EXHIBIT 2.1
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
dated as of
May 7, 2003
among
ENCOMPASS SERVICES CORPORATION
THE SELLING SUBSIDIARIES NAMED HEREIN
and
RESIDENTIAL ACQUISITION CORP.
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINED TERMS..............................................................1
1.1 Usage......................................................................1
1.2 Definitions................................................................2
ARTICLE II SALE OF ASSETS, ASSUMPTION OF LIABILITIES AND RELATED TRANSACTIONS........11
2.1 Purchase and Sale of Assets...............................................11
2.2 Assumption of Certain Liabilities.........................................13
2.3 Purchase Price............................................................14
2.4 Assumption of Certain Contracts...........................................14
ARTICLE III CLOSING...................................................................15
3.1 Closing...................................................................15
3.2 Items to be Delivered at the Closing By Sellers...........................16
3.3 Items to be Delivered at the Closing By Buyer.............................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS.................................17
4.1 Organization; Corporate Authority.........................................17
4.2 Corporate Action; Authority; Non-contravention............................18
4.3 Selling Subsidiaries......................................................18
4.4 Financial Statements......................................................18
4.5 Assets Necessary to Conduct Business......................................19
4.6 Accuracy of Information...................................................19
4.7 Taxes.....................................................................19
4.8 Contracts.................................................................20
4.9 Personal Property.........................................................21
4.10 Real Property.............................................................21
4.11 Intellectual Property.....................................................22
4.12 Insurance.................................................................23
4.13 Existing Permits..........................................................23
4.14 Compliance with Law.......................................................23
4.15 Legal Proceedings.........................................................24
4.16 Employees.................................................................24
4.17 ERISA Compliance..........................................................24
4.18 Environmental Matters.....................................................25
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4.19 No Brokers or Finders.....................................................25
4.20 Bonding, Letters of Credit and Deposits...................................25
4.21 Certain Interests.........................................................26
4.22 Bank Accounts.............................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER...................................26
5.1 Organization..............................................................26
5.2 Corporate Action; Authority; Non-Contravention............................26
5.3 No Brokers or Finders.....................................................26
5.4 Legal Proceedings.........................................................27
5.5 Financing.................................................................27
5.6 Investigation.............................................................27
ARTICLE VI COVENANTS WITH RESPECT TO CONDUCT OF SELLERS PRIOR TO CLOSING............27
6.1 Access....................................................................27
6.2 Financial Reports.........................................................28
6.3 Conduct of Residential Business...........................................28
6.4 Notification of Certain Matters...........................................31
6.5 Permits, Orders and Approvals.............................................31
6.6 Chapter 11 Cases..........................................................31
6.7 Inconsistent Agreements...................................................32
6.8 Corporate Names...........................................................32
6.9 Certain Asset Transfers...................................................32
6.10 Waiver and Release........................................................32
6.11 Court Approval of Agreement...............................................33
6.12 Delivery of Schedules; Changed Schedules..................................33
ARTICLE VII ADDITIONAL CONTINUING COVENANTS...........................................33
7.1 Tax Matters; Tax Returns..................................................33
7.2 Employment Matters........................................................34
7.3 Transfer Taxes............................................................35
7.4 Encompass Name............................................................36
7.5 Further Action............................................................36
7.6 Non-Competition; Non-Solicitation.........................................36
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7.7 Post-Closing Access.......................................................37
7.8 Insurance.................................................................37
7.9 Performance Bond Collateral; License Bonds................................37
ARTICLE VIII CONDITIONS OF PURCHASE....................................................38
8.1 General Conditions........................................................38
8.2 Conditions to Obligations of Buyer........................................39
8.3 Conditions to Obligations of Seller.......................................40
ARTICLE IX TERMINATION OF OBLIGATIONS; BREAK-UP FEE; EFFECT OF TERMINATION...........41
9.1 Termination of Agreement..................................................41
9.2 Break-up Fee and Expenses.................................................41
9.3 Effect of Termination.....................................................41
ARTICLE X GENERAL...................................................................42
10.1 Amendments; Waivers.......................................................42
10.2 Schedules; Exhibits; Integration..........................................42
10.3 Further Assurances; Right of Endorsement, Etc.............................42
10.4 Governing Law; Jurisdiction...............................................43
10.5 No Assignment.............................................................44
10.6 Headings..................................................................44
10.7 Counterparts..............................................................44
10.8 Publicity; Reports........................................................45
10.9 Confidentiality...........................................................45
10.10 Parties in Interest.......................................................45
10.11 Performance by Selling Subsidiaries.......................................45
10.12 Notices...................................................................45
10.13 Expenses..................................................................47
10.14 Remedies; Waiver..........................................................47
10.15 Knowledge Convention......................................................47
10.16 Representation By Counsel; Interpretation.................................47
10.17 Specific Performance......................................................47
10.18 Severability..............................................................47
10.19 Waiver of Jury Trial......................................................48
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10.20 Delivery by Facsimile.....................................................48
10.21 Non-Survival of Provisions................................................48
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EXHIBITS
Exhibit A Non-foreign Person Certificate
SCHEDULES
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
May 7, 2003, by and among Encompass Services Corporation (the "Company"), a
Texas corporation, the Subsidiaries of the Company owning Purchased Assets,
which are named on the signature pages hereto (the "Selling Subsidiaries"), and
Residential Acquisition Corp. (the "Buyer"), a Delaware corporation. The Company
and the Selling Subsidiaries are collectively referred to herein as "Sellers"
and, individually, as a "Seller". Capitalized terms used in this Agreement and
not otherwise defined have the meanings stated in Article I hereto.
R E C I T A L S
WHEREAS, the Company and its Subsidiaries (including the Selling
Subsidiaries) filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code on November 19, 2002 (the "Petition Date") with the Bankruptcy
Court (such proceedings which are jointly administered under Case No. 02-43582
are hereinafter referred to as the "Chapter 11 Cases"). The Sellers operate
their business and manage their properties during the Chapter 11 Cases as
debtors-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, upon the terms and conditions set forth herein, Sellers desire
to sell to Buyer and Buyer desires to purchase from Sellers, the Purchased
Assets; and
WHEREAS, in consideration for the Purchased Assets, Buyer will, among
other things, as more particularly defined herein: (i) assume the Assumed
Liabilities, and (ii) pay the Purchase Price to Sellers.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants, agreements, terms and conditions
contained herein, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.1 USAGE.
For all purposes of this Agreement, except as otherwise expressly
provided:
(a) the terms defined in this Article I have the meanings assigned
to them in this Article I and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP;
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement;
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(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
(e) all references to assets or properties of the Sellers that are
described as "relating to", "in connection with" or "arising out of" or words of
similar intent or effect shall be deemed to mean references to the assets and
properties of (i) the Selling Subsidiaries and (ii) those assets and properties
of the Company specifically relating to, used primarily in connection with or
arising out of, as the case may be, the Company's operation of the Residential
Business (and not relating to, used in connection with or arising out of the
Company's operation of its business generally); and
(f) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
1.2 DEFINITIONS.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply:
"Accounts Receivable" means all accounts receivable of each Seller
arising out of the Residential Business, of whatever kind or nature, including
all current or deferred rights to payment for projects completed or commenced or
services rendered on or prior to the Closing Date, whether or not such services
have been billed by such Seller as of the Closing Date (not including refunds,
if any, of Taxes relating to any period prior to the Closing), and all claims,
remedies and other rights related thereto.
"Action" means any action, motion, application, complaint, hearing,
investigation, petition, suit or other proceeding, whether civil or criminal, in
law or in equity, or before any arbitrator or Governmental Entity, including,
without limitation, any motion, application, adversary proceeding, complaint or
other proceeding filed in the Bankruptcy Court or any appeal of any Order
entered therein.
"Affiliate" means a Person, that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, another Person, including, the power to direct or cause the direction of
the management and policies of a Person, whether through the beneficial
ownership of more than 50% of the voting securities, election or appointment of
directors, or by contract or otherwise.
"Agent" means the administrative agent under the Existing Credit
Agreement.
"Agreement" has the meaning given to such term in the introduction of
this agreement.
"Allocation Schedule" has the meaning given to such term in Section
7.1(c).
"Alternate Order" means an Order of the Bankruptcy Court authorizing and
approving the sale of the Purchased Assets free and clear of all Encumbrances,
other than Permitted Encumbrances, and the consummation of the transactions
contemplated by this Agreement, which Order shall be in form and substance
satisfactory to the Buyer, the Sellers and the Agent.
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"Approval" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"Associate" of a Person means:
(a) a corporation or organization (other than a party to this
Agreement) of which such Person is a director, an officer, a partner or a member
or is, directly or indirectly, the beneficial owner of 10% or more of any class
of Equity Securities;
(b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a similar
capacity; or
(c) any immediate family member or spouse of such Person.
"Assumed Contracts" has the meaning given to such term in Section
2.1(a)(vii).
"Assumed Liabilities" has the meaning assigned to such term in Section
2.2(a).
"Assumption Order" means an Order (which may include the Confirmation
Order or an Alternate Order) entered pursuant to Section 365 of the Bankruptcy
Code authorizing Sellers to assume and assign to Buyer each Assumed Contract, in
form and substance satisfactory to Buyer.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute, and
applicable federal rules of bankruptcy procedure thereunder.
"Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of Texas (Houston Division) or such other court having
jurisdiction over the Chapter 11 Cases originally administered by the United
States Bankruptcy Court for the Southern District of Texas (Houston Division).
"Bond" means any payment, performance, bid or miscellaneous bond or any
other instrument or guarantee issued by a surety under which any Seller is named
as a principal or under which any Seller is an indemnitor or is otherwise
liable.
"Building Permits" means Permits obtained in the ordinary course of
business which are specific to a particular project or job.
"Buyer" has the meaning assigned to such term in the introduction to
this Agreement.
"Buyer Plans" has the meaning assigned to such term in Section 7.2(c).
"Cash Sweep" has the meaning assigned to such term in Section 6.3(c).
"Chapter 11 Cases" has the meaning assigned to such term in the recital
clauses hereof.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
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"Closing Date" means the business day (other than a Saturday, Sunday or
legal holiday) on which the Closing occurs, which shall in any event be, unless
otherwise mutually agreed by the Company and the Buyer, the later of the tenth
business day following the date on which the Bankruptcy Court shall have entered
the Confirmation Order (or, if applicable, an Alternate Order) and the date on
which the remaining conditions to Closing set forth in Article VIII hereof shall
be satisfied or waived.
"COBRA" means Section 4980B of the Code or Part 6 of Subtitle B of Title
I of ERISA.
"Commercial Software" means packaged commercially available software
programs generally available to the public through retail dealers in computer
software (which, for the avoidance of doubt, does not include the Solomon
accounting software utilized by certain Selling Subsidiaries or the accounting
and estimating system software utilized by Masters, Inc. and certain other
Selling Subsidiaries).
"Company" has the meaning assigned to such term in the introduction to
this Agreement.
"Confirmation Date" means the earlier of the date of entry of the
Confirmation Order or the date of entry of an Alternate Order, in each case as
set forth on the docket of the Bankruptcy Court.
"Confirmation Order" means an Order of the Bankruptcy Court authorizing
and approving, among other things, the Plan, and authorizing the sale of the
Purchased Assets free and clear of all Encumbrances, other than Permitted
Encumbrances and the consummation of the transactions contemplated by the Plan
and this Agreement, which Order shall be in form and substance reasonably
satisfactory to Buyer.
"Consolidating Financial Statements" has the meaning assigned to such
term in Section 4.4(c).
"Contract" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"Covered Properties" means all properties and facilities owned, leased
or operated by each Seller in connection with the Residential Business.
"Cure Payments" means the payment of cash by any Seller (as part of the
Chapter 11 Cases), or the distribution of other property, as necessary to cure a
default by any Seller under an executory contract or unexpired lease of a Seller
and to permit such Seller to assume and, if applicable, assign that contract or
lease under sections 365(a) and 365(f) of the Bankruptcy Code.
"Customer Contract" means a duly executed and valid Contract pursuant to
which any Seller is obligated to perform any Services in connection with the
Residential Business on or after the Closing Date and under which Contract the
obligation of any party thereto does not exceed $50,000.
"Designated Agreements" has the meaning assigned to such term in Section
2.4(c).
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"Disclosure Statement" means the second amended joint disclosure
statement filed by Company and its Subsidiaries on April 11, 2003 pursuant to
Section 1125 of the Bankruptcy Code (with such modifications as Buyer may
consent to in writing from time to time), which joint disclosure statement
relates to the Plan and is approved by the Bankruptcy Court pursuant to the
Disclosure Statement Order.
"Disclosure Statement Order" means an Order of the Bankruptcy Court
approving, among other things, the Disclosure Statement, the voting procedures
with respect to the Plan, and the deadline for voting on the Plan, which Order
shall be in form and substance reasonably satisfactory to Buyer.
"Due Diligence Letter" means the due diligence letter dated March 28,
2003, between Buyer and Company, as amended, modified or supplemented by the
Order of the Bankruptcy Court.
"Employee Plan" means any "employee benefit plan" (as that term is
defined in Section 3(3) of ERISA), as well as any other bonus, deferred
compensation, incentive compensation, stock purchase, stock option, severance or
termination plan, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, pension, profit sharing or retirement plan,
employment agreement or other employee benefit plan, program or arrangement,
under which any Seller or any ERISA Affiliate, has any present or future
obligation or Liability on behalf of its employees or former employees,
contractual employees or their dependents or beneficiaries.
"Encumbrance" means any mortgage, conditional sales agreement, title
retention contract, easement, encumbrance, security interest, lien, option,
pledge, or restriction (whether on voting, sale, transfer, disposition or
otherwise), whether imposed by agreement, understanding, law, equity or
otherwise, except for any restrictions generally arising under any applicable
federal or state securities law.
"Environmental, Health and Safety Laws" means all Laws, Permits, Orders
and Contracts and all common law relating to or addressing pollution or
protection of the environment, public health and safety, or employee health and
safety, including, but not limited to, all those relating to the presence, use,
production, manufacture, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, emission,
discharge, release, threatened release, recycling, reporting, control or cleanup
of any Hazardous Substance.
"Equity Securities" means any stock, shares, partnership interests,
membership interests, voting trust certificates, certificates of interest or
participation in any profit-sharing agreement or arrangement, options, warrants,
bonds, debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related regulations and published interpretations.
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"ERISA Affiliate" means with respect to any Person, any Person that is a
member of a "controlled group of corporations" with or is under "common control"
with such Person within the meaning of Section 414(b), (c) or (m) of the Tax
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder.
"Excluded Assets" has the meaning assigned to such term in Section
2.1(b).
"Excluded Liabilities" has the meaning assigned to such term in Section
2.2(b).
"Existing Credit Agreement" has the meaning set forth for such term in
the Plan.
"Financial Statements" has the meaning assigned to such term in Section
4.4(a)(ii).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied.
"Governmental Entity" means any government or any agency, bureau, board,
commission, court (including, without limitation, the Bankruptcy Court),
department, official, political subdivision, tribunal or other instrumentality
of any government, whether federal, state or local, domestic or foreign.
"Hazardous Substance" means (but shall not be limited to) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Laws as "hazardous substances," "hazardous materials," "hazardous
wastes," "pollutant," "contaminant" or "toxic substances," or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitibility, corrosivity, reactivity,
radioactivity, carcinogenicity, reproductive toxicity or "EP toxicity," asbestos
and asbestos-containing materials, PCBs, urea formaldehyde foam insulation,
petroleum and drilling fluids, produced waters and other wastes associated with
the exploration, development, or production of crude oil, natural gas or
geothermal energy.
