EXHIBIT 2.01
EXECUTED COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CONSOLIDATION CAPITAL CORPORATION,
CCC 12 ACQUISITION CORPORATION,
▇▇▇▇▇▇ ELECTRIC, INC.
AND
THE SHAREHOLDERS NAMED HEREIN
MADE EFFECTIVE AS OF MAY 8, 1998.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Table of Contents
Page
----
1. THE MERGER.............................................................. 1
1.1 The Merger........................................................ 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers......... 1
1.3 Effects of the Merger............................................. 2
2. CONVERSION AND EXCHANGE OF STOCK........................................ 2
2.1 Manner of Conversion.............................................. 2
2.2 Base Merger Consideration......................................... 3
2.3 Contingent Merger Consideration................................... 4
2.4 Exchange of Certificates and Payment of Cash...................... 6
3. POST-CLOSING ADJUSTMENT; PLEDGED ASSETS................................. 7
3.1 Post-Closing Adjustment........................................... 7
3.2 Pledged Assets.................................................... 8
4. CLOSING................................................................. 9
4.1 Location and Date................................................. 9
4.2 Effect............................................................ 9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS............................................................ 9
5.1 Due Organization.................................................. 9
5.2 Authorization; ▇▇▇▇▇▇▇▇........................................... 9
5.3 No Conflicts...................................................... 10
5.4 Capital Stock of the Company...................................... 10
5.5 Transactions in Capital Stock..................................... 10
5.6 Subsidiaries, ▇▇▇▇▇, and Notes.................................... 11
5.7 Predecessor Status................................................ 11
5.8 Absence of Claims Against the Company............................. 11
5.9 Company Financial Condition....................................... 11
5.10 Financial Statements.............................................. 11
5.11 Liabilities and Obligations....................................... 11
5.12 Accounts and Notes Receivable..................................... 12
5.13 Books and Records................................................. 12
5.14 Permits........................................................... 12
5.15 Real Property..................................................... 13
5.16 Personal Property................................................. 13
5.17 Intellectual Property............................................. 14
5.18 Material Contracts and Commitments................................ 14
5.19 Government Contracts.............................................. 15
5.20 Insurance......................................................... 16
5.21 Labor and Employment Matters...................................... 16
5.22 Employee Benefit Plans............................................ 17
5.23 Conformity with Law; Litigation................................... 18
5.24 Taxes............................................................. 19
5.25 Absence of Changes................................................ 20
5.26 Deposit Accounts; Powers of Attorney.............................. 21
5.27 Environmental Matters............................................. 21
5.28 Relations with Governments........................................ 22
5.29 Disclosure........................................................ 22
5.30 CCC Prospectus; Securities Representations........................ 22
5.31 Affiliates........................................................ 23
5.32 Location of Chief Executive Offices............................... 23
5.33 Location of Equipment and Inventory.............................. 23
6. REPRESENTATIONS OF CCC AND NEWCO....................................... 23
6.1 Due Organization................................................. 23
6.2 CCC Common Stock................................................. 23
6.3 Authorization; Validity of Obligations........................... 24
6.4 No Conflicts..................................................... 24
6.5 Capitalization of CCC and Ownership of CCC Stock................. 24
6.6 Conformity with Law; Litigation.................................. 24
6.7 Disclosure....................................................... 25
6.8 CCC Prospectus................................................... 25
6.9 Registration Statement........................................... 25
6.10 Investment Intent................................................ 25
7. COVENANTS.............................................................. 25
7.1 Tax Matters...................................................... 25
7.2 Accounts Receivable.............................................. 26
7.3 [Intentionally omitted.]......................................... 27
7.4 Related Party Agreements......................................... 27
7.5 Cooperation...................................................... 27
7.6 Conduct of Business Pending Closing.............................. 28
7.7 Access to Information............................................ 28
7.8 Prohibited Activities............................................ 29
7.9 Notice to Bargaining Agents...................................... 30
7.10 Sales of CCC Common Stock........................................ 30
7.11 CCC Stock Options................................................ 31
7.12 Tax Covenant..................................................... 31
7.13 Tax Free Reorganization Protection............................... 31
7.14 D&O Insurance and Indemnification of Directors and Officers...... 31
7.15 Government Contracts............................................. 32
7.16 CCC Stock........................................................ 32
7.17 Employee Benefits Matters........................................ 32
7.18 Guaranteed Debt.................................................. 32
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO............... 32
8.1 Representations and Warranties; Performance of Obligations....... 32
8.2 No Litigation.................................................... 33
8.3 No Material Adverse Change....................................... 33
8.4 Consents and Approvals........................................... 33
8.5 Opinion of Counsel............................................... 33
8.6 Charter Documents................................................ 33
8.7 Quarterly Financial Statements................................... 33
8.8 FIRPTA Compliance................................................ 33
8.9 Employment Agreements............................................ 33
8.10 Affiliate Agreements............................................. 33
8.11 Shareholders' Release............................................ 33
8.12 Related Party Receivables and Agreements......................... 34
8.13 Delivery of Closing Financial Certificate........................ 34
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS........................................................... 34
9.1 Representations and Warranties; Performance of Obligations....... 34
9.2 No Litigation.................................................... 34
9.3 Consents and Approvals........................................... 34
9.4 Employment Agreements............................................ 35
9.5 Registration Statement........................................... 35
ii
9.6 No Material Adverse Change......................................... 35
9.7 Officers and Directors of Surviving Corporation.................... 35
10. INDEMNIFICATION......................................................... 35
10.1 General Indemnification by the Shareholders....................... 35
10.2 General Indemnification by CCC and Newco.......................... 35
10.3 Limitation and Expiration......................................... 36
10.4 Indemnification Procedures........................................ 37
10.5 Survival of Representations Warranties............................ 38
10.6 Right to Set Off.................................................. 38
11. NONCOMPETITION.......................................................... 38
11.1 Prohibited Activities............................................. 38
11.2 Damages........................................................... 39
11.3 Reasonable Restraint.............................................. 39
11.4 Severability; Reformation......................................... 39
11.5 Independent Covenant.............................................. 39
11.6 Materiality....................................................... 40
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................... 40
12.1 Confidentiality................................................... 40
12.2 Damages........................................................... 40
13. GENERAL................................................................. 41
13.1 Termination....................................................... 41
13.2 Effect of Termination............................................. 41
13.3 Successors and Assigns............................................ 42
13.4 Entire Agreement; Amendment; Waiver............................... 42
13.5 Counterparts...................................................... 42
13.6 Brokers and Agents................................................ 42
13.7 Expenses.......................................................... 42
13.8 Specific Performance; Remedies.................................... 42
13.9 Notices........................................................... 42
13.10 Governing Law..................................................... 43
13.11 Severability...................................................... 43
13.12 Absence of Third Party Beneficiary Rights......................... 43
13.13 Further Representations........................................... 44
13.14 Representative.................................................... 44
13.15 Unanimous Written Consent of Shareholders......................... 44
iii
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of the 7th day of May, 1998, by and among Consolidation
Capital Corporation, a Delaware corporation ("CCC"), CCC 12 Acquisition
Corporation, a Utah corporation and a newly-formed, wholly-owned subsidiary of
CCC ("Newco"), and ▇▇▇▇▇▇ Electric, Inc., a Utah corporation (the "Company"),
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (each a "Shareholder" and collectively, the
"Shareholders").
BACKGROUND
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Company (the "Company Common Stock");
WHEREAS, the respective Boards of Directors of Newco and the Company deem it
advisable and in the best interests of Newco and the Company (each of which
are sometimes herein referred to as the "Constituent Corporations") and their
respective shareholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Articles of Merger (defined below)
and the applicable provisions of the laws of the State of Utah; and
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization (a "tax-
free reorganization") within the provisions of Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the representations,
warranties, covenants and agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and
Articles of Merger (the "Articles of Merger") substantially in the form
attached as EXHIBIT 1.1 hereto, and the separate corporate existence of the
Company shall cease. Newco, as it exists from and after the Effective Time, is
sometimes referred to as the "Surviving Corporation." The Surviving
Corporation's name will be changed to that of the Company immediately after
the Effective Time.
1.2 ARTICLES OF INCORPORATION; BYLAWS, DIRECTORS AND OFFICERS. At the
Effective Time:
(a) The Articles of Incorporation of Newco, as in effect immediately prior
to the Effective Time, which are attached as EXHIBIT 1.2(A), shall be the
Articles of Incorporation of the Surviving Corporation unless and until
thereafter amended as provided therein and under the laws of the State of Utah
(the "State Corporate Laws."), provided, that the provisions relating to the
indemnification of officers and directors contained therein as amended at the
Effective Time shall not be amended until the sixth (6th) anniversary of the
Closing Date (as defined in Section 4.1).
(b) The Bylaws of Newco, as in effect immediately prior to the Effective
Time, which are attached as EXHIBIT 1.2(B), shall be the Bylaws of the
Surviving Corporation unless and until thereafter amended as provided therein
and under the State Corporate Laws; provided, that the provisions relating to
the indemnification of officers and directors contained therein shall not be
amended until the sixth (6th) anniversary of the Closing Date.
(c) The directors of the Surviving Corporation shall be as set forth on
EXHIBIT 1.2(C) until their successors are elected and qualified, and the
initial officers of the Surviving Corporation shall be as set forth on EXHIBIT
1.2(C) until their successors are elected and qualified.
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the State Corporate Laws. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time (i) all the rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due
on whatever account, including without limitation subscriptions to shares, and
all other choses in action, and all and every other interest of or belonging
to or due to the Company or Newco shall be taken and deemed to be transferred
to, and vested in, the Surviving Corporation without further act or deed; and
all property, rights and privileges, immunities, powers and franchises and all
and every other interest shall be thereafter as effectually the property of
the Surviving Corporation, as they were of the Company and Newco, and (ii) all
debts, liabilities, duties and obligations of the Company and Newco shall
become the debts, liabilities, duties and obligations of the Surviving
Corporation and the Surviving Corporation shall thenceforth be responsible and
liable for all the debts, liabilities, duties and obligations of the Company
and Newco and neither the rights of creditors nor any liens upon the property
of the Company or Newco shall be impaired by the Merger, and may be enforced
against the Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 MANNER OF CONVERSION. At the Effective Time, by virtue of the Merger and
without any action on the part of CCC, Newco, the Company or the Shareholders,
the shares of capital stock of each of the Constituent Corporations shall be
converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of capital
stock of Newco shall continue to be issued and outstanding and shall represent
shares of stock of the Surviving Corporation. Each stock certificate of Newco
evidencing ownership of any such shares shall continue to evidence ownership
of such shares of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company. All
shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of CCC or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section 2.1(d),
and Sections 2.2, 2.3, 2.4, and 3.1, each issued and outstanding share of
Company Common Stock (other than shares to be canceled pursuant to Section
2.1(b)), that is issued and outstanding immediately prior to the Effective
Time shall automatically be canceled and extinguished and converted, without
any action on the part of the holder thereof, into the right to receive at the
time and in the amounts described in this Agreement (i) an amount of cash
equal to the cash portion of the Base Merger Consideration (as described in
Section 2.2(a)) divided by the number of shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares to
be canceled pursuant to Section 2.1(b)), (ii) that number of shares of CCC
common stock, $.001 par value ("CCC Common Stock"), valued at the Merger Price
(as described in Section 2.2(a)), that is equal in value to the CCC Common
Stock portion of the Base Merger Consideration (as defined in Section 2.2(a))
divided by the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 2.1(b)), (iii) an amount of cash equal to 50% of the
Contingent Merger Consideration (as defined in Section 2.3(a)) divided by the
number of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares to be canceled pursuant to
Section 2.1(b)), and (iv) that number of shares of CCC Common Stock, valued at
the Earn Out Period Average Price (as defined in Section 2.3(d)), that is
equal in value to 50% of the Contingent Merger Consideration divided by the
number of shares of Company Common Stock outstanding immediately prior to the
Effective Time (other than shares to be canceled pursuant to Section 2.1(b)).
All such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive the
consideration therefor upon the surrender of such certificate in accordance
with Sections 2.2, 2.3 and 2.4 of this Agreement.
2
(d) Fractional Shares. No fractional shares of CCC Common Stock shall be
issued pursuant to this Agreement, but in lieu thereof each holder of shares
of Company Common Stock who would otherwise be entitled to receive a fraction
of a share of CCC Common Stock shall receive from CCC an amount of cash equal
to the Merger Price or the Earn Out Period Average Price, as applicable,
multiplied by the fraction of a share of CCC Common Stock to which such holder
would otherwise be entitled. The fractional share interests of each
Shareholder shall be aggregated, so that no Shareholder shall receive cash in
an amount greater than the value of one full share of CCC Common Stock.
2.2 BASE MERGER CONSIDERATION.
(a) For purposes of this Agreement, the "Base Merger Consideration" shall be
$14,700,000. Of the Base Merger Consideration, $7,350,000 shall be paid in
cash at Closing (as defined in Section 4.1) in immediately available funds.
The remaining $7,350,000 of the Base Merger Consideration shall be paid at
Closing in shares of CCC Common Stock valued at a price per share (the "Merger
Price") which the parties hereto irrevocably agree is equal to the sum of (i)
the closing price of CCC Common Stock on March 25, 1998, plus (ii) the
"Interim Period Average" (as such term is defined below), plus (iii) the
closing price of CCC Common Stock on the date that is three days prior to the
Closing, divided by 3. Interim Period Average means the sum of the closing
prices of CCC Common Stock on every trading day from and including the date
referenced in clause (i) above and through and including the date referenced
in clause (iii) above, divided by the number of trading days included in such
period. The closing price of CCC Common Stock on a trading day, for purposes
of this Section, shall be the day's last trade price as reported on the Nasdaq
National Market (or if no trade price is reported for any such day, the
average of the last bid and ask prices for the CCC Common Stock). The shares
of CCC Common Stock to be issued in respect of the Base Merger Consideration
shall be registered under the Securities Act of 1933, as amended (the "1933
Act"), and approved for quotation on the Nasdaq National Market.
