EXHIBIT 2.11
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF DECEMBER 11, 1996
BY AND AMONG
AMERICAN RESIDENTIAL SERVICES, INC.,
MHAC ACQUISITION INC.,
METRO HEATING AND AIR CONDITIONING, INC.
AND
THE STOCKHOLDERS NAMED HEREIN
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Forward Merger; Purchase; Working Capital Adjustment; Restricted Stock
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of December 11, 1996, by and among American Residential Services, Inc., a
Delaware corporation ("ARS"), MHAC Acquisition Inc., a Delaware corporation and
a wholly owned subsidiary of ARS ("ARS Sub"), Metro Heating and Air
Conditioning, Inc., a North Carolina corporation (the "Company"), and the
persons listed on the signature page hereof under the caption "Stockholders"
(collectively, the "Stockholders," and each of those persons, individually, a
"Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination by means of a Merger
pursuant to which the Company will merge into ARS Sub on the terms and subject
to the conditions set forth herein (that Merger being the "Acquisition").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below in this Paragraph 1.
Capitalized terms used in this Agreement and not defined below in this Paragraph
1 have the meanings assigned to them in the Preliminary Statement, Article IX of
the Standard Provisions or the Special Provisions, as the case may be.
"ACQUIRED BUSINESS" means the Company.
"ACQUISITION CONSIDERATION" has the meaning specified in Paragraph
2.
"ARS ACQUISITION GUARANTY" means the guaranty in the form thereof
attached hereto as Exhibit 1-A pursuant to which ARS will guarantee the
payment by ARS Sub of the ARS Sub Notes and the performance by ARS Sub of
the ARS Sub Undertaking.
"ARS LEASE GUARANTIES" means the guaranties in the form thereof
attached hereto as Exhibit 1-B, with the blanks appropriately filled,
pursuant to which ARS will guarantee the performance by the Surviving
Corporation of its obligations under the Facility Leases.
"ARS PLEDGE AGREEMENT" means the pledge agreement in the form
thereof attached hereto as Exhibit 1-C pursuant to which ARS will pledge
to Xxxxx X. Xxxxxxxxxx, Xx., as agent for the holders of the ARS Sub
Notes, all the outstanding shares of common stock of
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ARS Sub to secure the performance by ARS of its guaranty in the ARS
Acquisition Guaranty of the payment by ARS Sub of the ARS Sub Notes.
"ARS SUB NOTES" means the promissory notes of ARS Sub in the form
thereof attached hereto as Exhibit 1-D, with the blanks appropriately
filled, payable on January 3, 1997 to the respective orders of the
Stockholders in the principal amounts specified in Schedule 2(D).
"ARS SUB UNDERTAKING" means the undertaking of ARS Sub in the form
thereof attached hereto as Exhibit 1-E pursuant to which ARS Sub will
undertake to deliver to each Stockholder a certificate evidencing the
number of whole shares of ARS Common Stock specified in Schedule 2(D).
"CALCULATED VALUE" means $19.131.
"CEILING AMOUNT" means $21,180,000; provided, however, that, except
in the case of a Stockholder Indemnified Loss attributable to a Third
Party Claim arising out of or based on a violation of the federal
securities laws by ARS, the Ceiling Amount is $4,314,000 for purposes of
Section 7.06(b).
"CLOSING" has the meaning specified in Paragraph 3.
"CLOSING DATE" means December 11, 1996 or such later date as to
which ARS and the Company shall agree in writing.
"COMPANY" means Metro Heating and Air Conditioning, Inc., a North
Carolina corporation.
"COMPANY CAPITAL STOCK" means the Common Stock, par value $1.00 per
share, of the Company.
"COUNSEL FOR THE COMPANY AND THE STOCKHOLDERS" means Xxxxx & Xxx
Xxxxx, PLLC.
"CURRENT BALANCE SHEET" means the balance sheet of the Company as of
September 30, 1996.
"CURRENT BALANCE SHEET DATE" means September 30, 1996.
"DGCL" means the Delaware General Corporation Law.
"EFFECTIVE DATE" means the Closing Date.
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"EXECUTIVE EMPLOYMENT AGREEMENT" means the Employment Agreement
entered into as of the Effective Date between ARS Sub and Xxxxx X.
Xxxxxxxxxx, Xx. in substantially the form attached as Exhibit 5.02-1 to
Schedule 5.02.
"FACILITY LEASES" means the four leases from (a) Xxxxx X.
Xxxxxxxxxx, Xx. and Xxxxx X. Xxxxxxxxxx, (b) Metro Partners, LLC, (c)
Xxxxx X. Xxxxxxxxxx, Xx. and Xxxxxxx Xxxxxxxxxx and (d) J&S Xxxxxxxxxx,
LLC, respectively, to the Company in the respective forms thereof attached
hereto as Exhibits 1-F, 1-G, 1-H and 1-I.
"INITIAL FINANCIAL STATEMENTS" means (a) the audited balance sheet
of the Company as of December 31, 1995 and the related statements of
operations and retained earnings for the Company's fiscal year ended
December 31, 1995, together with the related audit report of Xxxxxx
Xxxxxxxx LLP, and (b) the Current Balance Sheet and the related statement
of operations for the nine months ended the Current Balance Sheet Date,
which Xxxxxx Xxxxxxxx LLP has reviewed and the Company has delivered to
ARS.
"NCBCA" means the North Carolina Business Corporation Act.
"PRO RATA SHARE" of a Stockholder means (a) 80% in the case of Xxxxx
X. Xxxxxxxxxx, Xx., (b) 10% in the case of Xxxxx X. Xxxxxxxxxx, Xx. and
(c) 10% in the case of Xxxxx X. Xxxxxxxxxx; provided, however, that the
Pro Rata Shares of the Ceiling Amount are 100%, 0% and 0%, respectively,
for Xxxxx X. Xxxxxxxxxx, Xx., Xxxxx X. Xxxxxxxxxx, Xx. and Xxxxx X.
Xxxxxxxxxx for purposes of Section 7.06(a).
"RESPONSIBLE OFFICER" means Xxxxx X. Xxxxxxxxxx, Xx.
"SPECIAL PROVISIONS" has the meaning specified in Paragraph 5.
"STANDARD PROVISIONS" has the meaning specified in Paragraph 4.
"SURVIVING CORPORATION" means ARS Sub, which is to be designated in
the Certificates of Merger as the surviving corporation of the Merger.
"THRESHOLD AMOUNT" means $480,000.
"WORKING CAPITAL ADJUSTMENT" means the amount, if any, by which
$2,000,000 exceeds the Final Working Capital, as determined pursuant to
Addendum W.
Paragraph 2. (A) CERTIFICATES OF MERGER. Subject to the terms and
conditions hereof, the Company will cause Certificates of Merger to be duly
executed and delivered on or promptly after the Closing Date and filed with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of North Carolina.
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(B) THE EFFECTIVE TIME. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificates
of Merger specify or, if the Certificates of Merger do not specify another time,
5:00 p.m., Houston, Texas time, on the Effective Date.
(C) CERTAIN EFFECTS OF THE MERGER. At and as of the Effective Time,
(1) the Company will be merged with and into ARS Sub in accordance with the
provisions of the DGCL and the NCBCA, (2) the Company will cease to exist as a
separate legal entity, (3) the certificate of incorporation of ARS Sub will be
amended (a) to reduce the par value of its Common Stock to $.001 per share and
(b) to change the name of ARS Sub to "Metro Heating and Air Conditioning, Inc.",
(4) ARS Sub will be the Surviving Corporation and, as such, will, all with the
effect provided by the DGCL and the NCBCA, (a) possess all the properties and
rights, and be subject to all the restrictions and duties, of the Company and
ARS Sub and (b) be governed by the laws of the State of Delaware, (5) the
Charter Documents of ARS Sub then in effect (after giving effect to the
amendment of ARS Sub's certificate of incorporation specified in clause (3) of
this sentence) will thereafter remain (until changed in accordance with (a)
applicable law (in the case of the certificate of incorporation) or (b) their
terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (6) the initial board of directors of the Surviving Corporation
will be the persons named in Schedule 2(C), and those persons will hold the
office of director of the Surviving Corporation, subject to the provisions of
the applicable laws of the State of Delaware and the Charter Documents of the
Surviving Corporation, and (7) the initial officers of the Surviving Corporation
will be as set forth in Schedule 2(C), and each of those persons will serve in
each office specified for that person in Schedule 2(C), subject to the
provisions of the Charter Documents of the Surviving Corporation, until that
person's successor is duly elected to, and, if necessary, qualified for, that
office.
(D) EFFECT OF THE MERGER ON CAPITAL STOCK. As of the Effective Time,
as a result of the Merger and without any action on the part of any holder
thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) be converted into the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, on surrender of the certificates evidencing those shares, the
principal amount of ARS Sub Notes and the rights pursuant to the ARS Sub
Undertaking to receive the number of whole shares of ARS Common Stock as
provided in Schedule 2(D) (the "Acquisition Consideration"), (b) cease to
be outstanding and to exist and (c) be canceled and retired;
(2) each share of Company Capital Stock held in the treasury of the
Company or any Company Subsidiary will (a) cease to be outstanding and to
exist and (b) be canceled and retired; and
(3) each share of the Common Stock, par value $.001 per share, of
ARS Sub issued and outstanding immediately prior to the Effective Time
will remain unchanged and
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such shares will constitute all the issued and outstanding shares of
Capital Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), the Acquisition
Consideration.
(E) DELIVERY, EXCHANGE AND PAYMENT. (1) At or after the Effective
Time: (a) the Stockholders, as holders of certificates representing shares of
Company Capital Stock, will, on surrender of those certificates to ARS (or any
agent that may be appointed by ARS for purposes of this Paragraph 2(E)),
receive, subject to the provisions of this Paragraph 2(E), the Acquisition
Consideration; and (b) until any certificate representing Company Capital Stock
has been surrendered and replaced pursuant to this Paragraph 2(E), that
certificate will, for all purposes, be deemed to evidence ownership of the right
to receive the number of whole shares of ARS Common Stock to be delivered
pursuant to the ARS Sub Undertaking in respect of that certificate pursuant to
Paragraph 2(D). All shares of ARS Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by ARS at the Effective Time.
(2) Each Stockholder will deliver to ARS (or any agent that may be
appointed by ARS for purposes of this Paragraph 2(E)) on or before the Closing
Date the certificates representing all the Company Capital Stock owned by that
Stockholder, duly endorsed in blank, or accompanied by stock powers in blank
duly executed, by that Person, and with all necessary transfer tax and other
revenue stamps, acquired at that Person's expense, affixed and canceled. Each
Stockholder shall cure any deficiencies in the endorsement of the certificates
or other documents of conveyance respecting, or in the stock powers
accompanying, the certificates representing Company Capital Stock delivered by
that Person.
(3) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to ARS Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company Capital
Stock for which shares of ARS Common Stock have been issued in the Merger until
those certificates are surrendered as provided herein, but (a) on that surrender
ARS will cause to be paid, to the Person in whose name the certificates
representing such shares of ARS Common Stock shall then be issued, the amount of
dividends or other distributions previously paid with respect to such shares of
ARS Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and (b) at the appropriate payment date
or as soon as practicable thereafter, ARS will cause to be paid to that Person
the amount of dividends or other distributions with a record date, or which have
been accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such shares of
ARS Common Stock, subject in all cases to any applicable escheat laws. No
interest will be payable with respect to the payment of such dividends or other
distributions on surrender of outstanding certificates.
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Xxxxxxxxx 3. THE CLOSING. On or before the Closing Date, the parties
hereto will take all actions necessary to (A) effect the Acquisition (including,
as permitted by the DGCL and the NCBCA, (i) the execution of Certificates of
Merger (a) meeting the requirements of the DGCL and the NCBCA, respectively, and
(b) providing that the Merger will become effective on the Effective Date and
(ii) the filing of those Certificates of Merger with the Secretary of State of
the State of Delaware and the Secretary of State of the State of North
Carolina), (B) verify the existence and ownership of the certificates evidencing
the Company Capital Stock to be exchanged for the Acquisition Consideration
pursuant to Paragraph 2(E) and (C) satisfy the document delivery requirements on
which the obligations of the parties to effect the Acquisition and the other
transactions contemplated hereby are conditioned by the provisions of Article V
(all those actions collectively being the "Closing"). The Closing will take
place at the offices of Xxxxx & Xxxxx, L.L.P., 00xx Xxxxx, 000 Xxxxxxxxx,
Xxxxxxx, Xxxxx at 10:00 a.m., Houston time, or at such later time on the Closing
Date as ARS shall specify by written notice to the Responsible Officer.
Paragraph 4. INCORPORATION OF STANDARD PROVISIONS. (A) The American
Residential Services, Inc. Standard Provisions for Business Combinations, marked
"Form 96-1 (BC)" and attached hereto as Annex 1 (the "Standard Provisions"),
hereby are incorporated in this Agreement by this reference and constitute a
part of this Agreement with the same force and effect as if set forth at length
herein.
(B) Section 1.03 hereby is amended by adding "applicable to the
Stockholder" immediately after "Requirement" in clause (a) of its first
sentence.
(C) Sections 2.02, 2.06 (each sentence), 2.07 (the first two
sentences), 2.08, 2.09, 2.10, 2.11 (the first sentence), 2.12, 2.14(a) (each
sentence), 2.14(b), 2.15 (the first sentence), 2.16 (each sentence), 2.18(a),
2.18(b) (the first sentence), 2.18(c), 2.18(d), 2.19(a), 2.20 (each sentence),
2.22 (the third sentence), 2.23, 2.24 (the first sentence), 2.25(b), 2.25(c)
(the first and final sentences), 2.25(d), 2.25(e), 2.25(f), 2.25(g) (the first
sentence), 2.25(h) (the first sentence) and 2.29 hereby are amended by deleting
therefrom the word "accurately".
(D) Section 2.11 hereby is further amended by deleting therefrom its
final sentence.
(E) Section 2.13(b) hereby is amended by deleting therefrom its
paragraph (iii).
(F) The representations and warranties in Sections 2.14(a) (clause
(ii) of the first sentence and the final sentence), 2.14(b)(i), 2.15, 2.17, 2.20
(clause (a) of the second sentence), 2.25(g) (the first sentence) and Section
2.29 (as to the matters referred to in clause (k) thereof) are made to the
knowledge of the Company and each of the Stockholders.
(G) Section 2.14(a)(ii) hereby is further amended by deleting
therefrom "ERISA,".
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(H) Section 2.22 hereby is further amended by (i) deleting from its
first sentence ", accurate" and (ii) adding "other than in the ordinary course
of business" immediately after "aggregate" in clause (f) of its first sentence.
(I) Section 2.24 hereby is further amended by changing "an accurate"
to "a" in clause (a) of its second sentence.
(J) Section 2.25(a) hereby is amended by changing "an accurate," to
"a".
(K) Section 3.02(c) hereby is amended by adding "and the Lien
created by the ARS Pledge Agreement" immediately after "other assets" in its
clause (iii).
(L) The following Sections are added after Section 3.05:
Section 3.06. ORGANIZATION AND POWER OF ARS SUB. ARS Sub is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite corporate power
and authority under the laws of that State and its Charter Documents to
own or lease and to operate its properties presently and following the
Effective Time and to carry on its business as now conducted and as
proposed to be conducted following the Effective Time.
Section 3.07. ARS SUB: AUTHORIZATION; ENFORCEABILITY; ABSENCE OF
CONFLICTS; REQUIRED CONSENTS. (a) The execution, delivery and performance by ARS
Sub of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate power under its
Charter Documents and the applicable Governmental Requirements of the State of
Delaware and have been duly authorized by all proceedings, including actions
permitted to be taken in lieu of proceedings, required under its Charter
Documents and the applicable Governmental Requirements of its Organization
State.
(b) This Agreement has been, and each of the other Transaction
Documents to which ARS Sub is a party, when executed and delivered to the
other parties thereto (or, in the case of the Certificates of Merger, the
applicable Governmental Authorities), will have been, duly executed and
delivered by it and is, or when so executed and delivered will be, its
legal, valid and binding obligation, enforceable against it in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and (ii)
subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with their
respective terms by ARS Sub of the Transaction Documents to which it is a
party have not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of ARS Sub, (B)
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any Governmental Requirement applicable to ARS Sub or (C) any Material
Agreement of ARS Sub, (ii) result in the acceleration or mandatory
prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of ARS Sub or afford any holder of any of that Indebtedness,
or any beneficiary of any of those Guaranties, the right to require ARS
Sub to redeem, purchase or otherwise acquire, reacquire or repay any of
that Indebtedness, or to perform any of those Guaranties, (iii) cause or
result in the imposition of, or afford any Person the right to obtain, any
Lien upon any property or assets of ARS Sub (or upon any revenues, income
or profits of ARS Sub therefrom), other than negative pledge covenants of
ARS respecting the Capital Stock of its Subsidiaries and its other assets,
or (iv) result in the revocation, cancellation, suspension or material
modification, in any single case or in the aggregate, of any Governmental
Approval possessed by ARS Sub at the date hereof and necessary for the
ownership or lease and the operation of its properties or the carrying on
of its business as now conducted, including any necessary Governmental
Approval under each applicable Environmental Law and Professional Code.
(d) Except for (i) the filing of the Certificates of Merger, if any,
with the applicable Governmental Authorities, and (ii) as may be required
by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or
notices to or filings with any Governmental Authority are required to be
made, by ARS Sub for the execution, delivery or performance by ARS Sub of
the Transaction Documents to which it is a party, the enforcement against
ARS Sub of its obligations thereunder or the effectuation of the
Acquisition and the other transactions contemplated thereby.
Section 3.08. NO DEFAULTS. No condition or state of facts exists,
or, with the giving of notice or the lapse of time or both, would exist,
which (a) entitles any holder of any outstanding Indebtedness, or any
Guaranty not constituting Indebtedness, of ARS or any of its Subsidiaries,
or a representative of that holder, to accelerate the maturity, or require
a mandatory prepayment, of that Indebtedness or Guaranty, or affords that
holder or its representative, or any beneficiary of that Guaranty, the
right to require ARS or any of its Subsidiaries to redeem, purchase or
otherwise acquire, reacquire or repay any of that Indebtedness, or to
perform that Guaranty in whole or in part, or (b) constitutes a violation
or breach of, or a default under, any Material Agreement of ARS by ARS or
any of its Subsidiaries except, in the case of both clauses (a) and (b)
hereof, for such matters, singly or in the aggregate, as would not have a
material adverse effect on ARS and its Subsidiaries taken as a whole.
Section 3.09. NO MATERIAL ADVERSE CHANGE. Since September 30, 1996,
there has not been, and there exists no condition or state of facts that
reasonably could be expected to result in, a material adverse change in
the business, operations, property or assets, liabilities, financial
condition or results of operations of ARS and its Subsidiaries taken as a
whole.
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Section 3.10. SEC DOCUMENTS. ARS timely filed its Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1996 (the
"Recent Form 10-Q") with the SEC. The Recent Form 10-Q is the only
periodic report required to be filed by ARS with the SEC pursuant to the
Exchange Act through the date hereof. The Recent Form 10-Q (a) did not
contain any untrue statement of a material fact or omit to state a
material fact that is necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b)
complied, as of the date it was filed with the SEC, in all material
respects with the applicable requirements of the Exchange Act.
Section 3.11. NO BROKERS. ARS has not, directly or indirectly, in
connection with this Agreement or the transactions contemplated hereby,
(a) employed any broker, finder or agent or (b) agreed to pay or incurred
any obligation to pay any broker's or finder's fee, any sales commission
or any similar form of compensation.
(M) Notwithstanding Section 5.03(b)(2)(G), the Company and the
Stockholders will not be required to deliver any certificate respecting the
filing of returns relating to or the payment of state franchise and/or income
tax returns in the State of North Carolina.
(N) Section 6.01 hereby is amended by adding the following as its
final two sentences:
Notwithstanding the foregoing, the Stockholders will be responsible for
filing the Company's federal income tax return for, and will pay out of
their own funds all federal income taxes attributable to the Company's
operations during, the Company's final S corporation year, which will be
deemed for purposes of this Agreement to be the period beginning on
January 1, 1996 and ending on the Closing Date; provided however, that if
any income of the Company attributable to the period beginning the day
after the Closing Date and ending on December 31, 1996 is deemed for
purposes of determining the federal income tax liabilities of the
Stockholders for the year ended December 31, 1996 to have been distributed
to the Stockholders, the Surviving Corporation will be liable for and will
indemnify the Stockholders for any additional federal income tax payable
on the amount of that deemed distribution. Each of the Stockholders and
the Surviving Corporation will be solely responsible for the expenses it
incurs in performing its obligations pursuant to the preceding sentence.
(O) Section 6.02 hereby is amended by changing "within 90 days
after" to "contemporaneously with".
(P) The following Sections are added after Section 6.02:
Section 6.03. MANAGEMENT COMPENSATION AGREEMENTS. ARS will cause the
Surviving Corporation to maintain in effect and to perform its obligations
under the 19 management compensation plans attached to Schedule 2.22
during the year ended
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December 31, 1997; provided; however, that (a) any such plan may be
amended or modified by the Surviving Corporation with the prior written
consent of Xxxxx X. Xxxxxxxxxx, Xx.; and (b) no such plan shall alter the
status of any employee named in any such plan as an employee at will whose
employment may be terminated by the Surviving Corporation at any time and
for any reason.