"HIPAA" has the meaning assigned to such term in Section 4.17(b)(ii).
"HVAC" means heating, ventilation and air conditioning.
"Indebtedness" means indebtedness for borrowed money, reimbursement
obligations with respect to letters of credit and similar instruments,
obligations incurred, issued or assumed as the deferred purchase price of
property or services (other than accounts payable incurred in the ordinary
course of business consistent with past practice and not more than 90 days old),
obligations of others secured (or, for which the holder of such indebtedness has
an existing right, contingent or otherwise, to be secured) by any Encumbrance
(other than Permitted Encumbrances) on any of the Purchased Assets, capital
lease obligations, and obligations in respect of guarantees of any of the
foregoing or any "keep well" or other agreement to maintain any financial
statement condition of another Person, in each case, whether or not matured,
liquidated, fixed, or contingent, and without duplication. The term
"Indebtedness" shall mean the amount required to retire such Indebtedness on the
date in question and includes all principal, interest, fees, expenses,
prepayment penalties and other similar obligations owed in respect of
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any outstanding Indebtedness.
"Insurance Policies" has the meaning given to such term in Section 4.12.
"Intangible Property" means Intellectual Property Rights and computer
firmware and software (existing in original form) relating thereto (excluding
Commercial Software), marketing rights, goodwill, sales data, customer lists and
other information relating to customers, suppliers' names, mailing lists,
advertising matters, contractual rights, orders, backlog, outstanding proposals,
manufacturing standards and procedures and all related agreements and
documentation that are, in each case, used or held for use in or otherwise
relating to the Residential Business.
"Intellectual Property Rights" means all intellectual property rights,
including, without limitation, patents, patent applications, trademarks,
trademark applications, tradenames, servicemarks, servicemark applications,
trade dress, logos and designs and the goodwill connected with the foregoing,
copyrights and copyright applications, know-how, trade secrets, proprietary
processes and formulae, confidential information, franchises, licenses,
inventions, instructions, marketing materials and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
"Inventory" means all inventory of Sellers including all merchandise,
raw materials, work in progress, supplies used in production, finished products
and other Tangible Personal Property, held for sale or used or held for use in
connection with the Residential Business.
"IRS" means the Internal Revenue Service or any successor entity
thereof.
"Law" means any foreign or domestic constitutional provision, statute or
other law (including the common law), ordinance, rule, regulation, or
interpretation of any Governmental Entity and any Order.
"Liability" means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due to become due, regardless of when asserted.
"Licensed Intellectual Property" means all Intellectual Property Rights
for which the Sellers' have a valid license to use and which are used in, held
for use in or which otherwise relate to the Residential Business.
"Loss" means any cost, damage, disbursement, expense, Liability, loss,
deficiency, obligation, penalty or settlement of any kind or nature, whether
foreseeable or unforeseeable, including but not limited to, interest or other
carrying costs, penalties, legal, Taxes, accounting and other professional fees
and expenses incurred in the investigation, collection, prosecution and defense
of claims and amounts paid in settlement, that may be imposed on or otherwise
incurred or suffered by the specified Person.
"Material Adverse Effect" means any material adverse change in the
business, operations, Purchased Assets, condition (financial or otherwise),
operating results, prospects, or Liabilities of the Residential Business;
provided, however, that any adverse change, effect, event,
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occurrence, state of facts or development attributable primarily to conditions
affecting the residential HVAC and plumbing services industry or the United
States economy as a whole shall not be deemed in and of itself to constitute a
Material Adverse Effect (and shall not be taken into account in determining
whether there has been or will be a Material Adverse Effect).
"Material Contract" means any Contract (i) (A) to which any Seller is a
party or to which any of their respective properties is subject or (B) by which
any Seller is bound and (ii) upon which the Residential Business is
substantially dependent or which is otherwise material to the Residential
Business as of or after the date hereof and includes but is not limited to the
Contracts set forth in Schedule 4.8(a).
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ, including, without limitation, any order entered by the
Bankruptcy Court in the Chapter 11 Cases (including, without limitation, the
Confirmation Order, the Disclosure Statement Order and any Alternate Order).
"Organizational Documents" means certificates of incorporation, by-laws,
certificates of formation, limited liability company operating agreements,
shareholders, partnership or limited partnership agreements or other formation
or governing documents of a particular entity.
"Owned Intellectual Property" means all Intellectual Property Rights
owned by Sellers and that are used in, held for use in or which otherwise relate
to the Residential Business.
"Periodic Taxes" has the meaning assigned to such term in Section
7.1(b).
"Permit" means any license, permit, consent, approval, franchise,
certificate of authority, or Order, or any waiver of the foregoing, required to
be issued by any Governmental Entity and necessary for the operation of the
Residential Business or for the transfer of the Purchased Assets, including,
without limitation, (i) any license issued to any employee of any Seller and
(ii) any permit issued in connection with any construction job, in each case, as
necessary for the operation of the Residential Business or use of the Purchased
Assets.
"Permitted Encumbrances" means (i) any Encumbrances described on
Schedule 1A, (ii) any easements and any rights of lessors under any leases
included in the Assumed Contracts, (iii) statutory liens arising in the ordinary
course securing Assumed Liabilities which are not past due, (iv) Encumbrances
for Taxes, assessments and other governmental charges that are not due and
payable and that may hereafter be paid without penalty, or (v) any other
encumbrances and defects in title to Real Property that do not secure monetary
obligations and do not individually or in the aggregate materially detract from
or interfere with the use of such Real Property in the conduct of the
Residential Business.
"Person" means any natural person, corporation, limited partnership,
general partnership, limited liability company, limited liability partnership,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any Governmental Entity.
"Petition Date" has the meaning assigned to such term in the recital
clauses hereof.
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"Plan" means the second amended joint plan of reorganization filed with
the Bankruptcy Court in the Chapter 11 Cases by Company and its Subsidiaries
(including the Selling Subsidiaries) on April 11, 2003 (with such modifications
as Buyer may in its discretion consent to in writing from time to time).
"Products" means products, technology and services, sold, installed,
manufactured, constructed, licensed or otherwise exploited by any Seller in
connection with the Residential Business.
"Prohibited Transaction" has the meaning assigned to such term in
Section 6.7(a).
"Purchase Price" has the meaning assigned to such term in Section 2.3.
"Purchased Assets" means all of the assets relating to, used in
connection with or arising out of the Sellers' operation of the Residential
Business (whether real, personal or mixed, tangible or intangible), including,
but not limited to, any assets owned by any Seller or leased by any Seller
pursuant to capital or operating leases that constitute Assumed Contracts.
"Real Property" means all land, all improvements thereon and thereto,
all fixtures, all tenements, easements, right-of-way and rights appurtenant
thereto, all air space, minerals, gravel, hydrocarbons, substances, water and
water rights, all rights in connection therewith, any other real property, and
any interest therein, including, without limitation, leasehold estates, of each
Seller that are, in each case, used or held for use in connection with the
Residential Business.
"Requesting Party" has the meaning given to such term in Section 7.7.
"Residential Business" means the business of the Sellers currently
conducted as the "Residential Group of Encompass Services," including, without
limitation, all business of the Selling Subsidiaries and the portion of the
business of Company that is related to providing residential HVAC and plumbing
services and any other services ancillary thereto (for the avoidance of doubt,
such definition shall not include the residential facility services operations
of the Company as conducted through the entities set forth in Schedule 1B, the
assets of which the Company has sold, transferred or conveyed prior to date
hereof or of which the Company intends to sell pursuant to a separate
transaction).
"Seller" has the meaning assigned to such term in the introduction to
this Agreement.
"Selling Subsidiaries" has the meaning assigned to such term in the
introduction to this Agreement, and "Selling Subsidiary" shall mean any one of
the Selling Subsidiaries.
"Services" means the services performed by Sellers, their employees,
agents and representatives for customers of the Residential Business, including,
without limitation, plumbing and HVAC services.
"Supply Contract" means a duly executed and valid Contract pursuant to
which any Seller is obligated to receive any goods or services in connection
with the Residential Business on or after the Closing Date and under which
Contract the obligation of any party thereto does not exceed $50,000.
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"Subsidiary" with respect to any Person, any corporation, partnership,
limited liability company or other organization, whether incorporated or
unincorporated, of which such Person or any other subsidiary of such Person
beneficially owns a majority of the voting or equity securities.
"Tangible Personal Property" means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
(including trailers and vans), and other items of tangible personal property
(other than Inventories) of every kind owned or leased by Sellers (wherever
located and whether or not carried on Sellers' books), together with any express
or implied warranty by the manufacturers or sellers or lessors of any item or
component part thereof and all maintenance records and other documents relating
thereto, in each case used or held for use in connection with the Residential
Business.
"Tax" means any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind imposed by any Governmental Entity, including but
not limited to any foreign, federal, state, county or local income, sales and
use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax, the liability for taxes of any Person
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign Law) or as a result of transferee or successor liability, by Contract or
otherwise, any interest and penalties (civil or criminal) related thereto or to
the nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax Liability.
"Tax Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Tax Return" means any report, declaration, claim for refund, return or
other information, including schedules, attachments and amendments thereto,
required to be supplied to a Governmental Entity with respect to Taxes
including, where permitted or required, combined or consolidated returns for any
group of entities that includes any Subsidiary.
"Transaction Documents" means this Agreement and any other agreement,
certificate, consent, waiver, document or instrument to be executed and/or
delivered pursuant to this Agreement.
"Transferred Employee" has the meaning assigned to such term in Section
7.2(a).
"Unaudited Consolidating Financial Statements" has the meaning assigned
to such term in Section 4.4(c).
"Unaudited Residential Group Financial Statements" has the meaning
assigned to such term in Section 4.4(a)(i).
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ARTICLE II
SALE OF ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS
2.1 PURCHASE AND SALE OF ASSETS.
(a) Purchased Assets. Subject to the terms and conditions of this
Agreement, at the Closing, each Seller shall sell, convey, assign, transfer and
deliver to (and Company shall cause each Selling Subsidiary to sell, convey,
assign, transfer and deliver to) Buyer or its designee(s) and Buyer or its
designee(s) shall purchase, acquire and accept from each Seller, free and clear
of all Encumbrances other than Permitted Encumbrances, all of the right, title
and interest in, to and under the Purchased Assets. The Purchased Assets shall
include, but shall not be limited to, the items set forth on Schedule 2.1(a),
and also shall include the following to the extent used or held for use in the
Residential Business or otherwise relating to the Residential Business:
(i) all Real Property, including, owned and leased Real
Property listed on Schedule 4.10(a) and Schedule 4.10(b), respectively;
(ii) all Tangible Personal Property, including, Tangible
Personal Property listed on Schedule 4.9(a);
(iii) all Intangible Property and all general intangibles,
including goodwill, associated with the Residential Business, including,
Intangible Property listed on Schedule 4.11(a) and Schedule 4.11(b);
(iv) all Accounts Receivable;
(v) all Inventory;
(vi) Permits that are transferable without third party
consent necessary therefor (provided, however, that, if such third party
consent shall have been obtained, a Permit shall be deemed
"transferable"; and provided further that the Sellers shall have the
continuing obligation (both before and after Closing) to use all
commercially reasonable efforts to endeavor to obtain the necessary
consents to the transfer of Permits);
(vii) all rights and interests arising under or in connection
with the Supply Contracts, the Customer Contracts, the Material
Contracts set forth in Schedule 4.8(a), the other Material Contracts
that would be set forth on Schedule 4.8(a) but for the fact that such
Contracts do not meet the threshold amounts provided in Section 4.8(a)
requiring them to be included in such Schedule 4.8(a), and the Contracts
set forth in Schedule 2.1(vii), (collectively, the "Assumed Contracts"),
provided that the Assumed Contracts shall not include (x) any Customer
Contracts which have been completed (with final payment made) at or
prior to Closing, (y) any Contracts relating to Employee Plans or (z)
any Contracts requiring Cure Payments unless such Contract and the
applicable Cure Payment is set forth on Schedule 2.1(vii);
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(viii) all insurance and indemnity claims (including, without
limitation, all insurance proceeds paid or payable by any insurance
provider for any Purchased Asset);
(ix) all rebates from any Person that supplies goods or
services to the Residential Business and that is paid by such Person
after the Closing Date, excluding any such rebates relating to periods
prior to Closing paid or credited to, or otherwise negotiated by, the
Company in accordance with past practice which is not attributable
primarily to the Residential Business and which was not historically
allocated to the Residential Business;
(x) all cash, cash equivalents held in the accounts set
forth on Schedule 4.22, any and all checks received by the Selling
Subsidiaries but not yet processed, prepaid expenses (including Periodic
Taxes), deposits (including, but not limited to, customer deposits,
deposits held by utilities or Governmental Entities, deposits under
Assumed Contracts), restricted cash and cash equivalents securing or
collateralizing obligations and other similar collateral or reserves,
including, but not limited to those listed on Schedule 4.20; provided,
however, that deposits in the name of any entity other than a Selling
Subsidiary which support Bonds or any Company-wide insurance programs
shall not be included in the Purchased Assets;
(xi) all of Sellers' books and records relating to the
Residential Business and the Transferred Employees;
(xii) all Actions (whether or not asserted as of the Closing
Date) asserted or that may be asserted on behalf of any Seller relating
to the Purchased Assets or the Residential Business, the operations of
any Selling Subsidiary, or any of the foregoing (excluding Actions
against directors, officers or employees of the Company or any of its
Subsidiaries, which shall remain the property of the Company and its
Subsidiaries); and
(xiii) all other property of Sellers of every kind, character
or description, tangible or intangible, known or unknown, wherever
located and whether or not reflected on the Financial Statements, or
similar to the properties described above, and used or held for use in
connection with the Residential Business, except for the Excluded
Assets.
At any time on or prior to the Confirmation Date, at the Buyer's option,
in its sole discretion, the Buyer may determine to exclude assets, properties,
Contracts (subject to the Buyer's compliance with the terms of Section 2.4(c))
and rights from the Purchased Assets (including, without limitation, any "asset"
having a negative value) which shall then be deemed Excluded Assets.
(b) Excluded Assets. Notwithstanding the generality of Section
2.1(a), the following assets are not a part of the sale and purchase
contemplated by this Agreement and are excluded from the Purchased Assets
(collectively, the "Excluded Assets"):
(i) the Purchase Price delivered to Company pursuant to this
Agreement, any rights of any of the Sellers under this Agreement and any
other Transaction Document;
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(ii) Sellers' Organizational Documents, corporate seals,
minute books, stock books and other corporate records having to do with
the corporate organization and capitalization of Sellers and all income
Tax records for period prior to the Closing Date;
(iii) the Equity Securities of Sellers;
(iv) any and all avoidance actions, arising under chapter 5
of the Bankruptcy Code, of the Sellers or arising with respect to the
Residential Business in connection with the Chapter 11 Cases; and
(v) those other assets of Sellers specifically set forth on
Schedule 2.1(b)(v).