(b) The Base Merger Consideration has been calculated based upon several
factors, including the assumption that (i) earnings of the Company before
interest and taxes, computed in accordance with generally accepted accounting
principles ("GAAP") consistently applied throughout the periods involved but
adjusted to reflect the add-back of those nonrecurring costs that are
specified on SCHEDULE 5.9 hereto ("Adjusted EBIT"), for the twelve month
period ended December 31, 1997 shall have been equal to or greater than
$4,084,000 (the "1997 Adjusted EBIT Target") and (ii) the net worth of the
Company, calculated in accordance with GAAP consistently applied, but in any
event excluding any material increase in intangible assets of the Company
since December 31, 1997, shall be equal to or greater than $2,500,000 (the
"Net Worth Target") as of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section 8.13),
the Certified Closing Net Worth (as defined in Section 8.13) is less than the
Net Worth Target, then the Base Merger Consideration to be delivered to the
Shareholders may, at CCC's election, be reduced either (i) at the Closing, or
(ii) after completion of the Post-Closing Audit (as defined in Section 3.1),
by the difference between the Net Worth Target and the Certified Closing Net
Worth set forth on the Closing Financial Certificate (which reduction shall be
pro rata in cash and in CCC Common Stock valued at the Merger Price in the
same proportions as the cash and CCC Common Stock components of the Base
Merger Consideration as provided in Section 2.2(a)).
(d) In addition to any reduction to the Base Merger Consideration described
in Section 2.2(c), if, on the Closing Financial Certificate, the Certified
Year End Adjusted EBIT (as defined in Section 8.13) is less than the 1997
Adjusted EBIT Target, then the Base Merger Consideration to be delivered to
the Shareholders may, at CCC's election, be reduced either (i) at the Closing,
or (ii) after completion of the Post-Closing Audit (as defined in Section
3.1), by the product of 3.5 multiplied by the difference between the 1997
Adjusted EBIT Target and the Certified Year End Adjusted EBIT set forth on the
Closing Financial Certificate (which reduction shall be pro rata in cash and
in CCC Common Stock valued at the Merger Price in the same proportions as the
cash and CCC Common Stock components of the Base Merger Consideration as
provided in Section 2.2(a)).
(e) If, on or prior to the Effective Time, CCC should split or combine the
CCC Common Stock, or pay a stock dividend or other stock distribution in CCC
Common Stock, or otherwise change the CCC Common Stock
3
into any other securities, or make any other dividend or distribution on the
CCC Common Stock (other than normal quarterly dividends, as the same may be
adjusted from time to time and in the ordinary course), then the number of
shares of CCC Common Stock issuable as the Base Merger Consideration will be
appropriately adjusted to reflect such split, combination, dividend or other
distribution or change.
2.3 CONTINGENT MERGER CONSIDERATION.
(a) For purposes of this Agreement, but subject to the provisions of
subsections (i), (ii), and (iii) below, the "Contingent Merger Consideration"
shall mean the sum of the First Year Earn Out Amount and the Second Year Earn
Out Amount, provided however that in no event shall the Contingent Merger
Consideration exceed $6,300,000 (the "Maximum Earn Out Amount").
(i)The "First Year Earn Out Amount" shall mean the lesser of (A) 75% of the
Actual Earn Out EBIT (hereinafter defined) of the Surviving Corporation for
the twelve month period ending on the last day of the month of the first
anniversary of the Closing, or (B) $3,150,000; provided, however, that no
Contingent Merger Consideration shall be paid if the Actual Earn Out EBIT for
such period does not exceed $3,600,000.
(ii)The "Second Year Earn Out Amount" shall mean the lesser of (A) 75% of the
Actual Earn Out EBIT of the Surviving Corporation for the twelve month period
ending on the last day of the month of the second anniversary of the Closing,
or (B) $3,150,000; provided, however, that no Contingent Merger Consideration
shall be paid if the Actual Earn Out EBIT for such period does not exceed
$3,000,000.
(iii)For purposes of this Section 2.3, "Actual Earn Out EBIT" for any period
is equal to the following for such period: the unadjusted earnings (including
interest earnings) of the Surviving Corporation before interest expense and
income tax expense, calculated in accordance with GAAP consistently applied;
provided however, that in any event Actual Earn Out EBIT shall (1) exclude any
increases in intangible assets of the Surviving Corporation, (2) exclude the
amortization of goodwill and other intangibles recognized by CCC in connection
with the acquisition of the Company or any future acquisitions, (3) exclude
expenses (including corporate overhead) of CCC other than those expenses
incurred for the benefit of the Surviving Corporation that do not duplicate
expenses incurred by the Surviving Corporation nor exceed the amounts of
similar expenses incurred in the most recently ended fiscal year by the
Company prior to the Closing, and (4) include depreciation and amortization of
assets of the Surviving Corporation except to the extent such amounts result
from an increase in the book value of the assets resulting from the Merger.
CCC's Accountant (hereinafter defined) will calculate the Contingent Merger
Consideration and the Actual Earn Out EBIT applying the same accounting
principles applied by the Company, with all such computations made (and
definitions used) in the same way the computations were made (and definitions
were used) by the Company prior to the Closing and will conform to the methods
of accounting utilized consistently during the calendar years 1996 and 1997
for the Company, provided in each case that such computations were in
accordance with GAAP.
(b) Price Waterhouse LLP, CCC's independent accountant ("CCC's Accountant"),
will determine the Actual Earn Out EBIT for each of the years ending April 30,
1999 and 2000 and deliver prompt notice of such amount to the Shareholders
(the "Earn Out EBIT Notice") with supporting documentation. The Shareholders
(through the Representative as defined in Section 13.14(a)) shall have the
right to inspect, audit and make extracts from all of the records, files and
books of account of CCC relating to the Actual Earn Out EBIT for purposes of
verifying the amount of the consideration payable pursuant to Section 2.3, at
reasonable times during business hours, upon advance notice to CCC.
(c) The Shareholders (through the Representative) shall have thirty (30)
days from the receipt of the Earn Out EBIT Notice to notify CCC if they
dispute the amount of the Actual Earn Out EBIT. If CCC has not received notice
of any such dispute within such 30-day period, the Actual Earn Out EBIT
contained in the Earn Out EBIT Notice shall be final. If, however, the
Shareholders (through the Representative) have delivered notice of such a
dispute to CCC within such 30-day period, then CCC shall, pursuant to Section
2.3(d) below, pay such amount of the Contingent Merger Consideration that is
not subject to any dispute and CCC's Accountant shall select an independent
accounting firm that has not represented any of the parties hereto within the
preceding two (2) years
4
and is one of the six largest accounting firms in the United States (each, a
"New Accounting Firm") to review the amount of the disputed Actual Earn Out
EBIT, the books of the Surviving Corporation, and the Earn Out EBIT Notice
(and related information) to determine the amount, if any, that the Actual
Earn Out EBIT is in error. Such New Accounting Firm shall be confirmed by the
Shareholders through the Representative and CCC within five (5) days of its
selection, unless there is an actual conflict of interest. The New Accounting
Firm shall make its determination of the Actual Earn Out EBIT (the "Revised
Earn Out EBIT") if any, within thirty (30) days of its selection. The Revised
Earn Out EBIT shall be final and binding on the parties hereto, and, upon such
determination, CCC shall be entitled or required to adjust the First Year Earn
Out Amount or the Second Year Earn Out Amount accordingly. If the Revised Earn
Out EBIT is higher than the Actual Earn Out EBIT, CCC shall pay to the
Shareholders interest, at the Prime Rate (defined below), on the deficiency
from the date that is three months after the end of the period with respect to
which the disputed Actual Earn Out EBIT is calculated. The costs of the New
Accounting Firm shall be borne by CCC if the Revised Earn Out EBIT is higher
than the Actual Earn Out EBIT and by the Shareholders in all other cases. For
purposes of this Section, the term "Prime Rate" shall mean the annual rate of
interest announced by Citibank, N.A. in New York, New York as its prime rate
in effect on the Contingent Merger Consideration Payment Date.
(d) The Contingent Merger Consideration described in Section 2.3 (a), will
be paid 50% in cash and 50% in shares of CCC Common Stock and will be paid in
a single lump payment by federal wire transfer of same day funds promptly
following the determination of the Actual Earn Out EBIT for the applicable
period by CCC's Accountant, which shall be made not later than the date that
is three months after the end of the period with respect to which the Actual
Earn Out EBIT is calculated unless the Shareholders dispute the Actual Earn
Out EBIT in accordance herewith. For purposes of determining the number of
shares of CCC Common Stock that are issuable as part of the Contingent Merger
Consideration, the value of each such share shall be equal to the Earn Out
Period Average Prices for the thirty (30) trading days prior to and including
the last day of May 1999, in the case of the First Year Earn Out Amount, and
May 2000, in the case of the Second Year Earn Out Amount. The "Earn Out Period
Average Price" means the quotient of (i) the sum of the closing price of a
share of CCC Common Stock on the Nasdaq National Market on each trading day
from and including the date that is thirty (30) trading days prior to and
including the last day of May 1999, in the case of CCC Common Stock
deliverable with respect to the First Year Earn Out Amount, and May 2000 in
the case of CCC Common Stock deliverable with respect to the Second Year Earn
Out Amount, (or if no trade price is reported for any such day, the average of
the last bid and ask prices for the CCC Common Stock), divided by (ii) 30. The
date or dates on which the Contingent Merger Consideration is paid to the
Shareholders is hereinafter referred to as the AContingent Merger
Consideration Payment Date." The certificates evidencing CCC Common Stock
received as part of the Merger Consideration shall be issued in the
denominations and names of the Shareholders as set forth in written
instructions delivered by the Shareholders to CCC at least five (5) business
days prior to the Closing Date and the Contingent Merger Consideration Payment
Date or Dates, as applicable. The shares of CCC Common Stock to be issued in
respect of the Contingent Merger Consideration shall be registered under the
1933 Act and approved for quotation on the Nasdaq National Market.
(e) If, on or prior to a Contingent Merger Consideration Payment Date but
after calculation of the Earn Out Period Average Price with respect thereto,
CCC should split or combine the CCC Common Stock, or pay a stock dividend or
other stock distribution in CCC Common Stock, or otherwise change the CCC
Common Stock into any other securities, or make any other dividend or
distribution on the CCC Common Stock (other than normal quarterly dividends,
as the same may be adjusted from time to time and in the ordinary course),
then the number of shares of CCC Common stock issuable as the Contingent
Merger Consideration will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or change.
(f) If, at any time on or before the second anniversary of the Closing Date,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ employment agreement with the surviving corporation is
terminated by CCC or the Surviving Corporation, respectively (or either of
such company's successor), in such company's capacity as employer, without
cause (as defined in ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ Employment Agreement with the
Surviving Corporation), CCC immediately whereupon shall pay to the
Shareholders an amount equal to the Maximum Earn Out Amount. CCC acknowledges
that such a payment would constitute liquidated damages and not a penalty.
5
(g) In the event CCC or any of its subsidiaries takes any action or omits to
take any action which is not commercially reasonable in the circumstances for
the conduct of the business of CCC and its subsidiaries taken as a whole and
which has a direct, quantifiable, negative impact on the Contingent Merger
Consideration; then, in any such event, the parties, in good faith, shall make
reasonable adjustments in the calculation of the Actual Earn Out EBIT as may
be necessary to neutralize the impact of any such action or omission.
(h) CCC and Newco agree that separate books and records will be kept for the
Surviving Corporation during the period from the Closing through April 30,
2000.
2.4 EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
(a) Delivery of Consideration. At Closing, in exchange for the outstanding
shares of capital stock of the Company, CCC shall cause to be made available
to the Shareholders the Base Merger Consideration (including cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section
2.1(d)), with all cash payments to be made by federal wire transfer of
immediately available funds pursuant to wire transfer instructions provided by
the Shareholders at least two business days prior to Closing. The certificates
evidencing the CCC Common Stock component of the Base Merger Consideration and
the Contingent Merger Consideration (the cash and the CCC Common Stock
components of the Base Merger Consideration and the Contingent Merger
Consideration are referred to together as the "Merger Consideration") shall
bear appropriate legends pursuant to the terms of this Agreement and any
applicable Affiliate Agreement (as described in Section 8.10), and CCC shall
be entitled to issue appropriate stop transfer instructions to its transfer
agent consistent with the terms of this Agreement and any applicable Affiliate
Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
Shareholders shall deliver to CCC the certificates (the "Certificates")
representing Company Common Stock owned by them, accompanied by blank stock
powers duly executed by each respective Shareholder and with all necessary
transfer tax and other revenue stamps, acquired at the Shareholder's expense,
affixed and canceled. Each Shareholder shall promptly cure any deficiencies
with respect to the stock powers accompanying such Certificates. The
Certificates so delivered shall forthwith be canceled. Until delivered as
contemplated by this Section 2.4(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the number of shares of CCC Common Stock and the amount of cash as
provided by this Article 2 and the applicable provisions of the State
Corporate Laws.
(c) No Further Ownership Rights in Capital Stock of the Company. All CCC
Common Stock and cash to be delivered (including CCC Common Stock delivered
but withheld pursuant to Section 3.1(a)) upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and, following the Effective Time, the
Shareholders shall have no further rights to, or ownership in, shares of
capital stock of the Company. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock which were issued and outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Section 2.4.