Section 6.04. ENVIRONMENTAL MATTERS. Notwithstanding any other
provision of this Agreement, ARS hereby covenants and agrees that it shall
take such actions as are necessary to maintain the Company's eligibility
to participate in the North Carolina Leaking Petroleum Underground Storage
Tank Trust Fund (the "Trust Fund") for at least two years after the
Closing Date. In the event of a circumstance within two years of the
Closing Date that results in proceeds being paid from the Trust Fund to
the Company, theStockholders shall reimburse the Company, without regard
to the Threshold Amount limitations set forth in Article VII, in the
amount by which (a) the amount of any applicable deductible for which the
Company is responsible under the Trust Fund in connection with that
circumstance exceeds (b) (i) $30,000 minus (ii) the total cost and expense
ARS causes the Company to incur pursuant to Section 6.05; provided,
however, in no event shall any of the Stockholders be liable for any
sampling, testing, audit, investigative or other non-remediation cost.
Section 6.05. UNDERGROUND TANKS. As soon as practicable following
the Closing, ARS shall cause the Company to cease the use of and take out
of service and remove the three underground gasoline tanks currently used
by the Company at its Raleigh, North Carolina facility at the Company's
sole cost and expense and to take such other actions as are required for
the official closure of such tanks in compliance with all applicable
Environmental Laws. The Stockholders jointly and severally represent and
warrant to ARS that the cost and expense ARS has agreed to cause the
Company to incur pursuant to this Section 6.05 will not exceed $30,000 and
agree, without regard to the Threshold Amount limitations set forth in
Article VII, to indemnify ARS against any such costs and expenses in
excess of that amount pursuant to Section 7.04(e).
Section 6.06. PROMISSORY NOTES. ARS hereby acknowledges and agrees
that the promissory notes listed in Schedule 2.11 are the valid, binding
and enforceable obligations of the Company and that such promissory notes
will be paid by the Company as and when they become due.
Section 6.07. 1996 PROFIT-SHARING PLAN CONTRIBUTION BY THE COMPANY.
ARS will cause the Company promptly to pay, to the extent not already paid
on or before the Closing Date, into the Company's qualified profit-sharing
plan for employees all amounts accrued by the Company for such
contributions for the 11-month period ending November 30, 1996.
Section 6.08. CERTAIN TAX MATTERS. (a) ARS and the Stockholders
agree to file their federal income and other Tax returns so as to treat
the Merger of the Company into ARS Sub as a transfer of the assets of the
Company to ARS Sub in exchange for the Acquisition
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Consideration and the assumption of certain liabilities and the
distribution of the Acquisition Consideration by ARS Sub to the
Stockholders. ARS shall prepare the form or forms which are required by
Section 1060 or other provisions of the Code in respect of such
transaction and, absent manifest error, the Stockholders hereby agree to
execute and file those forms.
(b) In preparing such form or forms, ARS will allocate the amount
deemed to have been paid for the Company's assets for federal income tax
purposes (the "Purchase Price") in accordance with applicable law and, in
doing so, the fair market values of those assets will be determined by ARS
in its sole reasonable judgment, which will be binding absolute manifest
error; provided, however, that the portion of Purchase Price which is
allocated to goodwill shall equal or exceed the portion of the Purchase
Price which is in excess of the adjusted basis of those assets on the
Closing Date. ARS and the Stockholders recognize that the Acquisition
Consideration does not include the Acquisition expenses of ARS and agree
that ARS will allocate those expenses appropriately in its discretion.
Each of the Stockholders and ARS agrees (i) to file its federal income and
other Tax returns reflecting such allocations in accordance with that
determination, (ii) to take no position contrary thereto unless required
to do so pursuant to a "determination" (as defined in Section 1313(a) of
the Code) and (iii) to cooperate in the preparation of any forms or
reports required to be filed in connection with the transactions effected
pursuant to this Agreement.
(Q) Notwithstanding clause (b) of the first sentence of Section
7.01, (i) the representations and warranties of the Stockholders which relate
expressly or by necessary implication to ERISA matters will, in the case of
those relating to the Company's termination of the qualified defined benefit
plan referred to in Paragraph G of Schedule 2.25 (but only in that case),
terminate and expire on the second anniversary of the Effective Date and (ii)
the representations and warranties of the Stockholders which relate expressly or
by necessary implication to employment or labor matters other than ERISA matters
also will terminate and expire on the second anniversary of the Effective Date.
(R) Clause (a) of the proviso in the second sentence of Section 7.01
hereby is amended by adding "and if made known to the Stockholders by a written
notice delivered by ARS prior to the termination and expiration of the
representation and warranty on which that claim is based," immediately before
"shall".
(S) Section 7.04(c) hereby is amended by adding the following
proviso at the end thereof:
; provided, however, that if the Indemnifying Party disputes that advice
of counsel and is advised by other counsel reasonably acceptable to the
Indemnified Party and whose fees and expenses are paid by the Indemnifying
Party that there are no different or additional legal defenses available
to the Indemnified Party, then the Indemnified Party may employ separate
counsel only at its own expense.
-11-
(T) Section 7.04(d) hereby is amended by adding the following
proviso at the end thereof:
; provided, however, that the Indemnified Party shall pay those costs and
expenses if the Indemnified Party is determined pursuant to Section
7.04(c) not to have been entitled to indemnification hereunder.
(U) Section 7.04(e) hereby is amended by changing "15 days" to "15
Houston, Texas business days".
(V) Section 8.01(a) hereby is amended by adding the following
proviso at the end thereof:
; provided, however, that in the case of any such service facility located
in the State of North Carolina, the "Territory" surrounding that facility
will be: (i) the city in which that service facility is located; (ii) the
county in which that service facility is located; (iii) the counties
contiguous to the county in which that service facility is located; and
(iv) the area located within a radius of 50 miles of that service
facility.
(W) Notwithstanding the provisions of Section 8.01, Xxxxx X.
Xxxxxxxxxx, Xx. and Xxxxx X. Xxxxxxxxxx shall not be restricted by the
provisions of Section 8.01 from organizing or operating a not-for-profit heating
and air conditioning services Entity providing services to poor or elderly
persons without or for nominal charge.
(X) The definition of "Damage" in Section 9.01 hereby is amended by
adding the following proviso at the end thereof:
; provided, that if any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Third Party Claim and for which
the Indemnified Party seeks indemnification pursuant to Section 7.04(e),
the amount of Damages attributable to that claim will not include any
amount representing consequential, exemplary, punitive or treble damage.
(Y) The definition of "Related Person" in Section 9.01 hereby is
amended to read in its entirety as follows:
"RELATED PERSON" of a Stockholder means: (a) if that Stockholder is
a natural person, (i) any family member of that Stockholder, including
ascendants, descendants and spouses of ascendants and descendants
(collectively "family member"), (ii) any estate of that Stockholder or any
family member of that Stockholder, (iii) the trustee of any trust of which
all the beneficiaries, other than beneficiaries that are charities with
respect to which contributions or transfers thereto are deductible for
federal income, estate or gift tax purposes, are Related Persons of that
Stockholder, including but not limited to charitable
-12-
remainder trusts or charitable lead trusts created by a Stockholder or
Related Persons of the Stockholder, (iv) any Entity the entire equity
interest in which is owned by any one or more of that Stockholder and
Related Persons of that Stockholder and (v) any private foundation created
by a Stockholder or Related Persons of that Stockholder with respect to
which contributions or transfers thereto are deductible for federal
income, estate or gift tax purposes; and (b) if that Stockholder is an
Entity, estate or trust, (i) any Person who owns an equity interest in
that Stockholder on the date hereof, (ii) any Person who would be a
Related Person under clause (a) of this definition of a natural person who
is an ultimate beneficial owner of that Stockholder or (iii) any other
Entity the entire equity interest in which is owned by any one or more of
that Stockholder and Related Persons of that Stockholder.
(Z) Clause (b) of the first sentence of Section 10.05 hereby is
amended by adding the following proviso at the end thereof:
; provided, however, that the Company will pay the fees, expenses and
disbursements of counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement to the extent that
those fees, expenses and disbursements are recorded as a liability of the
Company for the purpose of determining the Final Working Capital and the
Working Capital Adjustment, if any.
(AA) Section 10.07 hereby is amended by (i) changing "TEXAS" to "NEW
YORK" and (ii) adding the following proviso at the end thereof:
; PROVIDED, HOWEVER, THAT ARTICLE VIII AND THE RIGHTS AND OBLIGATIONS
THEREUNDER OF THE PARTIES THERETO WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NORTH CAROLINA
WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
(BB) Section 10.12 hereby is amended by adding "or release the
claims" immediately after "rights" in its final sentence.
Paragraph 5. INCORPORATION OF SPECIAL PROVISIONS. The following
documents attached hereto as Addenda (the "Special Provisions") hereby are
incorporated in this Agreement by this reference and constitute a part of this
Agreement with the same force and effect as if set forth at length herein:
(A) Addendum U -- "Special Provisions Relating to the Unregistered
ARS Common Stock Included in the Acquisition Consideration";
and
(B) Addendum W -- "Special Provisions Relating to Working Xxxxxxx".
-00-
Xxxxxxxxx 6. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 7. NOTICES. For purposes of Section 10.06, notices shall
be addressed to the Stockholders and the Company, as follows:
(A) if to a Stockholder, addressed to him or her at:
Xx. Xxxxx X. Xxxxxxxxxx, Xx.
0000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
or
Xx. Xxxxx X. Xxxxxxxxxx, Xx.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
or
Xx. Xxxxx X. Xxxxxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xxxxx & Xxx Xxxxx, PLLC
NationsBank Corporate Center
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxx, Xxxxx Xxxxxxxx 28202-4003
Attn: Neill X. XxXxxxx
; and
(B) if to the Company, addressed to it at:
Metro Heating and Air Conditioning, Inc.
000 Xxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: President
-14-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
AMERICAN RESIDENTIAL SERVICES, INC.
By:
Xxxx X. Held
Senior Vice President
MHAC ACQUISITION INC.
By:
Xxxx X. Held
Vice President
METRO HEATING AND AIR CONDITIONING, INC.
By:
Xxxxx X. Xxxxxxxxxx, Xx.
President
Stockholders:
Xxxxx X. Xxxxxxxxxx, Xx.
Xxxxx X. Xxxxxxxxxx, Xx.
Xxxxx X. Xxxxxxxxxx
-15-
SCHEDULE 2(C)
to the
Agreement and Plan of Reorganization
to which
American Residential Services, Inc.
and
Metro Heating and Air Conditioning, Inc.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows: Xxxxxx X. Xxxxxx, Xx., Xxxxxxx X. XxXxxxxxx and
C. Xxxxxxxx Xxxxxx, Xx.
C. The officers of the Surviving Corporation immediately after the
Effective Time are as follows:
President.................................. Xxxxx X. Xxxxxxxxxx, Xx.
Vice President and Assistant Secretary..... Xxxxxxx X. XxXxxxxxx
Vice President and Secretary............... Xxxx X. Held
Controller................................. Xxxxxxx Xxxxxx
Treasurer.................................. A. Xxxxxxxxx Xxxxxx III
End of Schedule
SCHEDULE 2(D)
to the
Agreement and Plan of Reorganization
to which
American Residential Services, Inc.
and
Metro Heating and Air Conditioning, Inc.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. Subject to reduction by the application of the Working Capital
Adjustment, if any, the aggregate Acquisition Consideration will be comprised of
(1) ARS Sub Notes in the aggregate principal amount of $16,866,000 and (2) the
ARS Sub Undertaking pursuant to which ARS Sub undertakes to deliver to the
Stockholders 225,500 shares of ARS Common Stock. The Calculated Value may be
higher or lower than the fair market value of a share of ARS Common Stock on the
Closing Date.
C. Each of the Stockholders will be entitled to receive his or her
Pro Rata Share of the Acquisition Consideration pursuant to Paragraph 2(D),
subject to the provisions of Paragraph 2(E) as follows: (1) Xxxxx X. Xxxxxxxxxx,
Xx., the owner of 4,800 shares of Company Capital Stock, will receive an ARS Sub
Note payable to his order in the principal amount of $13,492,800 and, when the
ARS Sub Undertaking is performed by ARS Sub, 180,400 shares of ARS Common Stock;
and (2) each of Xxxxx X. Xxxxxxxxxx, Xx. and Xxxxx X. Xxxxxxxxxx, each the owner
of 600 shares of Company Capital Stock, will receive an ARS Sub Note payable to
his or her order in the principal amount of $1,686,600 and, when the ARS Sub
Undertaking is performed by ARS Sub, 22,550 shares of ARS Common Stock.
End of Schedule
Annex 1
AMERICAN RESIDENTIAL SERVICES, INC.
STANDARD PROVISIONS
FOR
BUSINESS COMBINATIONS
Form 96-1 (BC)
TABLE OF CONTENTS
PAGE
ARTICLE I REPRESENTATIONS AND WARRANTIES OF EACH
STOCKHOLDER..............................................1
Section 1.01. Ownership and Status of Company Capital Stock............1
Section 1.02. Power of the Stockholder; Approval of the Acquisition....1
Section 1.03. No Conflicts or Litigation...............................2
Section 1.04. No Brokers...............................................2
Section 1.05. Preemptive and Other Rights; Waiver......................2
Section 1.06. Control of Related Businesses............................2
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS......................3
Section 2.01. Organization.............................................3
Section 2.02. Qualification............................................3
Section 2.03. Authorization; Enforceability; Absence of Conflicts;
Required Consents........................................3
Section 2.04. Charter Documents and Records; No Violation..............4
Section 2.05. No Defaults..............................................4
Section 2.06. Company Subsidiaries.....................................5
Section 2.07. Capital Stock of the Company and the Company
Subsidiaries.............................................5
Section 2.08. Transactions in Capital Stock............................6
Section 2.09. No Bonus Shares..........................................6
Section 2.10. Predecessor Status; etc..................................6
Section 2.11. Related Party Agreements.................................6
Section 2.12. Litigation...............................................6
Section 2.13. Financial Statements; Disclosure. .......................6
Section 2.14. Compliance With Laws.....................................7
Section 2.15. Certain Environmental Matters............................8
Section 2.16. Liabilities and Obligations..............................9
Section 2.17. Receivables..............................................9
Section 2.18. Real Properties..........................................9
Section 2.19. Other Tangible Assets...................................10
Section 2.20. Proprietary Rights......................................10
Section 2.21. Relations With Governments, etc.........................10
Section 2.22. Commitments.............................................11
Section 2.23. Inventories.............................................12
Section 2.24. Insurance...............................................12
Section 2.25. Employee Matters........................................12
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TABLE OF CONTENTS
PAGE
Section 2.26. Compliance With ERISA, etc..............................14
Section 2.27. Taxes...................................................17
Section 2.28. Government Contracts....................................18
Section 2.29. Absence of Changes......................................18
Section 2.30. Bank Relations; Powers of Attorney......................19
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ARS...................20
Section 3.01. Organization; Power.....................................20
Section 3.02. Authorization; Enforceability; Absence of Conflicts;
Required Consents.......................................20
Section 3.03. Charter Documents.......................................21
Section 3.04. Capital Stock of ARS....................................21
Section 3.05. No Litigation...........................................21
ARTICLE IV COVENANTS EXTENDING TO THE EFFECTIVE TIME...............22
Section 4.01. Access and Cooperation; Due Diligence...................22
Section 4.02. Conduct of Business Pending the Effective Time..........22
Section 4.03. Prohibited Activities...................................23
Section 4.04. No Shop.................................................24
Section 4.05. Notice to Bargaining Agents.............................25
Section 4.06. Notification of Certain Matters.........................25
Section 4.07. Supplemental Information................................25
Section 4.08. Additional Financial Statements.........................26
Section 4.09. Termination of Plans....................................26
Section 4.10. Disposition of Unwanted Assets..........................26
Section 4.11. HSR Act Matters.........................................26
Section 4.12. NYSE Listing............................................27
ARTICLE V CONDITIONS TO CLOSING AND CONSUMMATION..................27
Section 5.01. Conditions to the Obligations of Each Party.............27
Section 5.02. Conditions to the Obligations of the Company and
the Stockholders........................................27
Section 5.03. Conditions to the Obligations of ARS and ARS Sub........27
ARTICLE VI COVENANTS FOLLOWING THE EFFECTIVE TIME..................29
Section 6.01. Preparation and Filing of Tax Returns...................29
Section 6.02. Removal of Guaranties...................................29
-ii-
TABLE OF CONTENTS
PAGE
ARTICLE VII INDEMNIFICATION................................................29
Section 7.01. Survival of Representations and Warranties..............29
Section 7.02. Indemnification of ARS Indemnified Parties..............30
Section 7.03. Indemnification of Stockholder Indemnified Parties......30
Section 7.04. Conditions of Indemnification...........................31
Section 7.05. Remedies Not Exclusive..................................33
Section 7.06. Limitations on Indemnification..........................33
ARTICLE VIII LIMITATIONS ON COMPETITION.....................................34
Section 8.01. Prohibited Activities...................................34
Section 8.02. Damages.................................................35
Section 8.03. Reasonable Restraint....................................35
Section 8.04. Severability; Reformation...............................35
Section 8.05. Independent Covenant....................................35
Section 8.06. Materiality.............................................35
ARTICLE IX DEFINITIONS AND DEFINITIONAL PROVISIONS.................35
Section 9.01. Defined Terms...........................................35
Section 9.02. Other Defined Terms.....................................47
Section 9.03. Other Definitional Provisions...........................47
Section 9.04. Captions................................................48
ARTICLE X GENERAL PROVISIONS......................................48
Section 10.01.Treatment of Confidential Information...................48
Section 10.02.Brokers and Agents......................................49
Section 10.03.Assignment; No Third Party Beneficiaries................49
Section 10.04.Entire Agreement; Amendment; Waivers....................49
Section 10.05.Expenses................................................49
Section 10.06.Notices.................................................50
Section 10.07.Governing Law...........................................50
Section 10.08.Exercise of Rights and Remedies.........................50
Section 10.09.Time....................................................51
Section 10.10.Reformation and Severability............................51
Section 10.11.Remedies Cumulative.....................................51
Section 10.12.Release.................................................51
-iii-
TABLE OF CONTENTS
PAGE
ARTICLE XI TERMINATION.............................................52
Section 11.01.Termination of This Agreement...........................52
Section 11.02.Liabilities in Event of Termination.....................52
-iv-
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each of the Stockholders represents and warrants to ARS that, as
applied solely to himself, all the following representations and warranties in
this Article I are as of the date of this Agreement, and will be, as amended or
supplemented pursuant to Section 4.07, on the Closing Date and immediately prior
to the Effective Time, true and correct:
Section 1.01. OWNERSHIP AND STATUS OF COMPANY CAPITAL STOCK. The
Stockholder is the record and beneficial owner or, if the Stockholder is a trust
or the estate of a deceased natural person, the legal owner of the number of
shares of the Company Capital Stock set forth, by each class, and by each series
in each class thereof, opposite the Stockholder's name in Schedule 1.01, free
and clear of all Liens, except for the Liens accurately set forth in Schedule
1.01, all of which will be released at or before the Closing Date.
Section 1.02. POWER OF THE STOCKHOLDER; APPROVAL OF THE
ACQUISITION. (a) The Stockholder has the full power, legal capacity and
authority to execute and deliver this Agreement and each other Transaction
Document to which the Stockholder is a party and to perform the Stockholder's
obligations in this Agreement and in all other Transaction Documents to which
the Stockholder is a party. This Agreement constitutes, and each such other
Transaction Document, when executed in the Stockholder's individual capacity and
delivered by the Stockholder, will constitute, the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and (ii) subject to
general principles of equity (regardless of whether that enforceability is
considered in a proceeding in equity or at law). If the Stockholder is an
Entity, the Stockholder has obtained, in accordance with all applicable
Governmental Requirements and its Charter Documents, all approvals and the
taking of all actions necessary for the authorization, execution, delivery and
performance by the Stockholder of this Agreement and the other Transaction
Documents to which the Stockholder is a party. If the Stockholder is acting
otherwise than in his individual capacity (whether as an executor or a guardian
or in any other fiduciary or representative capacity), all actions on the part
of the Stockholder and all other Persons (including any court) necessary for the
authorization, execution, delivery and performance by the Stockholder of this
Agreement and the other Transaction Documents to which the Stockholder is a
party have been duly taken.
(b) The Stockholder, acting in each capacity in which he is
entitled, by reason of the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State or for any other reason, to
vote to approve or disapprove the consummation of the Acquisition, has voted all
the shares of the Company Capital Stock owned by him and entitled to a vote or
votes on that matter, in any one or more of the manners prescribed or permitted
by the Company's Charter Documents or the Governmental Requirements of the
Company's Organization
-1-
State, whichever are controlling, to approve this Agreement and the consummation
of the Acquisition and the other transactions contemplated hereby.