2.2 ASSUMPTION OF CERTAIN LIABILITIES.
(a) Assumed Liabilities. On the Closing Date, Buyer shall assume the
following (collectively, the "Assumed Liabilities"):
(i) all Liabilities and other obligations under the Assumed
Contracts; provided that Liabilities under the Assumed Contracts shall
not include any Cure Payments or any Liability of the type described on
clauses (ii) - (vii) below unless specifically assumed under those
clauses);
(ii) all accrued trade payables that are owing after the
Closing arising from the operation of the Residential Business in the
ordinary course of business consistent with past practice and shown on
the latest financial statements delivered under Section 4.4 or incurred
since the date of such financials in the ordinary course of business;
provided that any accrued trade payables which constitute "pre-petition
debt" shall not be included in the Assumed Liabilities;
(iii) (A) any and all bonuses of Transferred Employees for the
current bonus period arising from the operation of the Residential
Business and accruing in a manner consistent with past practice of the
Residential Business, (B) any and all accrued salary, commissions,
bonuses and payroll taxes of Transferred Employees arising from the
operation of the Residential Business attributable to the pay period or
commission payment period, as applicable, ending after the date hereof
to the extent not paid prior to Closing, (C) any accrued vacation
obligations in respect of Transferred Employees and (D) obligations in
respect of any employees listed on Schedule 4.16 who are not Transferred
Employees to the extent expressly assumed pursuant to Section 7.2;
excluding, in any event, any other Liabilities to any employees and
Transferred Employees arising out of the operation of the Residential
Business prior to the Closing Date, including, without limitation, any
Liabilities for workers compensation claims or health insurance claims
of any Transferred Employees arising out of events or circumstances
occurring prior to the Closing Date);
(iv) all Liabilities under the Bonds listed on Schedule 4.20;
(v) any Periodic Taxes in respect of the Purchased Assets
first due after the Closing;
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(vi) any negative cash balance of the accounts set forth on
Schedule 4.22 (whether arising from overdraft on any such accounts or
from any and all checks issued by the Selling Subsidiaries prior to the
Closing Date but not yet processed as of such date) that may exist on or
after the Closing Date; and
(vii) all product returns and warranty claims in the ordinary
course of business, but solely to the extent requiring return,
replacement or repair of the Product or Service provided (specifically
excluding any other Liabilities arising out of Products or Services sold
or provided prior to the Closing, including, without limitation, any
such Liability for any claim relating to mold, any claim under any
Environmental, Health and Safety Laws, and any claims for property
damage, personal injury or death).
(b) Excluded Liabilities. Except for the Assumed Liabilities, Buyer
shall not assume, shall not take subject to, shall not be liable for and shall
not perform, discharge or pay any Liabilities of Sellers, of any kind or nature,
whether absolute, contingent, accrued, known or unknown, matured or unmatured,
including, without limitation: (i) any Liabilities of Sellers that are
discharged pursuant to Section 1141(d)(1) of the Bankruptcy Code or any Order of
the Bankruptcy Court (including, without limitation, the Confirmation Order or
an Alternate Order), (ii) any Liabilities of Sellers, the collection of which
has been permanently enjoined by an Order of the Bankruptcy Court or by any
applicable provision of the Bankruptcy Code (including, without limitation,
Section 524 of the Bankruptcy Code), (iii) any Liabilities relating to or
arising out of any Excluded Assets or the operation of the entities listed on
Schedule 1B, and (iv) all other Liabilities of Sellers that are not Assumed
Liabilities (collectively, the "Excluded Liabilities").
2.3 PURCHASE PRICE.
The total purchase price (the "Purchase Price") to be paid to Company by
Buyer at the Closing for the Purchased Assets shall be: (i) the assumption of
the Assumed Liabilities, plus (ii) $40,000,000 in cash.
2.4 ASSUMPTION OF CERTAIN CONTRACTS.
One or more Assumption Orders (or one or more other Orders in form and
substance satisfactory to Buyer) shall provide for the assumption by the Sellers
and assignment to the Buyer or its designee(s), effective upon the Closing, of
Assumed Contracts on the following terms and conditions:
(a) As of the Closing, the Sellers shall assume and assign to the
Buyer or its designee(s), the Assumed Contracts. Schedule 2.1(vii) sets forth
the Cure Payment amounts under each Assumed Contract based on the Sellers' books
and records or by an applicable proof of claim.
(b) On or prior to the Closing Date the Company shall pay all Cure
Payments required under each Assumed Contract and such payment shall be made
prior to the assignment of such Assumed Contract from Sellers to Buyer or its
designee(s).
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(c) Not later than one day prior to the confirmation hearing in
connection with the Plan (or, if earlier, the hearing held by the Bankruptcy
Court in connection with an Alternate Order), the Buyer shall provide written
notice to the Sellers of any Contracts, which, but for such notice, would be
Assumed Contracts, but of which the Buyer has determined not to accept
assignment ("Designated Agreements"). Sellers' shall list each such Designated
Agreement in Schedule 7.1(a) of the Plan Supplement (as defined in the Plan),
or, if applicable, such commensurate disclosure document relating to an
Alternate Order. Notwithstanding anything else in this Agreement, Designated
Agreements: (i) shall not be deemed Assumed Contracts; (ii) shall not be deemed
Purchased Assets; and (iii) consequently, the Sellers may, at their option,
either assume or reject such Designated Agreements (to the extent otherwise
permitted by the Bankruptcy Court and applicable law), and the Buyer shall bear
no Liability for any rejection damages or Cure Payments associated with such
assumption or rejection, as the case may be.
(d) The Buyer and the Sellers agree that there shall be excluded
from the Purchased Assets any Assumed Contracts that are not assignable or
transferable pursuant to the Bankruptcy Code or otherwise without the consent of
any Person other than Sellers or any Affiliate of Sellers, to the extent that
such consent shall not have been given prior to the Closing; provided, however,
that the Sellers shall have the continuing obligation (both before and after the
Closing) to use all commercially reasonable efforts (including, without
limitation, prosecution of appropriate motions pursuant to Section 365 of the
Bankruptcy Code) to endeavor to obtain all necessary consents, if any, to the
assignment thereof and, upon obtaining the requisite third party consents
thereto, such Purchased Asset shall be assigned to the Buyer free and clear of
all Encumbrances other than Permitted Encumbrances; provided, that the Sellers
shall not be required to make any additional payments (other than Cure Payments)
in connection with any such assignment. With respect to any Assumed Contract
that is not transferred at the Closing as contemplated by the immediately
preceding sentence, effective as of the Closing, Sellers shall use reasonable
commercial efforts to enter into arrangements reasonably requested by the Buyer
designed to provide the Buyer and its Subsidiaries the full and exclusive
benefits of such asset provided the Buyer, or Buyer's designee, assumes the duty
to perform the obligations relating to such Assumed Contracts accruing on and
after the Closing. If and to the extent such arrangements cannot be made, the
Buyer shall have no obligation with respect to such Assumed Contract.
ARTICLE III
CLOSING
3.1 CLOSING.
Upon the terms and subject to the conditions set forth in this
Agreement, the Closing will take place on the Closing Date at the offices of
O'Melveny & Xxxxx LLP, 30 Rockefeller Plaza, New York, New York, or such other
place as the parties hereto shall agree. Time is of the essence with respect to
the performance of the covenants, terms and conditions set forth in this
Agreement and in the consummation of the transactions contemplated hereby. The
Closing will be deemed to occur at 12:01 a.m., Eastern time, on the Closing
Date.
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3.2 ITEMS TO BE DELIVERED AT THE CLOSING BY SELLERS.
At the Closing, Sellers shall deliver or cause to be delivered to Buyer:
(a) one or more bills of sale and assignment, in form and substance
reasonably satisfactory to Buyer and the Company, conveying to Buyer or any
entity designated by Buyer good and valid title to all of the Purchased Assets
(other than the Real Property) free and clear of all Encumbrances other than
Permitted Encumbrances;
(b) special warranty deeds and (where applicable) assignments of
leases, in each case in form and substance reasonably satisfactory to Buyer and
the Company, properly executed and acknowledged, conforming to and conveying to
Buyer, or an entity designated by Buyer, good and indefeasible title for all
Real Property free and clear of all Encumbrances other than Permitted
Encumbrances;
(c) such other instruments of transfer, in each case in form and
substance reasonably satisfactory to Buyer and the Company, necessary or
appropriate to transfer to and vest in Buyer or any entity designated by Buyer
all of Sellers' right, title and interest in and to the Purchased Assets free
and clear of all Encumbrances other than Permitted Encumbrances;
(d) a certificate from each Seller, substantially in the form of
Exhibit A, duly executed and acknowledged, certifying that the transactions
contemplated hereby are exempt from withholding under Section 1445 of the Tax
Code;
(e) a certified copy of the Confirmation Order (or, if applicable,
of an Alternate Order), each Assumption Order, and such other Orders as Buyer
may reasonably request to effectuate the transactions contemplated hereby;
(f) with respect to each Seller: (i) certified copies of its
Organizational Documents as in effect as of the date hereof, and where such
concept is applicable, a good standing certificate from the Secretary of State
(or equivalent functionary) of the jurisdiction of its formation and each other
state (or other jurisdiction) in which it is qualified as a foreign entity to do
business, each dated a recent date prior to the Closing Date, (ii) resolutions
of its board of directors which, among other things, (x) approve and authorize
and/or ratify the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party, and (y) generally authorize
its officers to do or cause to be done from time to time all such other acts and
things and to execute and deliver all such instruments and documents as Seller
shall deem necessary or desirable to carry out the purposes and the intent of
this Agreement, certified as of the Closing Date by its corporate secretary or
an assistant secretary (or such other officer as such Seller may approve) as
being in full force and effect without modification or amendment, and (iii)
signature and incumbency certificates of its officers executing this Agreement;
and
(g) such other documents and instruments as Buyer may reasonably
request to give effect to the transactions contemplated hereby.
3.3 ITEMS TO BE DELIVERED AT THE CLOSING BY BUYER.
At the Closing, Buyer shall deliver or cause to be delivered to the
Company:
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(a) the Purchase Price in immediately available funds;
(b) certified copies of (i) its Organizational Documents as in
effect as of the Closing Date and a good standing certificate from the Secretary
of State (or equivalent functionary) of the jurisdiction of its formation and
each other state (or other jurisdiction) in which it is qualified as a foreign
entity to do business, each dated a recent date prior to the Closing Date, (ii)
resolutions of its board of directors which, among other things, (x) approve and
authorize and/or ratify the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party, and (y)
generally authorize its officers to do or cause to be done from time to time all
such other acts and things and to execute and deliver all such instruments and
documents as Buyer shall deem necessary or desirable to carry out the purposes
and the intent of this Agreement, certified as of the Closing Date by its
corporate secretary or an assistant secretary (or such other officer as Buyer
may approve) as being in full force and effect without modification or
amendment, and (iii) signature and incumbency certificates of its officers
executing this Agreement; and
(c) agreements between Buyer (and, to the extent required by the
applicable surety company, each operating company of the Buyer performing, or
expected to perform, bonded work) and each surety company that has provided the
Bonds listed on Schedule 4.20, on terms reasonably acceptable to Buyer and each
such surety company; provided, that such agreements shall expressly provide that
Buyer shall not be required to deliver or make available any collateral (other
than any collateral existing as of the date hereof, and, as to such collateral
the Sellers shall comply with their obligations under Section 7.9(a)) in
connection with such Bonds.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant (as of the date
hereof and as of the Closing Date) and agree as follows:
4.1 ORGANIZATION; CORPORATE AUTHORITY.
Each Seller is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Sellers have the
requisite power and authority to conduct the Residential Business as now being
conducted and have all necessary power and authority to own their respective
properties and assets and, where such concept is applicable, are duly qualified
or licensed to do business as foreign corporations or other entities in good
standing in all jurisdictions in which the character or the location of the
assets owned or leased by any of them or the nature of the business conducted by
any of them requires licensing or qualification, except where such failure to be
so qualified or licensed or to be in good standing could not reasonably be
expected to have a Material Adverse Effect. Schedule 4.1 lists (i) the
jurisdiction in which Company and each Selling Subsidiary was organized, and
(ii) each jurisdiction in which Company and each Selling Subsidiary is qualified
or licensed to do business as a foreign Person.
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4.2 CORPORATE ACTION; AUTHORITY; NON-CONTRAVENTION.
Subject to approval of this Agreement by the Bankruptcy Court, each
Seller has the requisite power to enter into, execute, and perform all
obligations under this Agreement and each other Transaction Document. The
execution, delivery and performance hereof, and the consummation of the
transactions contemplated by this Agreement: (i) are within the powers of such
Seller, are not in contravention of the terms of any Organizational Documents of
such Seller, each as amended to date, and have been duly authorized by all
necessary board, stockholder and member action of such Seller, (ii) except as
otherwise expressly provided in this Agreement do not require any Approval,
(iii) do not conflict with or result in any breach or contravention of any
Assumed Contract to which such Seller is a party or by which it is bound, and
(iv) do not violate any Laws to which such Seller or the Purchased Assets may be
subject.
4.3 SELLING SUBSIDIARIES.
Schedule 4.3 lists all Selling Subsidiaries. Except as described in
Schedule 4.3, the Company owns all of the outstanding Equity Securities of each
Selling Subsidiary, beneficially and of record.
4.4 FINANCIAL STATEMENTS.
(a) Schedule 4.4 attached hereto contains true, correct and complete
copies of the following:
(i) the unaudited consolidated balance sheets of the
Residential Business as of December 31 of each of 2000, 2001 and 2002,
and the related unaudited consolidated statements of operations and cash
flows of the Residential Business for the fiscal years then ended
(except that no statements of cash flows for 2000 are included) (all of
the foregoing being hereinafter collectively referred to as the
"Unaudited Residential Group Financial Statements"); and
(ii) to the extent available on the date hereof, the
unaudited interim consolidated balance sheet of the Residential Business
as of the last day of the calendar month immediately preceding the date
hereof (to the extent not available, then as of the last day of the
calendar month immediately preceding such month), and the related
unaudited interim consolidated statements of operations and cash flows
of the Residential Business for the 2-month period ended as of the date
of such delivered month-ending consolidated balance sheet (all of the
foregoing being hereinafter collectively referred to as the "Unaudited
Interim Financial Statements" and, collectively with the Unaudited
Residential Group Financial Statements, the "Financial Statements").
(b) Except to the extent that they include (i) Excluded Assets or
(ii) results of operations for the businesses described on Schedule 1B (which
previously comprised a portion of the Company's residential business), the
Financial Statements (x) fairly present in all material respects the financial
position of the Residential Business on a consolidated basis, as applicable, as
of the dates then ending and the consolidated results of operations of the
Residential Business for the periods then ended, (y) have been prepared in
accordance with GAAP throughout the periods covered thereby except as disclosed
on Schedule 4.4 and (z) are in accordance with the
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books and records of Sellers which have been maintained in a manner consistent
with historical practice. The Unaudited Residential Group Financial Statements
and Unaudited Interim Financial Statements were prepared in a manner consistent
in all material respects with the audited consolidated balance sheets of the
Company and the related audited consolidated statements of operations and cash
flows of the Company.
(c) Schedule 4.4 also contains (i) the unaudited consolidating
balance sheets of the Residential Business as of December 31 of each of 2001 and
2002, and the related unaudited consolidating statement of operations of the
Residential Business for the fiscal years then ended (all of the foregoing being
hereinafter collectively referred to as the "Unaudited Consolidating Financial
Statements") and (ii) the unaudited interim consolidating balance sheet of the
Residential Business as of the last day of the calendar month immediately
preceding the date hereof (to the extent not available, then as of the last day
of the calendar month immediately preceding such month), and the related
unaudited consolidating statement of operations of the of the Residential
Business for the 2-month period ended as of the date of such delivered
month-ending consolidated balance sheet (collectively, together with the
Unaudited Consolidating Financial Statements, the "Consolidating Financial
Statements"). The Consolidating Financial Statements (i) are in accordance with
the books and records of Sellers which have been maintained in a manner
consistent with historical practice and (ii) form the basis of the Financial
Statements.
