this Agreement and the Other Agreements which have not been
previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing that CSI file a registration statement under the 1933 Act
covering the registration of the shares of CSI Stock issued to the STOCKHOLDERS
pursuant to this Agreement and the Other Agreements (including any stock issued
as (or issuable upon the conversion or exchange of any convertible security,
warrant, right or other security which is issued by CSI as) a dividend or other
distribution with respect to, or in exchange for, or in replacement of such CSI
Stock) then held by such Founding Stockholders (a "Demand Registration"). Within
ten (10) days of the receipt of such request, CSI shall give written notice of
such request to all other Founding Stockholders and shall, as soon as
practicable but in no event later than 45 days after notice from any
STOCKHOLDER, file and use its best efforts to cause to become effective a
registration statement covering all such shares. CSI shall be obligated to
effect only one Demand Registration for all Founding Stockholders and will keep
such Demand Registration current and effective for not less than 90 days (or
such shorter period as is required to sell all of the shares registered
thereby).
Notwithstanding the foregoing paragraph, following any such a demand, a
majority of CSI's disinterested directors (i.e. directors who have not demanded
or elected to sell shares in any such public offering) may defer the filing of
the registration statement for up to a 30 day period after the date on which CSI
would otherwise be required to make such filing pursuant to the foregoing
paragraph.
If at the time of any request by the Founding Stockholders for a Demand
Registration CSI has fixed plans to file within 60 days after such request a
registration statement covering the sale of
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any of its securities in a public offering under the 1933 Act, no registration
of the Founding Stockholders' CSI Stock shall be initiated under this Section
17.2 until 90 days after the effective date of such registration unless CSI is
no longer proceeding diligently to effect such registration; provided that CSI
shall provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
17.3 REGISTRATION PROCEDURES. All expenses incurred in connection with the
registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by CSI. In connection with
registrations under Sections 17.1 and 17.2, CSI shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the CSI Stock and use its best efforts to
cause such registration to promptly become and remain effective for a period of
at least 90 days (or such shorter period during which holders shall have sold
all CSI Stock which they requested to be registered); (ii) use its best efforts
to register and qualify the CSI Stock covered by such registration statement
under applicable state securities laws as the holders shall reasonably request
for the distribution for the CSI Stock; and (iii) take such other actions as are
reasonable and necessary to comply with the requirements of the 1933 Act and the
regulations thereunder.
17.4 UNDERWRITING AGREEMENT. In connection with each registration pursuant
to Sections 17.1 and 17.2 covering an underwritten registered offering, CSI and
each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of CSI's size and investment stature,
including indemnification.
17.5 AVAILABILITY OF RULE 144. CSI shall not be obligated to register
shares of CSI Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
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17.6 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 CSI stock
to the public without registration, CSI agrees to use its best efforts to:
(i) make and keep public information regarding CSI available as
those terms are understood and defined in Rule 144 under the 1933 Act for
a period of four years beginning 90 days following the effective date of
the Registration Statement;
(ii) file with the SEC in a timely manner all reports and other
documents required of CSI under the 1933 Act and the 1934 Act at any time
after it has become subject to such reporting requirements; and
(iii) so long as a STOCKHOLDER owns any restricted CSI Common Stock,
furnish to each STOCKHOLDER forthwith upon written request a written
statement by CSI as to its compliance with the reporting requirements of
Rule 144 (at any time from and after 90 days following the effective date
of the Registration Statement, and of the 1933 Act and the 1934 Act (any
time after it has become subject to such reporting requirements), a copy
of the most recent annual or quarterly report of CSI, and such other
reports and documents so filed as a STOCKHOLDER may reasonably request in
availing itself of any rule or regulation of the SEC allowing a
STOCKHOLDER to sell any such shares without registration.
18. GENERAL
18.1 COOPERATION. The COMPANY, STOCKHOLDERS, CSI and NEWCO shall each
deliver or cause to be delivered to the other on the Funding and Consummation
Date, and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The COMPANY will cooperate and use its reasonable
efforts to have the present officers, directors and employees of the COMPANY
cooperate with CSI on and after the Funding and Consummation Date in furnishing
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information, evidence, testimony and other assistance in connection with any tax
return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Funding
and Consummation Date.
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
CSI, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 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 CSI and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and CSI,
acting through their respective officers or trustees, duly authorized by their
respective Boards of Directors. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any other
Schedule required hereby, provided that the COMPANY shall make a good faith
effort to cross reference disclosure, as necessary or advisable, between related
Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each party
represents and warrants that it employed no broker or agent in connection with
this transaction and agrees to indemnify the other parties hereto against all
loss, cost, damages or expense arising out of claims for fees or commission of
brokers employed or alleged to have been employed by such indemnifying party.