Section 1.03. NO CONFLICTS OR LITIGATION. The execution, delivery
and performance in accordance with their respective terms by the Stockholder of
this Agreement and the other Transaction Documents to which the Stockholder is a
party do not and will not (a) violate or conflict with any Governmental
Requirement, (b) breach or constitute a default under any agreement or
instrument to which the Stockholder is a party or by which the Stockholder or
any of the shares of the Company Capital Stock owned by the Stockholder is
bound, (c) result in the creation or imposition of, or afford any Person the
right to obtain, any Lien upon any of the shares of the Company Capital Stock
owned by the Stockholder (or upon any revenues, income or profits of the
Stockholder therefrom) or (d) if the Stockholder is an Entity, violate the
Stockholder's Charter Documents. No Litigation is pending or, to the knowledge
of the Stockholder, threatened to which the Stockholder is or may become a party
which (a) questions or involves the validity or enforceability of any of the
Stockholder's obligations under any Transaction Document or (b) seeks (or
reasonably may be expected to seek) (i) to prevent or delay the consummation by
the Stockholder of the transactions contemplated by this Agreement to be
consummated by the Stockholder or (ii) damages in connection with any
consummation by the Stockholder of the transactions contemplated by this
Agreement.
Section 1.04. NO BROKERS. The Stockholder has not, directly or
indirectly, in connection with this Agreement or the transactions contemplated
hereby (a) employed any broker, finder or agent (other than a Purchaser
Representative) or (b) agreed to pay or incurred any obligation to pay any
broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 1.05. PREEMPTIVE AND OTHER RIGHTS; WAIVER. Except for the
right of the Stockholder to receive shares of ARS Common Stock as a result of
the Acquisition or to acquire ARS Common Stock pursuant to any written option
granted by ARS to the Stockholder, the Stockholder either (a) does not own or
otherwise have any statutory or contractual preemptive or other right of any
kind (including any right of first offer or refusal) to acquire any shares of
the Company Capital Stock or ARS Common Stock or (b) hereby irrevocably waives
each right of that type the Stockholder does own or otherwise has.
Section 1.06. CONTROL OF RELATED BUSINESSES. Except as accurately
set forth in Schedule 1.06, the Stockholder is not, alone or with one or more
other Persons, the controlling Affiliate of any Entity, business or trade (other
than the Company and the Company Subsidiaries, if the Stockholder is an
Affiliate of the Company) that (a) is engaged in any line of business which is
the same as or similar to any line of business in which the Company or any
Company Subsidiary is engaged or (b) is, or has within the three-year period
ending on the date of this Agreement, engaged in any transaction with the
Company or any Company Subsidiary, except for transactions in the ordinary
course of business of the Company or that Company Subsidiary.
-2-
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent
and warrant to, and agree with, ARS that all the following representations and
warranties in this Article II are as of the date of this Agreement, and will be,
as amended or supplemented pursuant to Section 4.07, on the Closing Date and
immediately prior to the Effective Time, true and correct:
Section 2.01. ORGANIZATION. Schedule 2.01 sets forth the
Organization State of each of the Company and the Company Subsidiaries. Each of
the Company and the Company Subsidiaries (a) is a corporation duly organized,
validly existing and in good standing under the laws of its Organization State,
(b) has all requisite corporate power and authority under those laws and its
Charter Documents to own or lease and to operate its properties and to carry on
its business as now conducted and (c) is duly qualified and in good standing as
a foreign corporation in all jurisdictions in which it owns or leases property
or in which the carrying on of its business as now conducted so requires except
where the failure to be so qualified, singly or in the aggregate, would not have
a Material Adverse Effect.
Section 2.02. QUALIFICATION. Schedule 2.02 accurately lists all
the jurisdictions in which each of the Company and the Company Subsidiaries is
authorized or qualified to own or lease and to operate its properties or to
carry on its business as now conducted, and neither the Company nor any Company
Subsidiary owns, leases or operates any properties, or carries on its business,
in any jurisdiction not listed in Schedule 2.02 which is Material to the
Acquired Business.
Section 2.03. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF
CONFLICTS; REQUIRED CONSENTS. (a) The execution, delivery and performance by the
Company of this Agreement and each other Transaction Document to which it is a
party, and the effectuation of the Acquisition and the other transactions
contemplated hereby and thereby, are within its corporate or other power under
its Charter Documents and the applicable Governmental Requirements of its
Organization State and have been duly authorized by all proceedings, including
actions permitted to be taken in lieu of proceedings, required under its Charter
Documents and those Governmental Requirements.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is a party, when executed and delivered to ARS
(or, in the case of the Certificates of Merger, if any, the applicable
Governmental Authorities) will have been, duly executed and delivered by the
Company and is, or when so executed and delivered will be, the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as that enforceability may be (i) limited by any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally
-3-
and (ii) subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by the Company of the Transaction Documents to which it
is a party have not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of any of the Company and the Company
Subsidiaries, (B) any Governmental Requirement applicable to any of the Company
and the Company Subsidiaries or (C) any Material Agreement of the Company, (ii)
result in the acceleration or mandatory prepayment of any Indebtedness, or any
Guaranty not constituting Indebtedness, of any of the Company and the Company
Subsidiaries or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require any of the Company
and the Company Subsidiaries to redeem, purchase or otherwise acquire, reacquire
or repay any of that Indebtedness, or to perform any of those Guaranties, (iii)
cause or result in the imposition of, or afford any Person the right to obtain,
any Lien upon any property or assets of any of the Company and the Company
Subsidiaries (or upon any revenues, income or profits of any of the Company and
the Company Subsidiaries therefrom) or (iv) result in the revocation,
cancellation, suspension or material modification, in any single case or in the
aggregate, of any Governmental Approval possessed by any of the Company and the
Company Subsidiaries at the date hereof and necessary for the ownership or lease
or the operation of its properties or the carrying on of its business as now
conducted, including any necessary Governmental Approval under each applicable
Environmental Law and Professional Code.
(d) Except for (i) the filing of the Certificates of Merger, if
any, with the applicable Governmental Authorities, (ii) as may be required by
the HSR Act or the applicable state securities or blue sky laws, no Governmental
Approvals are required to be obtained, and no reports or notices to or filings
with any Governmental Authority are required to be made, by any of the Company
and the Company Subsidiaries for the execution, delivery or performance by the
Company of the Transaction Documents to which it is a party, the enforcement
against the Company of its obligations thereunder or the effectuation of the
Acquisition and the other transactions contemplated thereby.
Section 2.04. CHARTER DOCUMENTS AND RECORDS; NO VIOLATION. The
Company has caused true, complete and correct copies of the Charter Documents,
each as in effect on the date hereof, and the minute books and similar corporate
or other Entity records of each of the Company and the Company Subsidiaries to
be delivered or otherwise made available to ARS. No breach or violation of any
Charter Document of any of the Company and the Company Subsidiaries has occurred
and is continuing.
Section 2.05. NO DEFAULTS. No condition or state of facts exists,
or, with the giving of notice or the lapse of time or both, would exist, which
(a) entitles any holder of any outstanding Indebtedness, or any Guaranty not
constituting Indebtedness, of any of the Company and the Company Subsidiaries,
or a representative of that holder, to accelerate the maturity, or require a
mandatory prepayment, of that Indebtedness or Guaranty, or affords that holder
or its representative,
-4-
or any beneficiary of that Guaranty, the right to require any of the Company and
the Company Subsidiaries to redeem, purchase or otherwise acquire, reacquire or
repay any of that Indebtedness, or to perform that Guaranty in whole or in part,
(b) entitles any Person to obtain any Lien (other than a Permitted Lien) upon
any properties or assets constituting any part of the Acquired Business (or upon
any revenues, income or profits of any of the Company and the Company
Subsidiaries therefrom) or (c) constitutes a violation or breach of, or a
default under, any Material Agreement of the Company by any of the Company and
the Company Subsidiaries.
Section 2.06. COMPANY SUBSIDIARIES. Schedule 2.01 either (a)
accurately sets forth the form of organization, legal name, and Organization
State of each Company Subsidiary or (b) correctly states no Entity is a Company
Subsidiary. Except as accurately disclosed in Schedule 2.06, each Company
Subsidiary is a wholly owned Subsidiary of the Company. In the case of any
Company Subsidiary that is not a wholly owned Subsidiary of the Company,
Schedule 2.06 accurately sets forth, by each class and each series within each
class, the number of outstanding shares (or other percentage ownership
interests) of Capital Stock of the Company Subsidiary, (a) the Company's
aggregate direct and indirect ownership of those shares (or interests) and (b)
the name and address of record and percentage ownership of those shares (or
interests) of each holder of record thereof other than the Company or a Company
Subsidiary. No Lien exists on any outstanding Capital Stock of any Company
Subsidiary which is owned directly or indirectly by the Company other than (a)
the Liens, if any, described in Schedule 2.06, all of which will be released at
or before the Effective Time, and (b) Permitted Liens. Except as accurately set
forth in Schedule 2.06, the Company does not own, of record or beneficially,
directly or indirectly through any Person, and does not control, directly or
indirectly through any Person or otherwise, any Capital Stock or any option,
warrant or right to acquire Capital Stock of any Entity other than a Company
Subsidiary.
Section 2.07. CAPITAL STOCK OF THE COMPANY AND THE COMPANY
SUBSIDIARIES. Schedule 2.07 accurately sets forth, by each class and by each
series within each class, the total number of shares of authorized Company
Capital Stock and the total number of such shares that have been issued and are
now outstanding. Except as accurately set forth in Schedule 2.07: (a) no shares
of Company Capital Stock are held by the Company or any Company Subsidiary as
treasury shares; and (b) no outstanding options, warrants or rights to acquire
Capital Stock of the Company or any Company Subsidiary exist. All the issued and
outstanding Capital Stock of each of the Company and the Company Subsidiaries
(a) have been duly authorized and validly issued in accordance with the
applicable Governmental Requirements of their issuer's Organization State and
Charter Documents and (b) are fully paid and nonassessable. Neither the Company
nor any Company Subsidiary has issued or sold any of its outstanding Capital
Stock in breach or violation of (a) any applicable statutory or contractual
preemptive rights, or any other rights of any kind (including any rights of
first offer or refusal), of any Person or (b) the terms of any options, warrants
or rights to acquire its Capital Stock which then were outstanding. No Person
has, otherwise than solely by reason of that Person's right, if any, to vote
shares of the Capital Stock of the Company or any Company Subsidiary it holds,
any right to vote on any matter with the holders of Capital Stock of the Company
or any Company Subsidiary.
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Section 2.08. TRANSACTIONS IN CAPITAL STOCK. Except as accurately
set forth in Schedule 2.08: (a) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire or reacquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (b) no transaction has been effected, and
no action in contemplation of the transactions described in this Agreement has
been taken, respecting the equity ownership of either the Company or any Company
Subsidiary.
Section 2.09. NO BONUS SHARES. Except as accurately set forth in
Schedule 2.09, no outstanding Company Capital Stock was issued for less than the
fair market value thereof at the time of issuance or was issued in exchange for
any consideration other than cash.
Section 2.10. PREDECESSOR STATUS; ETC. Schedule 2.10 accurately
lists all the legal and assumed names of all predecessor companies for the past
five years of the Company, including the names of any Entities from which the
Company previously acquired material assets. Except as accurately disclosed in
Schedule 2.10, the Company has not been a Subsidiary or division of another
corporation or a part of an acquisition that later was rescinded.
Section 2.11. RELATED PARTY AGREEMENTS. Schedule 2.11 accurately
sets forth all Related Party Agreements in effect on the date hereof. Except for
those Related Party Agreements specifically referred to in Schedule 2.11 as
"Retained Related Party Agreements" (the "Retained Related Party Agreements"),
each Related Party Agreement in effect on the date hereof will have been
terminated, and all Indebtedness of each Related Person and its Affiliates owed
to any of the Company and the Company Subsidiaries will have been paid in full,
prior to the Effective Time, and no Related Party Agreement then will exist. The
terms and conditions of each of the Retained Related Party Agreements are no
less favorable to the Company than the Company reasonably could have expected to
obtain in an arm's-length transaction with a Person other than an Affiliate of
the Company, the rentals provided for in the Retained Related Party Agreements
constituting leases of property to the Acquired Business do not and will not
exceed fair market rentals of the properties being rented or leased under those
Retained Related Party Agreements and the payments provided to be made by the
Company or any Company Subsidiary in the other Retained Related Party Agreements
do not exceed the fair market value of the goods or other property provided to
or the services performed for the Acquired Business.
Section 2.12. LITIGATION. Except as accurately disclosed in
Schedule 2.12, no Litigation is pending or, to the knowledge of the Company or
any Stockholder, threatened to which the Company or any Company Subsidiary is or
may become a party.
Section 2.13. FINANCIAL STATEMENTS; DISCLOSURE. (a) FINANCIAL
STATEMENTS. (i) The Financial Statements (including in each case the related
schedules and notes, if any) delivered to ARS present fairly, in all material
respects, the financial position of the Acquired Business at the respective
dates of the balance sheets included therein and the results of operations and
cash flows of the Acquired Business for the respective periods set forth therein
and have been prepared in accordance with GAAP. As of the date of any balance
sheet included in the Financial Statements
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delivered to ARS, neither the Company nor any Company Subsidiary then had any
outstanding Indebtedness to any Person or any liabilities of any kind (including
contingent obligations, tax assessments or unusual forward or long-term
commitments), or any unrealized or anticipated loss, which in the aggregate then
were Material to the Company and required to be reflected in those Financial
Statements or in the notes related thereto in accordance with GAAP which were
not so reflected.
(ii) Since the Current Balance Sheet Date, no change has occurred
in the business, operations, properties or assets, liabilities, condition
(financial or other) or results of operations of the Company or any Company
Subsidiary that could reasonably be expected, either alone or together with all
other such changes, to have a Material Adverse Effect.
(b) DISCLOSURE. (i) As of the date hereof, all Information that
has been made available to ARS by or on behalf of the Company prior to the date
of this Agreement in connection with the transactions contemplated hereby is,
taken together, true and correct in all material respects (other than financial
budgets and projections) and does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which those statements were made.
(ii) All Information that is made available after the date hereof
from time to time prior to the Effective Time to ARS by or on behalf of the
Company in connection with or pursuant to this Agreement, any other Transaction
Document or the transactions contemplated hereby or thereby will be, when made
available and taken together, true and correct in all material respects (other
than financial budgets and projections) and will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not materially misleading in light of
the circumstances under which those statements are made.
(iii) All financial budgets and projections that have been or are
hereafter from time to time prepared by the Company or any of its
Representatives and made available prior to the Effective Time to ARS pursuant
to or in connection with this Agreement, any other Transaction Document or the
transactions contemplated hereby or thereby have been and will be prepared and
furnished to ARS in good faith and were and will be based on facts and
assumptions that are believed by the management of the Company to be reasonable
in light of the then current and foreseeable business conditions of the Company
and the Company Subsidiaries and represented and will represent management's
good faith estimate of the projected financial performance of the Acquired
Business based on the information available to the Responsible Officers at the
time so furnished.
Section 2.14. COMPLIANCE WITH LAWS. (a) Except as accurately
disclosed in Schedule 2.14: (i) each of the Company and the Company Subsidiaries
possesses, or, if required by the applicable Environmental Laws (including those
relating to the maintenance, repair or servicing of appliances, equipment or
other products containing chlorofluorocarbons or hydrochloro- fluorocarbons) and
Professional Codes, one or more of its employees as required by those
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Environmental Laws and Professional Codes possesses, all necessary master
licenses and similar Governmental Approvals required for the conduct of its
business; and (ii) each of the Company and the Company Subsidiaries and such one
or more of its employees are in compliance in all material respects with the
terms and conditions of all Governmental Approvals necessary for the ownership
or lease and the operation of its properties (including all the facilities and
sites it owns or holds under any lease) and the carrying on of its business as
now conducted. Schedule 2.14 accurately discloses all the Governmental Approvals
so possessed (other than permits for particular jobs for customers as may be
required under the applicable Professional Codes). All the Governmental
Approvals so listed are valid and in full force and effect and, except as
accurately disclosed in Schedule 2.14, neither the Company nor any Company
Subsidiary has received, nor to the knowledge of any Stockholder, has any
employee of either received, any notice from any Governmental Authority of its
intention to cancel, terminate or not renew any of those Governmental Approvals.
(b) Except as accurately disclosed in Schedule 2.14, each of the
Company and the Company Subsidiaries: (i) has been and continues to be in
compliance with all Governmental Requirements applicable to it or any of its
presently or previously owned or operated properties (including all the
facilities and sites now or previously owned or held by it under any lease),
businesses or operations, including all applicable Governmental Requirements
under ERISA, Environmental Laws and Professional Codes; and (ii)(A) neither the
Company nor any Company Subsidiary has received, nor to the knowledge of the
Company has any employee of either received, any notice from any Governmental
Authority which asserts, or raises the possibility of assertion of, any
noncompliance with any of those Governmental Requirements and (B) to the
knowledge of each of the Company, the Company Subsidiaries and the Stockholders,
no condition or state of facts exists which would provide a valid basis for any
such assertion.
Section 2.15. CERTAIN ENVIRONMENTAL MATTERS. Except as accurately
disclosed in Schedule 2.15: (a) the Company and each Company Subsidiary have
complied, and remain in compliance, with the provisions of all Environmental
Laws applicable to any of them or any of their respective presently owned or
operated facilities, sites or other properties, businesses and operations and
which relate to the reporting by the Company and each Company Subsidiary of all
sites presently owned or operated by any of them where Solid Wastes, Hazardous
Wastes or Hazardous Substances have been treated, stored, disposed of or
otherwise handled; (b) no release (as defined in those Environmental Laws) at,
from, in or on any site owned or operated by the Company or any Company
Subsidiary has occurred which, if all relevant facts were known to the relevant
Governmental Authorities, reasonably could be expected to require remediation to
avoid deed record notices, restrictions, liabilities or other consequences that
would not be applicable if that release had not occurred; (c) neither the
Company nor any Company Subsidiary (or any agent or contractor of either) has
transported or arranged for the transportation of any Solid Wastes, Hazardous
Wastes or Hazardous Substances to, or disposed or arranged for the disposition
of any Solid Wastes, Hazardous Wastes or Hazardous Substances at, any off-site
location that could lead to any claim against the Company, any Company
Subsidiary, ARS or any Subsidiary of ARS, as a potentially responsible party or
otherwise, for any clean-up costs, remedial work, damage to natural resources,
personal injury or property damage, including any claim under CERCLA; and (d) no
storage tanks exist on
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or under any of the properties owned or operated by the Company or any Company
Subsidiary from which any Solid Wastes, Hazardous Wastes or Hazardous Substances
have been released into the surrounding environment. The Company has provided
ARS with copies (or if not available, accurate written summaries) of all
environmental investigations, studies, audits, reviews and other analyses
conducted by or on behalf, or which otherwise are in the possession, of the
Company or any Company Subsidiary respecting any facility, site or other
property presently owned or operated by the Company and each Company Subsidiary.
Section 2.16. LIABILITIES AND OBLIGATIONS. Schedule 2.16
accurately lists all present liabilities, of every kind, character and
description and whether accrued, absolute, fixed, contingent or otherwise, of
each of the Company and the Company Subsidiaries which (a) (i) exceed or
reasonably could be expected to exceed $10,000 and (ii) (A) had been incurred
prior to the Current Balance Sheet Date, but are not reflected on the Current
Balance Sheet, or (B) were incurred after the Current Balance Sheet Date
otherwise than in the ordinary course of business and consistent with past
practice. Schedule 2.16 also accurately lists and describes, for each of the
Company and the Company Subsidiaries, each of its outstanding secured and
unsecured Guaranties not constituting its Indebtedness and, for each of those
Guaranties, whether any Stockholder or Related Person or Affiliate of any
Stockholder is a Person whose obligation is covered by that Guaranty, and if
that item is secured by any property or asset of the Company or any Company
Subsidiary, the nature of that security.
Section 2.17. RECEIVABLES. Except as accurately set forth in
Schedule 2.17, all the accounts and notes or other advances receivable of the
Company and the Company Subsidiaries reflected on the Current Balance Sheet were
collected, or are collectible, in the respective amounts so reflected, net of
the reserves, if any, reflected in the Current Balance Sheet.
Section 2.18. REAL PROPERTIES. (a) Schedule 2.18 accurately lists
and correctly describes in all material respects: (i) all real properties owned
by any of the Company and the Company Subsidiaries and, for each of those
properties, the address thereof and the use thereof in the business of the
Company and the Company Subsidiaries, and (ii) all real properties of which any
of the Company and the Company Subsidiaries is the lessee and, for each of those
properties, the address thereof and the lease (including its expiration date and
any renewal options) relating thereto.
(b) The Company has provided ARS with true, complete and correct
copies of all title reports and insurance policies owned or in the possession of
any of the Company and the Company Subsidiaries and relating to any of the real
properties listed as being owned in Schedule 2.18. Except as accurately set
forth in Schedule 2.18 or those reports and policies, and except for Permitted
Liens, the Company or a Company Subsidiary owns in fee, and has good, valid and
marketable title to, free and clear of all Liens, each property listed in
Schedule 2.18 as being owned.