4.5 ASSETS NECESSARY TO CONDUCT BUSINESS.
Except as set forth in Schedule 4.5: (i) the Purchased Assets constitute
all of the assets, properties, Contracts and rights which are reasonably
necessary to carry on the Residential Business by Buyer as currently conducted
on the date of this Agreement, (ii) there are no assets, properties, Contracts
or rights used in or reasonably necessary for the conduct of the Residential
Business as presently conducted which are not owned, leased or licensed by the
Selling Subsidiaries, and (iii) no part of the Residential Business is conducted
by or through any Person other than the Selling Subsidiaries.
4.6 ACCURACY OF INFORMATION.
The exhibits, schedules and other information supplied on or prior to
the date hereof by or on behalf of any Seller to Buyer, its agents or
representatives in connection with the transactions contemplated hereunder, this
Agreement or the negotiations leading up to this Agreement, do not, taken as a
whole, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make such information, in light of the
circumstances under which it was provided, not misleading. If any of such
information at any time subsequent to delivery and prior to Closing becomes
untrue or misleading in any material respect, Sellers will promptly notify Buyer
in writing of such fact after discovery thereof and the reason for such change.
4.7 TAXES.
(a) Each Seller has filed all Tax Returns required to be filed by or
on behalf of any one of them, as the case may be, prior to the Closing Date. All
such Tax Returns are correct and
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complete in all material respects and each Seller has duly paid all Taxes,
whether or not shown on any Tax Return, or have made provision for the payment
of all Taxes (except in the case that a breach of the foregoing would not result
in a Liability to Buyer); and, as of the Closing Date, there will be no
Encumbrances (except, with respect to Periodic Taxes, Permitted Encumbrances) on
any Purchased Assets that arose in connection with any failure to pay any Tax.
Seller has not received notice of any, and there are no pending Tax assessments
from a Governmental Entity which may give rise to an Encumbrance (except, with
respect to Periodic Taxes, Permitted Encumbrances) on the Purchased Assets after
the Closing.
(b) Except as described on Schedule 4.7(b), each Selling Subsidiary
has withheld proper and accurate amounts from its employees' compensation in
full and complete compliance with all withholding and similar provisions of the
Tax Code and any and all other applicable Laws, and has withheld and paid, or
caused to be withheld and paid, or has made provision for the payment of, all
Taxes on monies paid by any Seller to independent contractors, creditors and
other Persons for which withholding or payment is required by applicable Law.
4.8 CONTRACTS.
(a) Schedule 4.8(a) is a true, complete and correct list of all
Contracts conforming to the descriptions set forth below in this Section 4.8(a)
to which any Seller is a party which relates to the Residential Business, copies
of each of which have been delivered or otherwise made available to Buyer: (i)
Contracts requiring aggregate payments by or to any Seller in excess of $50,000
or not made in the ordinary course of business, (ii) any option or other
Contract to purchase or otherwise acquire or sell or otherwise dispose of any
interest in any Real Property, (iii) any Contract limiting or restricting in any
material manner the operation of the Residential Business, (iv) any lease or
similar Contract under which (a) any Seller is the lessee of, or holds or uses,
Tangible Personal Property or Real Property owned by any third Person for an
annual rent in excess of $50,000 or (b) any Seller is the lessor of, or makes
available for use by any third Person, any Tangible Personal Property for an
annual rent in excess of $50,000, (v) employment and severance Contracts,
including Contracts to employ or terminate executive officers or other personnel
and other Contracts with present or former officers, directors or shareholders
or members of any Seller that will or could result in the payment by or the
creation of any commitment or obligation (absolute or contingent) to pay on
behalf of Buyer or any Seller any severance, termination, "golden parachute," or
other similar payments to any present or former employees or directors of any
Seller following termination of employment or otherwise as a result of the
consummation of the transactions contemplated by this Agreement, (vi) any
Contract (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products or other personal property, or for
the furnishing or receipt of services, the performance of which shall extend
over a period of more than one year, and involves consideration in excess of
$50,000, and (vii) any power of attorney (irrevocable or otherwise) to any
Person for any purpose relating to the Residential Business, Purchased Assets or
Assumed Liabilities, other than powers of attorney given to regulatory
authorities in connection with routine qualifications to do business. Sellers
have delivered or otherwise made available to Buyer a copy of each Contract set
forth on Schedule 4.8(a).
(b) Except as set forth on Schedule 4.8(b): (i) the Material
Contracts constitute lawful, valid and legally binding obligations of the
Sellers and, to the knowledge of the Sellers,
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the other parties thereto in accordance with their terms (subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity), (ii) each Material
Contract is in full force and effect and constitutes the entire agreement by and
between or among the parties thereto, (iii) each Material Contract shall
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the consummation of the transactions contemplated
by this Agreement, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, (iv) after giving effect to the Assumption Order, no
Material Contract prohibits or requires the consent of any Person to the
assignment to and assumption by Buyer or its designee of such Material Contract,
(v) no party to any Material Contract has, to the knowledge of the Sellers,
repudiated any provision thereof, and (vi) no Seller who is a party to any such
contract is in breach or default, and to the knowledge of each Seller, no other
party to any such contract is in breach or default, and to the knowledge of
Sellers no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification or
acceleration thereunder (other than any such breaches or defaults which shall be
cured pursuant to Order of the Bankruptcy Court).
4.9 PERSONAL PROPERTY.
(a) Schedule 4.9(a) contains a true, correct, and complete list of
all items of Tangible Personal Property, (i) with a net book value of more than
$100,000, or (ii) for which a filing or other action would be required to be
made with a Governmental Entity in order to effectuate the transfer of title of
such item to Buyer.
(b) Except as described in Schedule 4.9(b), the Sellers have good
and indefeasible title to the Tangible Personal Property, free and clear of any
Encumbrances, other than Permitted Encumbrances. At the Closing, Sellers shall
deliver the Purchased Assets to Buyer or its designee, free and clear of all
Encumbrances other than Permitted Encumbrances.
4.10 REAL PROPERTY.
(a) Schedule 4.10(a) contains a true, correct and complete list and
brief description of all of the owned Real Property. Sellers own and hold good
and indefeasible fee simple or leasehold title, as the case may be, to the Real
Property, together with all buildings, improvements and fixtures thereon and all
appurtenances and rights thereto, free and clear of any Encumbrances other than
Permitted Encumbrances. At the Closing, Sellers will convey to Buyer or its
designee(s) good and indefeasible fee simple or leasehold title, as the case may
be, to the Real Property, respectively, free and clear of any Encumbrances other
than Permitted Encumbrances. There are no pending or, to the knowledge of
Sellers, threatened condemnation or similar proceedings or special assessments
which are being passed through under any applicable lease relating to the Real
Property, or any portion thereof.
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(b) Schedule 4.10(b) contains a true, correct and complete list of
all Real Property leased by the Residential Business, and sets forth the names
of the lessor and the lessee and the basic terms thereof. With respect to any
Real Property leased or subleased by Sellers: (i) all such leases or subleases
are legal, valid, binding, enforceable and in full force and effect and shall
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the consummation of the transactions contemplated
by this Agreement, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, (ii) no Seller who is a party to any such lease or
sublease is in breach or default, and to the knowledge of Sellers, no other
party to any such lease or sublease is in breach or default, and to the
knowledge of Sellers no event has occurred which, with notice or lapse of time,
would constitute a breach or default or permit termination, modification or
acceleration thereunder (other than any such breaches or defaults which shall be
cured pursuant to Order of the Bankruptcy Court), (iii) to the knowledge of
Sellers, there are no disputes, oral agreements, or forbearance programs in
effect as to any such lease or sublease, and (iv) other than Permitted
Encumbrances, no Seller has assigned, transferred, conveyed, or encumbered any
interest in any lease or sublease.
4.11 INTELLECTUAL PROPERTY.
(a) Schedule 4.11(a) sets forth a true, correct and complete list of
all Owned Intellectual Property and includes any registrations made with respect
to Owned Intellectual Property.
(b) Schedule 4.11(b) sets forth a true, correct and complete list of
all Licensed Intellectual Property.
(c) Except as set forth in Schedule 4.11(c), each Seller: (i) owns,
has the exclusive right to use, sell, license and dispose of, and has the
exclusive right to bring actions for the infringement of all Owned Intellectual
Property and has not licensed the Owned Intellectual Property to any other
Person, and (ii) has a valid license to use its Licensed Intellectual Property,
assuming that the respective licensor thereof has valid title thereto or a valid
license for such Licensed Intellectual Property and has the right to license
such Licensed Intellectual Property to such Seller (and such Seller has not
received notice that any such licensor does not have valid title thereto or a
valid license or that the licensor is not permitted to license such Licensed
Intellectual Proptery).
(d) No Selling Subsidiary or the Residential Business has interfered
with, infringed upon or misappropriated any Intellectual Property Rights of any
Person or committed any acts of unfair competition, and neither Sellers nor the
Residential Business have received from any Person in the past two years any
notice, charge, complaint, claim or assertion thereof, and no such claim has
been threatened.
(e) Neither Sellers nor the Residential Business have sent to any
Person in the past two years, or otherwise communicated to any Person, any
notice, charge, complaint, claim or other assertion of any present, impending or
threatened infringement by or misappropriation of, or other conflict with, any
Intellectual Property Rights of the Residential Business by such other
22
Person or any acts of unfair competition by such other Person and, to the
knowledge of Sellers, no such infringement, misappropriation, conflict or act of
unfair competition is occurring or threatened.
4.12 INSURANCE.
Schedule 4.12 contains (i) a correct and complete list of all policies
of general liability, pollution/professional liability, auto, theft/fidelity and
workmen's compensation insurance (collectively, with such policies described in
(ii) below, the "Insurance Policies") maintained by any Seller since February
22, 2000 covering or relating to the Residential Business (specifying the
insurer, amount of coverage, type of insurance, policy number, deductible or
retention amount, policy premium, policy term and whether such policy provides
coverage on a claims made or occurrence basis), (ii) a list of other Insurance
Policies known to the Sellers to have been maintained by any Seller since August
1, 1998 covering or relating to the Residential Business (specifying, with
respect thereto, information for the Insurance Policies as provided under (i)
above) and (iii) a correct and complete list of all currently outstanding claims
under those Insurance Policies specified pursuant to (i) and (ii) above that
have been brought since August 1, 1998. Except as set forth on Schedule 4.12,
with respect to each policy of insurance listed on such Schedule (a) each of the
claims listed pursuant to (iii) of the previous sentence has been tendered to
the applicable insurer under such policies, (b) the insurance coverage available
under such Insurance Policies has not been exhausted, (c) all premiums with
respect thereto that are currently due have been paid and are not subject to
adjustment, and no Person is in default in any respect with respect to its
obligations under such policy, and no basis exists that would give any insurer
under any such policy the right to cancel or unilaterally reduce or limit the
stated coverages contained in such policy; and (d) no Seller has received any
notice that such policy has been or shall be canceled or terminated.
4.13 EXISTING PERMITS.
Schedule 4.13 contains a true, correct, and complete list of the Permits
(including applications therefor) other than the Building Permits held in the
name of any Selling Subsidiary or used or held for use in the Residential
Business, including, without limitation, all HVAC and plumbing licenses under
which the Residential Business is currently conducted that is in the name of
individuals whose licenses are used by the Residential Business, and such
Schedule identifies the name of the Person who holds such Permit. Sellers hold,
and Schedule 4.13 together with the Building Permits, set forth, all Permits
that are required by any Governmental Entity to permit each Seller to conduct
the Residential Business now conducted by them and to operate any of their
assets owned or used by them. Except as described in Schedule 4.13, all Permits
set forth on Schedule 4.13 and all Building Permits: (i) are valid and
subsisting and in full force and effect, (ii) other than those Permits held in
the name of individuals whose licenses are used by the Residential Business, are
transferable to Buyer without any further action by Sellers, and (iii) no
suspension, cancellation or termination of any Permits is threatened or pending.
4.14 COMPLIANCE WITH LAW.
Sellers have conducted the Residential Business in accordance with
applicable Laws, and
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the forms, procedures and practices of each Seller relating to the Residential
Business is in compliance in all material respects with all such Laws and no
Action, demand or notice has been filed or commenced against any Seller alleging
failure to so comply. Sellers' use and operation of their respective assets
relating to the Residential Business (including, without limitation, the
Purchased Assets) are in compliance in all material respects with all applicable
Laws.
4.15 LEGAL PROCEEDINGS.
Except as described in Schedule 4.15, there is no Order or Action
pending or, to the knowledge of any Seller, threatened, against or affecting any
Seller or any of their respective properties or assets that individually or when
aggregated with one or more other Orders or Actions would have a material
adverse effect on: (i) the Residential Business, the Purchased Assets (or the
use, operation or value thereof) or the Assumed Liabilities, taken as a whole,
or any Seller's ability to perform this Agreement or any other Transaction
Document to which it is a party, or (ii) on any material aspect of the
transactions contemplated by this Agreement. Except as described in Schedule
4.15, there is no matter as to which any Seller has received any notice, claim
or assertion, or, to the knowledge of any Seller, which otherwise has been
threatened, (a) against or affecting any officer, employee or agent (in their
capacity as such) of the Selling Subsidiaries (provided that, with respect to
any notice, claim or assertion that has been threatened, such representation is
made only in respect of material claims or assertions) or (b) against or
affecting any director, officer, employee, agent or representative of any Seller
or any other Person in connection with which any such Person has or may
reasonably be expected to have any right to be indemnified by any Seller and
which, in the case of this clause (b), would have a material adverse effect on:
(i) the Residential Business, the Purchased Assets (or the use, operation or
value thereof), the Assumed Liabilities, or any Seller's ability to perform this
Agreement or any other Transaction Document to which it is a party, or (ii) on
any material aspect of the transactions contemplated by this Agreement.
4.16 EMPLOYEES.
Schedule 4.16 sets forth a list of all employees of the Residential
Business.
4.17 ERISA COMPLIANCE.
(a) Schedule 4.17(a) contains a true and complete list of all
Employee Plans.
(b) Except as set forth on Schedule 4.17(b), (i) each Employee Plan
covering employees employed in the Residential Business has been established,
maintained, operated and administered in all material respects in accordance
with its terms and in compliance with ERISA and the Tax Code; and (ii) each
Employee Plan covering employees employed in the Residential Business which is
subject to the requirements of COBRA and the Health Insurance Portability and
Accountability Act ("HIPAA") has been maintained in all material respects in
compliance with COBRA and HIPAA, including all notice requirements, and no tax
payable on account of Section 4980B or any other section of the Tax Code has
been incurred.
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4.18 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 4.18(a), there is no Action
against any Sellers relating to Environmental, Health, and Safety Laws and no
Seller has received any written or oral notice, report or other information (i)
regarding any actual or alleged violation by any Seller in connection with the
Residential Business of any Environmental, Health and Safety Laws, or any
resulting Liabilities, including any investigatory, remedial or corrective
obligations, relating to the Residential Business or any of its past owned or
leased properties or operations, or (ii) that any Seller is potentially
responsible in connection with the Residential Business under any Environmental,
Health and Safety Laws for response costs, corrective action or natural resource
damages, as those terms are defined under the Environmental, Health and Safety
Laws, at any location.
(b) Except as set forth on Schedule 4.18(b), there are no hazardous
waste treatment, storage or disposal facilities, as those terms are defined
under the Environmental, Health and Safety Laws, located at any of the Covered
Properties. Except as set forth on Schedule 4.18, there is not now and there has
never been any asbestos containing material in any form or condition,
underground storage tanks, above-ground storage tanks, landfill, waste pile,
surface impoundment, or article or equipment containing polychemical biphenyls
on or at any of the Covered Properties.