(d) Lost, Stolen or Destroyed Certificates. If any certificates evidencing
shares of Company Common Stock shall have been lost, stolen or destroyed, then
CCC shall cause payment to be made in exchange for such lost, stolen or
destroyed certificates, upon the delivery to CCC of an affidavit of that fact
by the holder thereof, of such shares of CCC Common Stock and cash as provided
in Section 2.1; provided, however that CCC may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver an indemnification agreement
having such terms as it may reasonably direct as indemnity against any claim
that may be made against CCC with respect to the certificates alleged to have
been lost, stolen or destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this Section
2.4, none of the Surviving Corporation or any party hereto shall be liable to
a holder of shares of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
6
3. POST-CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 POST-CLOSING ADJUSTMENT.
(a) The Base Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within one hundred twenty (120) days following the Effective Time, CCC
shall cause CCC's Accountant to audit the Surviving Corporation's books to
determine the accuracy of the information set forth on the Closing Financial
Certificate (the "Post-Closing Audit"). The parties acknowledge and agree that
for purposes of determining the net worth of the Company as of the Closing
Date, the value of the assets of the Company shall, except with the prior
written consent of CCC, be calculated as provided in the last paragraph of
Section 8.13. The Shareholders shall cooperate and shall use reasonable
efforts to cause the officers and employees of the Company to cooperate with
CCC and CCC's Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to CCC's Accountant to facilitate the
completion of the Post-Closing Audit within the aforementioned time period.
Without limiting the generality of the foregoing, within two weeks after the
Closing the Shareholders shall provide CCC's Accountants with the information
and/or documents reasonably requested by them. In the event that CCC's
Accountant determines that the actual Company net worth as of the Closing Date
was less than the Net Worth Target, or that the actual Adjusted EBIT for the
year ended December 31, 1997 was less than the 1997 Adjusted EBIT Target, CCC
shall deliver a written notice (the "Financial Adjustment Notice") to the
Shareholders setting forth (i) the determination made by CCC's Accountant of
the actual Company net worth (the "Actual Company Net Worth") and the actual
Adjusted EBIT for the year ended December 31, 1997 (the "Actual Adjusted
EBIT"), (ii) the amount of the Merger Consideration that would have been
payable at Closing pursuant to Section 2.2(c) had the Actual Company Net Worth
and Actual Adjusted EBIT been reflected on the Closing Financial Certificate
instead of the Certified Closing Net Worth and Certified Adjusted Year-End
EBIT, respectively, and (iii) the amount by which the number of shares issued
as the Merger Consideration would have been reduced at Closing had the Actual
Company Net Worth been used in the calculations pursuant to Section 2.2(c)
(the "Merger Consideration Adjustment"). In determining the Actual Company Net
Worth for purposes of the Post-Closing Audit, CCC's Accountant shall not take
into account any liabilities associated with the Identified Sales Tax
Liabilities (defined below). The term "Identified Sales Tax Liabilities" means
any liability (including penalties and other costs) due to the failure of the
Company to withhold or have withheld or pay or have paid over to the proper
governmental authorities any sales taxes required to have been withheld and
paid over, or the failure of the Company to comply with all information
reporting and backup withholding requirements, including maintenance of
required records with respect thereto.
(c) The Merger Consideration Adjustment shall take account of the reduction,
if any, to the Merger Consideration already taken pursuant to Section
2.2(c)(i).
(d) The Shareholders shall have thirty (30) days from the receipt of the
Financial Adjustment Notice to notify CCC if the Shareholders disputes such
Financial Adjustment Notice. If CCC has not received notice of such a dispute
within such 30-day period, CCC shall be entitled to receive from the
Shareholders (which may, at CCC's sole discretion, be from the Pledged Assets
as defined in Section 3.2) the Merger Consideration Adjustment. If, however,
the Shareholders has delivered notice of such a dispute to CCC within such 30-
day period, then CCC's Accountant shall select an independent accounting firm
that has not represented any of the parties hereto within the preceding two
(2) years to review the Surviving Corporation's books, Closing Financial
Certificate and Financial Adjustment Notice (and related information) to
determine the amount, if any, of the Merger Consideration Adjustment. Such
independent accounting firm shall be confirmed by the Shareholders and CCC
within five (5) days of its selection, unless there is an actual conflict of
interest. The independent accounting firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to CCC's Accountant
in connection with the transactions contemplated hereby, or (ii) reviewed by
CCC's Accountant during the course of the Post-Closing Audit. The independent
accounting firm shall make its determination of the Merger Consideration
Adjustment, if any, within thirty (30) days of its selection. The
determination made by the independent accounting firm shall be
7
final and binding on the parties hereto, and upon such determination, CCC
shall be entitled to receive from the Shareholders (which may, at CCC's sole
discretion, be from the Pledged Assets as defined in Section 3.2) the Merger
Consideration Adjustment. The costs of the independent accounting firm shall
be borne by the party (either CCC or the Shareholders) whose determination of
the Company's net worth at Closing, or actual Adjusted EBIT for the year ended
December 31, 1997, whichever is in dispute, was further from the determination
of the independent accounting firm, or equally by CCC and the Shareholders in
the event that the determination by the independent accounting firm is
equidistant between the Certified Closing Net Worth and the Actual Company Net
Worth or the Certified Adjusted Year End EBIT and the Actual Adjusted EBIT,
whichever is in dispute.
3.2 PLEDGED ASSETS.
(a) As collateral security for the payment of any indemnification
obligations of the Shareholders pursuant to (and subject to the limitations
of) Article 10, the Shareholders shall, and by execution hereof do hereby,
transfer, pledge and assign to CCC, for the benefit of CCC, a security
interest in the following assets (collectively, with respect to all of the
Shareholders, the "Pledged Assets"):
(i)such Shareholders' pro rata portion of shares of CCC Common Stock with a
value, based on the Merger Price, equal to ten percent (10%) of the Base
Merger Consideration, and the certificates and instruments, if any,
representing or evidencing such Shareholder's Pledged Assets;
(ii)all securities hereafter delivered to any Shareholder with respect to or
in substitution for the Shareholder's Pledged Assets, all certificates and
instruments representing or evidencing such securities, and all cash and non-
cash dividends and other property at any time received, receivable or
otherwise distributed in respect of or in exchange for any or all thereof; and
in the event such Shareholder receives any such property, such Shareholder
shall hold such property in trust for CCC and shall immediately deliver such
property to CCC to be held hereunder as Pledged Assets; and
(iii)all cash and non-cash proceeds of all of the foregoing property and all
rights, titles, interests, privileges and preferences appertaining or incident
to the foregoing property.
(b) Each certificate, if any, evidencing a Shareholder's Pledged Assets
issued in his or her name in the Merger shall be delivered to CCC directly by
the transfer agent, such certificate bearing no restrictive or cautionary
legend other than those imprinted by the transfer agent at CCC's request in
accordance with the terms and provisions of this Agreement. Each Shareholder
shall, at the Closing, deliver to CCC, for each such certificate, a stock
power duly signed in blank by him. All shares of CCC Common Stock comprising a
Shareholder's Pledged Assets shall not be commingled with the assets of CCC or
any of its subsidiaries.
(c) The Pledged Assets shall be available to satisfy any indemnification
obligations of each Shareholder pursuant to (and subject to the limitations
of) Article 10 until the date which is one year after the Effective Time (the
"Release Date. ."). On the Release Date, CCC shall release such pledge and
return or cause to be returned to the Shareholders the Pledged Assets
(including dividends and distributions with respect to shares of CCC Common
Stock subject to pledge), less Pledged Assets having an aggregate value equal
to the amount of (i) any finally adjudicated claim (to the extent not fully
satisfied) or any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10) subject to the limitations of Article 10, and
(ii) any indemnification obligations of any Shareholder pursuant to Article 10
subject to the limitations of Article 10 to the extent previously paid from
the Pledged Assets. For purposes of the preceding sentence and Article 10, the
CCC Common Stock held as Pledged Assets shall be valued at the average of the
closing price per share on the Nasdaq National Market of CCC Common Stock for
the five trading days prior to the satisfaction of an indemnification
obligation (or if no trade price is reported for any such day, the average of
the last bid and ask prices for the CCC Common Stock) with respect to
indemnification obligations pursuant to Article 10. Notwithstanding the
foregoing or anything to the contrary herein, the Shareholders shall be
entitled to satisfy any claims relating to the Pledged Assets, including but
not limited to any indemnification pursuant to Article 10 hereof, with cash,
in lieu of shares of CCC Common Stock constituting Pledged Assets.
8
(d) While any shares of CCC Common Stock remain subject to the pledge set
forth herein, and pending the disbursement thereof in accordance with this
Section 3.1, the Shareholders shall have all the rights of shareholders of CCC
with respect to such shares (including without limitation the right to vote
such shares in accordance with their respective interest therein and the right
to receive dividends and distributions thereon), except (i) the right of
possession thereof, (ii) the right to sell, assign, pledge, hypothecate or
otherwise dispose of such shares or any interest therein and (iii) the right
to possession of any dividends or other distributions received in respect
thereof.
4. CLOSING
4.1 LOCATION AND DATE. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place
at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, on May 29, 1998, providing that all conditions to
Closing shall have been satisfied or waived, or at such other time, place and
date as CCC, the Company and the Shareholders may mutually agree, which date
shall be referred to as the "Closing Date."
4.2 EFFECT. On the Closing Date, the articles of merger, or other
appropriate documents executed in accordance with the State Corporate Laws
(the "Merger Documents"), together with any required officers' certificates,
shall be filed in accordance with the provisions of the State Corporate Laws.
The Merger shall become effective upon such filings or at such later time as
may be specified in such filings (the "Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
To induce CCC and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, the Company (with respect to representations
relating to the Company only) and the Shareholders, jointly and severally,
represent and warrant to CCC and Newco, as follows (for purposes of this
Agreement, the phrases "knowledge of the Company" or the "Company's
knowledge," or words of similar import, mean the actual knowledge of the
directors and officers of the Company.
5.1 DUE ORGANIZATIONORGANIZATION. The Company is a corporation duly
organized, validly existing and rin good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
business in the places and in the manner as now conducted except where the
failure to be so authorized, qualified or licensed would not have a material
adverse effect on the business, operations, properties, assets or condition,
financial or otherwise, of the Company taken as a whole, provided that the
foregoing shall not include any material adverse effect attributable to (a)
factors affecting the electrical contracting industry generally, (b) general
national, regional or local economic or financial conditions, (c) changes in
governmental or legislative laws, rules or regulations, or (d) actions taken
by CCC or any affiliate of CCC ("Material Adverse Effect"). SCHEDULE 5.L
hereto contains (i) a list of all jurisdictions in which the Company conducts
business and (ii) a list of all jurisdictions in which the Company is
authorized or qualified to do business as a foreign corporation. The Company
is in good standing in all jurisdictions where the failure to be in good
standing would have a Material Adverse Effect. The Company has delivered to
CCC or given CCC access to true, complete and correct copies of the Articles
of Incorporation and Bylaws of the Company. Such Articles of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." The Company is
not in violation of any Charter Documents. The minute books, original stock
ledger and corporate seal of the Company have been made available to CCC and
are correct and, except as set forth in SCHEDULE 5.1, complete in all material
respects.
5.2 AUTHORIZATION; VALIDITY. The Company has the requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. Each Shareholder has the full legal right and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
performance by the Company of the
9
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company and the Shareholders and this Agreement has
been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and the
Shareholders, enforceable against the Company and the Shareholders in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
5.3 NO CONFLICTS. Except as set forth on SCHEDULES 5.3 OR 5.14, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment of the terms hereof will
not:
(a) Conflict with, or result in a breach or violation of, any of the Charter
Documents;
(b) other than such as would not, individually or in the aggregate, have a
Material Adverse Effect, conflict with, or result in a default (or an event
that would constitute a default but for the requirement of notice or lapse of
time or both) under, any document, agreement or other instrument to which the
Company or any Shareholder is a party or by which the Company or any
Shareholder is bound, or result in the creation or imposition of any lien,
charge or encumbrance on any of the Company's properties pursuant to (i) any
law or regulation to which the Company or any Shareholder or any of their
respective property is subject, or (ii) any judgment, order or decree to which
the Company or any Shareholder is bound or any of their respective property is
subject;
(c) result in termination or any impairment of any material permit, license,
franchise, surety bond, insurance coverage, contractual right or other
authorization of the Company;
(d) violate any material law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any Shareholder is subject or by which the
Company or any Shareholder is bound; or
(e) require the consent of any third party.
5.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 50,000 shares of Common Stock, no par value, of which
1,222 shares are issued and outstanding. No shares are held as treasury stock.
Except as disclosed in SCHEDULE 5.4, all of the issued and outstanding shares
of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Shareholders in the respective amounts set forth on
SCHEDULE 5.4, free and clear of all Liens (defined below). All of the issued
and outstanding shares of the capital stock of the Company were offered,
issued, sold and delivered by the Company in compliance with all applicable
state and federal laws concerning the issuance of securities. Further, none of
such shares was issued in violation of any preemptive rights. There are no
voting agreements or voting trusts with respect to any of the outstanding
shares of the capital stock of the Company. For purposes of this Agreement,
"Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
federal and state securities laws), or preferential arrangement of any kind or
nature whatsoever (including any restriction on the transfer of any assets,
any conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
5.5 TRANSACTIONS IN CAPITAL STOCK. Except as disclosed in SCHEDULE 5.5, no
option, warrant, call, subscription right, conversion right or other contract
or commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise cause to become outstanding
any shares of capital stock. Except as disclosed in SCHEDULE 5.5, the Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof.
10
5.6 SUBSIDIARIES, STOCK, AND NOTESSTOCK, AND NOTES.
(a) Except as set forth on SCHEDULE 5.6(A), the Company has no subsidiaries.
(b) Except as set forth on SCHEDULE 5.6(B), the Company does not presently
own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the
Company, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
(c) Except as set forth on SCHEDULE 5.6(C), there are no promissory notes
that have been issued to, or are held by, the Company.
5.7 PREDECESSOR STATUS. SCHEDULE 5.7 sets forth a list of all names of all
predecessor companies of the Company, including the names of any entities from
which the Company previously acquired substantially all of the assets. Except
as set forth in SCHEDULE 5.7, the Company has never been a subsidiary or
division of another corporation.
5.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except as set forth in SCHEDULE
5.8, no Shareholder has any claims against the Company.