(c) The Company has provided ARS with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is leasing
each of the properties listed in Schedule 2.18 as being leased and, except as
accurately set forth in Schedule 2.18, (i) each of
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those leases is, to the knowledge of the Company, valid and binding on the
lessor party thereto, and (ii) the lessee party thereto has not sublet any of
the leased space to any Person other than the Company or a Company Subsidiary.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties listed in
Schedule 2.18 and, except as accurately set forth in Schedule 2.18, are
maintained in accordance with reasonable commercial operating practices and
adequate for the purposes for which they presently are being used or held for
use, ordinary wear and tear excepted.
Section 2.19. OTHER TANGIBLE ASSETS. (a) Schedule 2.19 accurately
discloses all leases, including capital leases, that are Material to the Company
under which the Company or a Company Subsidiary is leasing its property, plant
and equipment and other tangible assets other than real properties. Except as
accurately set forth in Schedule 2.19, (i) each of those leases is, to the
knowledge of the Company, valid and binding on the lessor party thereto and (ii)
the lessee party thereto has not sublet any of the leased property to any Person
other than the Company or a Company Subsidiary.
(b) Except as accurately set forth in Schedule 2.19, all the
property, plant and equipment of the Company and its Subsidiaries are in good
working order and condition, ordinary wear and tear excepted, and adequate for
the purposes for which they presently are being used or held for use.
Section 2.20. PROPRIETARY RIGHTS. Except as accurately set forth
in Schedule 2.20, each of the Company and the Company Subsidiaries owns, free
and clean of all Liens other than Permitted Liens, or has the legal right to use
all Proprietary Rights that are necessary to the conduct of its business as now
conducted, in each case free, to their knowledge, of any claims or
infringements. Schedule 2.20 accurately (a) lists these Proprietary Rights and
(b) indicates those owned by the Company or any Company Subsidiary and, for
those not listed as so owned, the agreement or other arrangement pursuant to
which they are possessed. Except as accurately set forth in Schedule 2.20, (a)
no consent of any Person will be required for the use of any of these
Proprietary Rights by ARS or any Subsidiary of ARS following the Effective Time
and (b) no governmental registration of any of these Proprietary Rights has
lapsed or expired or been canceled, abandoned, opposed or the subject of any
reexamination request.
Section 2.21. RELATIONS WITH GOVERNMENTS, ETC. Neither the
Company nor any Company Subsidiary has made, offered or agreed to offer anything
of value to any governmental official, political party or candidate for
government office which would cause the Company or any Company Subsidiary to be
in violation of the Foreign Corrupt Practices Act of 1977 or any Governmental
Requirement to a similar effect.
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Section 2.22. COMMITMENTS. Schedule 2.22 sets forth a complete,
accurate list of each of the following to which any of the Company and the
Company Subsidiaries is a party or by which any of its properties is bound and
which presently remains executory in whole or in any part:
(a) each partnership, joint venture or cost-sharing agreement;
(b) each guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(c) each instrument, agreement or other obligation evidencing or
relating to Indebtedness of any of the Company and the Company
Subsidiaries or to money lent or to be lent to another Person involving
more than $25,000;
(d) each contract to purchase or sell real property;
(e) each agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any 12-month period
in excess of $25,000 and which is not terminable without penalty and on
no more than 30 days' prior notice;
(f) each agreement for the acquisition or provision of services,
supplies, equipment, inventory, fixtures or other property involving
more than $25,000 in the aggregate;
(g) each contract containing any noncompetition covenant;
(h) each agreement providing for the purchase from a supplier of
all or substantially all the requirements of the Company or any Company
Subsidiary of a particular product or service; and
(i) each other agreement or commitment not made in the ordinary
course of business that is Material to the Acquired Business.
True, correct and complete copies of all written items listed above, and true,
correct and complete written descriptions of all oral items listed above, have
heretofore been delivered or made available to ARS. Except as accurately set
forth in Schedule 2.22: (a) there are no existing or asserted defaults, events
of default or events, occurrences, acts or omissions that, with the giving of
notice or lapse of time or both, would constitute defaults or events of default
under any of the items listed above which are Material to the Acquired Business
by any of the Company and the Company Subsidiaries or, to the knowledge of the
Company, any other party thereto; and (b) no penalties have been incurred, nor
are amendments pending, with respect to the items listed above which are
Material to the Acquired Business. The items listed above are in full force and
effect and are valid
-11-
and enforceable obligations of the Company or the Company Subsidiaries parties
thereto and, to the knowledge of the Company, the other parties thereto in
accordance with their respective terms, and no defenses, off-sets or
counterclaims have been asserted or, to the knowledge of the Company, may be
made by any party thereto (other than by the Company or a Company Subsidiary),
nor has the Company or a Company Subsidiary, as the case may be, waived any
rights thereunder.
Section 2.23. INVENTORIES. Except as accurately set forth in
Schedule 2.23, all inventories, net of reserves determined in accordance with
GAAP, of each of the Company and the Company Subsidiaries which are classified
as such on the Current Balance Sheet are, to the knowledge of the Company,
merchantable and salable or usable in the ordinary course of business of the
Acquired Business. The Acquired Business does not depend on any single vendor
for its inventories the loss of which could have a Material Adverse Effect.
Section 2.24. INSURANCE. Schedule 2.24 accurately sets forth a
list of all insurance policies carried by each of the Company and the Company
Subsidiaries. The Company has previously provided ARS with: (a) an accurate list
of all insurance loss runs and worker's compensation claims received for the
most recently ended three policy years; and (b) true, complete and correct
copies of all insurance policies carried by each of the Company and the Company
Subsidiaries which are in effect, all of which (i) have been issued by insurers
of recognized responsibility and (ii) currently are, and will remain without
interruption through the Effective Date, in full force and effect. Except as set
forth in Schedule 2.24: (a) no insurance carried by the Company or any Company
Subsidiary has been canceled by the insurer during the past five years, and
neither the Company nor any Company Subsidiary has ever been denied coverage;
and (b) neither the Company nor any Company Subsidiary or Stockholder has
received any notice or other communication from any issuer of any such insurance
policy of any material increase in any deductibles, retained amounts or the
premiums payable thereunder, and, to the knowledge of the Company and the
Stockholders, no such increase in deductibles, retainages or premiums is
threatened.
Section 2.25. EMPLOYEE MATTERS. (a) CASH COMPENSATION. Schedule
2.25 sets forth an accurate, complete written list of the names, titles and
rates of annual cash compensation, at the Current Balance Sheet Date and at the
date hereof (and the portions thereof attributable to salary or the equivalent,
fixed bonuses, discretionary bonuses and other cash compensation, respectively)
of all key employees, nonemployee officers, nonemployee directors and key
consultants and independent contractors of each of the Company and the Company
Subsidiaries who receive annualized cash compensation of greater than $100,000.
(b) EMPLOYMENT AGREEMENTS. Schedule 2.25 accurately lists all
Employment Agreements remaining executory in whole or in part on the date
hereof, and the Company has provided ARS with true, complete and correct copies
of all those Employment Agreements. Neither the Company nor any Company
Subsidiary is a party to any oral Employment Agreement.
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(c) OTHER COMPENSATION PLANS. Schedule 2.25 accurately lists all
Other Compensation Plans either remaining executory on the date hereof or to
become effective after the date hereof. The Company has provided ARS with a
true, correct and complete copy of each of those Other Compensation Plans that
is in writing and an accurate written description of each of those Other
Compensation Plans that is not written. Except as accurately set forth in
Schedule 2.25, each of the Other Compensation Plans, including each that is a
Welfare Plan, may be unilaterally amended or terminated by the Company or any
Company Subsidiary without liability to any of them, except as to benefits
accrued thereunder prior to that amendment or termination.
(d) ERISA BENEFIT PLANS. Schedule 2.25 accurately (i) lists each
ERISA Pension Benefit Plan (A)(1) the funding requirements of which (under
Section 301 of ERISA or Section 412 of the Code) are, or at any time during the
six-year period ending on the date hereof were, in whole or in part, the
responsibility of the Company or any Company Subsidiary or (2) respecting which
the Company or any Company Subsidiary is, or at any time during that period was,
a "contributing sponsor" or an "employer" as defined in Sections 4001(a)(13) and
3(5), respectively, of ERISA (each plan described in this clause (A) being a
"Company ERISA Pension Plan"), (B) each other ERISA Pension Benefit Plan
respecting which an ERISA Affiliate is, or at any time during that period was,
such a "contributing sponsor" or "employer" (each plan described in this clause
(B) being an "ERISA Affiliate Pension Plan") and (C) each other ERISA Employee
Benefit Plan that is being, or at any time during that period was, sponsored,
maintained or contributed to by the Company or any Company Subsidiary (each plan
described in this clause (C) and each Company ERISA Pension Plan being a
"Company ERISA Benefit Plan"), (ii) states the termination date of each Company
ERISA Benefit Plan and ERISA Affiliate Pension Plan that has been terminated and
(iii) identifies for each ERISA Affiliate Pension Plan the relevant ERISA
Affiliates. The Company has provided ARS with (i) true, complete and correct
copies of (A) each Company ERISA Benefit Plan and ERISA Affiliate Pension Plan,
(B) each trust agreement related thereto and (C) all amendments to those plans
and trust agreements. Except as accurately set forth in Schedule 2.25, (i)
neither the Company nor any Company Subsidiary is, or at any time during the
six-year period ended on the date hereof was, a member of any ERISA Group that
currently includes, or included when the Company or a Company Subsidiary was a
member, among its members any Person other than the Company and the Company
Subsidiaries and (ii) no Person is an ERISA Affiliate of the Company or any
Company Subsidiary (other than the Company or any Company Subsidiary in the case
of any other Company Subsidiary or any Company Subsidiary in the case of the
Company, if the Company and the Company Subsidiaries comprise an ERISA Group).
(e) EMPLOYEE POLICIES AND PROCEDURES. Schedule 2.25 accurately
lists all Employee Policies and Procedures. The Company has provided ARS with a
copy of all written Employee Policies and Procedures and a written description
of all material unwritten Employee Policies and Procedures.
(f) UNWRITTEN AMENDMENTS. Except as accurately described in
Schedule 2.25, no material unwritten amendments have been made, whether by oral
communication, pattern of
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conduct or otherwise, with respect to any of the Employment Agreements, Other
Compensation Plans or Employee Policies and Procedures.
(g) LABOR COMPLIANCE. Each of the Company and the Company
Subsidiaries has been and is in compliance with all applicable Governmental
Requirements respecting employment and employment practices, terms and
conditions of employment and wages and hours, and neither the Company nor any
Company Subsidiary is liable for any arrears of wages or penalties for failure
to comply with any of the foregoing. Neither the Company nor any Company
Subsidiary has engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices. Except as accurately set
forth in Schedule 2.25, there are no (i) unfair labor practice charges or
complaints or racial, color, religious, sex, national origin, age, disability or
handicap discrimination charges or complaints pending or, to the knowledge of
the Company, threatened against the Company or any of the Company Subsidiaries
before any Governmental Authority (nor, to the knowledge of the Company, does
any valid basis therefor exist) or (ii) existing or, to the knowledge of the
Company, threatened labor strikes, disputes, grievances, controversies or other
labor troubles affecting the Company or any of the Company Subsidiaries (nor, to
the knowledge of the Company, does any valid basis therefor exist).
(h) UNIONS. Except as set forth on Schedule 2.25, (i) neither the
Company nor any Company Subsidiary or ERISA Affiliate has ever been a party to
any agreement with any union, labor organization or collective bargaining unit.
No employees of the Company and the Company Subsidiaries are represented by any
union, labor organization or collective bargaining unit and, to the knowledge of
the Company, (ii) none of the employees of the Company and the Company
Subsidiaries has threatened to organize or join a union, labor organization or
collective bargaining unit.
(i) CHANGE OF CONTROL BENEFITS. Except as accurately set forth in
Schedule 2.25, neither the Company nor any of the Company Subsidiaries is a
party to any agreement, or has established any policy, practice or program,
requiring it to make a payment or provide any other form of compensation or
benefit or vesting rights to any person performing services for the Company or
any of the Company Subsidiaries which would not be payable or provided in the
absence of this Agreement or the consummation of the transactions contemplated
by this Agreement, including any parachute payment under Section 280G of the
Code.
(j) RETIREES. Neither the Company nor any of the Company
Subsidiaries has any obligation or commitment to provide medical, dental or life
insurance benefits to or on behalf of any of its employees who may retire or any
of its former employees who have retired except as may be required pursuant to
the continuation of coverage provisions of Section 4980B of the Code and the
applicable parallel provisions of ERISA.
Section 2.26. COMPLIANCE WITH ERISA, ETC. (a) COMPLIANCE. Each of
the Company ERISA Benefit Plans and Other Compensation Plans (each, a "Plan")
(i) is in substantial compliance
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with all applicable provisions of ERISA, as well as with all other applicable
Governmental Requirements, and (ii) has been administered, operated and managed
in accordance with its governing documents.
(b) QUALIFICATION. All Plans that are intended to qualify under
Section 401(a) of the Code (the "Qualified Plans") are so qualified and have
been determined by the IRS to be so qualified (or application for determination
letters have been timely submitted to the IRS). The Company has provided ARS
with true, complete and correct copies of the current plan determination
letters, most recent actuarial valuation reports, if any, most recent Form 5500,
or, as applicable, Form 5500-C/R, filed with respect to each such Qualified Plan
and most recent trustee or custodian report. To the extent that any Qualified
Plans have not been amended to comply with applicable Governmental Requirements,
the remedial amendment period permitting retroactive amendment of these
Qualified Plans has not expired and will not expire within 120 days after the
Effective Time. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries have
been timely filed or distributed.
(c) NO PROHIBITED TRANSACTIONS, ETC. None of the Stockholders,
any Plan or the Company or any Company Subsidiary has engaged in any Prohibited
Transaction. No Plan has incurred an accumulated funding deficiency, as defined
in Section 412(a) of the Code and Section 302(a) of ERISA, and no circumstances
exist pursuant to which the Company or any Company Subsidiary could have any
direct or indirect liability whatsoever (including being subject to any
statutory Lien to secure payment of any such liability), to the Pension Benefit
Guaranty Corporation under Title IV of ERISA or to the IRS for any excise tax or
penalty with respect to any Plan now or hereafter maintained or contributed to
by the Company or any of its ERISA Affiliates. Further:
(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan without a
determination by the IRS that such action does not adversely affect the
tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any Plan
which was not properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the
Effective Time, shall equal or exceed the actuarial present value of all
"benefit liabilities" (within the meaning of Section 4001(a)(16) of
ERISA) under that plan in accordance with the assumptions contained in
the regulations of the Pension Benefit Guaranty Corporation governing
the funding of terminated defined benefit plans;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609 of ERISA and
related regulations (relating to the benefit continuation rights imposed
by "COBRA" or qualified medical child support orders), the
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Company, each Company Subsidiary and the Stockholders have complied (and
at the Effective Time will have complied) in all material respects with
all reporting, disclosure, notice, election and other benefit
continuation and coverage requirements imposed thereunder as and when
applicable to those plans, and neither the Company nor any Company
Subsidiary has incurred (or will incur) any direct or indirect liability
or is (or will be) subject to any loss, assessment, excise tax penalty,
loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the
Company, any Company Subsidiary or any Stockholder, at any time prior to
the Effective Time, to comply with any such federal or state benefit
continuation or coverage requirement, which is capable of being assessed
or asserted before or after the Effective Time directly or indirectly
against the Company, any Company Subsidiary, any Stockholder, ARS or any
Subsidiary of ARS with respect to any of those group health plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total pension, medical and other benefit
liability for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause those Financial
Statements to be not representative of prior periods; and
(vii) neither the Company nor any Company Subsidiary has incurred
liability under Section 4062 of ERISA.
(d) MULTIEMPLOYER PLANS. Except as set forth in Schedule 2.26,
neither the Company nor any Company Subsidiary, and no ERISA Affiliate of any of
them, is, or at any time during the six-year period ended on the date hereof
was, obligated to contribute to a Multiemployer Plan. Neither the Company nor
any Company Subsidiary, and no ERISA Affiliate of any of them, has made a
complete or partial withdrawal from a Multiemployer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA. Schedule 2.26 lists
for each Multiemployer Plan on such Schedule the Company's best estimate of the
amount of withdrawal liability that would be incurred if the Company and each of
its ERISA Affiliates were to make a complete withdrawal from such Multiemployer
Plan as of the Closing Date. Except as set forth in Schedule 2.26, the aggregate
amount of such withdrawal liability if the Company and each of its ERISA
Affiliates were to make a complete withdrawal from each such Multiemployer Plan
would not exceed $25,000.
(e) CLAIMS AND LITIGATION. Except as accurately set forth in
Schedule 2.26, no Litigation or claims (other than routine claims for benefits)
are pending or, to the knowledge of the Company, threatened against, or with
respect to, any of the Plans or with respect to any fiduciary, administrator or
sponsor thereof (in their capacities as such), or any party-in-interest thereof.
(f) EXCISE TAXES, DAMAGES AND PENALTIES. No act, omission or
transaction has occurred which would result in the imposition on the Company or
any Company Subsidiary of (i) breach of fiduciary duty liability damages under
Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsection (c),
(i) or (l) of Section 502 of ERISA or (iii) any excise tax under applicable
provisions of the Code with respect to any Plan.
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(g) WELFARE TRUSTS. Any trust funding a Plan, which is intended
to be exempt from federal income taxation pursuant to Section 501(c)(9) of the
Code, satisfies the requirements of that section and has received a favorable
determination letter from the IRS regarding that exempt status and has not,
since receipt of the most recent favorable determination letter, been amended or
operated in a way that would adversely affect that exempt status.
Section 2.27. TAXES. (a) Each of the following representations
and warranties in this Section 2.27 is qualified to the extent set forth in
Schedule 2.27.
(b) All Returns required to be filed with respect to any Tax for
which any of the Company and the Company Subsidiaries is liable have been duly
and timely filed with the appropriate Taxing Authority, each Tax shown to be
payable on each such Return has been paid, each Tax payable by the Company or a
Company Subsidiary by assessment has been timely paid in the amount assessed and
adequate reserves have been established on the consolidated books of the Company
and the Company Subsidiaries for all Taxes for which any of the Company and the
Company Subsidiaries is liable, but the payment of which is not yet due. Neither
the Company nor any Company Subsidiary is, or ever has been, liable for any Tax
payable by reason of the income or property of a Person other than the Company
or a Company Subsidiary. Each of the Company and the Company Subsidiaries has
timely filed true, correct and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be filed by it. No
Liens for Taxes exist upon the assets of the Company or any Company Subsidiary
except Liens for Taxes which are not yet due. Neither the Company nor any
Company Subsidiary is, or ever has been, subject to Tax in any jurisdiction
outside of the United States. No Litigation with respect to any Tax for which
the Company or any Company Subsidiary is asserted to be liable is pending or, to
the knowledge of the Company or any Stockholder, threatened and no basis which
the Company or any Stockholder believes to be valid exists on which any claim
for any such Tax can be asserted against the Company or any Company Subsidiary.
There are no requests for rulings or determinations in respect of any Taxes
pending between the Company or any Company Subsidiary and any Taxing Authority.
No extension of any period during which any Tax may be assessed or collected and
for which the Company or any Company Subsidiary is or may be liable has been
granted to any Taxing Authority. Neither the Company nor any Company Subsidiary
is or has been a party to any tax allocation or sharing agreement. All amounts
required to be withheld by any of the Company and the Company Subsidiaries and
paid to governmental agencies for income, social security, unemployment
insurance, sales, excise, use and other Taxes have been collected or withheld
and paid to the proper Taxing Authority. The Company and each Company Subsidiary
have made all deposits required by law to be made with respect to employees'
withholding and other employment taxes.
(c) Neither the Company or any Company Subsidiary nor any
Stockholder is a "foreign person," as that term is referred to in Section
1445(f)(3) of the Code.
(d) The Company has not filed a consent pursuant to Section
341(f) of the Code or any comparable provision of any other tax statute and has
not agreed to have Section 341(f)(2)
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of the Code or any comparable provision of any other tax statute apply to any
disposition of an asset. The Company has not made, is not obligated to make and
is not a party to any agreement that could require it to make any payment that
is not deductible under Section 280G of the Code. No asset of the Company or of
any Company Subsidiary is subject to any provision of applicable law which
eliminates or reduces the allowance for depreciation or amortization in respect
of that asset below the allowance generally available to an asset of its type.
No accounting method changes of the Company or of any Company Subsidiary exist
or are proposed or threatened which could give rise to an adjustment under
Section 481 of the Code.