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18.6 EXPENSES. Whether or not the transactions herein contemplated shall
be consummated, CSI will pay the fees, expenses and disbursements of CSI and its
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments thereto, including all costs
and expenses incurred in the performance and compliance with all conditions to
be performed by CSI under this Agreement, including the fees and expenses of
Xxxxxx Xxxxxxxx, LLP, Xxxxxxxxx & Xxxxxxxxx, L.L.P., and any other person or
entity retained by CSI or by Notre Capital Ventures II, L.L.C., and the costs of
preparing the Registration Statement. Each STOCKHOLDER shall pay all sales, use,
transfer, real property transfer, recording, gains, stock transfer and other
similar taxes and fees ("Transfer Taxes") imposed in connection with the Merger,
other than Transfer Taxes, if any, imposed by the State of Delaware. Each
STOCKHOLDER shall file all necessary documentation and Returns with respect to
such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he, and not
the COMPANY or CSI, will pay all taxes due upon receipt of the consideration
payable pursuant to Section 2 hereof, and will assume all tax risks and
liabilities of such STOCKHOLDER in connection with the transactions contemplated
hereby.
18.7 NOTICES. All notices of communication required or permitted hereunder
shall be in writing and may be given by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person to
an officer or agent of such party.
(a) If to CSI, or NEWCO, addressed to them at:
Comfort Systems USA, Inc.
0000 Xxxxxxx, Xxxxx 000X
Xxxxxxx, Xxxxx 00000
Attn: Xxxx Xxxxxxxx
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with copies to:
Xxxxxxx X. Xxxxxxxxx
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
South Tower Pennzoil Place
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
(b) If to the STOCKHOLDERS, addressed to them at their addresses
set forth on Annex IV, with copies to:
Xxxxxxxxxxx X. Xxxxxxx
Xxxxxxx & Xxxxx, L.L.P.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
(c) If to the COMPANY, addressed to it at:
Atlas Comfort Services USA, Inc., formerly
Atlas Interest, Inc.
Atlas Air Conditioning Company
0000 Xxxxxxxxxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxx X. Atlas
Xxxxxxx X. Atlas
and marked "Personal and Confidential"
with copies to:
Comfort Systems USA, Inc.
0000 Xxxxxxx, Xxxxx 000X
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxxxxx
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
-73-
18.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the Expiration Date.
18.10 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.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 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.
18.13 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of CSI, NEWCO, the COMPANY and STOCKHOLDERS who hold or who will
hold at least 50% of the CSI Stock issued or to be issued upon consummation of
the Merger. Any amendment or waiver effected in accordance with this Section
18.15 shall be binding upon each of the parties hereto, any other person
receiving CSI Stock in connection with the Merger and each future holder of such
CSI Stock.
-75-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
COMFORT SYSTEMS USA, INC.
By:/S/ XXXX XXXXXXXX
Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer
ATLAS AIR ACQUISITION I CORP.
By:/S/ XXXXXX XXXXXXXXXXXXX
Name: Xxxxxx Xxxxxxxxxxxxx
Title: President
ATLAS COMFORT SERVICES USA, INC.
By:/S/ XXXXXXX X. ATLAS
Name: Xxxxxxx X. Atlas
Title: President
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STOCKHOLDERS:
/S/ XXXXX X. ATLAS
Xxxxx X. Atlas
/S/ XXXXXXX X. ATLAS
Xxxxxxx X. Atlas
-77-
ANNEX III
TO THAT CERTAIN
AGREEMENT AND PLAN OF ORGANIZATION
DATED AS OF MARCH 18, 1997
BY AND AMONG
COMFORT SYSTEMS USA, INC.
ATLAS AIR ACQUISITION I CORP.
ATLAS COMFORT SERVICES USA, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
CONSIDERATION TO BE PAID TO STOCKHOLDERS
Aggregate consideration to be paid to STOCKHOLDERS:
$25,480,000 in cash and the value of outstanding Common Stock of CSI
(assuming an offering price of $13.00 per share), consisting of 1,432,000
shares of CSI Stock and $6,864,000 in cash, it being agreed that the
actual amount of all cash payments described in this Annex III will depend
on the actual initial offering price of the Common Stock of CSI in the
IPO, and may be more or less than $13.00 per share; provided, however that
such price shall not be less than $8.00 per share.
Consideration to be paid to each STOCKHOLDER:
---------------------------------------------
Shares of Common Cash
Stockholder Stock of Csi ($)
--------------------------------------------------------------------------------
Xxxxx X. Atlas 716,000 $ 3,432,000
Xxxxxxx X. Atlas 716,000 3,432,000
---------- ------------
TOTALS: 1,432,000 $ 6,864,000
MINIMUM VALUE: $15,680,000 (based on a price of $8.00 per share)
ANNEX IV
TO THAT CERTAIN
AGREEMENT AND PLAN OF ORGANIZATION
DATED AS OF MARCH 18, 1997
BY AND AMONG
COMFORT SYSTEMS USA, INC.
ATLAS AIR ACQUISITION I CORP.
ATLAS COMFORT SERVICES USA, INC.
AND
THE STOCKHOLDERS NAMED THEREIN
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
The following is a list of the STOCKHOLDERS, their addresses and the number of
shares of the COMPANY Stock held by each thereof:
STOCKHOLDER ADDRESSES NO. SHARES HELD
--------------------------------------------------------------------------------
Xxxxx X. Atlas ______________ 1,500
Xxxxxxx X. Atlas ______________ 1,500
Total Outstanding 3,000