(c) Except as set forth in Schedule 4.18(c), no facts, events or
conditions exist relating to the past or present operations of the Residential
Business, the Purchased Assets, or the Covered Properties that have given, or
could reasonably be expected to give, rise to any Liabilities pursuant to any
Environmental, Health and Safety Laws, including, without limitation, any
relating to on-site or off-site releases or threatened releases of Hazardous
Substances or any personal injury, property damage or natural resources damage.
(d) Each Seller has provided the Buyer with true, correct and
complete copies of all reports and studies within the possession or control of
such Seller with respect to past or present environmental conditions or events
at any of the Covered Properties and there are no other environmental reports or
studies with respect thereto.
4.19 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker, or other
Person or firm engaged by or acting on behalf of any Seller or any of their
respective Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any brokerage or finder's or similar fee or
other commission as a result of this Agreement or such transactions.
4.20 BONDING, LETTERS OF CREDIT AND DEPOSITS.
Schedule 4.20 lists all (i) Bonds, letters of credit, deposits and other
similar reserves maintained in connection with the Residential Business,
including any such Bonds, letters of credit, deposits or similar reserves
maintained with any utility or any Governmental Entities, under any Assumed
Contract, and (ii) all restricted cash and cash equivalents or other similar
collateral or reserves in connection with the Residential Business
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4.21 CERTAIN INTERESTS.
Except as set forth on Schedule 4.21, (i) no Affiliate of any Seller nor
any officer or director of any thereof, nor any former owner of any Selling
Subsidiary (or other portion of the Residential Business), nor any former or
current Associate of any such individual, has any material interest in any of
the Purchased Assets, the Assumed Liabilities or any property used in or
pertaining to the Residential Business and (ii) as of the Closing Date, there
shall exist no Contract or other intercompany arrangement or Liability between
or among Selling Subsidiaries on the one hand and Company or one or more other
Selling Subsidiaries on the other hand.
4.22 BANK ACCOUNTS.
Schedule 4.22 sets forth (i) a complete list of all lockbox, deposit and
other accounts maintained by any Seller for purposes of the Residential
Business, indicating the name of the financial institution, the account number,
the purpose of such account (specifically identifying any accounts into which
customer payments are made or directed) and (ii) the cash balances in such
accounts (net of deposits) as of March 31, 2003.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants (as of the date hereof and as of the
Closing Date) and agrees as follows:
5.1 ORGANIZATION.
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of Delaware.
5.2 CORPORATE ACTION; AUTHORITY; NON-CONTRAVENTION.
Buyer has the requisite power to enter into, execute, and perform all
obligations under this Agreement and each other Transaction Document to which it
is party. The execution, delivery and performance hereof, and the consummation
of the transactions contemplated by this Agreement: (i) are within the power of
Buyer, are not in contravention of the terms of any Organizational Documents of
Buyer, each as amended to date, and have been duly authorized by all necessary
corporate action of Buyer, (ii) except as otherwise expressly provided in this
Agreement do not require any Approval by Buyer, (iii) do not conflict with or
result in any breach or to which any Buyer is a party or by which it is bound,
and (iv) do not violate any Laws to which any Buyer may be subject.
5.3 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker, or other
Person or firm engaged by or acting on behalf of Buyer or its Affiliates in
connection with the negotiation, execution or performance of this Agreement
26
or the transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fees or other commissions as a result of
this Agreement or such transactions.
5.4 LEGAL PROCEEDINGS.
To the knowledge of Buyer, there is no Order or Action pending or
threatened against or affecting Buyer that individually or when aggregated with
one or more other Actions would have a material adverse effect on Buyer's
ability to perform this Agreement or any other Transaction Document to which it
is a party or any material aspect of the transactions contemplated by this
Agreement.
5.5 FINANCING.
Buyer has provided to the Company the commitment letter it has received
from Wellspring Capital Partners III, LP regarding funds necessary to pay the
Purchase Price.
5.6 INVESTIGATION.
The Buyer acknowledges that in making the decision to enter into this
Agreement and to consummate the transactions contemplated hereby, the Buyer has
relied solely on the basis of its own independent investigation of the
Residential Business and the Purchased Assets and upon the express written
representations, warranties and covenants in this Agreement.
ARTICLE VI
COVENANTS WITH RESPECT TO CONDUCT OF SELLERS PRIOR TO CLOSING
During the period from the date hereof through the Closing Date, each
Seller covenants and agrees as follows:
6.1 ACCESS.
Each Seller will authorize and permit Buyer and its representatives
(which term shall be deemed to include its independent advisors and
representatives of prospective financing institutions) to have access during
normal business hours, upon reasonable notice, to all of their respective
properties, books and records, including Tax records, and all other information
with respect to the Residential Business as Buyer may from time to time request,
and to make copies of such information and documents, and to discuss their
respective businesses with such third Persons, including, without limitation,
Sellers' respective directors, officers, employees, accountants, counsel,
suppliers, customers, and creditors, as Buyer considers necessary or appropriate
for the purposes of familiarizing itself with and evaluating the Residential
Business, the Purchased Assets or the Assumed Liabilities or obtaining any
necessary Approvals of or Permits for the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Buyer shall be
entitled to conduct or cause to be conducted on the Real Property such surveys,
tests and inspections, including, environmental inspections and tests, as Buyer
shall deem necessary or useful in connection with its acquisition of such Real
Property (provided, however, that with respect to any leased Real Property, such
right shall be exercised within the terms of inspection rights permitted under
the respective lease).
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6.2 FINANCIAL REPORTS.
Company shall deliver to Buyer: (i) as promptly as possible, an
unaudited consolidated balance sheet for the Residential Business as of March
31, 2003 and the related statements of operations and cash flows for the
three-month period then ended, (ii) within 30 days after the end of each month,
an unaudited consolidated balance sheet for the Residential Business as of the
last day of the preceding month, and the related statements of operations and
cash flows for the Residential Business for the month then ended; (iii) as soon
as available, and in any event within ten (10) days after it is prepared, any
material operating reports and financial reports (including any projections and
budgets) relating to the Residential Business prepared for senior management;
and (iv) promptly following request, such other financial or operation reports
as Buyer may reasonably request. Each of the monthly financial statements
delivered pursuant to this Section 6.2 shall (x) fairly present in all material
respects the financial position of the Residential Business on a consolidated
basis as of the dates then ending and the consolidated results of operations of
the Residential Business for the periods then ended, (y) be prepared in
accordance with GAAP throughout the periods covered thereby (except as disclosed
on Schedule 4.4) and (z) be in accordance with the books and records of Sellers
which have been maintained in a manner consistent with historical practice.
6.3 CONDUCT OF RESIDENTIAL BUSINESS.
(a) Except as expressly contemplated by this Agreement, Sellers
shall conduct the Residential Business in the ordinary course and consistent
with past practice, and shall use all commercially reasonable efforts to
preserve intact the business organization and all material rights and
relationships relating to the Residential Business.
(b) Except as expressly contemplated by this Agreement, Company
shall not (to the extent it relates to or would impact the Residential
Business), and shall not permit any Selling Subsidiary, without the prior
written consent of Buyer to do any of the following:
(i) amend, terminate, renew/fail to renew, renegotiate or
default under (or take or omit to take any action that, with or without
the giving of notice or passage of time or both, would constitute a
default under) any Material Contract;
(ii) terminate, amend or fail to renew or preserve any
existing insurance coverage, including, without limitation, fail to pay
any premium therefor (and Sellers shall provide to Buyer evidence of
payment of such premiums, and any payments made under premium financing
arrangements, promptly after each such payment);
(iii) terminate or fail to renew or preserve any Permits,
other than in the ordinary course of business consistent with past
practices;
(iv) except as may be required with respect to obtaining
Bonds as required under Section 6.3(d), incur or agree to incur any
obligation or Liability (absolute or contingent) that individually calls
for payment by any Seller of more than $50,000 in any specific case or
$100,000 in the aggregate (other than ordinary course trade payables),
or incur any Indebtedness, guaranty or other extension of credit, or
enter into any commitment to make the same, to or for the benefit of any
Affiliate, director, officer,
28
employee, stockholder or any of their respective Associates or
Affiliates; provided, however, that the foregoing shall not prohibit or
restrict the incurrence of any obligation or Liability with respect to
any insurance or indemnity claims made by third parties (including
payment of deductible or risk retention amounts) relating to the
Residential Business;
(v) grant any general increase in the rates of pay or
benefits to officers, directors or employees (or a class thereof) or any
material increase in salary or benefits of any officer, director,
employee or agent or pay any bonus or other extraordinary payment to any
Person, or enter into any new employment, collective bargaining or
severance agreement, in each case, other than any changes disclosed to
Buyer prior to the date hereof;
(vi) sell, transfer, mortgage or otherwise Encumber or
dispose of any assets including the Purchased Assets except for
Permitted Encumbrances and for dispositions of property not material in
amount in the ordinary course of business, including, sales of inventory
in the ordinary course;
(vii) dispose of any Intangible Property, permit to lapse any
rights to the use of any Intangible Property or disclose any proprietary
or trade secrets other than as required by law;
(viii) make any commitments with respect to capital
expenditures aggregating more than $100,000;
(ix) enter into any Contract or assume or reject, pursuant to
Section 365 of the Bankruptcy Code, any Contract; provided, that Sellers
may enter into a Contract if (i) such Contract does not constitute a
Material Contract and is entered into in the ordinary course of
business; or (ii) such Contract is approved by Buyer in writing; or
(x) agree to or make any commitment to take any actions
prohibited by this Section 6.3.
(c) Notwithstanding the foregoing, in addition to the amounts
provided under Section 6.3(d) below (and not in duplication thereof), Buyer and
Sellers agree that the Selling Subsidiaries shall pay and distribute to the
Company between (and including the dates thereof) May 1, 2003 and the Closing
Date (the "Cash Sweep") an aggregate amount determined as follows: (i) if the
Closing occurs on or prior to June 8, 2003, $1,207,000; or (ii) if the Closing
occurs after June 8, 2003, an amount equal to $1,207,000 plus an amount equal to
$71,428.57 times the number of days occurring between June 8, 2003 to the
Closing Date (calculated from, and including, June 8, 2003 to, but not
including, the Closing Date).
(d) (i) Except (A) for the Cash Sweep set forth in Section
6.3(c) above and (B) for the amounts as provided under (ii) below, the
Residential Business shall not distribute any assets (including, without
limitation, any cash or restricted reserves) to the Company or any of its
Subsidiaries other than Selling Subsidiaries (and neither the Company nor any of
its Subsidiaries other than Selling Subsidiaries shall take transfer of any
thereof), and the Company shall not
29
transfer any Liabilities to the Residential Business or require the Selling
Subsidiaries to pay any amounts typically paid by the Company on their behalf.
(ii) At the time of Closing, the Selling Subsidiaries shall
have reimbursed the Company in full for the costs and expenses incurred
in respect of the Residential Business by paying to the Company an
aggregate monthly amount, for the period commencing May 1, 2003 through
the Closing Date, of $2,097,000 (relating to the payment of Group Health
premium and claims, 401(k) employee and employer match and property and
casualty insurance allocation); provided, however, that such amount
shall be pro rated for the month in which the Closing Date occurs by
multiplying $2,097,000 by a fraction, the numerator of which is the
number of days elapsed in such month through the Closing Date and the
denominator of which is the number of days in such month. Such payment
shall be final whether or not the actual amount of costs or expenses are
greater or less than the amount paid under this Section 6.3(d) and the
Company agrees to pay all such costs and expenses.
(e) The Company shall instruct the management of the Residential
Business to manage working capital and cash flow of the Residential Business in
the ordinary course and the Selling Subsidiaries shall not, and shall not permit
any of their respective personnel or agents, to materially change practices
regarding working capital accounts. Working capital and cash flow of the
Residential Business shall continue to be controlled by the Selling Subsidiaries
consistent with past practice during the period immediately preceding the date
of this Agreement and through Closing. Sellers shall use commercially reasonable
efforts to continue to obtain Bonds for the operation of the Residential
Business (and provide supporting collateral therefor; provided, however, that
the obligation to provide collateral in respect hereof shall be limited to the
collateral maintained by the Sellers in respect of Bonds on the date hereof
(including all Bonds of the Company and its Subsidiaries on the date hereof in
addition to the Bonds listed on Schedule 4.20) and shall not require the Sellers
to provide any additional collateral or, except to the extent that such existing
collateral is otherwise available therefor, to substitute any collateral with
respect thereto, but Sellers shall use commercially reasonable efforts prior to
the Closing to permit such existing collateral to be substituted for new Bonds
as any existing Bonds are released).
(f) Sellers and Buyer shall cause to be prepared and delivered
(including, without limitation, by instructing management of the Residential
Business to the extent of their authority to do so) to Buyer and the Company (i)
on the day following Closing and (ii) on a weekly basis after the Closing, an
accounting for the cash balances in the accounts listed on Schedule 4.22. Any
amounts on deposit and receipts in such accounts shall be received and held in
trust by Sellers for the benefit of Buyer, but may be applied by Sellers to
cover outstanding checks of the Residential Business written against such
accounts on or prior to Closing. On the day following the Closing and on a
weekly basis thereafter, as applicable, (i) Sellers shall turn over to Buyer all
cash or other deposits in such accounts in excess of checks outstanding or (ii)
in the event checks are outstanding against such accounts in excess of deposits
held therein, Buyer will transfer cash to such accounts to cover such
outstanding checks. Sellers shall not write any checks against such accounts on
or after Closing or make any withdrawals or otherwise apply any funds in such
accounts on or after Closing, except as provided above to cover outstanding
checks written against such accounts prior to Closing. Sellers and Buyer agree
they shall cooperate and cause
30
their respective Affiliates and Associates to cooperate with each other from and
after the Closing to give effect to the provisions of this Section 6.3(f).
6.4 NOTIFICATION OF CERTAIN MATTERS.
Sellers shall give prompt written notice to Buyer of, (i) the
occurrence, or failure to occur, of any event that would be likely to cause any
representation or warranty of such Seller contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date of this
Agreement to the Closing Date, (ii) any failure of any Seller, as the case may
be, to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, (iii)
the occurrence of any fact or condition after the date of this Agreement that
would be reasonably likely to cause or constitute a breach of any representation
or warranty had such representation or warranty been made at the time of the
occurrence, or such Seller's discovery of, such fact or condition, (iv) any fact
or condition of which Seller obtains knowledge which has had or could reasonably
be expected to have or result in a Material Adverse Effect, and (v) the
occurrence of any event that may make the satisfaction of the conditions set out
in Article VIII impossible or unlikely. No such notification shall affect the
representations or warranties of the Sellers or the conditions to their
respective obligations hereunder.
6.5 PERMITS, ORDERS AND APPROVALS.
(a) As promptly as practical after the date of this Agreement, each
Seller shall make all filings required by applicable law to be made by it in
order to consummate the transactions contemplated by this Agreement, including,
without limitation, seeking entry of an Order by the Bankruptcy Court to approve
this Agreement. All documents required to be filed by any Seller with any
Governmental Entity in connection with this Agreement or the transactions
contemplated by this Agreement will comply in all material respects with the
provisions of applicable Law.
(b) Each Seller and Buyer agree to cooperate and use their best
efforts to obtain all (and will immediately prepare all registrations, filings
and applications, requests and notices preliminary to obtaining all) Approvals,
Orders and Permits that may be necessary or which may be reasonably requested by
Buyer to consummate the transactions contemplated by this Agreement, including,
without limitation, (i) notifying state and local agencies that have issued
Permits to any Seller or one or more of its employees of the consummation of the
transactions contemplated hereby, and (ii) obtaining entry of an Assumption
Order by the Bankruptcy Court. Buyer shall pay the costs of obtaining all
Approvals and Permits (excluding, however, any Cure Payments relating to such
Approvals and Permits) and any related registrations or filing fees.