Section 2.28. GOVERNMENT CONTRACTS. Neither the Company nor any
Company Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 2.29. ABSENCE OF CHANGES. Since the Current Balance Sheet
Date, except as accurately set forth in Schedule 2.29, none of the following has
occurred with respect to the Company or any Company Subsidiary:
(a) any circumstance, condition, event or state of facts (either
singly or in the aggregate), other than conditions generally affecting
the Air Conditioning and Refrigeration Contracting or Plumbing
businesses, which has caused, is causing or will cause a Material
Adverse Effect;
(b) any change in its authorized Capital Stock or in any of its
outstanding Capital Stock or options, warrants or rights to acquire its
Capital Stock;
(c) any Restricted Payment, except any declaration or payment of
dividends by any Company Subsidiary solely to the Company;
(d) any increase in, or any commitment or promise to increase,
the rates of cash compensation as of the date hereof, or the amounts or
other benefits paid or payable under any Company ERISA Pension Plan or
Other Compensation Plan, except for ordinary and customary bonuses and
salary increases for employees (other than the Stockholders or their
family members) at the times and in the amounts consistent with its past
practice;
(e) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, that will have a
Material Adverse Effect following the Effective Time;
(f) any distribution, sale or transfer of, or any commitment to
distribute, sell or transfer, any of its assets or properties of any
kind which singly is or in the aggregate are Material to the Acquired
Business, other than distributions, sales or transfers in the ordinary
course of its business and consistent with its past practices to Persons
other than the Stockholders and their family members and Affiliates;
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(g) any cancellation, or agreement to cancel, any Indebtedness,
obligation or other liability owing to it, including any Indebtedness,
obligation or other liability of any Stockholder or any Related Person
or Affiliate thereof, provided that it may negotiate and adjust bills in
the course of good faith disputes with customers in a manner consistent
with past practice;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets,
property or rights or requiring consent of any Person to the transfer
and assignment of any such assets, property or rights;
(i) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of its business consistent with its past
practices;
(j) any waiver of any of its rights or claims that singly is or
in the aggregate are Material to the Acquired Business;
(k) any transaction by it outside the ordinary course of its
business or not consistent with its past practices;
(l) any incurrence by it of any Indebtedness or any Guaranty not
constituting its Indebtedness, or any commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, options, warrants,
rights to acquire the Capital Stock or the Indebtedness of any Person
other than short-term United States Treasury obligations or short-term
certificates of deposit of a commercial bank or trust company;
(n) except in accordance with the Company's consolidated capital
expenditure budget for the Company's current fiscal year, any capital
expenditure or series of related capital expenditures by the Company and
the Company Subsidiaries collectively in excess of $50,000, or
commitments by the Company and the Company Subsidiaries to make capital
expenditures totaling in excess of $50,000; or
(o) any cancellation or termination of a Material Agreement of
the Acquired Business.
Section 2.30. BANK RELATIONS; POWERS OF ATTORNEY. Schedule 2.30
accurately sets forth:
(a) the name of each financial institution in which the Company
or any Company Subsidiary has borrowing or investment arrangements,
deposit or checking accounts or safe deposit boxes;
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(b) the types of those arrangements and accounts, including, as
applicable, names in which accounts or boxes are held, the account or
box numbers and the name of each Person authorized to draw thereon or
have access thereto; and
(c) the name of each Person holding a general or special power of
attorney from the Company or any Company Subsidiary and a description of
the terms of each such power.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ARS
ARS represents and warrants to the Company and each Stockholder
that all the following representations and warranties in this Article III are as
of the date of this Agreement, and will be on the Closing Date and immediately
prior to the Effective Time, true and correct:
Section 3.01. ORGANIZATION; POWER. ARS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority under the laws of
that State and its Charter Documents to own or lease and to operate its
properties presently and following the Effective Time and to carry on its
business as now conducted and as proposed to be conducted following the
Effective Time.
Section 3.02. AUTHORIZATION; ENFORCEABILITY; ABSENCE OF
CONFLICTS; REQUIRED CONSENTS. (a) The execution, delivery and performance by ARS
of this Agreement and each other Transaction Document to which it is a party,
and the effectuation of the Acquisition and the other transactions contemplated
hereby and thereby, are within its corporate power under its Charter Documents
and the applicable Governmental Requirements of the State of Delaware and have
been duly authorized by all proceedings, including actions permitted to be taken
in lieu of proceedings, required under its Charter Documents and the applicable
Governmental Requirements of its Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which ARS is a party, when executed and delivered to the other
parties thereto (or, in the case of the Certificates of Merger, if any, the
applicable Governmental Authorities), will have been, duly executed and
delivered by it and is, or when so executed and delivered will be, its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as that enforceability may be (i) limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and (ii) subject to general
principles of equity (regardless of whether that enforceability is considered in
a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with
their respective terms by ARS of the Transaction Documents to which it is a
party have not and will not (i) violate, breach or constitute a default under
(A) the Charter Documents of ARS, (B) any Governmental Requirement applicable to
ARS or (C) any Material Agreement of ARS, (ii) result in the acceleration
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or mandatory prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of ARS or afford any holder of any of that Indebtedness, or any
beneficiary of any of those Guaranties, the right to require ARS to redeem,
purchase or otherwise acquire, reacquire or repay any of that Indebtedness, or
to perform any of those Guaranties, (iii) cause or result in the imposition of,
or afford any Person the right to obtain, any Lien upon any property or assets
of ARS(or upon any revenues, income or profits of ARS therefrom), other than
negative pledge covenants of ARS respecting the Capital Stock of its
Subsidiaries and its other assets, or (iv) result in the revocation,
cancellation, suspension or material modification, in any single case or in the
aggregate, of any Governmental Approval possessed by ARS at the date hereof and
necessary for the ownership or lease and the operation of its properties or the
carrying on of its business as now conducted, including any necessary
Governmental Approval under each applicable Environmental Law and Professional
Code.
(d) Except for (i) the filing of the Certificates of Merger, if
any, with the applicable Governmental Authorities, and (ii) as may be required
by the HSR Act or the applicable state securities or blue sky laws, no
Governmental Approvals are required to be obtained, and no reports or notices to
or filings with any Governmental Authority are required to be made, by ARS for
the execution, delivery or performance by ARS of the Transaction Documents to
which it is a party, the enforcement against ARS of its obligations thereunder
or the effectuation of the Acquisition and the other transactions contemplated
thereby.
Section 3.03. CHARTER DOCUMENTS. No breach or violation of any
Charter Document of ARS has occurred and is continuing.
Section 3.04. CAPITAL STOCK OF ARS. As of the date hereof, the
authorized capital stock of ARS is comprised of (A) 50,000,000 shares of ARS
Common Stock and (B) 10,000,000 shares of preferred stock, $.001 par value per
share. All shares of ARS Common Stock, if any, to be issued pursuant to
Paragraph 2, when issued, (a) will have been duly authorized and validly issued
in accordance with the Delaware General Corporation Law and the Charter
Documents of ARS and (b) will be fully paid and nonassessable. None of the
shares of ARS Common Stock, if any, to be issued pursuant to Paragraph 2 will,
when issued, have been issued in breach or violation of (a) any applicable
statutory or contractual preemptive rights, or any other rights of any kind
(including any rights of first offer or refusal), of any Person or (b) the terms
of any then outstanding options, warrants or other rights it has issued to
acquire ARS Common Stock.
Section 3.05. NO LITIGATION. No Litigation is pending or, to the
knowledge of ARS, threatened to which ARS is or may become a party which (a)
questions or involves the validity or enforceability of any obligation of ARS
under any Transaction Document, (b) seeks (or reasonably may be expected to
seek) (i) to prevent or delay consummation by ARS of the transactions
contemplated by this Agreement to be consummated by ARS or (ii) damages from ARS
in connection with any such consummation.
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ARTICLE IV
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 4.01. ACCESS AND COOPERATION; DUE DILIGENCE. (a) From the
date hereof and until the Effective Time, the Company will (i) afford to the
Representatives of ARS reasonable access to all the key employees, sites,
properties, books and records of each of the Company and the Company
Subsidiaries, (ii) provide ARS with such additional financial and operating data
and other information relating to the business and properties of each of the
Company and the Company Subsidiaries as ARS may from time to time reasonably
request and (iii) cooperate with ARS and its Representatives in the preparation
of any documents or other material that may be required in connection with any
Transaction Document. Each Stockholder and the Company will treat all
Confidential Information obtained by them in connection with the negotiation and
performance of this Agreement as confidential in accordance with the provisions
of Section 10.01.
(b) Each of the Company and the Stockholders will use its best
efforts to secure, as soon as practicable after the date hereof, all approvals
or consents of third Persons as may be necessary to consummate the transactions
contemplated hereby.
(c) From the date hereof and until the Effective Time, ARS will
(i) afford to the Representatives of the Company and the Stockholders access to
all sites, properties, books and records of ARS, (ii) provide the Company with
such additional financial and operating data and other information relating to
the business and properties of ARS as the Company or any Stockholder may from
time to time reasonably request and (iii) cooperate with the Company and the
Stockholders and their respective Representatives in the preparation of any
documents or other material which may be required in connection with any
Transaction Documents.
(d) If this Agreement is terminated pursuant to Article XI, ARS
promptly will return all written Confidential Information of the Company it then
possesses to the Company.
Section 4.02. CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME.
From the date hereof and until the Effective Time, the Company will, and will
cause each Company Subsidiary to:
(a) carry on its businesses in substantially the same manner as
it has heretofore and not introduce any material new method of
management, operation or accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(c) perform all its obligations under agreements relating to or
affecting its assets, properties and other rights;
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(d) keep in full force and effect without interruption all its
present insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and
preserve its business organization intact, (ii) retain its present
employees and (iii) maintain its relationships with suppliers, customers
and others having business relations with it;
(f) comply with all applicable Governmental Requirements; and
(g) except as required or expressly permitted by this Agreement,
maintain the instruments and agreements governing its outstanding
Indebtedness and leases on their present terms and not enter into new or
amended Indebtedness or lease instruments or agreements involving
amounts over $10,000 in any case or $100,000 in the aggregate, without
the prior written consent of ARS (which consent will not be unreasonably
withheld).
Section 4.03. PROHIBITED ACTIVITIES. From the date hereof and
until the Effective Time, without the prior written consent of ARS or unless as
required or expressly permitted by this Agreement, the Company will not, and
will not permit any Company Subsidiary to:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise create
any options, warrants or rights to acquire any of its Capital Stock;
(c) make any Restricted Payment (other than as provided in
Schedule 4.03);
(d) make any investments (other than short-term United States
Treasury obligations or short-term certificates of deposit of a
commercial bank or trust company) in the Capital Stock (or options,
warrants or rights to acquire the Capital Stock) or Indebtedness of any
Person;
(e) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in a single
transaction or a series of related transactions involving an aggregate
amount of more than $50,000 otherwise than in the ordinary course of its
business and consistent with its past practice;
(f) increase or commit or promise to increase the cash
compensation payable or to become payable to any officer, director,
stockholder, employee or agent, consultant or independent contractor of
any of the Company and the Company Subsidiaries or make any
discretionary bonus or management fee payment to any such Person, except
bonuses or salary increases to employees (other than the Stockholders or
their family members) at the times and in the amounts consistent with
its past practice;
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(g) create, assume or permit to be created or imposed any Liens
(other than Permitted Liens) upon any of its assets or properties,
whether now owned or hereafter acquired, except for purchase money Liens
incurred in connection with the acquisition of equipment with an
aggregate cost not in excess of $25,000 and necessary or desirable for
the conduct of the business of any of the Company and the Company
Subsidiaries;
(h) (i) adopt, establish, amend or terminate any ERISA Employee
Benefit Plan, or any Other Compensation Plan or Employee Policies and
Procedures or (ii) take any discretionary action, or omit to take any
contractually required action, if that action or omission could either
(A) deplete the assets of any ERISA Employee Benefit Plan or any Other
Compensation Plan or (B) increase the liabilities or obligations under
any such plan;
(i) sell, assign, lease or otherwise transfer or dispose of any
of its owned or leased property or equipment otherwise than in the
ordinary course of its business and consistent with its past practice;
(j) negotiate for the acquisition of any business or the start-up
of any new business;
(k) merge, consolidate or effect a share exchange with, or agree
to merge, consolidate or effect a share exchange with, any other Entity;
(l) waive any of its material rights or claims, provided that it
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(m) commit a material breach of or amend or terminate any
Material Agreement of the Company or the Acquired Business or any
Governmental Approvals Material to the Acquired Business; or
(n) enter into any other transaction that is not in the ordinary
course of its business and consistent with its past practice or that is
prohibited hereby.
Section 4.04. NO SHOP. Each of the Company and the Stockholders
agrees that, from the date hereof and until the first to occur of the Effective
Time or the termination of this Agreement in accordance with Article XI, neither
the Company nor any Stockholder, nor any of their respective officers and
directors shall, and the Company and each Stockholder will direct and use their
best efforts to cause each of their respective Representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including any proposal or offer to the
Stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or engage in any activities,
discussions or negotiations concerning, or provide any Confidential Information
respecting, the Acquired Business
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or ARS to, or have any discussions with, any Person relating to such an offer or
proposal or otherwise facilitate any effort or attempt to make or implement such
an offer or proposal. The Company and each Stockholder will: (a) immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect to any of the
foregoing, and each will take the steps necessary to inform the Persons referred
to in the first sentence of this Section 4.04 of the obligations undertaken in
this Section 4.04; and (b) notify ARS immediately if any such inquiries or
proposals are received by, any such information is requested from or any such
discussions or negotiations are sought to be initiated or continued with the
Company or any Stockholder.
Section 4.05. NOTICE TO BARGAINING AGENTS. Prior to the Closing
Date, the Company will (a) satisfy any requirement for notice of the
transactions contemplated by this Agreement under applicable collective
bargaining agreements and (b) provide ARS with proof that any required notice
has been sent.
Section 4.06. NOTIFICATION OF CERTAIN MATTERS. The Stockholders
and the Company shall give prompt notice to ARS of (a) the existence or
occurrence of each condition or state of facts which will or reasonably could be
expected to cause any representation or warranty of the Company or any
Stockholder contained herein to be untrue or incorrect in any material respect
at or prior to the Closing Date and (b) any material failure of any Stockholder
or the Company to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by that Person hereunder. ARS shall give prompt
notice to the Company of (a) the existence or occurrence of each condition or
state of facts which will or reasonably could be expected to cause any
representation or warranty of ARS contained herein to be untrue or inaccurate at
or prior to the Closing Date and (b) any material failure of ARS to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder. The delivery of any notice pursuant to this Section 4.06 shall
not be deemed to (a) modify the representations or warranties herein of the
party delivering that notice, or any other party, which modification may be made
only pursuant to Section 4.07, (b) modify the conditions set forth or referred
to in Article V or (c) limit or otherwise affect the remedies available
hereunder to the party receiving that notice.
Section 4.07. SUPPLEMENTAL INFORMATION. Each of the Company and
the Stockholders agrees that, with respect to the representations and warranties
of that party contained in this Agreement, that party will have the continuing
obligation until the Closing Date to provide ARS promptly with such additional
supplemental information (collectively, the "Supplemental Information"), in the
form of (a) amendments to then existing Schedules or (b) additional Schedules as
would be necessary, in the light of the circumstances, conditions, events and
states of facts then known to the Company or any Stockholder, to make each of
those representations and warranties true and correct as of the Closing Date.
For purposes only of determining whether the conditions to the obligations of
ARS which are specified in Section 5.03 have been satisfied, and not for any
purpose under Article VII, the Schedules as of the Closing Date shall be deemed
to be the Schedules as of the date hereof as amended or supplemented by the
Supplemental Information provided to ARS prior to the Closing pursuant to this
Section 4.07; provided, however, that if the Supplemental
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Information so provided discloses the existence of circumstances, conditions,
events or states of facts which, in any combination thereof, (a) have had a
Material Adverse Effect which was not reflected in the determination of the
Ceiling Amount or, in the sole judgment of ARS (which shall be conclusive for
purposes of this Section 4.07 and Article XI, but not for any purpose of Article
VII), (b) are having or will have a Material Adverse Effect, ARS will be
entitled either (i) to terminate this Agreement pursuant to Section 11.01(d) or
(ii) to treat as ARS Indemnified Losses for all purposes of Article VII (which
treatment will not prejudice the right of any Stockholders under Article VII to
contest Damage Claims made by ARS in respect of those ARS Indemnified Losses)
all Damages to the Acquired Business which are attributable to the
circumstances, conditions, events and states of facts first disclosed herein
after the date hereof in the Supplemental Information.
Section 4.08. ADDITIONAL FINANCIAL STATEMENTS. The Company will
furnish to ARS:
(a) as soon as available and in any event within 30 days after
the end of each of the Company's fiscal quarters which ends prior to the
Effective Time, an unaudited balance sheet of the Acquired Business as
of the end of that fiscal quarter and the related statements of income
or operations, cash flows and stockholders' or other owners' equity for
that fiscal quarter and for the period of the Company's fiscal year
ended with that quarter, in each case (i) setting forth in comparative
form the figures for the corresponding portion of the Company's previous
fiscal year and (ii) prepared in accordance with GAAP applied on basis
consistent (A) throughout the periods indicated (excepting footnotes)
and (B) with the basis on which the Initial Financial Statements
including the Current Balance Sheet were prepared; and
(b) if requested by ARS and promptly following any such request,
such summary operating or other financial information of the Acquired
Business as of the end of either the first or second fiscal month in any
of the Company's fiscal quarters as ARS may request.
Section 4.09. TERMINATION OF PLANS. If requested by ARS, the
Company will, or will cause the applicable Company Subsidiary to, if permitted
by all applicable Governmental Requirements to do so, terminate each Plan
identified in Schedule 2.25 as a "Plan To Be Terminated Prior to the Effective
Time" prior to the Effective Time.
Section 4.10. DISPOSITION OF UNWANTED ASSETS. The Company will
make all arrangements and take all such actions as are necessary and
satisfactory to ARS to dispose, prior to the Effective Time, of those assets of
the Company or the Company Subsidiaries which are listed in Schedule 4.10.
Section 4.11. HSR ACT MATTERS. If ARS shall determine that
filings pursuant to and under the HSR Act are necessary or appropriate in
connection with the effectuation of the Acquisition, and advises the Company in
writing of that determination, the Company promptly will compile and file (or
will cause its "ultimate parent entity" (as determined for purposes of the HSR
Act) to file) under the HSR Act such information respecting it as the HSR Act
requires of an Entity
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to be acquired, and the expiration or termination of the applicable waiting
period and any extension thereof under the HSR Act shall be deemed a condition
precedent set forth in Section 5.01.
Section 4.12. NYSE LISTING. ARS shall use its reasonable business
efforts to have the shares of ARS Common Stock issuable in the Acquisition, if
any, approved for listing on the New York Stock Exchange, subject to official
notice of issuance, at or prior to the Effective Time.
ARTICLE V
CONDITIONS TO CLOSING AND CONSUMMATION
Section 5.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY7.01.
THE CLOSING AND CERTAIN CONDITIONS. The obligation of each party hereto to take
the actions contemplated to be taken by that party at the Closing is subject to
the satisfaction on or before the Closing Date of each of the following
conditions or waiver pursuant to Section 10.04:
(a) NO LITIGATION. No Litigation shall be pending on the Closing
Date to restrain, prohibit or otherwise interfere with, or to obtain
material damages or other relief from ARS or any Subsidiary of ARS in
connection with, the consummation of the Acquisition;
(b) GOVERNMENTAL APPROVALS. All Governmental Approvals (other
than the acceptance for filing of the Certificates of Merger, if any)
required to be obtained by any of the Company, ARS and ARS Sub in
connection with the consummation of the Acquisition shall have been
obtained; and
(c) NYSE LISTING. All shares of ARS Common Stock issuable in the
Acquisition, if any, shall have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance.
Section 5.02. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS. The obligations of the Company and each Stockholder with
respect to actions to be taken by them at or before the Closing Date and the
actions to be taken on the Closing Date are subject to the satisfaction, or the
waiver by the Company on behalf of itself and each Stockholder pursuant to
Section 10.04 on or before the Closing Date, of (a) all the conditions set forth
in Schedule 5.02, if any, and (b) the condition that all the representations and
warranties of ARS in Article III shall be true and correct as of the Closing
Date as though made at that time.
Section 5.03. CONDITIONS TO THE OBLIGATIONS OF ARS AND ARS SUB.