5.9 COMPANY FINANCIAL CONDITION. The Company's (a) earnings before interest
and taxes, computed in accordance with GAAP adjusted to reflect the non-
recurring items set forth on SCHEDULE 5.9 hereto (the "Adjusted EBIT") for the
12-month period ended December 31, 1997 shall have been no less than
$4,084,000 and (b) net worth calculated in accordance with GAAP, consistently
applied, including intangible assets, as of the Closing was not less than
$2,500,000.
5.10 FINANCIAL STATEMENTSSTATEMENTS. SCHEDULE 5.10 includes (a) true,
complete and correct copies of the Company's audited balance sheet as of
December 31, 1997 (the "Balance Sheet Date") and 1996 (December 31, 1997 being
the end of its most recently completed fiscal year), and income statements and
statements of cash flows for the years ended December 31, 1997 and 1996
(collectively, the "Audited Financials"); (b) true, complete and correct
copies of the Company's unaudited income statement and statement of cash flow
for the year ended December 31, 1995 (the "Unaudited Financials") ; and (c)
true, complete and correct copies of the Company's unaudited balance sheet as
of February 28, 1998 for the two-month period then ended (the "Interim Balance
Sheet," and together with the Audited Financials and the Unaudited Financials,
the "Company Financial Statements"). Except as noted on the auditors' report
accompanying the Audited Financials, the Company Financial Statements have
been prepared in accordance with GAAP consistently applied, subject to, in the
case of the Interim Financials, (i) the exceptions stated on SCHEDULE 5.10,
and (ii) the omission of footnote information. Except as set forth in SCHEDULE
5.10 or as noted on the accompanying auditor's report, each balance sheet
included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
income statements included in the Company Financial Statements presents fairly
the results of its operations for the periods indicated thereon, in each case
in accordance with GAAP.
5.11 LIABILITIES AND OBLIGATIONSAND OBLIGATIONS.
(a) The Company is not liable for or subject to any liabilities except for:
(i)those liabilities reflected on the Interim Balance Sheet and not previously
paid or discharged;
(ii)those liabilities arising in the ordinary course of its business
consistent with past practice under any contract, commitment or agreement that
is not required to be listed on SCHEDULE 5.18(A) and those liabilities under
any contract, commitment or agreement specifically disclosed on any Schedule
to this Agreement.
(iii)those liabilities incurred since the Balance Sheet Date in the ordinary
course of business consistent with past practice, which liabilities are not,
individually or in the aggregate, material; and
11
(iv)those liabilities set forth on SCHEDULE 5.11.
(b) The Company has provided to CCC, in the case of those liabilities which
are not fixed or are contested, its good faith estimate of the maximum amount
which may be payable.
(c) SCHEDULE 5.11 also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the
Company or the Surviving Corporation would require additional material
expenditures of capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall include
without limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmatured or
otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or inchoate,
liquidated or unliquidated, secured or unsecured. SCHEDULE 5.11 contains a
complete list of all indebtedness of the Company as of the Balance Sheet Date.
5.12 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as SCHEDULE 5.12 is an
accurate list, as of a date not more than ten (10) business days prior to the
date hereof, of the accounts and notes receivable of the Company (including
without limitation receivables from and advances to employees, former
employees, and the Shareholders), which includes an aging of all accounts and
notes receivable showing amounts due in 30-day aging categories (collectively,
the "Accounts Receivable"). On the Closing Date, the Company will deliver to
CCC an accurate list, as of a date not more than ten (10) business days prior
to the Closing Date, of the Accounts Receivable. All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business or such other valid
obligations arising from receivables from and advances to employees, former
employees or the Shareholders. The Accounts Receivable are current and
collectible net of any respective reserves shown on the Company's books and
records (which reserves are adequate and calculated consistent with past
practice). Subject to such reserves and except for retainage, each of the
Accounts Receivable will be collected in full, without any set-off, within 180
days after the Closing Date (or with respect to those Accounts Receivable
specified on SCHEDULE 5.12, within the number of days after the Closing
specified for each such Account Receivable). To the Company's knowledge, there
is no contest, claim, or right of set-off, other than rebates and returns in
the ordinary course of business, under any contract with any obligor of an
Account Receivable relating to the amount or validity of such Account
Receivable.
5.13 BOOKS AND RECORDS. The Company has made and kept books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company.
5.14 PERMITS. Except as set forth on SCHEDULE 5.14, the Company owns or
holds all material licenses, franchises, permits and other governmental
authorizations, including without limitation permits, titles (including
without limitation motor vehicle titles and current registrations), fuel
permits, licenses and franchises necessary for the continued operation of its
business as it is currently being conducted (the "Permits."). The Permits are
valid, and the Company has not received any notice that any governmental
authority intends to modify, cancel, terminate or fail to renew any Permit.
Except as set forth on SCHEDULE 5.14, no present or former officer, manager,
member or employee of the Company or any affiliate thereof, or any other
person, firm, corporation or other entity, owns or has any proprietary,
financial or other interest (direct or indirect) in any Permits. The Company
has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Permits and
other applicable orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing, except where such non-compliance or
violation would not have a Material Adverse Effect. Except as set forth on
SCHEDULES 5.3 or 5.14, the transactions contemplated by this Agreement will
not result in a default under, or a breach or violation of, or adversely
affect the rights and benefits afforded to the Company by, any Permit.
12
5.15 REAL PROPERTY.
(a) For purposes of this Agreement, "Real Property" means all of the
Company's interest in real property, including without limitation, fee
estates, leaseholds and subleaseholds, purchase options, easements, licenses,
rights to access, and rights of way, and all buildings and other improvements
thereon, owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) The Company has no fee ownership in any Real Property.
(c) SCHEDULE 5.15(C) contains an accurate description as of the date of this
Agreement of all Real Property (including street address, legal description
(where known), owner and Company's use thereof) and, to the Company's
knowledge, any Liens other than for: (A) liens for current taxes not yet due
and payable, (B) easements, covenants, conditions, restrictions, rights of way
and title defects reflected in the public records, and any matters which would
be reflected in a current, accurate survey of the owned Real Property and
which do not individually, or in the aggregate, materially interfere with the
right or ability of CCC to use or operate the owned Real Property as the owned
Real Property is currently used by the Company, (C) liens securing
indebtedness for borrowed money that CCC or one of its affiliates has agreed
to assume at Closing, as set forth on SCHEDULE 5.15(C)(I), (D) landlord's
liens and liens for property taxes not delinquent, (E) statutory liens that
were created in the ordinary course of business not delinquent, (F)
restrictions or rights granted to governmental authorities under applicable
law, (G) zoning, building, or similar restrictions relating to or affecting
property, and (H) all matters of record, including leasehold interests in real
property owned by others and operating leases for personal property and leased
interests in property leased to others (collectively, "Permitted
Encumbrances").
(d) The Company: (i) holds no interest as landlord in any Real Property;
(ii) has a valid leasehold interest in all the Real Property listed as leased
by the Company on SCHEDULE 5.15(C) (the "leased Real Property."); (iii) is not
in default of any of its obligations under any lease relating to the leased
Real Property, nor has an event occurred which, with the giving of notice or
the passage of time, could become an event of default; (iv) has no knowledge
of any default by the landlord under any lease relating to the leased Real
Property; (v) has paid all rent under each lease relating to the leased Real
Property with respect to the period through the Closing Date; and (vi) has not
exercised any renewal or extension (other than renewals or extensions that
have been disclosed to CCC), termination, purchase or other option under any
lease relating to the leased Real Property.
(e) The Company has provided CCC with true and complete copies of each lease
relating to the leased Real Property and all amendments, renewals, extensions,
modifications or supplements thereto, and all correspondence pursuant to which
any party to any of such leases declared a default thereunder or provided
notice of the exercise of any option granted to such party under such lease.
(f) Except as provided on SCHEDULE 5.3, none of the leases relating to the
leased Real Property requires the consent or approval of any party thereto in
connection with the consummation of the transactions contemplated hereby.
5.16 PERSONAL PROPERTY.
(a) SCHEDULE 5.16(A) sets forth a complete and accurate list of all personal
property included on the Interim Balance Sheet and all other personal property
owned or leased by the Company with a current book value for any one item in
excess of $10,000 both (i) as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date, including in each case true, complete and
correct copies of leases for material equipment and an indication as to which
assets are currently owned, or were formerly owned, by any Shareholder or
business or personal affiliates of any Shareholder or of the Company.
(b) The Company currently owns or leases all personal property necessary to
conduct the business and operations of the Company as they are currently being
conducted.
(c) All of the trucks and other material machinery and equipment of the
Company, including those listed on SCHEDULE 5.16(A), are in good working order
and condition, ordinary wear and tear excepted. All leases set forth on
SCHEDULE 5.16(A) are in full force and effect and constitute valid and binding
agreements of the Company, and the Company is not in breach of any of their
material terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on SCHEDULE 5.16(A).
13
5.17 INTELLECTUAL PROPERTY.
(a) The Company and its subsidiaries own or possess adequate and enforceable
licenses or other rights to use (including foreign rights), all copyrights,
patents, trade names, trade secrets, registered and unregistered trademarks,
service marks, trade dress, franchises, domain names and similar rights now
used or employed in the business of the Company and its subsidiaries (the
"Intellectual Property") and such rights will not cease to be valid rights of
the Company and its subsidiaries by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) SCHEDULE 5.17 sets forth a list of all of the Intellectual Property of
the Company and its subsidiaries. SCHEDULE 5.17 also sets forth: (i) for each
patent, the number, normal expiration date and subject matter for each country
in which such patent has been issued, or, if applicable, the application
number, date of filing and subject matter for each country; (ii) for each
trademark and service mark, the application serial number or registration
number, the classes of goods and services covered and the expiration date for
each country in which a trademark or service mark has been registered; and
(iii) for each copyright, the number and date of filing for each country in
which a copyright has been filed. SCHEDULE 5.17 includes all unregistered and
common law rights to Intellectual Property that are material to the Company.
The Intellectual Property listed on SCHEDULE 5.17 is all such property used by
the Company or any of its subsidiaries in connection with their businesses.
True, correct and complete copies of all patents (including all pending
applications), trademark and service mark registrations and pending
applications, and copyright registrations and pending applications, owned,
controlled, created or used by or on behalf of the Company and its
subsidiaries have been provided to CCC. All pending patent applications have
been duly filed.
(c) Neither the Company nor any of its subsidiaries has any obligation to
compensate any person for the use of any Intellectual Property, and neither
the Company nor any of its Subsidiaries has granted to any person any license,
option, or other rights to use in any manner any of its Intellectual Property,
whether requiring the payment of royalties or not, other than licenses to the
Company of franchises or licenses in the ordinary course of business.
(d) Neither the Company nor any of its subsidiaries has received any notice
of invalidity or infringement of any rights of others with respect to the
Intellectual Property. No person has notified the Company or any of its
subsidiaries that it is claiming any ownership of or right to use such
Intellectual Property. No person, to the knowledge of the Company, is
infringing upon any such Intellectual Property in any way, except where such
use would not have a Material Adverse Effect on the Company. To the knowledge
of the Company after reasonable investigation, the use of the Intellectual
Property by the Company and its subsidiaries does not and will not conflict
with, infringe upon or otherwise violate the valid rights of any third party
in or to such Intellectual Property, and no action has been instituted against
or notices received by the Company or any subsidiary that are presently
outstanding alleging that the use of the Intellectual Property infringes upon
or otherwise violates any rights of a third party in or to such Intellectual
Property.
5.18 MATERIAL CONTRACTS AND COMMITMENTS.
(a) As of the date of this Agreement, SCHEDULE 5.18(A) contains a complete
and accurate list of each contract, commitment, lease, instrument, agreement,
license or permit, written or oral, to which the Company is a party or by
which it or its properties are bound (including without limitation, joint
venture or partnership agreements, contracts with any labor organizations,
employment agreements, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, liens,
pledges or other security agreements) (i) to which the Company on the one hand
and on the other hand any affiliate of the Company or any officer, director or
shareholder of the Company are parties ("Related Party Agreements"); (ii) that
may give rise to obligations or liabilities exceeding, during the current term
thereof, $2,000,000 individually, or that may generate revenues or income
exceeding, during the current term thereof, $2,000,000 individually
(collectively with the Related Party Agreements, the "Material Contracts"); or
(iii) that provides rights to indemnification to any current or former
directors, officers, employees or agents of the Company. The
14
Company has provided CCC with access to true, complete and correct copies of
the Material Contracts. Other than as disclosed on SCHEDULE 5.18(A) the
Company has complied with all of its material commitments and obligations, is
not in default under any of the Material Contracts, has no contracts under
which the work has been substantially delayed or changed for which proper
compensation is not expected, has no pending or expected claims in excess of
$50,000 against a prime contractor or owner in connection with completed work
or work in progress, and no notice of default has been received with respect
to any thereof, and there are no Material Contracts that were not negotiated
at arm's length. The Related Party Agreements have terms that are no less
favorable to the Company that could have been obtained from an unrelated
party.
(b) Each Material Contract, except those terminated pursuant to Section 7.4,
is valid and binding on the Company and is in full force and effect and, to
the knowledge of the Company and the Shareholders, is not subject to any
default thereunder by any party obligated to the Company pursuant thereto.
The outstanding balance on all loans or credit agreements either (i) between
the Company and any Person in which any Shareholder owns a material interest,
or (ii) guaranteed by the Company for the benefit of any Person in which any
Shareholder owns a material interest, are set forth in SCHEDULE 5.18(C) as of
the date indicated therein.
(c) The pledge, hypothecation or mortgage of all or substantially all of the
Company's assets (including, without limitation, a pledge of the Company's
contract rights under any Material Contract) will not, except as set forth on
SCHEDULE 5.18(D), (i) result in the breach or violation of, (ii) constitute a
default under, (iii) create a right of termination under, or (iv) result in
the creation or imposition of (or the obligation to create or impose) any lien
upon any of the assets of the Company (other than a lien created pursuant to
the pledge, hypothecation or mortgage described at the start of this Section
5.18(d)) pursuant to any of the terms and provisions of, any Material Contract
to which the Company is a party or by which the property of the Company is
bound.