6.6 CHAPTER 11 CASES.
Sellers shall and shall cause their respective counsel to appear in, be
heard on, and defend against any Action filed in the Bankruptcy Court and
hearing thereon that: (i) opposes the entry of, or seeks to materially amend or
modify, the Disclosure Statement Order or the Confirmation Order (or, if
applicable, any Alternate Order) or any other Order which relates to this
Agreement or the transactions contemplated hereby and is reasonably deemed
material by Buyer or (ii) seeks
31
to terminate, annul, modify or condition the automatic stay imposed on any
Purchased Asset pursuant to Section 362 of the Bankruptcy Code.
6.7 INCONSISTENT AGREEMENTS.
(a) Sellers shall not, without the consent of Buyer, nor shall any
Seller authorize any of its respective employees, officers, directors,
representatives or agents to, actively solicit or initiate discussions or
negotiations with any third party with respect to an investment (which
investment shall not include postpetition debtor in possession financing
provided by the senior bank lenders of the Company or debtor in possession
lenders) in any Selling Subsidiary or the Residential Business (including by way
of the purchase of any capital stock or other securities from the Company or any
stockholder thereof) or acquisition of all or any part of the Residential
Business (including by way of merger, purchase of capital stock, purchase of
assets or plan of reorganization or alternate plan of reorganization) (each, a
"Prohibited Transaction").
(b) Notwithstanding the foregoing, nothing contained herein shall
prohibit (i) any Seller and any of its respective employees, officers,
directors, representatives, or agents from providing information to any Person
in response to unsolicited inquiries regarding a potential sale of, or
investment in, the Residential Business or (ii) the Company's senior bank
lenders and debtor in possession lenders and the Official Committee of Unsecured
Creditors appointed as part of the Chapter 11 Cases from (A) soliciting or
initiating any negotiations or discussions with any third party with respect to
a sale of, or investment in, the Residential Business or (B) from taking any
other action they deem necessary or appropriate.
6.8 CORPORATE NAMES.
On or immediately following the Closing Date, each Selling Subsidiary
shall take all action necessary and file all documents or instruments necessary
with any Governmental Entity or other Person to change their respective current
names to names that are distinctly different in spelling and sound from their
respective current name. Such new name shall be subject to Buyer's prior
approval (which shall not be unreasonably withheld) and shall not conflict with
or interfere with Buyer's ability to use the Selling Subsidiaries' current names
after the Closing or otherwise be misleading to any Person. From and after the
Closing, each Seller agrees that it will not exploit the names set out in
Schedule 6.8 for monetary gain or otherwise.
6.9 CERTAIN ASSET TRANSFERS.
On or prior to Closing, the Company shall cause Encompass Services
Indiana, L.L.C., Wayzata, Inc. and such other non-residential subsidiaries (as
described in Schedule 4.5) to convey all of their assets that relate to the
Residential Business, as such assets are described in Schedule 4.5, to the
applicable Selling Subsidiary for transfer to Buyer.
6.10 WAIVER AND RELEASE.
(a) Sellers agree that effective as of the Closing Date, the Sellers
and its Affiliate that are subject to the Chapter 11 Cases and their successors
(the "Debtors") waive and release and shall be permanently enjoined from any
prosecution or attempted prosecution of any and all claims, obligations, rights,
causes of action or liabilities, whether known or unknown, foreseen or
32
unforeseen, existing or hereafter arising, which the Debtors have or may have
against any present officer or employee of the Debtors and their respective
attorneys, agents, and property; provided, however, that the foregoing will not
operate as a waiver of, or release from, (i) any cause of action arising out of
an express contractual obligation owing by any such officer or employee to the
Debtors, or (ii) any cause of action arising out of the willful misconduct or
gross negligence of such officer, or employee in connection with, related to, or
arising out of the administration of the Chapter 11 Cases, the pursuit of
confirmation of the Plan, the consummation of the Plan, the administration of
the Plan, or the property to be distributed under the Plan.
(b) Sellers further agree that any Alternate Order shall waive and
release all Debtors and Wellspring and each of their respective present or
former members, officers, directors, agents, financial advisors, attorneys,
employees, partners, and representatives and their respective property on the
same terms and conditions as set forth in Section 13.7 of the Plan.
6.11 COURT APPROVAL OF AGREEMENT.
Promptly following execution hereof, the Company shall file a motion
with the Bankruptcy Court seeking approval of this Agreement and shall use its
best efforts to obtain such approval.
6.12 DELIVERY OF SCHEDULES; CHANGED SCHEDULES.
(a) On or before May 16, 2003, the Sellers shall deliver to the
Buyer all Schedules hereto (other than Schedule 8.2(d)), and such Schedules
shall be in a form and substance reasonably satisfactory to Buyer (without
limiting the Buyer's rights under Section 8.2(h)).
(b) From and after the date of delivery by the Sellers of the
Schedules pursuant to Section 6.12(a), the Company covenants and agrees to
deliver promptly to Buyer (but no later than four business days prior to the
Closing Date) Schedules showing any changed facts or circumstances from the
matters disclosed in the Schedules previously delivered to Buyer hereunder;
provided, however, that such changes may only modify the Schedules as they
relate to representations and warranties of the Sellers contained herein.
ARTICLE VII
ADDITIONAL CONTINUING COVENANTS
7.1 TAX MATTERS; TAX RETURNS.
(a) From and after the Closing Date, to the extent reasonably
requested by any party hereto, each party hereto shall, and shall cause their
respective Affiliates to: (i) cooperate fully in the preparation of any Tax
Return, (ii) provide, or cause to be provided, any records, including Tax
records, and other information requested by such parties in connection
therewith, as well as access to, and the cooperation of, the auditors of such
party, at the sole cost and expense of the party making such request, and (iii)
cooperate fully in connection with any Tax investigation, audit or other
proceeding. Any information obtained pursuant to this Section 7.1 or pursuant to
any other Section hereof providing for the sharing of information or the review
of the Tax Return or other Schedule relating to Taxes shall be subject to
Section 10.9.
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(b) Real and personal property taxes, ad valorem taxes and other
taxes that are imposed on a periodic basis (as opposed to a net income basis)
(collectively, "Periodic Taxes") imposed in respect of the Purchased Assets
which are first due after the Closing Date shall be paid by Buyer.
(c) Buyer shall prepare and provide Company with a schedule (the
"Allocation Schedule"), which determines the Purchase Price and allocates the
Purchase Price to the Purchased Assets in accordance with the fair market value
of the Purchased Assets and the Assumed Liabilities in accordance with Section
1060 of the Tax Code, not later than 30 days prior to the extended due date of
the Tax Returns to which IRS Form 8594 must be attached. Buyer and Sellers agree
to use the allocation set forth in the Allocation Schedule in filing all
required forms under Section 1060 of the Code, and all other Tax Returns, and
Buyer and Sellers further agree that they shall not take any position
inconsistent with such allocation upon any examination of any such Tax Return,
in any refund claim or in any Tax litigation. The Purchase Price shall be deemed
to be paid ratably to each of the Selling Subsidiaries in consideration for the
Purchased Assets held by each Selling Subsidiary consistent with the Allocation
Schedule.
7.2 EMPLOYMENT MATTERS.
(a) The Buyer shall offer employment, effective as of the Closing
Date, to those employees of the Sellers engaged or employed in the operation of
the Purchased Assets or the Residential Business as set forth on Schedule 4.16
(except for any such Person set forth therein that (i) is not employed by a
Seller as of the Closing Date because such Person has voluntarily terminated his
or her employment with any of the Sellers or (ii) has been terminated by a
Seller prior to the Closing Date) at a comparable job and at a rate of base pay
commensurate with each such Transferred Employee's pay immediately prior to the
Closing Date; provided, however, that Buyer may notify the Company, at least
three business days prior to the Closing Date, of up to four of such employees
to whom the Buyer does not wish to make such an offer of employment, and the
Buyer shall not be obligated to make an offer to those employees specified in
such notice. Those employees of Sellers who accept such offers of employment are
referred to herein as "Transferred Employees". Upon request of the Buyer,
Sellers shall provide the Buyer reasonable access to data (including computer
data) regarding the ages, dates of hire, compensation and job description of the
Transferred Employees.
(b) The Buyer shall assume and be solely responsible for any
severance costs in accordance with the Sellers' policies regarding severance
payments (which Sellers have previously disclosed to Buyer) associated with the
termination of the employment of any of the employees set forth on Schedule 4.16
(except for any such Person set forth therein (i) who have voluntarily
terminated his or her employment with any of the Sellers, (ii) who do not
receive offers of employment from Buyer in accordance with the proviso in
Section 7.2(a) or (iii) who are otherwise entitled to severance benefits
pursuant to the Sellers' policies because they do not accept such offers of
employment from Buyer and, therefore, are not Transferred Employees. The Buyer
shall discharge all Liabilities and claims based on occurrences or conditions
first occurring or commencing on or after the Closing Date with respect to
Transferred Employees arising out of their employment with the Buyer after the
Closing Date, including, but not limited to, any claims arising out of any
Employee Plan maintained by the Buyer.
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(c) At Closing, the Buyer shall make available or establish a group
major medical plan for the Transferred Employees and their dependents. The Buyer
shall credit the Transferred Employees with all service recognized by any Seller
under employee plans as service with the Buyer for purposes of eligibility to
participate and vesting under all employee benefit plans, programs and policies
of the Buyer, whether now existing or hereafter adopted (the "Buyer Plans"). The
Buyer shall waive any coverage waiting period, pre-existing condition and
actively-at-work requirements under the Buyer Plans to the extent such
conditions or requirements have been satisfied under corresponding plans of
Sellers and shall provide that any eligible expenses incurred before the Closing
Date by a Transferred Employee (and his or her dependents) during the calendar
year of the Closing and disclosed to Buyer by such Transferred Employee shall be
taken into account for purposes of satisfying the applicable deductible,
coinsurance and maximum out-of-pocket provisions, and applicable annual and/or
lifetime maximum benefit limitations of the Buyer Plans.
(d) On and after the Closing Date, the Buyer shall have sole
responsibility for satisfying the continuation coverage requirements for group
health plans under COBRA for any and all of those employees of the Selling
Subsidiaries (including, without limitation, those employees set forth on
Schedule 4.16) that are (or shall be) "M&A qualified beneficiaries" (as defined
in Q&A-4(a) of Treasury Regulation Section 54.4980B-9 with respect to asset
sales) in connection with the transaction contemplated by this Agreement. For
the avoidance of doubt, "M&A qualified beneficiaries" shall not include any
Persons employed by the Company or its Subsidiaries other than Selling
Subsidiaries.
(e) The Transferred Employees shall be fully vested in their account
balances under the Company's 401(k) Plan, regardless of their years of vesting
service credit as of their termination of employment with all affiliated
employers under the Company's 401(k) Plan. Sellers shall give Buyer notice and
opportunity to comment on any notice to be provided to Transferred Employees
concerning their receipt of distributions under the Company's 401(k) Plan.
(f) Notwithstanding the foregoing, nothing in this Section 7.2 shall
be deemed or construed to give rise to any rights, claims, benefits, or causes
of action to any Transferred Employee or third party whatsoever (including any
Governmental Entity).
(g) Sellers shall have no responsibility or obligation to pay any
bonuses (whether earned, accrued or otherwise pursuant to any bonus plans
maintained by the Sellers) with respect to the Residential Business or any of
the Transferred Employees (or, if applicable, any other employee set forth on
Schedule 4.16).
7.3 TRANSFER TAXES.
In accordance with Section 1146(c) of the Bankruptcy Code, the making or
delivery of any instrument of transfer, including the filing of any deed or
other document of transfer to evidence, effectuate or perfect the rights,
transfers and interests contemplated by this Agreement, shall be in connection
with the Plan (or, if applicable, an Alternate Order) and as such shall be free
and clear of any and all transfer Tax, stamp Tax or similar Taxes; provided,
however, that if any Taxes are due in connection with the transactions
contemplated herein, Buyer, on the one
35
hand, and Sellers, on the other hand, shall each pay one-half of the amount of
any such Taxes and they shall pay such amount in a timely manner. The
instruments transferring the Purchased Assets to Buyer shall contain the
following endorsement:
"Because this instrument has been authorized pursuant to an
Order of the United States Bankruptcy Court for the Southern
District of Texas (Houston Division), in connection with a plan
of reorganization of the Grantor, it is exempt from transfer
taxes, stamp taxes or similar taxes pursuant to 11 U.S.C.
Section 1146(c)".
7.4 ENCOMPASS NAME.
Buyer shall and shall cause any of its designees acquiring the Purchased
Assets to cease using the Encompass name in connection with the Residential
Business following the Closing Date and remove such name from all signage and
any other Purchased Asset containing such name within six months after the
Closing Date; provided, however, that Buyer shall not be required pursuant to
this Agreement to remove the Encompass name from any items not within its
control.
7.5 FURTHER ACTION.
Sellers and Buyer agree that, from time to time after the Closing, upon
the reasonable request of the other, they will cooperate and will, to the extent
applicable, cause their respective Affiliates and Associates to cooperate with
each other to effect the transactions contemplated by this Agreement.
7.6 NON-COMPETITION; NON-SOLICITATION.
(a) From and at all times after Closing, no Seller shall directly or
indirectly invest in, own, operate, finance, control, advise, render services to
or guarantee the obligations of any Person engaged in or planning to become
engaged in any business similar to the Residential Business or any part thereof.
(b) From and at all times after Closing, no Seller shall, directly
or indirectly:
(i) solicit the business of any Person who is a customer of
Buyer, or cause, induce or attempt to cause or induce any customer,
supplier, employee or other business relation of Buyer to cease doing
business with Buyer, to deal with any competitor of Buyer or in any way
interfere with its relationship with Buyer;
(ii) cause, induce or attempt to cause or induce any
customer, supplier, employee or other business relation of Seller within
the year preceding the Closing Date to cease doing business with Buyer,
to deal with any competitor of Buyer or in any way interfere with its
relationship with Buyer; or
36
(iii) hire, retain or attempt to hire or retain any employee
or independent contractor of Buyer or in any way interfere with the
relationship between Buyer and any of its employees or independent
contractors.
(c) This Section 7.6 is reasonable and necessary to protect and
preserve Buyer's legitimate business interests and the value of the Purchased
Assets and to prevent any unfair advantage conferred on Sellers.
7.7 POST-CLOSING ACCESS.
For a period of five years following the Closing, each party hereto
shall afford any other party hereto upon the request of such party ("Requesting
Party") reasonable access to the books, records, manuals and other materials of
the Sellers and the Residential Business as well as the properties related to
the Sellers and the Residential Business in each case, to the extent relating to
any period prior to the Closing to (i) complete any financial statements or
audits thereof or tax returns, (ii) defend any tax disputes or claims or respond
to any requests in connection with any tax audits, (iii) comply with any legal
request or order, (iv) defend any disputes, claims, prosecution or litigation
including any enforcement of rights against third parties in the Bankruptcy
Court, or (v) for any other reasonable purpose. The Requesting Party shall pay,
upon request, all reasonable costs and expenses of such other party or parties
from whom access is requested. Any information provided pursuant to this Section
7.7 shall be subject to the terms of Section 10.9.