The obligations of ARS and ARS Sub with respect to actions to be taken by them
at or before the Closing Date are subject to the satisfaction, or the waiver by
ARS pursuant to Section 10.04, on or before the Closing Date of (a) all the
conditions set forth in Schedule 5.03, if any, and (b) all the following
conditions:
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(1) REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the Stockholders and the Company in Articles I and II and
in the Special Provisions, if any, shall be true and correct as of the
Closing as though made at that time;
(2) DELIVERY OF DOCUMENTS. The Stockholders and the Company shall
have delivered to ARS:
(A) a Company officer's certificate, in the form of
Exhibit 5.03-1 signed by the Company's President, respecting the
representations and warranties of the Stockholders and the
Company in Articles I and II and in the Special Provisions, if
any, and compliance with the covenants of the Stockholders and
the Company in Article IV and in the Special Provisions, if any;
(B) a Company secretary's certificate, in substantially
the form of Exhibit 5.03-2 signed by the Company's Secretary,
respecting the Charter Documents of the Company, resolutions of
the Board of Directors and stockholders of the Company and the
incumbency and signatures of certain officers of the Company;
(C) from each Stockholder, a certificate to the effect
that no withholding is required under Section 1445 of the Code
and in the form of Exhibit 5.03-3, with the blanks appropriately
filled, duly executed and delivered by that Stockholder;
(D) an opinion dated the Effective Date and addressed to
ARS from Counsel for the Company and the Stockholders
substantially in the form of Exhibit 5.03-4;
(E) from each officer and director of the Company and each
Company Subsidiary, if any, a notice of resignation substantially
in the form of Exhibit 5.03-5;
(F) from each Stockholder receiving ARS Common Stock as
Acquisition Consideration, if any, a lockup agreement
substantially in the form of Exhibit 5.03-6; and
(G) for each of the Company and the Company Subsidiaries,
a certificate, dated within 15 days prior to the Closing Date,
duly issued by the appropriate Governmental Authorities in its
Organization State and in each other jurisdiction listed for it
in Schedule 2.02, showing it to be in good standing and
authorized to do business in its Organization State and those
other jurisdictions and that all state franchise and/or income
tax returns and taxes due by it in its Organization State and
those other jurisdictions for all periods prior to the Closing
Date have been filed and paid.
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ARTICLE VI
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 6.01. PREPARATION AND FILING OF TAX RETURNS. Each party
hereto will, and will cause its Affiliates to, provide to each of the other
parties hereto such cooperation and information as any of them reasonably may
request in filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any audit or
other proceeding in respect of Taxes. This cooperation and information shall
include providing copies of all relevant portions of the relevant Returns,
together with such accompanying schedules and work papers, documents relating to
rulings or other determinations by Taxing Authorities and records concerning the
ownership and Tax bases of property as are relevant which a party possesses.
Each party will make its employees, if any, reasonably available on a mutually
convenient basis at its cost to provide an explanation of any documents or
information so provided. Subject to the preceding sentence, each party required
to file Returns pursuant to this Agreement shall bear all costs attributable to
the preparation and filing of those Returns.
Section 6.02. REMOVAL OF GUARANTIES. ARS will use its reasonable
best efforts to ensure that, within 90 days after the Effective Time, either (a)
the Stockholder Guaranties, if any, listed in Schedule 6.02 are terminated or
(b) the Indebtedness to which those Guaranties relate is retired; provided,
however, that if ARS is unable to effect the termination of any of those
Guaranties or the retirement of any of that Indebtedness, ARS will indemnify and
holds harmless each Stockholder from and against any liabilities, claims,
demands, judgments, losses, costs, damages or expenses whatsoever (including
reasonable attorneys' fees) that such Stockholder may sustain, suffer or incur
and that result from or arise out of or relate to that Guaranty or that
Indebtedness, as the case may be.
ARTICLE VII
INDEMNIFICATION
Section 7.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the
provisions of this Agreement will survive the Closing and Effective Time
indefinitely notwithstanding any investigation at any time made by or on behalf
of any party hereto or the provision of any Supplemental Information pursuant to
Section 4.07, provided that the representations and warranties set forth in (or
deemed by any of the Special Provisions to be set forth in) Articles I, II and
III and in any certificate delivered in connection herewith with respect to any
of those representations and warranties will terminate and expire on the second
anniversary of the Effective Date, except as follows: (a) the representations
and warranties of the Stockholders which relate expressly or by necessary
implication to Taxes, ERISA or other employment or labor matters will survive
until the expiration of the applicable statutes of limitations (including all
periods of extension and tolling); (b) the representations and warranties of the
Stockholders which relate expressly or by necessary
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implication to the environment or Environmental Laws will survive for a period
of five years from the Effective Date; (c) the representatives and warranties of
the Stockholders set forth in Sections 1.01 and 1.02 will survive forever; (d)
if the Company is not included in the Acquired Business, the representations and
warranties of the Company specified in Schedule 7.01, if any, will survive
forever and the representations and warranties of the Company in Article II will
expire as when the representations and warranties of the Stockholders to the
same effect expire; and (e) if the Company is included in the Acquired Business,
the representations and warranties of the Company will terminate and expire at
the Effective Time. After a representation and warranty has terminated and
expired, no indemnification will or may be sought pursuant to this Article VII
on the basis of that representation and warranty by any Person who would have
been entitled pursuant to this Article VII to indemnification on the basis of
that representation and warranty prior to its termination and expiration,
provided that: (a) the amount of that claim, if against the Company or any
Stockholder, shall be taken into account in determining whether the aggregate
amount of all claims against the Company or that Stockholder has exceeded the
Threshold Amount or that Stockholder's Pro Rata Share of the Threshold Amount
for purposes of Section 7.06; and (b) in the case of each representation and
warranty that will terminate and expire as provided in this Section 7.01, no
claim presented in writing for indemnification pursuant to this Article VII on
the basis of that representation and warranty prior to its termination and
expiration will be affected in any way by that termination and expiration.
Section 7.02. INDEMNIFICATION OF ARS INDEMNIFIED PARTIES. (a)
Subject to the applicable provisions of Sections 7.01 and 7.06, the Stockholders
covenant and agree that they, jointly and severally, will indemnify each ARS
Indemnified Party against, and hold each ARS Indemnified Party harmless from and
in respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (i) any breach of the representations and
warranties of the Stockholders or the Company set forth herein (other than in
Article I) or in certificates delivered in connection herewith (other than in
respect of certificates relating only to the representations and warranties in
Article I), or (ii) any nonfulfillment of any covenant or agreement on the part
of the Stockholders or the Company under this Agreement (each such Damage Claim
and each Damage Claim described in Section 7.02(b) being an "ARS Indemnified
Loss").
(b) Each Stockholder, severally and not jointly with any other
Person, covenants and agrees that he will indemnify each ARS Indemnified Party
against, and hold each ARS Indemnified Party harmless from and in respect of,
all Damage Claims that arise from, are based on or relate or otherwise are
attributable to (i) any breach of the representations and warranties of that
Stockholder solely as to that Stockholder set forth in Article I or in
certificates delivered by that Stockholder and relating to those representations
and warranties or (ii) any nonfulfillment of any several agreement on the part
of that Stockholder in this Agreement.
Section 7.03. INDEMNIFICATION OF STOCKHOLDER INDEMNIFIED PARTIES.
ARS covenants and agrees that it will indemnify each Stockholder Indemnified
Party against, and hold each Stockholder Indemnified Party harmless from and in
respect of, all Damage Claims that arise from, are based on or relate or
otherwise are attributable to (a) any breach by ARS of its representations
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and warranties set forth herein or in its certificates, if any, delivered to the
Company or the Stockholders in connection herewith or (b) any nonfulfillment of
any covenant or agreement on the part of ARS or ARS Sub in this Agreement (each
such Damage Claim being a "Stockholder Indemnified Loss").
Section 7.04. CONDITIONS OF INDEMNIFICATION. (a) All claims for
indemnification under this Agreement shall be asserted and resolved as follows
in this Section 7.04.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party claim or
claims asserted against the Indemnified Party ("Third Party Claim") that could
give rise to a right of indemnification under this Agreement and (ii) transmit
to the Indemnifying Party a written notice ("Claim Notice") describing in
reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), an estimate of the amount of damages
attributable to the Third Party Claim to the extent feasible (which estimate
shall not be conclusive of the final amount of that claim) and the basis for the
Indemnified Party's request for indemnification under this Agreement. Except as
set forth in Section 7.01, the failure to promptly deliver a Claim Notice shall
not relieve the Indemnifying Party of its obligations to the Indemnified Party
with respect to the related Third Party Claim except to the extent that the
resulting delay is materially prejudicial to the defense of that claim. Within
15 days after receipt of any Claim Notice (the "Election Period"), the
Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Article VII with respect to that Third Party Claim and (ii) if the
Indemnifying Party does not dispute its potential liability to the Indemnified
Party with respect to that Third Party Claim, whether the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to defend the
Indemnified Party against that Third Party Claim.
(c) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 7.04(c), and the Indemnified
Party will furnish the Indemnifying Party with all information in its possession
with respect to that Third Party Claim and otherwise cooperate with the
Indemnifying Party in the defense of that Third Party Claim; provided, however,
that the Indemnifying Party shall not enter into any settlement with respect to
any Third Party Claim that purports to limit the activities of, or otherwise
restrict in any way, any Indemnified Party or any Affiliate of any Indemnified
Party without the prior consent of that Indemnified Party (which consent may be
withheld in the sole discretion of that Indemnified Party). The Indemnified
Party is hereby authorized, at the sole cost and expense of the Indemnifying
Party, to file, during the Election Period, any motion, answer or other
pleadings that the Indemnified Party shall deem necessary or appropriate to
protect its interests or those of the Indemnifying Party. The Indemnified
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Party may participate in, but not control, any defense or settlement of any
Third Party Claim controlled by the Indemnifying Party pursuant to this Section
7.04(c) and will bear its own costs and expenses with respect to that
participation; provided, however, that if the named parties to any such action
(including any impleaded parties) include both the Indemnifying Party and the
Indemnified Party, and the Indemnified Party has been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party, then the Indemnified
Party may employ separate counsel at the expense of the Indemnifying Party, and,
on its written notification of that employment, the Indemnifying Party shall not
have the right to assume or continue the defense of such action on behalf of the
Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Article
VII, (B) elects not to defend the Indemnified Party pursuant to Section 7.04(c)
or (C) fails to notify the Indemnified Party that the Indemnifying Party elects
to defend the Indemnified Party pursuant to Section 7.04(c) or (ii) elects to
defend the Indemnified Party pursuant to Section 7.04(c) but fails diligently
and promptly to prosecute or settle the Third Party Claim, then the Indemnified
Party shall have the right to defend, at the sole cost and expense of the
Indemnifying Party (if the Indemnified Party is entitled to indemnification
hereunder), the Third Party Claim by all appropriate proceedings, which
proceedings shall be promptly and vigorously prosecuted by the Indemnified Party
to a final conclusion or settled. The Indemnified Party shall have full control
of such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party to
the effect that the Indemnifying Party disputes its potential liability to the
Indemnified Party under this Article VII and if that dispute is resolved in
favor of the Indemnifying Party, the Indemnifying Party shall not be required to
bear the costs and expenses of the Indemnified Party's defense pursuant to this
Section 7.04 or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses of such
litigation. The Indemnifying Party may participate in, but not control, any
defense or settlement controlled by the Indemnified Party pursuant to this
Section 7.04(d), and the Indemnifying Party shall bear its own costs and
expenses with respect to that participation.
(e) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within 15 days from its receipt of the Indemnity Notice
that the Indemnifying Party disputes the claim specified by the Indemnified
Party in the Indemnity Notice, that claim shall be deemed a liability of the
Indemnifying Party hereunder. If the Indemnifying Party has timely disputed that
claim, as provided above, that dispute shall be resolved by proceedings in an
appropriate court of competent jurisdiction if the parties do not reach a
settlement of that dispute within 30 days after notice of that dispute is given.
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(f) Payments of all amounts owing by an Indemnifying Party
pursuant to this Article VII relating to a Third Party Claim shall be made
within 30 days after the latest of (i) the settlement of that Third Party Claim,
(ii) the expiration of the period for appeal of a final adjudication of that
Third Party Claim or (iii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement in respect of that Third Party Claim. Payments of all
amounts owing by an Indemnifying Party pursuant to Section 7.04(e) shall be made
within 30 days after the later of (i) the expiration of the 30-day Indemnity
Notice period or (ii) the expiration of the period for appeal of a final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement.
Section 7.05. REMEDIES NOT EXCLUSIVE. The remedies provided in
this Agreement shall not be exclusive of any other rights or remedies available
to any other party, either at law or in equity.
Section 7.06. LIMITATIONS ON INDEMNIFICATION. (a) Notwithstanding
the provisions of Section 7.02(a), neither the Company nor any of the
Stockholders shall be required to indemnify or hold harmless any of the ARS
Indemnified Parties on account of any ARS Indemnified Loss under Section 7.02(a)
unless the liability of the Company and the Stockholders in respect of that ARS
Indemnified Loss, when aggregated with the liability of the Company and the
Stockholders in respect of all ARS Indemnified Losses under Section 7.02(a),
exceeds, and only to the extent the aggregate amount of all those ARS
Indemnified Losses does exceed, the Threshold Amount. In no event shall (i) the
aggregate joint and several liability of the Company and the Stockholders under
this Agreement, including Section 7.02(a), exceed the Ceiling Amount or (ii) the
aggregate liability of each Stockholder under this Agreement, including Sections
7.02(a) and 7.02(b), exceed that Stockholder's Pro Rata Share of the Ceiling
Amount. For purposes of determining the amount of ARS Indemnified Losses, no
effect will be given to any resulting Tax benefit to any ARS Indemnified Party.
(b) Notwithstanding the provisions of Section 7.03, ARS shall not
be required to indemnify or hold harmless any of the Stockholder Indemnified
Parties on account of any Stockholder Indemnified Loss unless the liability of
ARS in respect of that Stockholder Indemnified Loss, when aggregated with the
liability of ARS in respect of all Stockholder Indemnified Losses, exceeds, and
only to the extent the aggregate amount of all those Stockholder Indemnified
Losses does exceed, the Threshold Amount. In no event shall ARS be liable under
this Agreement, including Section 7.04, for any amount in excess of the Ceiling
Amount. For purposes of determining the amount of Stockholder Indemnified
Losses, no effect will be given to any resulting Tax benefit to any Stockholder
Indemnified Party.
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ARTICLE VIII
LIMITATIONS ON COMPETITION
Section 8.01. PROHIBITED ACTIVITIES. Each Stockholder agrees,
severally and not jointly with any other Person, that he will not, during the
period beginning on the date hereof and ending on the third anniversary of the
Closing Date, directly or indirectly, for any reason, for his own account or on
behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as
an employee, independent contractor, consultant or advisor, or as a
sales representative or distributor of any kind, in any business selling
any products or providing any services in competition with the Acquired
Business or ARS or any Subsidiary of ARS (ARS and its Subsidiaries
collectively being "ARS" for purposes of this Article VIII) in any area
within a radius of 100 miles of each service facility in which the
Acquired Business was engaged in business on the date hereof or
immediately prior to the Effective Date (each such area being a
"Territory");
(b) call on any natural person who is at that time employed by
the Acquired Business or ARS in any managerial capacity with the purpose
or intent of attracting that person from the employ of the Acquired
Business or ARS, provided that the Stockholder may call on and hire any
of his family members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Acquired
Business or ARS within any Territory (i) for the purpose of soliciting
or selling any product or service in competition with the Acquired
Business or ARS in that Territory and (ii) with the knowledge of that
customer relationship; or
(d) call on any Entity which has been called on by ARS in
connection with a possible acquisition by ARS, with the knowledge of
that Entity's status as such an acquisition candidate, for the purpose
of acquiring that Entity or arranging the acquisition of that Entity by
any Person other than ARS.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 5% of the outstanding capital stock of a competing Entity if
that class of capital stock is listed on a national stock exchange or included
in the Nasdaq National Market. For purposes hereof and the respective tax
reporting positions of the parties hereto, each party hereto agrees that the
percentage of the cash portion of the Acquisition Consideration to be received
by each Stockholder pursuant to Paragraph 2 which equals 1% of that
Stockholder's Pro Rata Share of the Ceiling Amount will represent, and be
received as, consideration for that Stockholder's agreement to observe the
covenants in this Section 8.01.
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Section 8.02. DAMAGES. Because of the difficulty of measuring
economic losses to ARS as a result of any breach by a Stockholder of his
covenants in Section 8.01, and because of the immediate and irreparable damage
that could be caused to ARS for which it would have no other adequate remedy,
each Stockholder agrees that ARS may enforce the provisions of Section 8.01 by
injunctions and restraining orders against that Stockholder if he breaches any
of those provisions.
Section 8.03. REASONABLE RESTRAINT. The parties hereto each agree
that Sections 8.01 and 8.02 impose a reasonable restraint on the Stockholders in
light of the activities and business of ARS on the date hereof, the current
business plans of ARS and the investment, if any, by each Stockholder in ARS as
a result of the Acquisition.
Section 8.04. SEVERABILITY; REFORMATION. The covenants in this
Article VIII are severable and separate, and the unenforceability of any
specific covenant in this Article VIII is not intended by any party hereto to,
and shall not, affect the provisions of any other covenant in this Article VIII.
If any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth in Section 8.01 are unreasonable as applied
to any Stockholder, the parties hereto, including that Stockholder, acknowledge
their mutual intention and agreement that those restrictions be enforced to the
fullest extent the court deems reasonable, and thereby shall be reformed to that
extent as applied to that Stockholder and any other Stockholder similarly
situated.
Section 8.05. INDEPENDENT COVENANT. All the covenants in this
Article VIII are intended by each party hereto to, and shall, be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of any Stockholder against ARS,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by ARS of any covenant in this Article VIII. It is
specifically agreed that the period specified in Section 8.01 shall be computed
in the case of each Stockholder by excluding from that computation any time
during which that Stockholder is in violation of any provision of Section 8.01.
The covenants contained in this Article VIII shall not be affected by any breach
of any other provision hereof by any party hereto.
Section 8.06. MATERIALITY. The Company and each Stockholder,
severally and not jointly with any other Person, hereby agree that this Article
VIII is a material and substantial part of the transactions contemplated hereby.
ARTICLE IX
DEFINITIONS AND DEFINITIONAL PROVISIONS
Section 9.01. DEFINED TERMS. As used in this Agreement, the
following terms have the meanings assigned to them below:
"ACQUIRED BUSINESS" has the meaning specified in Paragraph 1.
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"ACQUISITION" has the meaning specified in the Preliminary
Statement.
"ACQUISITION CONSIDERATION" has the meaning specified in
Paragraph 2.
"AGREEMENT" means this Agreement, including all attached
Schedules, Annexes, Addenda and Exhibits, as each of the same may be
amended, modified or supplemented from time to time pursuant to the
provisions hereof or thereof.
"AFFILIATE" means, as to any specified Person, any other Person
that, directly or indirectly through one or more intermediaries or
otherwise, controls, is controlled by or is under common control with
the specified Person. As used in this definition, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person (whether through
ownership of Capital Stock of that Person, by contract or otherwise).
"AIR CONDITIONING AND REFRIGERATION CONTRACTING" means the
design, installation, construction, maintenance, service, repair,
alteration or modification of any appliance, equipment or other product
used in environmental air conditioning or filtering, commercial
refrigeration or process cooling or heating systems.
"ARS" means American Residential Services, Inc., a Delaware
corporation.
"ARS COMMON STOCK" means the common stock, par value $.001 per
share, of ARS.
"ARS INDEMNIFIED LOSS" has the meaning specified in Section 7.02.
"ARS INDEMNIFIED PARTY" means ARS and its Affiliates and each of
their respective officers, directors, employees, agents and counsel;
provided, however, that no Person who indemnifies ARS Indemnified
Parties in this Agreement in his capacity as a Stockholder will be an
ARS Indemnified Party for purposes of this Agreement.
"ARS SUB" means the Subsidiary of ARS, if any, which is a party
to this Agreement.
"CAPITAL STOCK" means, with respect to: (a) any corporation, any
share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in that corporation; and (b) any
other Entity, any share, membership or other percentage interest, unit
of participation or other equivalent (however designated) of an equity
interest in that Entity.
"CEILING AMOUNT" has the meaning specified in Paragraph 1.
"CERTIFICATE OF MERGER" means, if the Acquisition is effected by
means of a Merger, (a) the articles or certificate of merger respecting
that Merger which contains the information
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required by the laws of Surviving Corporation's Organization State to
effect that Merger and, if the Organization State of any Entity merged
into the Surviving Corporation in that Merger is not the Organization
State of the Surviving Corporation, (b) the articles or certificate of
merger respecting that Merger which contains the information required by
the laws of that merged Entity's Organization State to effect that
Merger.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980.
"CHARTER DOCUMENTS" means, with respect to any Entity at any
time, in each case as amended, modified and supplemented at that time,
the articles or certificate of formation, incorporation or organization
(or the equivalent organizational documents) of that Entity, (b) the
bylaws or limited liability company agreement or regulations (or the
equivalent governing documents) of that Entity and (c) each document
setting forth the designation, amount and relative rights, limitations
and preferences of any class or series of that Entity's Capital Stock or
of any rights in respect of that Entity's Capital Stock.
"CLAIM NOTICE" has the meaning specified in Section 7.04.
"CLOSING" has the meaning specified in Paragraph 3.
"CLOSING DATE" has the meaning specified in Paragraph 1.
"CODE" means the Internal Revenue Code of 1986.
"COMPANY" has the meaning specified in Paragraph 1.
"COMPANY CAPITAL STOCK" has the meaning specified in the
Paragraph 1.
"COMPANY ERISA BENEFIT PLAN" has the meaning specified in Section
2.25.
"COMPANY ERISA PENSION PLAN" has the meaning specified in Section
2.25.
"COMPANY SUBSIDIARY" means at any time any Entity that is a
Subsidiary of the Company at that time.