5.19 GOVERNMENT CONTRACTS.
(a) Except as set forth on SCHEDULE 5.19, the Company is not a party to any
government contracts (i) with any local government agency or instrumentality
that may give rise to obligations or liabilities exceeding, prior to any
renewal thereof, $50,000 individually, or that may generate revenues or income
exceeding, prior to any renewal thereof, $50,000 individually, or (ii) with
any agency or instrumentality of the United States Government or any state
government.
(b) The Company has not been suspended or debarred from bidding on contracts
or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company and the Shareholders, has any suspension or debarment action been
threatened or commenced. To the knowledge of the Company and the Shareholders,
there is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
(c) Except as set forth on SCHEDULE 5.19, as of the date of this Agreement,
the Company has not been, nor is it now being, audited, or investigated by any
government agency, or the inspector general or auditor general or similar
functionary of any agency or instrumentality, nor, to the knowledge of the
Company and the Shareholders, has such audit or investigation been threatened.
(d) Except as set forth on SCHEDULE 5.19, as of the date of this Agreement,
the Company has no material dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against,
any agency or instrumentality of the United States Government or any state or
local government, relating to a contract.
(e) As of the date of this Agreement, the Company has not, with respect to
any government contract, received a cure notice advising the Company that it
is or was in default or would, if it failed to take remedial action, be in
default under such contract.
15
(f) The Company has not submitted any inaccurate, untruthful, or misleading
cost or pricing data, certification, bid, proposal, report, claim, or any
other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government that would be
contrary to any current rules and regulations.
(g) To the knowledge of the Company and the Shareholders, no employee,
agent, consultant, representative, or affiliate of the Company is in receipt
or possession of any competitor or government proprietary or procurement
sensitive information related to the Company's business under circumstances
where there is reason to believe that such receipt or possession is unlawful
or unauthorized.
(h) Each of the Company's government contracts has been issued, awarded or
novated to the Company in the Company's name.
(9) Except as set forth on SCHEDULE 5.19, the Company's cost accounting
records are presently in conformance with the requirements of the Federal
Acquisition Regulations to the extent applicable.
5.20 INSURANCE. SCHEDULE 5.20 sets forth, as of the date of this Agreement,
an accurate list of all insurance policies carried by the Company and all
insurance loss runs or workers' compensation claims received for the past two
policy years. The Company has delivered to CCC or given CCC access to true,
complete and correct copies of all current insurance policies, all of which
are in full force and effect. All premiums payable under all such policies
have been paid and the Company is otherwise in full compliance with the terms
of such policies. Such policies of insurance are of the type and in amounts
that to the knowledge of the Company, are customarily carried by persons
conducting businesses similar to that of the Company. The insurance carried by
the Company with respect to its properties, assets and business is, to the
Company's knowledge, with financially sound insurers. To the knowledge of the
Company, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
5.21 LABOR AND EMPLOYMENT MATTERS. Except as set forth in SCHEDULE 5.21, as
of the date of this Agreement, with respect to employees of and service
providers to the Company:
(a) the Company is and has been in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting minimum wage and overtime payments, employment
discrimination, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, and occupational safety and health
requirements, and has not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been, any
unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(c) there is not now, nor within the past three years has there been, any
labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization effort
exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge,
no claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been represented by
any labor union, and no collective bargaining agreement is binding and in
force against the Company or currently being negotiated by the Company; and
(g) to the knowledge of the Company, all persons classified by the Company
as independent contractors do satisfy and have satisfied the requirements of
law to be so classified, and the Company has fully and accurately reported
their compensation on IRS Forms 1099 when required to do so.
16
5.22 EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 5.22 are complete
and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multiemployer plans and
all multiple employer welfare arrangements (as defined in Sections 3(3), (1),
(2), (37) and (40), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), which are currently maintained and/or
sponsored by the Company, or to which the Company currently contributes, or
has an obligation to contribute in the future (including, without limitation,
any such plan or arrangement created by any agreements, including any
employment agreements and any other agreements containing "golden parachute"
provisions and deferred compensation agreements disclosed in SCHEDULE
5.18(A)), together with copies of any trusts related thereto and a
classification of employees covered thereby (collectively, the "Plans"). To
the best of the Company's knowledge, SCHEDULE 5.22 sets forth each plan or
arrangement that would have been an employee pension or welfare benefit plan
but for its termination within the past three years.
To the best of the Company's knowledge, all Plans are in material compliance
with all applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other applicable laws, and, in all material respects, have
been administered, operated and managed in material accordance with the
governing documents. All Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code have been determined by the Internal
Revenue Service to be so qualified, and 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 or employee welfare benefit plan and most recent trustee
or custodian report, are included as part of SCHEDULE 5.22. To the Company's
knowledge, to the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting
retroactive amendment of such Qualified Plans has not expired and will not
expire within 120 days after the Closing Date. To the Company's knowledge, all
reports and other documents required to be filed with any governmental agency
or distributed to plan participants or beneficiaries (including, but not
limited to, annual reports, summary annual reports, actuarial reports, PBGC-1
Forms, audits or tax returns) have been timely filed or distributed except to
the extent that the failure to file or distribute such reports or documents
would not subject the Company to any material penalty. None of: (i) the
Shareholders; (ii) to the knowledge of the Company, the Plans; or (iii) the
Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA which could result in the
imposition of a material penalty under ERISA or a material tax under the Code,
except in accordance with an applicable exemption or except any such
prohibited transaction that results from the conversion of the ESOP to a
Profit Sharing Plan (as defined) in Section 5.22(j) below) and the consequent
holding by the Profit Sharing Plan of a promissory note in favor of the
Company. No Plan has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and the Company does
not currently have (nor at the Closing Date will 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
("PBGC") with respect to any such Plan under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty; and neither the
Company nor any member of a "controlled group" (as defined in ERISA Section
4001(a)(14)) currently has (or at the Closing Date will have) any obligation
whatsoever to contribute to any "multiemployer pension plan" (as defined in
ERISA Section 4001(a)(13), nor has any withdrawal liability whatsoever
(whether or not yet assessed) arising under or capable of assertion under
Title IV of ERISA (including, but not limited to, Sections 4201, 4202, 4203,
4204, or 4205 thereof) been incurred by any Plan. Further, within the last
three years, except as set forth on SCHEDULE 5.22:
(a) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and, where required,
approval by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of ERISA has been
terminated;
(c) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
17
(d) the valuation of assets of any Qualified Plan subject to Title IV of
ERISA, as of the Closing Date, shall equal or exceed the actuarial present
value of all accrued pension benefits under such Qualified Plan in accordance
with the assumptions contained in the Regulations of the PBGC governing the
funding of terminated defined benefit plans;
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), and to the Company's knowledge, the Company has complied (and on the
Closing Date will have complied), in all material respects with all reporting,
disclosure, notice, election and other benefit continuation requirements
imposed thereunder as and when applicable to such plans, and the Company has
no (and will incur no) direct or indirect liability and is not (and will not
be) subject to any material 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, at any time prior to
the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against the Company
with respect to such group health plans;
(f) the Company has not been a member of a "controlled group" as defined in
ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding (other than routine claims for benefits)
and to the Company's knowledge, there is no threatened litigation, arbitration
or disputed claim, settlement or adjudication proceeding, or any governmental
or other proceeding, or investigation with respect to any Plan, or any
disputed claim, settlement or adjudication (other than routine claims for
benefits) with respect to any fiduciary, administrator, party in interest or
sponsor thereof (in their capacities as such);
(h) as required in accordance with GAAP, the Company Financial Statements as
of the Balance Sheet Date reflect the approximate total pension, medical and
other benefit expense for all Plans as of the date thereof, and no material
funding changes or irregularities not reflected thereon would cause such
Company Financial Statements to be inaccurate; and
(i) the Company has not incurred liability under Section 4062 of ERISA.
5.23 CONFORMITY WITH LAW; LITIGATION.
(a) Except as set forth on SCHEDULE 5.23(A), the Company is not in violation
of any law or regulation or under any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction which would have a Material Adverse
Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) Except as set forth on SCHEDULE 5.23(B), as of the date of this
Agreement, there are no claims, actions, suits or proceedings, pending or, to
the knowledge of the Company, threatened against or affecting the Company at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received which might have
a Material Adverse Effect on the Company. As of the date of this Agreement,
there are no judgments, orders, injunctions, decrees, stipulations or awards
(whether rendered by a court or administrative agency or by arbitration)
against the Company or against any of its properties or business which might
have a Material Adverse Effect on the Company.
18
5.24 TAXES.
(a) (i)The Company has timely filed all Tax Returns (as defined below) due
on or before the Closing Date and all such Tax Returns are true, correct and
complete in all material respects.
(ii)The Company has paid in full on a timely basis all Taxes (as defined
below).
(iii)The amount of the Company's liability for unpaid Taxes as of the Balance
Sheet Date did not exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) shown on the Interim Balance
Sheet, and the amount of the Company's liability for unpaid Taxes for all
periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(iv)There are no ongoing examinations or claims against the Company for Taxes,
and no notice of any audit, examination or claim for Taxes, whether pending or
threatened, has been received.
(v)The Company has a taxable year ended on December 31, in each year
commencing from the incorporation of the Company.
(vi)Through 1994, the Company filed on a modified cash basis (cash with
accrual for inventory). Since 1995, the Company has utilized the accrual
method of accounting for income Tax purposes and such method of accounting has
not changed since that time. The Company has not agreed to, and is not and
will not be required to, make any adjustments under Code Section 481(a) as a
result of a change in accounting methods.
(vii)The Company has withheld and paid over to the proper governmental
authorities all Taxes required to have been withheld and paid over, and
complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(viii)Copies of (A) any Tax examinations, (B) extensions of statutory
limitations for the collection or assessment of Taxes and (C) the Tax Returns
of the Company for the last five fiscal years have been made available to CCC.
(ix)There are (and as of immediately following the Closing there will be) no
Liens on the assets of the Company relating to or attributable to Taxes,
except for Permitted Encumbrances.
(x)To the Company's knowledge, there is no basis for the assertion of any
claim relating to or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company or otherwise have an
adverse effect on the Company or its business.
(xi)There are no contracts, agreements, plans or arrangements, including but
not limited to the provisions of this Agreement, covering any employee or
former employee of the Company that, individually or collectively, could give
rise to any payment (or portion thereof) that would not be deductible pursuant
to Sections 280G, 404 or 162 of the Code.
(xii)The Company is not, and has not been at any time, a party to a tax
sharing, tax indemnity or tax allocation agreement, and the Company has not
assumed the tax liability of any other person under contract.
(xiii)To the knowledge of the Company and the Shareholders, neither the
Company nor any Shareholder has taken any action or refrained from taking any
action that would cause the Merger not to qualify as a reorganization as
defined under Code Section 368(a)(1)(A) and Section 368(a)(2)(D).
19
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental charge,
impost or levy (including without limitation income taxes, franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipt taxes, value
added taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest
imposed by the United States or any state, county, local or foreign government
or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, between the Balance Sheet
Date and the date of this Agreement except as contemplated herein or as set
forth on SCHEDULE 5.25, there has not been:
(a) any change that by itself or together with other changes has had a
Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
(d) other than the AAA Account, any declaration or payment of any dividend
or distribution in respect of the capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock of the
Company, except for distributions relating to the payment of taxes (in the
event the Company is a Subchapter S Corporation under the Code);
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its
officers, directors, Shareholders, employees, consultants or agents, except in
the ordinary course of business consistent with past practice or as required
by contract or law;
(f) any work interruptions, labor grievances or claims filed, or any similar
event or condition of any character, which has had a Material Adverse Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any material
assets property or rights of the Company to any person, including without
limitation any Shareholder and the Shareholder's affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of any Shareholder and the Shareholder's affiliates owing to the
Company, provided that the Company may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent with past
practice;
(i) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, property or rights of
the Company or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(j) 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 business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party
other than in the ordinary course of business;
20
(m) any transaction by the Company outside the ordinary course of business;
(n) any capital commitment by the Company exceeding $50,000 individually;
(o) any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than
Permitted Encumbrances, liens arising under existing lease financing
arrangements which are not material and liens for Taxes not yet due and
payable);
(q) any entry into, amendment of, relinquishment, termination or non-renewal
by the Company of any contract, lease transaction, commitment or other right
or obligation requiring aggregate payments by the Company in excess of $50,000
with respect to such contract, lease, transaction, commitment or other right
or obligation other than in the ordinary course of business;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company and the
Shareholders, threat of commencement, of any lawsuit or proceeding against, or
investigation of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with CCC and its representatives regarding the
transactions contemplated by this Agreement).
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has any
account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
5.27 ENVIRONMENTAL MATTERS.
(a) Hazardous Material. To the knowledge of the Company and its
Shareholders, other than as set forth on SCHEDULE 5.27(A), no underground
storage tanks and no substance that has been designated by any Governmental
Entity or by applicable federal, state, local or other applicable law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws, but excluding office,
janitorial, and similar supplies properly and safely maintained (a "Hazardous
Material"), are present in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Company has
at any time owned, operated, occupied or leased (including the Real Property).
SCHEDULE 5.27(A) identifies all underground and aboveground storage tanks, and
the capacity, age, and contents of such tanks, which to the knowledge of the
Company and the Shareholders, are located on Real Property owned or leased by
the Company.
21
(b) Hazardous Materials Activities. Except as set forth on SCHEDULE 5.27(B),
to its knowledge, the Company has not transported, stored, used, manufactured,
disposed of or released, or exposed its employees or others to, Hazardous
Materials in violation of any law in effect on or before the Closing Date, nor
has the Company disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (collectively, "Company Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity in effect prior to or as of the date
hereof to prohibit, regulate or control Hazardous Materials or any Company
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan,
order, decree, judgment, notice or demand letter issued, entered, promulgated
or approved thereunder. To the Company's knowledge, there are no circumstances
that may prevent or interfere with such compliance in the future. SCHEDULE
5.27(C) includes a listing and description of all Environmental Permits
currently held by the Company.