7.8 INSURANCE.
Without limiting the generality of Section 7.5, Sellers agree to
cooperate with Buyer and its Affiliates to ensure that the Residential Business
in the hands of Buyer continues to benefit from the insurance arrangements
benefiting the Residential Business for periods prior to Closing. If Buyer
incurs any loss or Liability, or is subject to any claim, which may be covered
by such policies, at the request of Buyer, Sellers shall (x) comply with their
respective obligations under such policies required in connection with such
claims, (y) use commercially reasonable efforts to pursue such coverage or
claims (with Buyer bearing any processing expenses in connection therewith) and
(z) if and to the extent paid to the Sellers, remit to the Buyer any proceeds
received pursuant to such insurance to the extent attributable to such loss or
Liability of, or claim against, Buyer.
7.9 PERFORMANCE BOND COLLATERAL; LICENSE BONDS.
(a) Sellers agree to maintain the collateral, supporting the Bonds
listed on Schedule 7.9 and any additional Bonds obtained by the Sellers for the
Residential Business prior to the Closing Date, in place with the applicable
sureties until such Bonds have been released, and the Sellers shall not seek to
withdraw such collateral. Following the Closing, the Sellers shall not be
obligated to provide any substitute or additional collateral with respect to
such Bonds, and such collateral shall not be used or relied upon (by the Buyer,
for its or any sureties' benefit) for any other bonds that the Buyer may obtain.
Notwithstanding the foregoing, following the Closing, if a surety shall permit
the refund or return of all or any portion of such collateral supporting the
Bonds as aforesaid and, in connection therewith, such surety shall not require
Buyer to provide
37
any substitute or additional collateral in replacement therefor, then Sellers
may receive such refund or return without violation of this Section 7.9 and
without any further obligation hereunder with respect to such refunded or
returned collateral. Following the Closing, once such Bonds are released, the
Sellers shall be entitled to obtain return or repayment of collateral supporting
such Bonds without any restriction hereunder. If any claims against Sellers are
made in respect of such Bonds by the surety, or any surety collects or applies
against any of the collateral, as a result of any events or circumstances
arising in connection with the performance (or failure to perform) of the
underlying obligations that such Bonds secure after the Closing Date, Buyer
shall promptly pay Sellers the amount of any such claim or the collateral
collected or applied against and shall indemnify Sellers for any other losses
incurred in connection therewith.
(b) Commencing the month of the Closing, and for as long as any work
for which the Company has posted a Bond remains to be completed under the
Assumed Contracts, Buyer shall provide the Company a monthly report in terms
reasonably acceptable to the Company summarizing Buyer's current contract status
and cost to complete with respect to any such bonded work under an Assumed
Contract for which the Company is an indemnitor.
(c) For a period ending on the thirtieth day following the Closing
Date, the Sellers shall maintain, for the benefit of the Buyer, all of their
Bonds, and the collateral, deposits or other similar reserves associated
therewith, relating to licensing and permits for the Residential Business
existing as of the Closing Date. Upon the expiration of such thirty-day period,
the Sellers shall be entitled to terminate such licensing and permit Bonds and
may receive any refunded or other returned payment relating to collateral,
deposits or other similar reserves, in the name of any entity other than a
Selling Subsidiary, in respect thereof, without being obligated to post any
substitute or additional collateral, deposits or other similar reserves pursuant
to Section 7.9(a).
ARTICLE VIII
CONDITIONS OF PURCHASE
8.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be subject to
the following conditions unless waived in writing by Buyer and Company:
(a) No Orders; Legal Proceedings. No Law or Order shall have been
enacted, entered, issued, promulgated or enforced by any Governmental Entity,
nor shall any Action have been instituted and remain pending, and remain so by
any Governmental Entity that prohibits or restricts or would (if successful)
prohibit or restrict the transactions contemplated by this Agreement or that
prohibits or would (if successful) prohibit the operation of the Residential
Business following the Closing Date. No Governmental Entity shall have notified
any party to this Agreement that consummation of the transactions contemplated
by this Agreement would constitute a violation of any Laws of any jurisdiction
and/or that it intends to commence proceedings to restrain or prohibit such
transactions or force divestiture or rescission, unless such
38
Governmental Entity shall have withdrawn such notice and abandoned any such
proceedings prior to the Closing Date.
(b) Approvals. To the extent required by applicable Law, all Permits
and Approvals required to be obtained from any Governmental Entity required for
the consummation of the transactions contemplated hereby shall have been
received or obtained on or prior to the Closing Date (including, without
limitation, the Confirmation Order or, if the Agent shall have waived such
requirement of obtaining the Confirmation Order, an Alternate Order) and all
notifications have been made to applicable Governmental Entities in connection
with the assignment or transfer of any Permit; provided, that, this condition
shall not apply to Permits required for operation of the Residential Business
following the Closing.
8.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be subject to the
following conditions except to the extent waived in writing by Buyer:
(a) Representations and Warranties and Covenants of Seller.
(i) All of the representations and warranties of each Seller
herein contained shall be true, correct and complete in all material
respects as of the date hereof and at the Closing Date with the same
effect as though made at such time, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representations and warranties shall have been true,
correct and complete in all material respects on and as of such earlier
date.
(ii) Each Seller shall have performed all obligations and
complied with all covenants and conditions required by this Agreement to
be performed or complied with by it at or prior to the Closing Date, and
each Seller shall have delivered to Buyer certificates of such Seller in
form and substance reasonably satisfactory to Buyer, dated the Closing
Date and signed by the chief executive officer and chief financial
officer of Company and such officers of Sellers as Buyer may reasonably
request, certifying the accuracy of clauses (i) and (ii) of this Section
8.2(a).
(b) No Material Adverse Effect. There shall not have been any
Material Adverse Effect after the date hereof.
(c) Consents. Buyer shall have all Approvals and Permits from a
Governmental Entity required to be made or obtained for the continued operation
of the Residential Business by Buyer and its Subsidiaries following the Closing
as currently conducted, including, without limitation, the Approvals and Permits
listed on Schedule 4.13, each in form and substance reasonably satisfactory to
Buyer, except where the failure to have any such Approval or Permit from a
Governmental Entity would not materially restrict the ability of Buyer to
conduct the Residential Business in compliance with applicable Laws. For
purposes of the foregoing sentence, "materially" shall mean in a manner that
would reasonably be expected to result in the diminution of revenues of the
Residential Business by an amount in excess of $1,000,000 for the six-month
period immediately following the Closing Date.
39
(d) Employment Matters. Each employment agreement and
non-competition with the individuals listed on Schedule 8.2(d) shall be in full
force and effect on the Closing Date and shall be in form and substance
satisfactory to Buyer.
(e) Order Approving Transaction. An Order of the Bankruptcy Court
authorizing and approving this Agreement and the transactions contemplated
hereby shall have been entered no later than May 30, 2003 and the Closing shall
occur no later than June 29, 2003; provided, however, that to the extent such
Order is the Confirmation Order, it shall have become effective no later than
June 29, 2003.
(f) Other Bankruptcy Events. Each Order (including, but not limited
to, the Confirmation Order (if applicable), any Alternate Order, the Assumption
Order and the Disclosure Statement Order) entered at any time or from time to
time in the Chapter 11 Cases and relating to any Purchased Assets shall be in
form, substance and scope reasonably satisfactory to Buyer and shall not have
been stayed, vacated, reversed, modified or amended without the consent thereto
of Buyer. Without limiting the generality of the foregoing, no Order shall have
been entered by the Bankruptcy Court that: (i) authorizes the appointment of an
interim or permanent trustee or examiner in the Chapter 11 Cases or (ii)
terminates, annuls, modifies or conditions the automatic stay imposed on any
material asset reasonably necessary to the operation of the Residential Business
pursuant to Section 362 of the Bankruptcy Code.
(g) Due Diligence. Buyer shall have completed its due diligence
investigation and the results of which shall be satisfactory to the Buyer in its
sole discretion.
(h) Sellers' Schedules. The Sellers' Schedules (including any
updates thereto) shall be in form and substance acceptable to Buyer in its sole
discretion.
8.3 CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Sellers to effect the Closing shall be subject to the
following conditions, except to the extent waived in writing by Company:
(a) All of the representations and warranties of Buyer herein
contained shall be true, correct and complete in all material respects as of the
date hereof and at the Closing Date with the same effect as though made at such
time, except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties
shall have been true, correct and complete in all material respects on and as of
such earlier date; and
(b) Buyer shall have performed all obligations and complied with all
covenants and conditions required by this Agreement to be performed or complied
with by it at or prior to the Closing Date, and Buyer shall have delivered to
Company certificates of Buyer in form and substance reasonably satisfactory to
Company, dated the Closing Date and signed by its chief executive officer and
chief financial officer, certifying the accuracy of clauses (a) and (b) of this
Section 8.3.
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ARTICLE IX
TERMINATION OF OBLIGATIONS; BREAK-UP FEE; EFFECT OF TERMINATION
9.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this Agreement and the
transactions contemplated by this Agreement shall terminate if the Closing does
not occur on or before the close of business on June 30, 2003, unless extended
by mutual consent in writing of Buyer and Company and otherwise may be
terminated at any time before the Closing as follows and in no other manner:
(a) By mutual consent in writing of Buyer and Company;
(b) By Buyer:
(i) if there has been a material misrepresentation or other
material breach by any Seller in such party's representations,
warranties or covenants set forth herein; provided, however, that, if
such breach is susceptible to cure, the breaching party shall have ten
(10) days after receipt of notice from the other party of its intention
to terminate this Agreement if such breach continues in which to cure
such breach; or
(ii) if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the
obligations of Buyer to consummate the transactions contemplated by this
Agreement as set forth in Section 8.1 or 8.2;
(c) By Company:
(i) if there has been a material misrepresentation or other
material breach by Buyer in such party's representations, warranties or
covenants set forth herein; provided, however, that, if such breach is
susceptible to cure, the breaching party shall have ten (10) days after
receipt of notice from the other party of its intention to terminate
this Agreement if such breach continues in which to cure such breach; or
(ii) if any event occurs or condition exists which would
render impossible the satisfaction of one or more conditions to the
obligation of Sellers to consummate the transactions contemplated by
this Agreement as set forth in Section 8.1 or 8.3;
9.2 BREAK-UP FEE AND EXPENSES.
The Sellers shall pay the Buyer the break-up fee and expenses as
provided under the Due Diligence Letter.
9.3 EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement shall terminate
without further Liability of any party to another; provided, that the
obligations of the parties contained in Section 9.2,
41
Section 10.9 and Section 10.13 shall survive any such termination and shall
survive confirmation of any plan of reorganization and the conversion or
dismissal of the Chapter 11 Cases and shall not be discharged under Section
1141(d) of the Bankruptcy Code. A termination under Section 9.1 shall not
relieve any party of any Liability for a breach of, or for any misrepresentation
under this Agreement, or be deemed to constitute a waiver of any available
remedy (including specific performance if available) for any such breach or
misrepresentation.
ARTICLE X
GENERAL
10.1 AMENDMENTS; WAIVERS.
This Agreement and any Schedule or Exhibit attached hereto may be
amended only by agreement in writing of all parties hereto. No waiver of any
provision nor consent to any exception to the terms of this Agreement or any
agreement contemplated hereby shall be effective unless in writing and signed by
the party to be bound and then only to the specific purpose, extent and instance
so provided subject to ability of Sellers to update schedules in accordance with
Section 6.12.
10.2 SCHEDULES; EXHIBITS; INTEGRATION.
Each Schedule and Exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement. The
Schedules hereto shall be numbered to correspond to the applicable Section of
this Agreement and shall be deemed to qualify only that Section or other
Sections referencing such applicable Schedule. This Agreement, together with
such Schedules and Exhibits, and the Due Diligence Letter constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith, including, but not limited to, the letter of intent dated February
28, 2003, between Buyer and Company as such letter has been amended,
supplemented or otherwise modified as of the date hereof.
10.3 FURTHER ASSURANCES; RIGHT OF ENDORSEMENT, ETC.
(a) Each Seller shall, at any time and from time to time after the
Closing, upon the request of Buyer and at Buyer's expense, do, execute,
acknowledge and deliver, and cause to be done, executed, acknowledged or
delivered, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney or assurances as may be reasonably required to sell,
transfer, convey, assign and deliver to Buyer, or to aid and assist in the
collection of or reducing to possession by the Buyer, of the applicable
Purchased Assets, or to vest in the applicable Purchaser good and indefeasible
title to the Purchased Assets, free and clear of any and all Encumbrances other
than Permitted Encumbrances. Without limiting the generality of the foregoing,
in the event the Buyer has not obtained all Permits or has not transferred all
Permits to Buyer as of the Closing, Sellers shall, at Buyer's expense, cooperate
and use reasonable efforts to notify state and local agencies that have issued
such Permits and take all other actions reasonably requested to have such
Permits transferred to Buyer or to have new Permits issued to Buyer. In the
event the Buyer has not received all Permits to conduct the Residential Business
as it is being
42
conducted on the date hereof, at the Buyer's expense, Sellers shall also use
commercially reasonable efforts to enter into arrangements reasonably requested
by Buyer designed to provide Buyer and its Subsidiaries the full and exclusive
benefit of such Permits. In connection with the foregoing, Buyer assumes the
duty to perform all obligations relating to such Permits accruing after the
Closing.
(b) Effective upon the Closing, each Selling Subsidiary hereby
constitutes and appoints Buyer or any entity designated by Buyer and its and
their successors and assigns the true and lawful attorney of such Selling
Subsidiary with full power of substitution, in the name of Buyer or its
designee, or the name of such Selling Subsidiary, on behalf of and for the
benefit of Buyer or its designee, to collect all accounts and notes receivable
and other items being sold, transferred, conveyed and assigned to Buyer as
provided herein, to endorse, without recourse, checks, notes and other
instruments constituting or relating to the Residential Business or the
Purchased Assets in the name of each Selling Subsidiary, to institute and
prosecute, in the name of each Selling Subsidiary or otherwise, all proceedings
which Buyer may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in or to the Purchased Assets, to defend and
compromise any and all actions, suits or proceedings in respect of any of the
Purchased Assets or the Residential Business and to do all such acts and things
in relation thereto as any Buyer or its designee may deem advisable. The
foregoing powers are coupled with an interest and shall be irrevocable by each
Selling Subsidiary, directly or indirectly, whether by the dissolution of each
Selling Subsidiary or in any manner or for any reason.
10.4 GOVERNING LAW; JURISDICTION.
THIS AGREEMENT AND ALL DOCUMENTS, INSTRUMENTS AND AGREEMENTS EXECUTED
AND DELIVERED PURSUANT TO THE TERMS AND PROVISIONS HEREOF WILL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE BANKRUPTCY CODE AND, TO THE EXTENT NOT
INCONSISTENT WITH THE BANKRUPTCY CODE, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR
RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN NEW YORK TO BE APPLIED. IN
FURTHERANCE OF THE FOREGOING, THE LAW OF NEW YORK WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT AND THE TRANSACTION DOCUMENTS,
EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
THE BUYER AND THE SELLERS FURTHER AGREE THAT THE BANKRUPTCY COURT SHALL
HAVE EXCLUSIVE JURISDICTION OVER ALL DISPUTES AND OTHER MATTERS RELATING TO (A)
THE INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT OR ANY TRANSACTION DOCUMENT
AND (B) THE PURCHASED ASSETS AND THE ASSUMED LIABILITIES. BUYER CONSENTS TO AND
EXPRESSLY AGREES NOT TO CONTEST SUCH EXCLUSIVE JURISDICTION; PROVIDED, HOWEVER,
THAT IF THE BANKRUPTCY COURT REFUSES TO ACCEPT JURISDICTION OVER ANY SUCH
DISPUTE, THEN EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO AND ACCEPTS FOR
ITSELF AND ITS PROPERTIES,
43
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF AND SERVICE OF
PROCESS PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND THE RULES OF ITS
COURTS, WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY ARISING UNDER OR OUT OF IN RESPECT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR OBLIGATION. EACH PARTY
FURTHER IRREVOCABLY DESIGNATES AND APPOINTS THE INDIVIDUAL IDENTIFIED IN OR
PURSUANT TO SECTION 10.12 HEREOF TO RECEIVE NOTICES ON ITS BEHALF, AS ITS AGENT
TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH ACTION BEFORE ANY
GOVERNMENTAL ENTITY, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO EACH PARTY AT ITS ADDRESS PROVIDED IN SECTION
10.12; PROVIDED, THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE
TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF THE SERVICE OF SUCH PROCESS.