"CONFIDENTIAL INFORMATION" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales
programs, capital expenditure projects, cost summaries, pricing
formulae, contract analyses, financial information, projections,
confidential filings with any Governmental Authority and all other
confidential, nonpublic concepts, methods of doing
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business, ideas, materials or information prepared or performed for, by
or on behalf of that Person.
"COUNSEL FOR ARS" means Xxxx X. Held, Esq., in his capacity as
General Counsel and an officer of ARS.
"CURRENT BALANCE SHEET" has the meaning specified in Paragraph 1.
"CURRENT BALANCE SHEET DATE" has the meaning specified in
Paragraph 1.
"DAMAGE" to any specified Person means any cost, damage
(including any consequential, exemplary, punitive or treble damage) or
expense (including reasonable fees and actual disbursements by
attorneys, consultants, experts or other Representatives and Litigation
costs) to, any fine of or penalty on or any liability (including loss of
earnings or profits) of any other nature of that Person.
"DAMAGE CLAIM" means, as asserted (a) against any specified
Person, any claim, demand or Litigation made or pending against the
specified Person for Damages to any other Person, or (b) by the
specified Person, any claim or demand of the specified Person against
any other Person for Damages to the specified Person.
"EFFECTIVE DATE" has the meaning specified in Paragraph 1.
"EFFECTIVE TIME" has the meaning specified in Paragraph 2.
"ELECTION PERIOD" has the meaning specified in Section 7.04.
"EMPLOYEE POLICIES AND PROCEDURES" means at any time all employee
manuals and all material policies, procedures and work-related rules
that apply at that time to any employee, nonemployee director or officer
of, or any other natural person performing consulting or other
independent contractor services for, the Company or any Company
Subsidiary.
"EMPLOYMENT AGREEMENT" means at any time any (a) agreement to
which the Company or any Company Subsidiary is a party which then
relates to the direct or indirect employment or engagement, or arises
from the past employment or engagement, of any natural person by the
Company or any Company Subsidiary, whether as an employee, a nonemployee
officer or director, a consultant or other independent contractor, a
sales representative or a distributor of any kind, including any
employee leasing or service agreement and any noncompetition agreement,
and (b) agreement between the Company or any Company Subsidiary and any
Person which arises from the sale of a business by that Person to the
Company or any Company Subsidiary and limits that Person's competition
with the Company or any Company Subsidiary.
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"ENTITY" means any sole proprietorship, corporation, partnership
of any kind having a separate legal status, limited liability company,
business trust, unincorporated organization or association, mutual
company, joint stock company or joint venture.
"ENVIRONMENTAL LAWS" means any and all Governmental Requirements
relating to the environment or worker health or safety, including
ambient air, surface water, land surface or subsurface strata, or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes (including Solid Wastes, Hazardous Wastes or Hazardous
Substances) or noxious noise or odor into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, recycling, removal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances or wastes (including petroleum, petroleum distillates,
asbestos or asbestos-containing material, polychlorinated biphenyl's,
chlorofluorocarbons (including chlorofluorocarbon-12) or hydrochloro-
fluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA AFFILIATE" means, with respect to any specified Person at
any time, any other Person, including an Affiliate of the specified
Person, that is, or at any time within six years of that time was, a
member of any ERISA Group of which the specified Person is or was a
member at the same time.
"ERISA AFFILIATE PENSION PLAN" has the meaning specified in
Section 2.25.
"ERISA EMPLOYEE BENEFIT PLAN" means any "employee benefit plan"
as defined in Section 3(3) of ERISA and includes any ERISA Pension
Benefit Plan.
"ERISA GROUP" means any "group of organizations" within the
meaning of Section 414(b), (c), (m) or (o) of the Code or any
"controlled group" as defined in Section 4001(a)(14) of ERISA.
"ERISA PENSION BENEFIT PLAN" means any "employee pension benefit
plan", as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code (excluding any Multiemployer Plan).
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FINANCIAL STATEMENTS" means the Initial Financial Statements and
the other financial statements of the Company and the Company
Subsidiaries, if any, delivered to ARS pursuant to Section 4.08 prior to
the Effective Time.
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"GAAP" means generally accepted accounting principles and
practices in the United States as in effect from time to time which have
been concurred in by Xxxxxx Xxxxxxxx LLP and have been or are applied on
a basis consistent (except for changes concurred in by Xxxxxx Xxxxxxxx
LLP) with the most recent Financial Statements delivered to ARS prior to
the Effective Time.
"GOVERNMENTAL APPROVAL" means at any time any authorization,
consent, approval, permit, franchise, certificate, license, implementing
order or exemption of, or registration or filing with, any Governmental
Authority, including any certification or licensing of a natural person
to engage in a profession or trade or a specific regulated activity, at
that time.
"GOVERNMENTAL AUTHORITY" means (a) any national, state, county,
municipal or other government, domestic or foreign, or any agency,
board, bureau, commission, court, department or other instrumentality of
any such government, or (b) any Person having the authority under any
applicable Governmental Requirement to assess and collect Taxes for its
own account.
"GOVERNMENTAL REQUIREMENT" means at any time (a) any law,
statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, writ, edict, award, authorization or other requirement of
any Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or license
issued by any Governmental Authority or resulting from binding
arbitration, including any requirement under common law, at that time.
"GUARANTY" means, for any specified Person, without duplication,
any liability, contingent or otherwise, of that Person guaranteeing or
otherwise becoming liable for any obligation of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any liability of the specified Person, direct or indirect, (a)
to purchase or pay (or advance or supply funds for the purchase or
payment of) that obligation or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of that
obligation, (b) to purchase property, securities or services for the
purpose of assuring the owner of that obligation of its payment or (c)
to maintain working capital, equity capital or other financial statement
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay that obligation; provided, that the term
"Guaranty" does not include endorsements for collection or deposit in
the ordinary course of the endorser's business.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976.
"INDEBTEDNESS" of any Person means, without duplication, (a) any
liability of that Person (i) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds,
letters of credit, banker's acceptances and similar instruments), for
the deferred purchase
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price of property or services or arising under conditional sale or other
title retention agreements, other than trade payables arising in the
ordinary course of business, (ii) evidenced by notes, bonds, debentures
or similar instruments, (iii) in respect of capital leases or (iv) in
respect of interest rate protection agreements, (b) any liability
secured by any Lien upon any property or assets of that Person (or upon
any revenues, income or profits of that Person therefrom), whether or
not that Person has assumed that liability or otherwise become liable
for the payment thereof or (c) any liability of others of the type
described in the preceding clause (a) or (b) in respect of which that
Person has incurred, assumed or acquired a liability by means of a
Guaranty.
"INDEMNITY NOTICE" has the meaning specified in Section 7.04.
"INDEMNIFIED PARTY" has the meaning specified in Section 7.04.
"INDEMNIFYING PARTY" has the meaning specified in Section 7.04.
"INFORMATION" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements)
and (b) summaries of unwritten agreements, arrangements, contracts,
plans, policies, programs or practices or of unwritten amendments or
modifications of, supplements to or waivers under any of the foregoing
documents.
"INITIAL FINANCIAL STATEMENTS" has the meaning specified in
Paragraph 1.
"IRS" means the Internal Revenue Service.
"LIEN" means, with respect to any property or asset of any Person
(or any revenues, income or profits of that Person therefrom) (in each
case whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise), (a) any
mortgage, lien, security interest, pledge, attachment, levy or other
charge or encumbrance of any kind thereupon or in respect thereof or (b)
any other arrangement under which the same is transferred, sequestered
or otherwise identified with the intention of subjecting the same to, or
making the same available for, the payment or performance of any
liability in priority to the payment of the ordinary, unsecured
creditors of that Person, including any "adverse claim" (as defined in
the applicable Uniform Commercial Code) in the case of any Capital
Stock. For purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to that asset.
"LITIGATION" means any action, case, proceeding, claim,
grievance, suit or investigation or other proceeding conducted by or
pending before any Governmental Authority or any arbitration proceeding.
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"MATERIAL" means, as applied to any Entity or the Acquired
Business, material to the business, operations, property or assets,
liabilities, financial condition or results of operations of that Entity
and its Subsidiaries considered as a whole or the Acquired Business, as
the case may be.
"MATERIAL ADVERSE EFFECT" means, with respect to the consequences
of any fact or circumstance (including the occurrence or non-occurrence
of any event) to the Acquired Business, that such fact or circumstance
has caused, is causing or will cause, directly, indirectly or
consequentially, singly or in the aggregate with other facts and
circumstances, any Damages in excess of the Threshold Amount.
"MATERIAL AGREEMENT" of any Entity means any contract or
agreement (a) to which that Entity or any of its Subsidiaries is a
party, or by which that Entity or any of its Subsidiaries is bound or to
which any property or assets of that Entity or any of its Subsidiaries
is subject and (b) which is Material to that Entity.
"MERGER" means a transaction as a result of which the Acquisition
is effected and in which either (a) ARS Sub is merged with or into the
Company or (b) the Company is merged with or into ARS or ARS Sub, as the
case may be.
"MULTIEMPLOYER PLAN" means a "multiemployer" plan as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA.
"ORGANIZATION STATE" means, as applied to (a) any corporation,
its state or other jurisdiction of incorporation, (b) any limited
liability company or limited partnership, the state or other
jurisdiction under whose laws it is organized and existing in that legal
form, and (c) any other Entity, the state or other jurisdiction whose
laws govern that Entity's internal affairs.
"OTHER COMPENSATION PLAN" means any compensation arrangement,
plan, policy, practice or program established, maintained or sponsored
by the Company or any Company Subsidiary, or to which the Company or any
Company Subsidiary contributes, on behalf of any of its employees,
nonemployee directors or officers or other natural persons performing
consulting or other independent contractor services for the Company or
any Company Subsidiary, (a) including all such arrangements, plans,
policies, practices or programs providing for severance pay, deferred
compensation, incentive, bonus or performance awards or the actual or
phantom ownership of any Capital Stock or options, warrants or rights to
acquire Capital Stock of the Company or any Company Subsidiary, but (b)
excluding all Company ERISA Pension Plans and Employment Agreements.
"PERMITTED LIENS" means, as applied to the property or assets of
any Person (or any revenues, income or profits of that Person
therefrom): (a) Liens for Taxes if the same are not at the time due and
delinquent; (b) Liens of carriers, warehousemen, mechanics, laborers and
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materialmen for sums not yet due; (c) Liens incurred in the ordinary
course of that Person's business in connection with workmen's
compensation, unemployment insurance and other social security
legislation (other than pursuant to ERISA or Section 412(n) of the
Code); (d) Liens incurred in the ordinary course of that Person's
business in connection with deposit accounts or to secure the
performance of bids, tenders, trade contracts, statutory obligations,
surety and appeal bonds, performance and return-of-money bonds and other
obligations of like nature; (e) easements, rights-of-way, reservations,
restrictions and other similar encumbrances incurred in the ordinary
course of that Person's business or existing on property and not
materially interfering with the ordinary conduct of that Person's
business or the use of that property; (f) defects or irregularities in
that Person's title to its real properties which do not materially (i)
diminish the value of the surface estate or (ii) interfere with the
ordinary conduct of that Person's business or the use of any of such
properties; (g) any interest or title of a lessor of assets being leased
by any Person pursuant to any capital lease disclosed in Schedule 2.19
or any lease that, pursuant to GAAP, would be accounted for as an
operating lease; and (h) Liens securing purchase money Indebtedness
disclosed in Schedule 2.18 or 2.19 so long as such Liens do not attach
to any property or assets other than the properties or assets purchased
with the proceeds of such Indebtedness.
"PERSON" means any natural person, Entity, estate, trust, union
or employee organization or Governmental Authority or, for the purpose
of the definition of "ERISA Affiliate" any trade or business.
"PLAN" has the meaning specified in Section 2.26.
"PLUMBING" means the installation, repair, service or maintenance
of any piping, fixtures, appurtenances or appliances in and about
buildings where any natural person or persons live, work or assemble for
a supply of gas, water or liquids, or any combination thereof, or for
the disposal of waste water or sewage.
"PLUMBING LAWS" means any and all Governmental Requirements
related to Plumbing, such as Governmental Requirements relating to the
planning, superintending, installation, alteration, repair, service and
renovation of any pipeline, fixtures, appurtenances, appliances or drain
or waste pipes, and including Governmental Requirements relating to the
licensing of natural persons as plumbers of any classification.
"PROFESSIONAL CODES" means any and all Governmental Requirements
relating to the licensing or other regulation of the business of Air
Conditioning and Refrigeration Contracting, the installation, repair or
replacement of electrical appliances, equipment and systems, Plumbing or
other residential or commercial on-site services, including building,
electric and mechanical codes, Plumbing Laws and Governmental
Requirements relating to any Person who issues and performs, or arranges
to perform, services pursuant to any agreement or contract whereby, for
a fee, a Person undertakes, for a specified period of time, to maintain,
repair or replace all or any part of the structural components, the
appliances or
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the electrical, plumbing, heating, cooling or air-conditioning systems
on any residential or commercial property.
"PROHIBITED TRANSACTION" means any transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt
under Section 4975 of the Code or Section 408 of ERISA.
"PROPRIETARY RIGHTS" means (a) patents, applications for patents
and patent rights, (b) in each case, whether registered, unregistered or
under pending registration, trademark rights, trade names, trade name
rights, corporate names, business names, trade styles or dress, service
marks and logos and other trade designations and copyrights and (c), in
the case of the Company or any Company Subsidiary, all agreements
relating to the technology, know-how or processes used in any business
of the Company or any Company Subsidiary.
"PRO RATA SHARE" means for each Stockholder the fraction
expressed as a percentage and set forth either in Paragraph 1 or in a
Schedule to Paragraph 2, (a) the numerator of which is the number of
shares of outstanding Company Capital Stock owned by that Person, as set
forth in a Schedule to Paragraph 2, and (b) the denominator of which is
the total number of shares of outstanding Company Capital Stock owned by
all Stockholders as set forth in a Schedule to Paragraph 2.
"PURCHASER REPRESENTATIVE" means a "purchaser representative" as
defined in Securities Act Rule 501(h).
"QUALIFIED PLANS" has the meaning specified in Section 2.26.
"RELATED PARTY AGREEMENT" means any contract or other agreement,
written or oral, (a) to which the Company or any Company Subsidiary is a
party or is bound or by which any property of the Company or any Company
Subsidiary is bound or may be subject and (b) (i) to which any
Stockholder or any of that Stockholder's Related Persons or Affiliates
also is a party, or (ii) of which any Stockholder or any of that
Stockholder's Related Persons or Affiliates is a beneficiary.
"RELATED PERSON" of a Stockholder means: (a) if that Stockholder
is a natural person, (i) any family member of that Stockholder, (ii) any
estate of that Stockholder or any family member of that Stockholder,
(iii) the trustee of any trust of which all the beneficiaries are
Related Persons of that Stockholder and (iv) any Entity the entire
equity interest in which is owned by any one or more of that Stockholder
and Related Persons of that Stockholder; and (b) if that Stockholder is
an Entity, estate or trust, (i) any Person who owns an equity interest
in that Stockholder on the date hereof, (ii) any Person who would be a
Related Person under clause (a) of this definition of a natural person
who is an ultimate beneficial owner of that Stockholder or (iii) any
other Entity the entire equity interest in which is owned by any one or
more of that Stockholder and Related Persons of that Stockholder.
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"REPORTABLE EVENT" means, with respect to any Company ERISA
Pension Plan, (a) the occurrence of any of the events set forth in
Section 4043(b) or (c) (other than a Reportable Event as to which the
provision of 30 days' notice to the Pension Benefit Guaranty Corporation
is waived under applicable regulations), 4062(e) or 4063(a) of ERISA
with respect to that plan, (b) any event requiring the Company or any
ERISA Affiliate to provide security to that plan under Section
401(a)(29) of the Code or (c) any failure to make a payment required by
Section 412(m) of the Code with respect to that plan.
"REPRESENTATIVES" means, with respect to any Person, the
directors, officers, employees, Affiliates, accountants (including
independent certified public accountants), advisors, attorneys,
consultants or other agents of that Person, or any other representatives
of that Person or of any of those directors, officers, employees,
Affiliates, accountants (including independent certified public
accountants), advisors, attorneys, consultants or other agents.
"RCRA" means the Resource Conservation and Recovery Act of 1976.
"RESTRICTED PAYMENT" means, with respect to any Entity at any
time, any of the following effected by that Entity: (a) any declaration
or payment of any dividend or other distribution, direct or indirect, on
account of any Capital Stock of that Entity or any Affiliate of that
Entity or (b) any direct or indirect redemption, retirement, purchase or
other acquisition for value of, or any direct or indirect purchase,
payment or sinking fund or similar deposit for the redemption,
retirement, purchase or other acquisition for value of, or to obtain the
surrender of, any then outstanding Capital Stock of that Entity or any
Affiliate of that Entity or any then outstanding warrants, options or
other rights to acquire or subscribe for or purchase unissued or
treasury Capital Stock of that Entity or any Affiliate of that Entity.
"RETAINED RELATED PARTY AGREEMENT" has the meaning specified in
Section 2.11.
"RETURNS" of any Person means the returns, reports or statements
(including any Information returns) any Governmental Requirement
requires to be filed by that Person for purposes of any Tax.
"SECTION 338(H)(10) PURCHASE" means a transaction as a result of
which the Acquisition is effected by means of a Stock Purchase and in
connection with which ARS or ARS Sub makes an election under Section
338(h)(10) of the Code with respect to its purchase of the Company
Capital Stock.
"SECTION 351 TRANSACTION" means, if the Acquisition is structured
as a transaction qualifying for the deferral of federal income tax under
Section 351 of the Code, that transaction.
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"SECTION 368 REORGANIZATION" means, if the Acquisition is
structured as a transaction qualifying as a reorganization under Section
368 of the Code, that transaction.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SOLID WASTES, HAZARDOUS WASTES OR HAZARDOUS SUBSTANCES" have the
meanings ascribed to those terms in CERCLA, RCRA or any other
Environmental Law applicable to the business or operations of the
Company or any Company Subsidiary which imparts a broader meaning to any
of those terms than does CERCLA or RCRA.
"SPECIAL PROVISIONS" means the Special Provisions of ARS, if any,
referred to in Paragraph 5 and incorporated by reference in this
Agreement.
"STOCKHOLDER INDEMNIFIED LOSS" has the meaning specified in
Section 7.03.
"STOCKHOLDER INDEMNIFIED PARTY" means (a) each Stockholder and
each of that Stockholder's Affiliates (other than the Company or,
following the Effective Time, ARS or any of its Subsidiaries, if the
Stockholder is an Affiliate of ARS), agents and counsel and (b) prior to
the Effective Time, the Company and each of its officers, directors,
employees, agents and counsel who are not Stockholder Indemnified
Parties within the meaning of clause (a) of this definition.
"STOCK PURCHASE" means a transaction as a result of which the
Acquisition is effected by means of the purchase by ARS or ARS Sub from
the Stockholders of all the outstanding Company Capital Stock.
"SUBSIDIARY" of any specified Person at any time, means any
Entity a majority of the Capital Stock of which is at that time owned or
controlled, directly or indirectly, by the specified Person.
"SUPPLEMENTAL INFORMATION" has the meaning specified in Section
4.07.
"SURVIVING CORPORATION" means, if the Acquisition is effected by
means of Merger, the Company or the Person to be designated in the
Certificate of Merger as the surviving corporation of that merger.
"TAX" or "TAXES" means all net or gross income, gross receipts,
net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges or
assessments of any nature
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whatever imposed by any Governmental Requirement, whether disputed or
not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"TAXING AUTHORITY" means any Governmental Authority having or
purporting to exercise jurisdiction with respect to any Tax.
"TERMINATION EVENT" means, with respect to any Company ERISA
Pension Plan, (a) any Reportable Event with respect to that plan which
is likely to result in the termination of that plan, (b) the termination
of, or the filing of a notice of intent to terminate, that plan or the
treatment of any amendment to that plan as a termination under Section
4041(c) of ERISA or (c) the institution of proceedings to terminate, or
the appointment of a trustee to administer, that plan under Section 4042
of ERISA.
"THIRD PARTY CLAIM" has the meaning specified in Section 7.04.
"THRESHOLD AMOUNT" has the meaning specified in Paragraph 1.
"TRANSACTION DOCUMENT" means this Agreement and the other written
agreements, documents, instruments and certificates executed pursuant to
or in connection with this Agreement including those specified or
referred to in Article V to be delivered at or before the Closing, all
as amended, modified or supplemented from time to time.
"WELFARE PLAN" means an "employee welfare benefit plan" as
defined in Section 3(1) of ERISA.
Section 9.02. OTHER DEFINED TERMS. Words and terms used in these
Standard Provisions which are defined elsewhere in this Agreement are used
herein as therein defined.