(d) Environmental Liabilities. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending against the Company,
or to the knowledge of the Company, threatened against the Company concerning
any Environmental Permit, Hazardous Material or any Company Hazardous
Materials Activity. To the knowledge of the Company and the Shareholders,
there are no past or present actions, activities, circumstances, conditions,
events, or incidents that could involve the Company (or any person or entity
whose liability the Company has retained or assumed, either by contract or
operation of law) in any environmental litigation, or impose upon the Company
(or any person or entity whose liability the Company has retained or assumed,
either by contract or operation of law) any environmental liability including,
without limitation, common law tort liability.
5.28 RELATIONS WITH GOVERNMENTS. To the knowledge of the Company and the
Shareholders, the Company has not made, offered or agreed to offer anything of
value to any governmental official, political party or candidate for
government office, nor has it otherwise taken any action that would cause the
Company to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any law of similar effect.
5.29 DISCLOSURE. The Company has delivered or made available to CCC and
Newco true and complete copies of each agreement, contract, commitment or
other document (or summaries thereof) that is referred to specifically in the
Schedules or that has been requested by CCC. Without limiting any exclusion,
exception or other limitation contained in any of the representations and
warranties made herein, this Agreement and the schedules hereto do not and
will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements herein or therein not
misleading. If any Shareholder becomes aware of any fact or circumstance which
would change a representation or warranty of any Shareholder in this Agreement
or any representation made on behalf of the Company, the Shareholders (through
the Representative (as defined in Section 13.14) or otherwise) shall
immediately give notice of such fact or circumstance to CCC. However, such
notification shall not relieve the Company or the Shareholders of their
respective obligations under this Agreement.
5.30 CCC PROSPECTUS; SECURITIES REPRESENTATIONS. Each Shareholder has
received and reviewed a copy of the prospectus dated March 5, 1998 including
all supplements thereto (as supplemented, the "CCC Prospectus") contained in
CCC's shelf registration statement on Form S-1 (File No. 333-42317). Each
Shareholder (a) has such knowledge and experience in business and financial
matters and such knowledge concerning the business, operations and financial
condition of the Company that such Shareholder is capable of evaluating the
merits and risks of an investment in the shares of CCC Common Stock, (b) fully
understands the
22
nature, scope, and duration of the limitations on transfer contained herein,
in the Affiliate Agreement (if applicable), and under applicable law, and (c)
can bear the economic risk of any investment in the shares of CCC Common Stock
and can afford a complete loss of such investment. Each Shareholder, or such
Shareholder's purchaser representative, has had an adequate opportunity to ask
questions and receive answers (and has asked such questions and received
answers to his satisfaction) from the officers of CCC concerning the business,
operations and financial condition of CCC. Except as required by applicable
law, the Shareholders have no contract, undertaking, agreement or arrangement,
written or oral, with any other person to sell, transfer or grant
participation in any shares of CCC Common Stock to be acquired by such
Shareholder in the Merger.
5.31 AFFILIATES. SCHEDULE 5.31 lists each of the persons who is, in the
reasonable judgment of the Company and the Shareholders, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate" with
respect to the Company) promulgated under the 1933 Act.
5.32 LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 5.32 sets forth the
location of the Company's chief executive offices.
5.33 LOCATION OF EQUIPMENT AND INVENTORY. Set forth on SCHEDULE 5.33 is a
list of all locations where a filing is required under the UCC (as defined
below) with respect to Inventory and Equipment held on the date hereof by the
Company. For purposes of this Agreement, (a) the term "Inventory" shall mean
any "inventory" as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of Utah (the "UCC") owned by the
Company as of the date hereof, and, in any event, shall include, but shall not
be limited to, all merchandise, inventory and goods, and all additions,
substitutions and replacements thereof, wherever located, together with all
goods, supplies, incidentals, packaging materials, labels, materials and any
other items used or usable in manufacturing, processing, packaging or shipping
same; in all stages of production, and all proceeds therefrom; and (b) the
term "Equipment" shall mean any "equipment" as such term is defined in the UCC
owned by the Company as of the date hereof, and, in any event, shall include,
but shall not be limited to, all machinery, equipment, furnishings, fixtures
and vehicles owned by the Company, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
6. REPRESENTATIONS OF CCC AND NEWCO
To induce the Company and each Shareholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of CCC and Newco jointly
and severally represents and warrants to the Company and the Shareholders as
follows (for purposes of this Agreement, the phrases "knowledge of CCC,"
"knowledge of Newco," "CCC's knowledge," or "Newco's knowledge" or words of
similar import, mean the actual knowledge of the directors and officers of
each of CCC and Newco.
6.1 DUE ORGANIZATION. Each of CCC and Newco is a corporation duly organized,
validly existing and in good standing under the laws of its state of
organization, and each is duly authorized and qualified to do business under
all applicable laws, regulations, ordinances and orders of public authorities
to carry on their respective businesses in the places and in the manner as now
conducted, except where the failure to be so authorized, qualified or licensed
would not have a material adverse effect on the business, operations,
properties, assets or condition, financial or otherwise, of CCC or Newco.
Copies of the Certificate of Incorporation, Articles of Incorporation and the
Bylaws, each as amended, of CCC and Newco (collectively, the "CCC Charter
Documents") have been made available to the Company. Neither CCC nor Newco is
in violation of any CCC Charter Document.
6.2 CCC COMMON STOCK. The shares of CCC Common Stock to be delivered to the
Shareholders pursuant to this Agreement, when delivered in accordance with the
terms of this Agreement, will be duly authorized and validly issued shares of
CCC capital stock, fully paid and nonassessable. All of the shares of CCC
Common Stock to be issued to the Shareholders in accordance herewith will be
offered, issued, sold and
23
delivered by CCC in compliance with all applicable state and federal laws
concerning the issuance of securities and none of such shares was or will be
issued in violation of the preemptive rights of any shareholder of CCC.
6.3 AUTHORIZATION; VALIDITY OF OBLIGATIONS. CCC and Newco have all requisite
corporate power and authority to enter into this Agreement and the
transactions contemplated hereby. Each of CCC and Newco has the full legal
right and authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by CCC and
Newco and the performance by each of CCC and Newco of the transactions
contemplated herein will, prior to Closing, have been duly and validly
authorized by the respective Boards of Directors of CCC and Newco, and this
Agreement will, prior to Closing, have been duly and validly authorized by all
necessary corporate action. This Agreement is a legal, valid and binding
obligation of each of CCC and Newco enforceable against CCC and Newco in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
6.4 NO CONFLICTS. Except as set forth on SCHEDULE 6.4, the execution,
delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the fulfillment of the terms hereof will
not:
(a) conflict with, or result in a breach or violation of the CCC Charter
Documents;
(b) conflict with, or result in a default (or would constitute a default but
for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either CCC or Newco is a party, or by
which either CCC or Newco is bound, or result in the creation or imposition of
any lien, charge or encumbrance on any of CCC's or Newco's properties pursuant
to (i) any law or regulation to which either CCC or Newco or any of their
respective property is subject, or (ii) any judgment, order or decree to which
CCC or Newco is bound or any of their respective property is subject;
result in termination or any impairment of any material permit, license,
franchise, contractual right or other authorization of CCC or Newco;
(c) violate any material law, order, judgment, rule, regulation, decree or
ordinance to which CCC or Newco is subject, or by which CCC or Newco is bound;
or
require the consent of any third party.
6.5 CAPITALIZATION OF CCC AND OWNERSHIP OF CCC STOCK. The authorized capital
stock of CCC consists of 250,000,000 shares of Common Stock, of which
36,856,369 shares were outstanding on April 30, 1998, and 500,000 shares of
Convertible Non-Voting Common Stock, par value $.001 per share, of which
500,000 shares were outstanding on March 31, 1998. The authorized capital
stock of Newco consists of 100 shares of Common Stock, of which 100 shares are
outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by CCC. All of the issued and outstanding shares
of CCC Common Stock are duly authorized and validly issued shares of CCC,
fully paid and non-assessable. All of the issued and outstanding shares of CCC
Common Stock have been offered, issued, sold and delivered by CCC in
compliance with all applicable state and federal laws concerning the issuance
of securities and none of such shares were issued in violation of the
preemptive rights of any shareholder of CCC.
6.6 CONFORMITY WITH LAW; LITIGATION.
(1) Neither CCC nor Newco is in violation of any law or regulation or under
any order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them which would have a material adverse effect on
the business operations, properties, assets or condition, financial or
otherwise of CCC and its subsidiaries taken as a whole. CCC has conducted and
is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals,
24
variances, rules and regulations and is not in violation of any of the
foregoing which might have a material adverse effect on the business
operations, properties, assets or conditions, financial or otherwise of CCC
and its subsidiaries taken as a whole.
(b) There are no claims, actions, suits or proceedings, pending or, to the
knowledge of CCC or Newco, threatened against or affecting CCC or Newco at law
or in equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over either of them that would have a material adverse effect and
no notice of any such claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against CCC or Newco or against any of the
properties of either of them which would have a material adverse effect on the
business operations, properties, assets or conditions, financial or otherwise
of CCC and its subsidiaries taken as a whole.
6.7 DISCLOSURE. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the Schedules hereto and all other documents and information
relating to CCC (excluding any information related to the Company or the
Shareholders) furnished to the Company, the Shareholders and their
representatives pursuant hereto do not and will not include any untrue
statement of material fact or omit to state a material fact necessary to make
the statements herein or therein not misleading. If CCC or Newco becomes aware
of any fact or circumstances which would change a representation or warranty
of CCC or Newco in this Agreement, CCC and Newco shall immediately give notice
of such fact or circumstance to the Shareholders and the Company. However,
such notification shall not relieve CCC or Newco of their respective
obligations under this Agreement.
6.8 CCC PROSPECTUS. The CCC Prospectus, in the form delivered to the
Shareholders pursuant to Section 5.30 hereof, does not contain, as of the date
hereof, with respect to the sale of shares of CCC Common Stock to the
Shareholders hereunder, any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading. The balance sheet of CCC (including the
related notes) included in the CCC Prospectus presents fairly, in all material
respects, the financial position of CCC as of the date thereof in conformity
with GAAP. There have been no material adverse changes in the business of CCC
since the date of the CCC Prospectus.
6.9 REGISTRATION STATEMENT. The Shares to be delivered pursuant to this
Agreement will be issued pursuant to a Shelf Registration Statement on Form S-
1 filed with the United States Securities and Exchange Commission (the
"Registration Statement") on February 27, 1998 and declared effective on March
5, 1998. To the knowledge of CCC, no stop order suspending the effectiveness
of the Registration Statement shall have been issued and no proceeding for
that purpose shall have been instituted or threatened by the SEC. The Shares
will be subject to the contractual restrictions on resale set forth in Section
7.10 below and will be tradable in accordance with the requirements of Rule
145(d) under the 1933 Act.
6.10 INVESTMENT INTENT. CCC is acquiring the shares of the Company for
investment purposes only, for its own account and not as a nominee or agent
for any other Person, and not with a view to or for resale in connection with
any distribution thereof within the meaning of the 1933 Act, and can bear the
economic risk of an investment in the shares of the Company and can afford a
complete loss of such investment.
7. COVENANTS
7.1 TAX MATTERS.
(a) The following provisions shall govern the allocation of responsibility
as between the Shareholders, on the one hand, and the Surviving Corporation,
on the other, for certain tax matters following the Closing Date:
(i) The Representative shall cause to be prepared and cause to be filed,
within the time and in the manner provided by law, all Tax Returns of the
Company for all periods ending on or before the Closing Date
25
that are due after the Closing Date. The Shareholders shall pay to the
Surviving Corporation on or before the due date of such Tax Returns the amount
of all Taxes shown as due on such Tax Returns to the extent that such Taxes
are not reflected in the current liability accruals for Taxes (excluding
reserves for deferred Taxes) shown on the Company's books and records as of
the Closing Date. Such Returns shall be prepared and filed in accordance with
applicable law and in a manner consistent with past practices and shall be
subject to review and approval by CCC. To the extent reasonably requested by
the Shareholders or required by law, CCC and the Surviving Corporation shall
participate in the filing of any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns for Tax periods which begin before
the Closing Date and end after the Closing Date. The Shareholders shall pay to
the Surviving Corporation within fifteen (15) days after the date on which
Taxes are paid with respect to such periods an amount equal to the portion of
such Taxes which relates to the portion of such taxable period ending on the
Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. Notwithstanding the
preceding sentence, the Shareholders shall not be responsible for any tax that
may arise under Section 4978 of the Code as a result of the consummation of
the Merger. For purposes of this Section 7.1, in the case of any Taxes that
are imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the Closing Date shall
(A) in the case of any Taxes other than Taxes based upon or related to income
or receipts, be deemed to be the amount of such Tax for the entire taxable
period multiplied by a fraction the numerator of which is the number of days
in the taxable period ending on the Closing Date and the denominator of which
is the number of days in the entire taxable period, and (B) in the case of any
Tax based upon or related to income or receipts be deemed equal to the amount
which would be payable if the relevant taxable period ended on the Closing
Date. Any credits relating to a taxable period that begins before and ends
after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company. The Surviving Corporation will pay over to the
Shareholders any Tax refunds attributable to Tax periods ending on or before
the Closing Date; provided that either (i) the Company paid the Taxes subject
to the refund, (ii) such Taxes were reflected in the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the
Company's books and records as of the Closing Date, or (iii) that the
Shareholders paid to the Company or to the applicable taxing authority,
pursuant to this Section 7.1(a), the Taxes subject to the refund(s).
(iii) CCC and the Surviving Corporation on the one hand and the
Shareholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding
with respect to Taxes; (B) make available to the other, as reasonably
requested, all information, records or documents with respect to Tax matters
pertinent to the Company for all periods ending prior to or including the
Closing Date; and (C) preserve information, records or documents relating to
Tax matters pertinent to the Company that is in their possession or under
their control until the expiration of any applicable statute of limitations or
extensions thereof.