IF ANY AGENT SO APPOINTED REFUSES TO ACCEPT SERVICE, THE DESIGNATING PARTY
HEREBY AGREES THAT SERVICE OF PROCESS SUFFICIENT FOR PERSONAL JURISDICTION IN
ANY ACTION AGAINST IT IN THE APPLICABLE JURISDICTION MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS PROVIDED IN SECTION
10.12. EACH PARTY HEREBY ACKNOWLEDGES THAT SUCH SERVICE SHALL BE EFFECTIVE AND
BINDING IN EVERY RESPECT. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY PARTY TO
BRING ANY ACTION OR PROCEEDING AGAINST THE OTHER PARTY IN ANY OTHER JURISDICTION
IF THE BANKRUPTCY COURT REFUSES TO ACCEPT JURISDICTION. NOTHING HEREIN SHALL
LIMIT OR OTHERWISE AFFECT ANY CHOICE OF LAW OR CHOICE OF VENUE MADE BY ANY
SELLER AND BUYER IN ANY OTHER AGREEMENT TO WHICH THEY ARE BOTH A PARTY.
10.5 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it are
assignable except that Buyer may assign its rights hereunder to any Affiliate of
Buyer; provided, however, that Buyer shall remain liable for all obligations of
Buyer hereunder notwithstanding such assignment.
10.6 HEADINGS.
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
10.7 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or
44
more counterparts have been signed by each party and delivered in the case of
the Sellers, by Company to the Buyer and in the case of Buyer, to Company.
10.8 PUBLICITY; REPORTS.
Sellers and Buyer shall coordinate all publicity relating to the
transactions contemplated by this Agreement and no party shall issue any press
release, publicity statement or other public notice relating to this Agreement,
or the transactions contemplated by this Agreement, without obtaining the prior
consent of both Company and Buyer except to the extent that a particular action
is required by applicable Law. Sellers shall obtain the prior consent of Buyer
to the form and content of any application or report, other than reports under
the Exchange Act made to any Governmental Entity or which relates to this
Agreement.
10.9 CONFIDENTIALITY.
All information disclosed by any party (or its representatives) whether
before or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding, this Agreement
to any other party (or its representatives) shall be kept confidential by such
other party and its representatives and shall not be used by any such Persons
other than as contemplated by this Agreement, except to the extent that such
information (i) was known by the recipient when received, (ii) it is or
hereafter becomes lawfully obtainable from other sources, (iii) is necessary or
appropriate to disclose to a Governmental Entity having jurisdiction over a
party, (iv) as may otherwise be required by Law or (v) to the extent such duty
as to confidentiality is waived in writing by the other party.
10.10 PARTIES IN INTEREST.
This Agreement shall be binding upon and inure to the benefit of each
party, and nothing in this Agreement, express or implied, is intended to confer
upon any other Person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
10.11 PERFORMANCE BY SELLING SUBSIDIARIES.
Company agrees to cause its Selling Subsidiaries to comply with any
obligations hereunder relating to such Subsidiaries and to cause its Selling
Subsidiaries to take any other action which may be necessary or reasonably
requested by Buyer to consummate the transactions contemplated by this
Agreement.
10.12 NOTICES.
Any notice or other communication hereunder must be given in writing and
(a) delivered in person, (b) transmitted by telex, telefax or telecommunications
mechanism or (c) mailed by certified or registered mail, postage prepaid),
receipt requested as follows:
45
If to Buyer, addressed to:
Wellspring Capital Management LLC
000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxx
Xxxx Xxxxxxx
With copies to:
O'Melveny & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxxx
Xxxx X. Xxxxxxx
If to Company or any Selling Subsidiary, addressed to:
Encompass Services Corporation
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Corporate Secretary
With copies to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
or to such other address or to such other Person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 10.12 and an appropriate answerback is received, (ii) if given by mail,
five business days after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when actually delivered at such address.
46
10.13 EXPENSES.
Except as expressly provided otherwise in Section 9.2, the parties
hereto shall each bear their own expenses incurred in connection with this
Agreement and each other Transaction Document.
10.14 REMEDIES; WAIVER.
To the extent permitted by Law all rights and remedies existing under
this Agreement and any related agreements or documents are cumulative to and not
exclusive of, any rights or remedies otherwise available. No failure on the part
of any party to exercise or delay in exercising any right hereunder shall be
deemed a waiver thereof, nor shall any single or partial exercise preclude any
further or other exercise of such or any other right.
10.15 KNOWLEDGE CONVENTION.
Whenever any statement herein or in any schedule, exhibit, certificate
or other documents delivered to Buyer pursuant to this Agreement is made "to its
knowledge" or "to its best knowledge" or words of similar intent or effect of
any Seller or its representative, such Person shall make such statement based
upon such Person's conscious awareness of facts or other information arising
from representations made by the individuals set forth on Schedule 10.15.
10.16 REPRESENTATION BY COUNSEL; INTERPRETATION.
Each party hereto acknowledges that each party to this Agreement has
been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of Law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of Buyer and Sellers.
10.17 SPECIFIC PERFORMANCE.
Each party hereto acknowledges that, in view of the uniqueness of the
Residential Business and the transactions contemplated by this Agreement, each
party would not have an adequate remedy at law for money damages in the event
that this Agreement has not been performed in accordance with its terms, and
therefore agrees that the other party shall be entitled to specific enforcement
of the terms hereof in addition to any other remedy to which it may be entitled,
at law or in equity.
10.18 SEVERABILITY.
If any term or provision of this Agreement is determined to be invalid,
illegal or unenforceable by any Governmental Entity, the remaining provisions of
this Agreement to the extent permitted by Law shall remain in full force and
effect provided that the essential terms and conditions of this Agreement for
both parties remain valid, binding and enforceable. Such Government Entity shall
have the power to reduce the scope of any offending provision, to delete
specific words or phrases or to replace any invalid or unenforceable term or
provision with a
47
term or provision that comes closest to expressing the intention of the invalid
or unenforceable term or provision. In event that such Governmental Entity does
not cure such offending term or provision, the parties agree to negotiate in
good faith to modify this Agreement to fulfill as closely as possible the
original intents and purposes hereof. To the extent permitted by Law, the
parties hereby to the same extent waive any provision of Law that renders any
provision hereof prohibited or unenforceable in any respect.
10.19 WAIVER OF JURY TRIAL.
EACH PARTY HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, ANTITRUST CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON-LAW OR
STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON
THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS
AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH LEGAL COUNSEL OF ITS OWN
CHOOSING, OR HAS HAD AN OPPORTUNITY TO DO SO, AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS HAVING HAD THE OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS
AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT WITHOUT A JURY.
10.20 DELIVERY BY FACSIMILE.
This Agreement and any Transaction Document, and any amendments hereto
or thereto, to the extent signed and delivered by means of a facsimile machine,
shall be treated in all manner and respects as an original Contract and shall be
considered to have the same binding legal effects as if it were the original
signed version thereof delivered in person. At the request of any party hereto
or to any such Contract, each other party hereto or thereto shall re-execute
original forms thereof and deliver them to all other parties. No party hereto or
to any such Contract shall raise the use of a facsimile machine to deliver a
signature or the fact that any signature or Contract was transmitted or
communicated through the use of a facsimile machine as a defense to the
formation of a Contract and each such party forever waives any such defense.
10.21 NON-SURVIVAL OF PROVISIONS.
The representations and warranties respectively made by the Sellers and
the Buyers in this Agreement and in any certificate delivered hereunder will
expire as of the Closing. Subsequent to Closing, no claim with respect to any
breach of any representation or warranty
48
contained in this Agreement may be pursued or maintained (either hereunder or
otherwise) against any other party hereto, and no party shall have any liability
or responsibility for any such breach.
[Remainder of page intentionally left blank]
49
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officers as of the day and year first
above written.
BUYER:
RESIDENTIAL ACQUISITION CORP.
By: /s/ XXXX XXXXXXX
----------------------------------
Name: Xxxx Xxxxxxx
Title: Chief Executive Officer
COMPANY:
ENCOMPASS SERVICES CORPORATION
By: /s/ XXXXXXX X. XXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman
SELLING SUBSIDIARIES:
XX XXXX, INC.
By: /s/ XXXX X. XXXXX
---------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
ASSET PURCHASE AGREEMENT EXECUTION PAGE
A-ABC APPLIANCE, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
A-ABC SERVICES, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
AIRTRON OF CENTRAL FLORIDA, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
AIRTRON, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
ENCOMPASS RESIDENTIAL SERVICES OF
HOUSTON, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
ASSET PURCHASE AGREEMENT EXECUTION PAGE
XXXXX SERVICES, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
HALLMARK AIR CONDITIONING, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
K & N PLUMBING, HEATING AND AIR
CONDITIONING, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
MASTERS, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
XXXX X. XXXXX CO., INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
ASSET PURCHASE AGREEMENT EXECUTION PAGE
VAN'S COMFORTEMP AIR CONDITIONING INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
XXXXXXX & SONS, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
XXXXXX REFRIGERATION, AIR
CONDITIONING & HEATING, INC.
By: /s/ XXXX X. XXXXX
----------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President
ASSET PURCHASE AGREEMENT EXECUTION PAGE
EXHIBIT A
A-1
CERTIFICATION OF NON-FOREIGN STATUS
To inform Residential Acquisition Corp. ("Buyer"), a Delaware
corporation, that withholding of tax under Section 1445 of the Internal Revenue
Code of 1986, as amended ("Code"), will not be required upon the transfer of
assets pursuant to the Asset Purchase Agreement (the "Agreement") entered into
as of May 7, 2003, by and among Buyer, Encompass Services Corporation
("Encompass"), a Texas corporation and the subsidiaries of Encompass owning the
Purchased Assets (as defined in the Agreement) (the "Selling Subsidiaries," and
together with Encompass, the "Selling Parties"), the undersigned hereby
certifies the following on behalf of the Selling Parties:
1. None of the Selling Parties is a foreign corporation, foreign
partnership, foreign trust, foreign estate or nonresident alien (as those terms
are defined in the Code and the Income Tax Regulations promulgated thereunder);
2. The table below reflects the U.S. employer or tax identification
numbers of each of the Selling Parties.
Selling Party US Employer or Tax Identification Number
--------------------------------------------------- ----------------------------------------
ENCOMPASS SERVICES CORPORATION
--------------------------------------------------- ----------------------------------------
A-ABC APPLIANCE, INC
--------------------------------------------------- ----------------------------------------
A-ABC SERVICES, INC.
--------------------------------------------------- ----------------------------------------
XX XXXX, INC.
--------------------------------------------------- -----------------------------------------
AIRTRON, INC.
--------------------------------------------------- ----------------------------------------
AIRTRON OF CENTRAL FLORIDA, INC.
--------------------------------------------------- ----------------------------------------
ENCOMPASS RESIDENTIAL SERVICES OF HOUSTON, INC.
--------------------------------------------------- ----------------------------------------
XXXXX SERVICES, INC.
--------------------------------------------------- ----------------------------------------
HALLMARK AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
K&N PLUMBING, HEATING AND AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
A-1
MASTERS, INC.
--------------------------------------------------- ----------------------------------------
XXXX X. XXXXX CO., INC.
--------------------------------------------------- ----------------------------------------
VAN'S CONFORTEMP AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
XXXXXXX & SONS, INC.
--------------------------------------------------- ----------------------------------------
XXXXXX REFRIGERATION, AIR CONDITIONING & HEATING,
INC.
--------------------------------------------------- ----------------------------------------
3. The following table sets for the office addresses of each of the
Selling Parties.
Selling Party Office Address
--------------------------------------------------- ----------------------------------------
ENCOMPASS SERVICES CORPORATION
--------------------------------------------------- ----------------------------------------
A-ABC APPLIANCE, INC.
--------------------------------------------------- ----------------------------------------
A-ABC SERVICES, INC.
--------------------------------------------------- ----------------------------------------
XX XXXX, INC.
--------------------------------------------------- ----------------------------------------
AIRTRON, INC.
--------------------------------------------------- ----------------------------------------
AIRTRON OF CENTRAL FLORIDA, INC.
--------------------------------------------------- ----------------------------------------
ENCOMPASS RESIDENTIAL SERVICES OF HOUSTON, INC.
--------------------------------------------------- ----------------------------------------
XXXXX SERVICES, INC.
--------------------------------------------------- ----------------------------------------
HALLMARK AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
K&N PLUMBING, HEATING AND AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
MASTERS, INC.
--------------------------------------------------- ----------------------------------------
XXXX X. XXXXX CO., INC.
--------------------------------------------------- ----------------------------------------
A-2
VAN'S CONFORTEMP AIR CONDITIONING, INC.
--------------------------------------------------- ----------------------------------------
XXXXXXX & SONS, INC.
--------------------------------------------------- ----------------------------------------
XXXXXX REFRIGERATION, AIR CONDITIONING & HEATING,
INC.
--------------------------------------------------- ----------------------------------------
Each Selling Party understand that this Certification may be disclosed
to the Internal Revenue Service by the Buyer and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Each Selling Party understands that the Buyer is relying on this
Certification in determining whether withholding is required upon said transfer.
[Remainder of page intentionally left blank]
A-3
Under penalty of perjury I declare that I have examined this Certification and
to the best of my knowledge and belief it is true and correct and complete, and
I further declare that I have authority to sign this document on behalf of such
Selling Party.
Dated: As of _______, 2003
ENCOMPASS:
ENCOMPASS SERVICES CORPORATION
By:
---------------------------------------
Name:
Title:
SELLING SUBSIDIARIES:
A-ABC APPLIANCE, INC.
By:
---------------------------------------
Name:
Title:
A-ABC SERVICES, INC.
By:
Name:
Title:
XX XXXX, INC.
By:
---------------------------------------
Name:
Title:
AIRTRON, INC.
By:
---------------------------------------
Name:
Title:
X-0
XXXXXXX XX XXXXXXX XXXXXXX, INC.
By:
---------------------------------------
Name:
Title:
ENCOMPASS RESIDENTIAL SERVICES OF HOUSTON,
INC.
By:
---------------------------------------
Name:
Title:
XXXXX SERVICES, INC.
By:
---------------------------------------
Name:
Title:
HALLMARK AIR CONDITIONING, INC.
By:
---------------------------------------
Name:
Title:
K&N PLUMBING, HEATING AND AIR CONDITIONING,
INC.
By:
---------------------------------------
Name:
Title:
MASTERS, INC.
By:
---------------------------------------
Name:
Title:
XXXX X. XXXXX CO., INC.
By:
---------------------------------------
Name:
Title:
A-5
VAN'S CONFORTEMP AIR CONDITIONING, INC.
By:
---------------------------------------
Name:
Title:
XXXXXXX & SONS, INC.
By:
---------------------------------------
Name:
Title:
XXXXXX REFRIGERATION, AIR CONDITIONING & HEATING, INC.
By:
---------------------------------------
Name:
Title:
A-6