Section 9.03. OTHER DEFINITIONAL PROVISIONS. (a) Except as
otherwise specified herein, all references herein to any Governmental
Requirement defined or referred to herein, including the Code, CERCLA, ERISA,
the Exchange Act, RCRA and the Securities Act, shall be deemed references to
that Governmental Requirement or any successor Governmental Requirement, as the
same may have been amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a whole
and not to any provision of this Agreement, and the words "Article,"
"Paragraph," "Section," "Annex," "Addendum," "Schedule" and "Exhibit" refer to
Articles, Paragraphs and Sections of, and Annexes, Addenda, Schedules and
Exhibits to, this Agreement unless otherwise specified.
(c) Whenever the context so requires, the singular number
includes the plural and vice versa, and a reference to one gender includes the
other gender and the neuter.
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(d) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
Section 9.04. CAPTIONS. Captions to Articles, Paragraphs,
Sections and subsections of, and Annexes, Addenda, Schedules and Exhibits to,
this Agreement or any other Transaction Document are included for convenience of
reference only, and such captions shall not constitute a part of this Agreement
or any other Transaction Document for any other purpose or in any way affect the
meaning or construction of any provision of this Agreement or any other
Transaction Document.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. TREATMENT OF CONFIDENTIAL INFORMATION. (a) Each of
the Company and the Stockholders, severally and not jointly with any other
Person, acknowledges that it has or may have had in the past, currently has and
in the future may have access to Confidential Information of the Company and the
Company Subsidiaries and ARS and its Subsidiaries. Each of the Company and the
Stockholders, severally and not jointly with any other Person, agrees that it
will keep confidential all such Confidential Information furnished to it and,
except with the specific prior written consent of ARS, will not disclose such
Confidential Information to any Person except (a) Representatives of ARS and (b)
its own Representatives, provided that these Representatives (other than
counsel) agree to the confidentiality provisions of this Section 10.01;
provided, however, that Confidential Information shall not include such
information as (i) becomes known to the public generally through no fault of any
Stockholder, (ii) is required to be disclosed by law or the order of any
Governmental Authority under color of law, provided, that prior to disclosing
any information pursuant to this clause (ii), each Stockholder shall, if
possible, give prior written notice thereof to ARS and provide ARS with the
opportunity to contest such disclosure, or (iii) the disclosing party reasonably
believes is required to be disclosed in connection with the defense of a lawsuit
against the disclosing party. In the event of a breach or threatened breach by
any Stockholder of the provisions of this Section 10.01 with respect to any
Confidential Information, ARS shall be entitled to an injunction restraining
such Stockholder from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting ARS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 10.01(a), and because
of the immediate and irreparable damage that would be caused to ARS for which it
would have no other adequate remedy, each of the Company and the Stockholders
agrees that ARS may enforce the provisions of Section 10.01(a) by injunctions
and restraining orders against each of them who breaches any of those
provisions.
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(c) The obligations of the parties under this Section 10.01 shall
survive the termination of this Agreement.
Section 10.02. BROKERS AND AGENTS. The Stockholders jointly and
severally represent and warrant to ARS that the Company has not directly or
indirectly employed or become obligated to pay any broker or similar agent in
connection with the transactions contemplated hereby and agree, without regard
to the Threshold Amount limitations set forth in Article VII, to indemnify ARS
against all Damage Claims arising out of claims for any and all fees and
commissions of brokers or similar agents employed or promised payment by the
Company.
Section 10.03. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and the rights of the parties hereunder may not be assigned (except by
operation of law) and shall be binding on and inure to the benefit of the
parties hereto, the successors of ARS, and the heirs and legal representatives
of the Stockholders (and, in the case of any trust, the successor trustees of
that trust). Neither this Agreement nor any other Transaction Document is
intended, or shall be construed, deemed or interpreted, to confer on any Person
not a party hereto or thereto any rights or remedies hereunder or thereunder,
except as provided in Section 10.12 or Article VII or as otherwise provided
expressly herein or therein.
Section 10.04. ENTIRE AGREEMENT; AMENDMENT; WAIVERS. This
Agreement and the documents delivered pursuant hereto constitute the entire
agreement and understanding among the Stockholders, the Company, ARS Sub and ARS
and supersede all prior agreements and understandings, both written and oral,
relating to the subject matter of this Agreement. This Agreement may be amended,
modified or supplemented, and any right hereunder may be waived, if, but only
if, that amendment, modification, supplement or waiver is in writing and signed
by the Stockholders entitled to receive at least 80% of the total Acquisition
Consideration, the Company and ARS; provided, however, that no such amendment,
modification, supplement or waiver will be effective unless it is signed by each
Stockholder affected thereby to the extent that it (a) changes the several
nature of that Stockholder's representations and warranties (to the extent they
are not already joint and several as provided in Article II and Section 10.02),
(b) reduces the amount, or changes the components, of the Acquisition
Consideration that Stockholder is entitled to receive pursuant to Section 1.4,
or (c) amends or waives this sentence. The waiver of any of the terms and
conditions hereof shall not be construed or interpreted as, or deemed to be, a
waiver of any other term or condition hereof.
Section 10.05. EXPENSES. Whether or not the transactions
contemplated hereby are consummated, (a) ARS will pay the fees, expenses and
disbursements of ARS and its Subsidiaries and their Representatives which are
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the performance
of and compliance with all conditions to be performed by ARS under this
Agreement, and (b) the Stockholders will pay from personal funds, and not from
funds of the Company or any Company Subsidiary, all sales, use, transfer and
other similar taxes and fees incurred in connection with the transactions
contemplated hereby including the fees, expenses and disbursements of counsel
for the
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Company and the Stockholders incurred in connection with the subject matter of
this Agreement. The Stockholders will file all necessary documentation and
Returns with respect to all sales, use, transfer and other similar taxes and
fees they are required by this Section 10.05 to pay. In addition, each
Stockholder acknowledges that he, and not the Company or ARS or the Surviving
Corporation, will pay all Taxes due upon receipt of the consideration payable to
that Stockholder pursuant to the transactions contemplated by this Agreement.
Section 10.06. NOTICES. All notices required or permitted
hereunder shall be in writing, and shall be deemed to be delivered and received
(a) if personally delivered or if delivered by telex, telegram, facsimile or
courier service, when actually received by the party to whom notice is sent or
(b) if delivered by mail (whether actually received or not), at the close of
business on the third Houston, Texas business day next following the day when
placed in the mail, postage prepaid, certified or registered, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
(i) if to ARS or any of its Subsidiaries, addressed to it at:
American Residential Services, Inc.
Post Oak Tower
0000 Xxxxxxxxxx Xx., Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attn.: Xxxx X. Held, Esq.
Senior Vice President, General Counsel and Secretary
Fax No.: 000-000-0000
; and
(ii) if to the Company or any of the Stockholders, addressed to
such Person as set forth in Paragraph 7.
Section 10.07. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
Section 10.08. EXERCISE OF RIGHTS AND REMEDIES. Except as
otherwise provided herein, no delay or omission in the exercise of any right,
power or remedy accruing to any party hereto as a result of any breach or
default hereunder by any other party hereto shall impair any such right, power
or remedy, nor shall it be construed, deemed or interpreted as a waiver of or
acquiescence in any such breach or default, or of any similar breach or default
occurring later; nor shall any waiver of any single breach or default be
construed, deemed or interpreted as a waiver of any other breach or default
hereunder occurring before or after that waiver.
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Section 10.09. TIME. Time is of the essence in the performance of
this Agreement in all respects.
Section 10.10. REFORMATION AND SEVERABILITY. If any provision of
this Agreement is invalid, illegal or unenforceable, that provision shall, to
the extent possible, be modified in such manner as to be valid, legal and
enforceable but so as to most nearly retain the intent of the parties hereto as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this Agreement, and in either case the validity, legality
and enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby.
Section 10.11. REMEDIES CUMULATIVE. No right, remedy or election
given by any term of this Agreement shall be deemed exclusive, but each shall be
cumulative with all other rights, remedies and elections available at law or in
equity.
Section 10.12. RELEASE. Subject to the limitations set forth in
the last sentence in this Section 10.12, each Stockholder hereby unconditionally
and irrevocably releases and forever discharges, effective as of and forever
after the Effective Time, to the fullest extent permitted by applicable law, all
past, present and future ARS Indemnified Parties (including, after the Effective
Time, each of the Company and the Company Subsidiaries which is a Subsidiary of
ARS immediately after the Effective Time) (collectively, the "Released Parties")
from any and all debts, liabilities, obligations, claims, demands, actions or
causes of action, suits, judgments or controversies of any kind whatsoever
(collectively, "Pre-Acquisition Claims") against the Company and the Company
Subsidiaries, if any, or any of them that arises out of or is based on any
agreement or understanding or act or failure to act (INCLUDING ANY ACT OR
FAILURE TO ACT THAT CONSTITUTES ORDINARY OR GROSS NEGLIGENCE OR RECKLESS OR
WILLFUL, WANTON MISCONDUCT), misrepresentation, omission, transaction, fact,
event or other matter occurring prior to the Effective Time (whether based at
law or in equity or otherwise, foreseen or unforeseen, matured or unmatured,
known or unknown, accrued or not accrued) (collectively, "Pre-Acquisition
Matters"), including: (a) claims by the Stockholder with respect to repayment of
loans or indebtedness; (b) any rights, titles and interests in, to or under any
agreements, arrangements or understandings to which the Stockholder is a party;
and (c) claims by the Stockholder with respect to dividends, violation of
preemptive rights, or payment of salaries or other compensation or in any way
arising out of or in connection with the Stockholder's employment with the
Company or any Company Subsidiary, the cessation of that employment, the
Stockholder's status as an officer, director or stockholder of the Company or
otherwise (but excluding any and all claims in respect of (i) accrued and unpaid
amounts owing to the Stockholder pursuant to each Employment Agreement disclosed
in Schedule 2.25 to which the Stockholder is a party, (ii) accrued and unpaid
cash compensation owing to the Stockholder in the normal and ordinary course of
business and consistent with past practices, (iii) benefits accrued under each
Company ERISA Benefit Plan or Other Compensation Plan, the existence of which
has been disclosed in Schedule 2.25, and (iv) amounts or other obligations owing
to the Stockholder, directly or indirectly, pursuant to each Retained Related
Party Agreement, if any, which is disclosed in Schedule 2.11 and to which the
Stockholder, directly or indirectly, is a party). The Stockholder further agrees
not to file or bring any Litigation before any Governmental Authority on the
basis of
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or respecting any Pre-Acquisition Claim concerning any Pre-Acquisition Matter
against any Related Party. Each Stockholder (a) acknowledges that he or she
fully comprehends and understands all the terms of this Section 10.12 and their
legal effects and (b) expressly represents and warrants that (i) he or she is
competent to effect the release made in this Section 10.12 knowingly and
voluntarily and without reliance on any statement or representation of any
Released Party or its Representatives and (ii) he or she had the opportunity to
consult with an attorney of his or her choice regarding this Section 10.12. This
Section 10.12 shall not affect the rights of the Stockholders under this
Agreement or any other Transaction Document.
ARTICLE XI
TERMINATION
Section 11.01. TERMINATION OF THIS AGREEMENT. This Agreement may
be terminated at any time prior to the Effective Time solely:
(a) by the mutual written consent of ARS and the Company;
(b) by the Stockholders or the Company, on the one hand, or by
ARS, on the other hand, if the transactions contemplated by this Agreement to
take place at the Closing shall not have been consummated by the close of
business on the 90th day after the date of this Agreement, unless the failure of
such transactions to be consummated results from the willful failure of the
party (or in the case of the Stockholders and the Company, any of them) seeking
to terminate this Agreement to perform or adhere to any agreement required
hereby to be performed or adhered to by it prior to or on the Closing Date;
(c) by the Stockholders or the Company, on the one hand, or by
ARS, on the other hand, if a material breach or default shall be made by the
other party (or in the case of the Stockholders and the Company, any of them) in
the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein; or
(d) by ARS if it is entitled to do so as provided in Section
4.07.
Section 11.02. LIABILITIES IN EVENT OF TERMINATION. If this
Agreement is terminated pursuant to Section 11.01, there shall be no liability
or obligation on the part of any party hereto except (a) as provided in Section
10.05 and (b) to the extent that such liability is based on the breach by that
party of any of its representations, warranties or covenants set forth in this
Agreement.
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Addendum U
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO
THE UNREGISTERED ARS COMMON STOCK
INCLUDED IN THE ACQUISITION CONSIDERATION
A. DEFINED TERMS. Words and terms used in this Addendum which are
defined elsewhere in the Agreement in which this Addendum is incorporated by
reference are used herein as defined therein.
B. REPRESENTATION AND WARRANTY BY EACH STOCKHOLDER. Each
Stockholder represents and warrants to ARS that, as applied solely to himself,
as of the date of this Agreement, the Closing Date and immediately prior to the
Effective Time: (1) the Stockholder will be acquiring the shares of ARS Common
Stock to be issued pursuant to Paragraph 2 to him solely for his account, for
investment purposes only and with no current intention or plan to distribute,
sell or otherwise dispose of any of those shares in connection with any
distribution; (2) the Stockholder is not a party to any agreement or other
arrangement for the disposition of any shares of ARS Common Stock other than
this Agreement and the Joinder to the Registration Rights Agreement; (3)
Schedule B to this Addendum correctly states (a) whether the Stockholder is, or
is not, an "accredited investor" as defined in Securities Act Rule 501(a) and,
if the Stockholder is not such an investor, (b) the name and address of his
Purchaser Representative; and (4) the Stockholder (a) is able to bear the
economic risk of an investment in the ARS Common Stock acquired pursuant to this
Agreement, (b) can afford to sustain a total loss of that investment, (c) has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment in the ARS
Common Stock, (d) or his Purchaser Representative, if any, has had an adequate
opportunity to ask questions and receive answers from the officers of ARS
concerning any and all matters relating to the transactions contemplated hereby,
including the background and experience of the current and proposed officers and
directors of ARS, the business, operations and financial condition of ARS and
any plans of ARS for additional acquisitions, and (e) or his Purchaser
Representative, if any, has asked all questions of the nature described in
preceding clause (d), and all those questions have been answered to his
satisfaction and the satisfaction of his Purchaser Representative, if any. For
purposes of Section 7.01, the representation and warranty made in this Section B
shall be deemed to be included in Article I.
C. RESTRICTIONS ON TRANSFER OF ARS COMMON STOCK. (1) Each
Stockholder agrees with ARS that, during the two-year period ending on the
second anniversary of the Effective Date (the "Restricted Period"), the
Stockholder will not voluntarily, except pursuant to and in accordance with the
applicable provisions of the Joinder to the Registration Rights Agreement: (a)
sell, assign,
1
exchange, transfer, encumber, pledge, distribute, appoint or otherwise dispose
of (1) any shares of ARS Common Stock received by any Stockholder in the
Acquisition or (2) any interest in (including any option to buy or sell) any of
those shares of ARS Common Stock, in whole or in part, and ARS will have no
obligation to, and shall not, treat any such attempted transfer as effective for
any purpose; or (b) engage in any transaction, whether or not with respect to
any shares of ARS Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning the shares of ARS Common Stock acquired
pursuant to Paragraph 2 (including, for example, engaging in put, call,
short-sale, straddle or similar market transactions); provided, however, that
this Section C shall not restrict any transfer of ARS Common Stock acquired by a
Stockholder pursuant to Paragraph 2 to any of that Stockholder's Related Persons
who agree in writing to be bound by the provisions of Section 10.01 and this
Section C. Each Stockholder agrees with ARS that the certificates evidencing the
ARS Common Stock delivered to that Stockholder pursuant to Paragraph 2 will bear
a legend substantially in the form set forth below and containing such other
information as ARS may deem necessary or appropriate:
EXCEPT PURSUANT TO THE TERMS OF THE [TITLE OF ACQUISITION AGREEMENT]
AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE OTHER PARTIES
THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL
NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
TWO-YEAR PERIOD ENDING ON __________ [DATE THAT IS THE SECOND
ANNIVERSARY OF THE EFFECTIVE DATE.] ON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND
(AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE.
(2) Each Stockholder, severally and not jointly with any other
Person: (a) acknowledges that the shares of ARS Common Stock to be delivered to
that Stockholder pursuant to Paragraph 2 (i) have not been and, except pursuant
to the Joinder to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by that
Stockholder without compliance with the Securities Act and (ii) will, as a
result of the restrictions on their transferability which are imposed by this
Agreement during the Restricted Period, have a value materially less on the
Effective Date than the value of then freely tradable shares of ARS Common
Stock; (b) covenants that none of the shares of ARS Common Stock issued to that
Stockholder pursuant to Paragraph 2 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full compliance
with all the applicable provisions of the Securities Act and the rules and
regulations of the SEC and applicable state securities laws and regulations; and
(c) agrees with ARS that all certificates evidencing shares of ARS Common Stock
issued pursuant to Paragraph 2 will bear the following legend in addition to the
legend prescribed by Section C(1) of this Addendum:
2
THE SHARES REPRESENTED HEREBY HAVE BEEN ISSUED PURSUANT TO A CLAIM OF
EXEMPTION UNDER THE SECURITIES ACT OF 1933 AND THE APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OF
1933 AND APPLICABLE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
In addition, each Stockholder agrees with ARS that the certificates evidencing
shares of ARS Common Stock issued pursuant to Paragraph 2 to that Stockholder
will bear any legend required by the securities or blue sky laws of the state in
which that Stockholder resides.
End of Addendum
3
SCHEDULE B
to
Addendum U
to the
Agreement and Plan of Reorganization
to which
American Residential Services, Inc.
and
Metro Heating and Air Conditioning, Inc.
are parties
A. Words and terms used in this Schedule which are defined in the
captioned Agreement are used herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in
Securities Act Rule 501(a) because each Stockholder, alone or together with his
or her spouse, has a net worth that exceeds $1,000,000.
End of Schedule
4
Addendum W
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO WORKING CAPITAL
A. DEFINED TERMS. Words and terms used in this Addendum which are
defined elsewhere in the Agreement in which this Addendum is incorporated by
reference are used herein as defined therein. As used in this Addendum the
following terms have the meanings assigned to them below in this Section A:
"ADJUSTMENT DETERMINATION DATE" means the date that is 30 days
following delivery by ARS of the Post-closing Statement to the Sellers,
unless the Final Working Capital and the Working Capital Adjustment, if
any, are determined pursuant to Section B of this Addendum by Xxxxxx
Xxxxxxxx LLP, in which event the Adjustment Determination Date is the
date Xxxxxx Xxxxxxxx LLP delivers those determinations in writing to
ARS.
"FINAL BALANCE SHEET" means a balance sheet of the Acquired
Business as of November 30, 1996 which is prepared in accordance with
GAAP on the same basis on which the Current Balance Sheet was prepared.
"FINAL WORKING CAPITAL" means, as of November 30, 1996 and as
determined from the Final Balance Sheet, the amount by which (a) the
sum, without duplication of amounts, of all amounts that are included
and classified as current assets on that balance sheet exceeds, or is
exceeded by, (b) the sum, without duplication of amounts, of all amounts
that are included and classified as liabilities or as mandatorily
redeemable Capital Stock on that balance sheet; provided, that if that
determination is made pursuant to Section B of this Addendum by Xxxxxx
Xxxxxxxx LLP, the amount equal to 50% of the fees and expenses of Xxxxxx
Xxxxxxxx LLP which are attributable to its audit of the Final Balance
Sheet and its making of that determination will be deemed a liability of
the Acquired Business for the purpose of determining its Final Working
Capital and resulting Working Capital Adjustment, if any; and provided,
further, that if at any time those current assets are exceeded by those
liabilities, Final Working Capital will be expressed as a negative
amount.
"POST-CLOSING STATEMENT" has the meaning specified in Section B
of this Addendum.
"SELLER" means (1) the Company, if the Acquisition is effected by
means of an Asset Purchase, or (2) any Stockholder, if the Acquisition
is effected by any other means.
1
B. WORKING CAPITAL ADJUSTMENT. (1) As soon as practicable, and in
any event within 75 days after the Effective Date, ARS will cause to be prepared
and delivered to the Sellers (a) the Final Balance Sheet and (b) a statement
(the "Post-closing Statement") of the Final Working Capital and the Working
Capital Adjustment, if any. The Post-closing Statement will be final and binding
on ARS and the Sellers unless, within 30 days following the delivery of the
Post-closing Statement, any Seller notifies ARS in writing that that Seller does
not accept as correct the amount of the Final Working Capital or the amount of
the Working Capital Adjustment, if any, as set forth in the Post-closing
Statement. If any Seller timely delivers that notice respecting the Post-closing
Statement, the Final Balance Sheet will be audited, and the Final Working
Capital and the Working Capital Adjustment, if any, will be determined within 30
days after the delivery to ARS of that notice, by Xxxxxx Xxxxxxxx LLP, and these
determinations will be final and binding on ARS and each Seller.
(2) If a Working Capital Adjustment is determined with finality
pursuant to Section B(1) of this Addendum, each Seller will, no later than 10
Houston, Texas business days after ARS makes a written request therefor, pay in
cash that Seller's Pro Rata Share (which, if the Company is the Seller, will be
100%) of the Working Capital Adjustment, together with interest on that sum at
8% per annum from (and including) the Effective Date to (but excluding) the
Adjustment Determination Date.
End of Addendum
2