(iv) The Shareholders shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes and fees arising from or relating to
the transactions contemplated by this Agreement, and the Shareholders shall,
at their own expense, file all necessary Tax Returns and other documentation
with respect to all such transfer, documentary, sales, use, stamp,
registration, and other Taxes and fees. If required by applicable law, CCC and
the Surviving Corporation will join in the execution of any such Tax Returns
and other documentation.
7.2 ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable (other
than those specified on SCHEDULE 5.12) are not collected in full (net of
reserves specified in Section 5.12 and retainage) within 180 days after the
Closing (or with respect to those Accounts Receivable specified on SCHEDULE
5.12, within the number of days after the Closing specified on such SCHEDULE)
then, at the request of the Surviving Corporation, the Shareholders shall pay
(based on their percentage ownership of the Company immediately prior to the
Effective
26
Time) the Surviving Corporation an amount equal to the Accounts Receivable not
so collected, and upon receipt of such payment the Surviving Corporation shall
assign to the Shareholders making the payment all of their rights with respect
to the uncollected Accounts Receivable giving rise to the payment and shall
also thereafter promptly remit any excess collections received by it with
respect to such assigned Accounts Receivable. The Surviving Corporation shall
provide reasonable assistance to the Shareholders with collections of the
uncollected Accounts Receivable.
7.3 [INTENTIONALLY OMITTED.]
7.4 RELATED PARTY AGREEMENTS. All Related Party Agreements, other than those
listed on SCHEDULE 7.4, will be terminated at the Closing by the Company
and/or Shareholder parties thereto. Reasonably promptly following the Closing
and at the expense of CCC, the Shareholders shall, if requested by CCC, direct
a third party, which shall be reasonably acceptable to CCC, to evaluate if the
rents with respect to each lease that is a Related Party Agreement (other than
those listed on SCHEDULE 7.4) are greater than those for comparably situated
properties in the same geographic market as of the date the Related Party
Agreement was entered into or as of the date of such evaluation. To the extent
that such third party reasonably determines that the rents payable with
respect to any such lease are 25% or more than for comparably situated
properties both as of the date the Related Party Agreement was entered into
and the date of the evaluation, the parties will negotiate in good faith to
adjust such rents to market rates.
7.5 COOPERATION.
(a) The Company, the Shareholders, CCC and Newco shall each deliver or cause
to be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by CCC's
Accountant (in connection with such accountants' audit or review of the
Company) or the Nasdaq National Market.
(b) The Shareholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of
the Company cooperate with CCC on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
(c) Each party hereto shall cooperate in attempting to obtain all consents
and approvals that are required under this Agreement to effect the
transactions contemplated hereby or that are advisable in order that any
Material Contract remain in effect after the Merger and without giving rise to
any right to termination, cancellation or acceleration or loss of any right or
benefit. In addition, each party hereto shall otherwise use their best efforts
to consummate the transaction contemplated hereby and to fulfill their
obligations under this Agreement. The Company and the Shareholders and Newco
and CCC shall each diligently make, and cooperate with the other in using
their best efforts (excluding out of pocket expenditures) to obtain or cause
to be obtained prior to the Closing Date all such consents without any change
in the terms or conditions of any contract or license that could reasonably be
expected to be materially less advantageous to the Surviving Corporation than
those pertaining under the contract or license as in effect on the date of
this Agreement. The Company and Shareholders shall advise CCC and Newco of any
difficulties experienced in obtaining any of the consents and of any
conditions proposed, considered, or requested for any of the consents. CCC and
Newco agree to use their best efforts to assist the Company and Shareholders
in obtaining such consents, and to take such reasonable actions necessary or
desirable to obtain such consents, including without limitation, executing
such instruments and other documents as may be required in connection with
obtaining such consents.
(d) The Company, the Shareholders and CCC shall file any information and
documents that remain to be filed under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 (the "HSR Act") as promptly as
27
practicable at such time as such items are required to be filed. CCC shall be
responsible for any separate or joint filing fees under the HSR Act, including
the $45,000 filing fee required under the Departments of Commerce, Justice and
State of Judiciary and Related Agencies Appropriations Act, PUB.L. 103-317,
tit. 1, 108 Stat. 1739 (1994). The Parties hereby agree to (a) cooperate with
each other in connection with such HSR Act filings, which cooperation shall
include furnishing the other with any information or documents that may be
reasonably required in connection with such filings; (b) promptly file, after
any request by the Federal Trade Commission ("FTC") or Department of Justice
("DOJ") and after appropriate negotiation with the FTC or DOJ of the scope of
such request, any information or documents requested by the FTC or DOJ; and
(c) furnish each other with any correspondence from or to, and notify each
other of any other communications with, the FTC or DOJ that relates to the
transactions contemplated hereunder, and to the extent practicable, to permit
each other to participate in any conferences with the FTC or DOJ.
7.6 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on SCHEDULE
7.6, between the date hereof and the Effective Time, the Company will (except
as requested or agreed by CCC):
(a) carry on its business 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, facilities and equipment and other assets in as
good working order and condition as at present, ordinary wear and tear
excepted;
(c) perform in the ordinary course of business all of its obligations under
debt and lease instruments and other agreements relating to or affecting its
assets, properties, equipment or rights;
(d) maintain present debt and lease instruments and not enter into new or
amended debt or lease instruments other than in the ordinary course of
business without the consent of CCC;
(e) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(f) use its best efforts to maintain and preserve its business organization
intact, retain its present key employees and maintain its relationships and
present agreements with suppliers, customers and others having business
relations with the Company;
(g) maintain compliance in all material respects with all permits, rules,
laws and regulations, consent orders and the like; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except in the ordinary course of business consistent with past practice or as
required by contract or law.
7.7 ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of CCC during normal business hours and with reasonable prior
notice access to (a) all of the sites, properties, books and records of the
Company and (b) such additional financial and operating data and other
information as to the business and properties of the Company as CCC may from
time to time reasonably request, including without limitation, access upon
reasonable request to the Company's employees, customers, vendors, suppliers
and creditors. No information or knowledge obtained in any investigation
pursuant to this Section 7.7 shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger. However, if CCC
becomes aware of a breach of any warranty or representation by the Company or
any Shareholder, CCC shall promptly notify the Company and the Representative
of same.
28
7.8 PROHIBITED ACTIVITIES. Except (i) as set forth in SCHEDULE 7.8 and (ii)
for the borrowing and incurring of additional indebtedness, and distributions
of cash to the Shareholders sufficient cash to pay out to the Shareholders (A)
the total amounts in their respective AAA account as of December 31, 1997 and
(B) profits and adjustments through the date of closing; provided that, the
Net Worth Target is met, between the date hereof and the Effective Time, the
Company will not, without the prior written consent of CCC;
(a) make any change in its Articles of Incorporation or Bylaws, or authorize
or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance, delivery or
sale of any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities, except (i) as required under any currently existing
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended), any currently existing employment
agreement or any currently existing buy sell agreements, (ii) shares issued
upon exercise of options or other rights outstanding as of the date hereof, or
(iii) shares, if any, required to be issued under the tax-qualified employee
stock ownership plan;
(c) except for the AAA account and the payments of profits and adjustments
through the Closing Date, declare or pay any dividend, or make any
distribution (whether in cash, stock or property) in respect of its stock
whether now or hereafter outstanding, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock
except as provided above in subsection (b), or purchase, redeem or otherwise
acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $50,000 individually;
(e) except in the ordinary course of business consistent with past practice
or as required by contract or law, increase the compensation payable or to
become payable to any officer, director, Shareholder, employee, agent,
representative or independent contractor; make any bonus or management fee
payment to any such person (except for accrued and unpaid bonuses); make any
loans or advances; adopt or amend any Plan; or grant any severance or
termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance
(other than Permitted Encumbrances) upon any assets or properties whether now
owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger, consolidation,
purchase of a substantial portion of assets or otherwise) any business or the
start-up of any new business, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the Company;
(i) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(j) waive any material rights or claims of the Company, provided that the
Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a material breach of or amend or terminate any material
agreement, permit, license or other right except for any amendments or
terminations in the ordinary course of business;
(l) enter into any other transaction (i) that is not negotiated at arm=s
length with a third party not affiliated with the Company or any officer,
director or Shareholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
29
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing down
the value of inventory or writing off notes or accounts receivable other than
in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of business and
consistent with past practice, change any tax election, adopt any tax
accounting method other than in the ordinary course of business and consistent
with past practice, change any tax accounting method, file any Tax Return
(other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of CCC; or
(p) take, or agree (in writing or otherwise) to take, any of the actions
described in Sections 7.8(a) through (o) above, or any action which would make
any of the representations and warranties of the Company and the Shareholders
contained in this Agreement untrue or result in any of the conditions set
forth in Articles 8 and 9 not being satisfied.
7.9 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by CCC, and shall provide CCC with proof that any required notice has been
sent.
7.10 SALES OF CCC COMMON STOCK.
(a) Except with the consent of CCC, no Shareholder will, directly or
indirectly, offer, sell, contract to sell, pledge or otherwise dispose of any
shares of CCC Common Stock received by such Shareholder in the Merger as the
Base Merger Consideration prior to the first anniversary of the Closing.
Thereafter, up to one-third of the shares of CCC Common Stock received by a
Shareholder as part of the Base Merger Consideration may be resold at any time
after the first anniversary of the Closing, an additional one-third may be
resold beginning eighteen months after the Closing by each Shareholder and the
remaining one-third may be resold beginning on the second anniversary of the
Closing. Notwithstanding anything in the foregoing to the contrary, a
Shareholder may transfer shares of CCC Common Stock to a Related Party for
estate planning purposes, provided that such Related Party transferee (i)
acknowledges the contractual restrictions relating to the transfer of such
shares set forth in this Section 7.10 and (ii) agrees to be bound by the same.
For purposes hereof, "Related Party" means, with respect to any Person that is
an individual, any spouse, lineal descendant (including by adoption),
executor, administrator, trustee, legatee or beneficiary of such Person or any
other Person controlled by such Person. For purposes hereof, "Person" means an
individual, corporation, association, partnership, joint venture, trust,
estate, limited liability company, limited liability partnership or other
entity or organization. Transfers of shares of CCC Common Stock by employees
of CCC also are subject to CCC policies against ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the misuse
of material non-public information and compliance with applicable securities
laws and rules. Persons who become affiliates of CCC may be subject to
additional restrictions on the trading of their CCC Common Shares pursuant to
applicable law.
(b) Each Shareholder agrees to sell the shares of CCC Common Stock to be
received by such Shareholder in the Merger only in accordance with the
requirements, if any, of applicable law, including, without limitation, Rule
145(d) promulgated under the 1933 Act or any successor to such rule. CCC
acknowledges that the provisions of this Section 7.10(b) will be satisfied as
to any sale by a Shareholder of the CCC Common Stock that the Shareholder may
acquire pursuant to the Merger by a broker's letter and a letter from the
Shareholder with respect to that sale stating that the applicable requirements
of Rule 145(d)(1) have been met or are inapplicable by virtue of Rule
145(d)(2) or Rule 145(d)(3).
(c) The certificate or certificates evidencing the shares of CCC Common
Stock to be delivered to the Shareholders in the Merger will bear restrictive
legends substantially in the following forms as long as applicable:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), MAY APPLY. IF RULE 145 APPLIES, PRIOR MAY 29, 1999,
THESE SHARES
30
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF RULE 145(D)(1)
OR ANOTHER APPLICABLE EXEMPTION UNDER THE SECURITIES ACT. WITHOUT LIMITING
THE FOREGOING, IF RULE 145 APPLIES, AFTER MAY 29, 1999 THESE SHARES MAY BE
TRANSFERRED BY NON-AFFILIATES OF THE ISSUER UNDER RULE 145(D)(2) SO LONG AS
THE ISSUER IS CURRENT IN ITS REPORTING OBLIGATIONS UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, OR UNDER ANOTHER APPLICABLE EXEMPTION
UNDER THE SECURITIES ACT. WITHOUT LIMITING THE FOREGOING, AFTER MAY 29,
2000, THESE SHARES MAY BE TRANSFERRED BY NON-AFFILIATES OF THE ISSUER
WITHOUT RULE 145 RESTRICTIONS IN ACCORDANCE WITH RULE 145(D)(3).
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CONTRACTUAL
RESTRICTIONS ON TRANSFER EXPIRING ON [STAGGERED DATES STARTING FROM THE
EFFECTIVE DATE], PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF
REORGANIZATION DATED AS OF MAY 8, 1998 (THE "AGREEMENT"), BY AND AMONG THE
ISSUER, CCC 12 ACQUISITION CORP., ▇▇▇▇▇▇ ELECTRIC, INC. (THE "COMPANY") AND
THE SHAREHOLDERS OF THE COMPANY. PRIOR TO THE EXPIRATION OF SUCH HOLDING
PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER
SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR
ASSIGNMENT EXCEPT TO THE EXTENT SUCH SALE, TRANSFER OR ASSIGNMENT IS IN
COMPLIANCE WITH THE AGREEMENT. UPON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS
EXPIRED.
7.11 CCC STOCK OPTIONS. CCC shall make available to the Surviving
Corporation for distribution at the discretion of the President of the
Surviving Corporation options to purchase a number of shares of CCC Common
Stock, with a value equal to 6.0% of the Base Merger Consideration, valued at
the Merger Price, to be granted to the key employees of the Surviving
Corporation (who were not, unless otherwise approved by CCC, Shareholders) on
or shortly after the Closing in accordance with CCC's policies and under the
terms of CCC's 1997 Long-Term Incentive Plan. The exercise price of such
options shall be equal to the fair market value of the underlying shares of
CCC Common Stock on the date of grant and such options shall have vesting
provisions established by the Compensation Committee of the Board of Directors
of CCC. The options issued under the terms of this Section 7.11 shall be
nonqualified stock options that shall become exercisable over no more than a
four year period with at least 25% of such options vesting each year (with the
four year period commencing on the Closing Date) and shall expire on the tenth
anniversary of the date of grant provided the optionee is still an employee.
The shares of CCC Common Stock underlying such options shall be registered
under the 1933 Act and approved for listing on Nasdaq.
7.12 TAX COVENANT. CCC, Newco and the Company shall treat the Merger for
income tax purposes as a reorganization within the meaning of Section 368(a)
of the Code and any comparable state or local tax statute.
7.13 TAX FREE REORGANIZATION PROTECTION. Prior to the Effective Time, CCC,
Newco, the Shareholders and the Company will each use their best efforts to
cause the Merger to qualify, and prior to the Effective Time and on and after
the Closing Date, will refrain from taking any actions that would result in
the Merger failing to qualify, as a reorganization as defined under Code
Section 368(a)(1)(A) and Section 368(a)(2)(D). After the Effective Time, CCC,
Newco, the Shareholders and the Company will refrain from taking any actions
that would cause the stock paid to the Shareholders pursuant to Section 2.3 of
this Agreement to be taxable to the Shareholders upon receipt.
7.14 D&O INSURANCE AND INDEMNIFICATION OF DIRECTORS AND OFFICERS. All rights
to indemnification for acts or omissions occurring prior to the Closing now
existing in favor of the current or former directors, officers, employees or
agents of the Company required by applicable law, under the Company's Charter
Documents, or any other agreement between any such director, officer, employee
or agent of the Company and the Company and any other now existing obligation
of the Company to indemnify directors or officers for acts or omissions
31
occurring prior to the Closing shall survive the Merger and shall continue in
full force and effect in accordance with their terms for a period of not less
than six (6) years from the Effective Time and, to the extent the Surviving
Corporation fails to perform its obligations with respect thereto, CCC shall
perform such obligations. In addition, CCC will provide to each director and
officer of the Surviving Corporation, during the term of his service, D&O
insurance having coverage at least as comprehensive as the D&O insurance
currently maintained by CCC.
7.15 GOVERNMENT CONTRACTS. To the extent applicable, it is the intention of
the Company to transfer to Newco and novate the government contracts listed on
SCHEDULE 5.19 and to obtain the required governmental recognition of Newco as
the Company=s successor in interest to such government contracts. Recognizing
that applicable government regulations may not permit the Company to transfer
the Company's government contracts and obtain novation of those contracts
prior to the Closing, the Company and Newco agree to cooperate and diligently
pursue contract novation pursuant to applicable and required government
procedures.
7.16 CCC STOCK. Between the date of this Agreement and the Effective Time,
CCC shall not declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its equity securities or directly or indirectly redeem, purchase or otherwise
acquire or offer to acquire any shares of its equity securities, other than
any such action which would not result in any adjustment to the Base Merger
Consideration or the Contingent Merger Consideration pursuant to Section
2.2(b) and 2.3(e).
7.17 EMPLOYEE BENEFITS MATTERS. For the twelve month period commencing as of
the Closing Date, CCC and any successor thereto shall continue to maintain all
Plans maintained by the Company as of the Closing Date for the benefit of all
employees of CCC or any entity related to CCC under the terms of Code Sections
414(b), (c), (m) or (o) who are engaged in the performance of services with
respect to the business conducted by the Company prior to the Closing Date.
Any amendment, modification, or termination of any Plan of the Company
maintained by CCC or its successor during any period such Plan is required to
be maintained in accordance with this Section 7.17 shall only be made if CCC
and the president of the Surviving Corporation or his successor, in his
capacity as an employee of CCC or any affiliate thereof, shall mutually agree
to such amendment, modification, or termination.
7.18 GUARANTEED DEBT. It is understood and agreed that the Shareholders will
seek to have all personal guarantees (by pledge of assets or otherwise) of any
Shareholder released in connection with consummation of the Merger and that
CCC will cooperate with the Shareholders in such effort. Following the Closing
CCC will not and will cause the Surviving Corporation not to draw under any
line of credit or other indebtedness the repayment of which has been
personally guaranteed by a Shareholder (by pledge of assets or otherwise)
unless and until such personal guarantee (including any pledge of assets) has
been fully released.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO
The obligation of CCC and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. (a) All of
the representations and warranties of the Shareholders and the Company
contained in this Agreement shall be true, correct and complete on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date except (i) to the extent any
such representation or warranty is expressly stated only as of a specified
earlier date or dates, in which case such representation and warranty shall be
true and accurate as of such earlier specified date or dates (but also subject
to clause (iii) of this Section 8.1(a)), (ii) for changes that are permitted
or contemplated pursuant to this Agreement or (iii) where the consequence of
the matter set forth in such representation and warranty having failed to be
true and accurate as of the date when made, on the Closing Date or on such
earlier specified date would not, in the reasonable discretion of CCC and
Newco, have a Material Adverse Effect, (b) all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by the Company and the Shareholders on or before the Closing Date
shall have been duly complied with, performed or satisfied, except to the
extent that the consequence of the failure of the
32
Company and the Shareholders to have so complied with, performed or satisfied
would not have a Material Adverse Effect; and (c) a certificate to the
foregoing effects dated the Closing Date and signed on behalf of the Company
and by the Shareholders shall have been delivered to CCC.
8.2 NO LITIGATION. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or provision challenging CCC's proposed
acquisition of the Company, limiting or restricting CCC's conduct or operation
of the business of the Company (or its own business) following the Merger or
restraining or prohibiting the Company or the Shareholders from consummating
the transactions contemplated hereby shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding
of any nature having a reasonable likelihood of success pending or threatened
against CCC, Newco, the Shareholders or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, financial condition or results of
operations of CCC and its subsidiaries taken as a whole or the Company;
provided, however, that CCC and Newco shall be required to effect the Merger
(and this condition shall be deemed satisfied) if the foregoing matters
(including those set forth in Section 8.1 above), taken together, would not,
in the reasonable discretion of CCC and Newco, have a Material Adverse Effect.
8.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, properties, assets, or condition
(financial or otherwise) of the Company since the date of this Agreement; and
CCC shall have received a certificate signed by each Shareholder dated the
Closing Date to such effect with respect to the Company only; provided,
however, that CCC and Newco shall be required to effect the Merger (and this
condition shall be deemed satisfied) if the foregoing matters, taken together,
would not, in the reasonable discretion of CCC and Newco, have a Material
Adverse Effect.
8.4 CONSENTS AND APPROVALS. All consents marked with an asterisk on SCHEDULE
5.3 or SCHEDULE 5.14 (the "Required Consents"), shall have been obtained. No
action by the DOJ or FTC challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
8.5 OPINION OF COUNSEL. CCC shall have received an opinion from counsel to
the Company and the Shareholders, dated the Closing Date, in substantially the
form of EXHIBIT 8.5.
8.6 CHARTER DOCUMENTS. CCC shall have received (a) a copy of the Articles of
Incorporation of the Company certified by an appropriate authority in the
state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company.
8.7 QUARTERLY FINANCIAL STATEMENTS. CCC shall have received from the Company
completed quarterly financial statements for any quarter ending after the date
of the Interim Financials in a form reasonably satisfactory to CCC.
8.8 FIRPTA COMPLIANCE. The Company shall have delivered to CCC a properly
executed statement in a form reasonably acceptable to CCC for purposes of
satisfying CCC's obligations under Treas. Reg. ' 1.1445-2(b).
8.9 EMPLOYMENT AGREEMENTS. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall enter into, at Closing, an
employment agreement with the Surviving Corporation in substantially the form
of EXHIBIT 8.9 hereto.
8.10 AFFILIATE AGREEMENTS. The Shareholders listed on SCHEDULE 5.31 shall
have entered into an Affiliate Agreement in the form set forth as EXHIBIT
8.10.
8.11 SHAREHOLDERS' RELEASE. The Shareholders shall each have delivered to
CCC an instrument dated the Closing Date in the form of EXHIBIT 8.11.
33
8.12 RELATED PARTY RECEIVABLES AND AGREEMENTS. Except with respect to the
items on SCHEDULE 8.12, all employees, shareholders, directors, officers and
Affiliates of the Company shall have repaid in full all obligations to the
Company in respect of borrowings or advances. The Related Party Agreements set
forth in SCHEDULE 8.12 shall have been terminated as of the Closing.
8.13 DELIVERY OF CLOSING FINANCIAL CERTIFICATE. CCC shall have received a
certificate (the "Closing Financial Certificate"), dated as of the Closing
Date, signed on behalf of the Company and by the Shareholders, setting forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the "Certified
Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on SCHEDULE 5.9) for the most recent fiscal
year preceding the Closing Date (the "Certified Year-End Adjusted EBIT"); and
(d) a statement that all of the Company financial conditions set forth in
Section 5.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the
Certified Closing Net Worth the Company shall not take account of any increase
in intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after December 31, 1997.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS
The obligation of the Shareholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of the
representations and warranties of CCC and Newco contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the
same effect as though such representations and warranties had been made as of
such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by CCC and Newco on or
before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date
and signed by the President or any Vice President of CCC shall have been
delivered to the Company and the Shareholders.
9.2 NO LITIGATION. No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or
other legal or regulatory restraint or provision challenging CCC's proposed
acquisition of the Company, limiting or restricting CCC's conduct or operation
of the business of the Company (or its own business) following the Merger or
restraining or prohibiting the Company or the Shareholders from consummating
the transactions contemplated hereby shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding
of any nature having a reasonable likelihood of success pending or threatened,
against CCC, Newco, the Shareholders, or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, financial condition, results of
operations or prospects of CCC and its subsidiaries taken as a whole.
9.3 CONSENTS AND APPROVALS. All necessary consents of, and filings with, any
governmental authority or agency or third party relating to the consummation
by CCC and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action
by the DOJ or FTC challenging or seeking to enjoin the consummation of the DOJ
transactions contemplated hereby shall be pending.
34
9.4 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have afforded
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ the opportunity to enter into, at Closing, an employment
agreement with the Surviving Corporation in substantially the form of EXHIBIT
8.9 hereto.
9.5 REGISTRATION STATEMENT. No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for that
purpose shall have been instituted or threatened by the SEC and the shares of
CCC Common Stock to be issued as part of the Base Merger Consideration shall
have been approved for listing on Nasdaq.
9.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, properties, assets, or condition
(financial or otherwise) of CCC and its subsidiaries, taken as a whole, since
the date of this Agreement, and the Shareholders shall have received a
certificate signed by CCC and Newco dated the Closing Date to such effect;
provided, however, that the Shareholders and the Company shall be required to
effect the Merger (and this condition shall be deemed satisfied) if the
foregoing matters, taken together, would not, in the reasonable discretion of
the Shareholders and the Company, have a material adverse effect on the
business operations, properties, assets or conditions, financial or otherwise,
of CCC and its subsidiaries taken as a whole.
9.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The persons set forth
on SCHEDULE 1.2(C) shall have been appointed, effective at the Effective Time,
to serve as officers and directors of the Surviving Corporation.
10. INDEMNIFICATION
10.1 GENERAL INDEMNIFICATION BY THE SHAREHOLDERS. The Shareholders, jointly
and severally, covenant and agree to indemnify, defend, protect and hold
harmless CCC, Newco and the Surviving Corporation and their respective
officers, directors, employees, shareholders, assigns, successors and
affiliates (individually, a "CCC Indemnified Party" and collectively, the "CCC
Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes of
action, lawsuits, administrative proceedings (including informal proceedings),
investigations, audits, demands, assessments, adjustments, judgments,
settlement payments, deficiencies, penalties, fines, interest (including
interest from the date of such damages), costs and expenses (including without
limitation reasonable attorneys' fees and disbursements of every kind, nature
and description) (collectively, "Damages") suffered, sustained, incurred or
paid by the CCC Indemnified Parties in connection with, resulting from or
arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Shareholders or
the Company set forth in this Agreement or any Schedule or certificate,
delivered by or on behalf of any Shareholder or the Company in connection
herewith; or
(ii) any nonfulfillment of any covenant or agreement by the Shareholders
or, prior to the Effective Time, the Company, under this Agreement; or
(iii) the assertion against any CCC Indemnified Party of any Damages
relating to the business, operations or assets of the Company prior to the
Closing Date or the actions or omissions of the directors, officers,
shareholders, employees or agents of the Company prior to the Closing Date,
other than Damages arising from matters expressly disclosed in the Company
Financial Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on SCHEDULES 5.23 (conformity with law;
litigation), 5.27 (environmental matters), and any receivables from related
persons that are listed on SCHEDULE 8.12 and are not repaid pursuant to their
terms; and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 GENERAL INDEMNIFICATION BY CCC AND NEWCO. CCC and ▇▇▇▇▇, jointly and
severally, covenant and agree to indemnify, defend, protect and hold harmless
the Shareholders and their respective officers,
35
directors, employees, shareholders, assigns, successors and affiliates
(individually, a "Shareholder Indemnified Party" and collectively, the
"Shareholder Indemnified Parties") from, against and in respect of:
(a) all Damages suffered, sustained, incurred or paid by the Shareholder
Indemnified Parties in connection with, resulting from or arising out of,
directly or indirectly:
(i) any breach of any representation or warranty of CCC or Newco set forth
in this Agreement or any Schedule or certificate, delivered by or on behalf of
any CCC or Newco in connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by CCC or Newco under
this Agreement.
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.2.
10.3 LIMITATION AND EXPIRATION. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1 or
Section 10.2 unless and until the aggregate amount of Damages exceeds one
percent (1%) of the Base Merger Consideration (the "Indemnification
Threshold"), at which time the Indemnifying Party (defined in Section 10.4
below) shall be liable for all Damages from the first dollar; provided,
however, that the Indemnification Threshold shall not apply to (i) Damages
arising out of any breaches of the covenants of the Shareholders set forth in
this Agreement or representations and warranties made in Sections 5.4 (capital
stock of the Company), 5.5 (transactions in capital stock), 5.23 (conformity
with law; litigation), 5.24 (taxes), 5.27 (environmental matters), or
resulting from any receivables from related persons that are listed on
Schedule 8.13 and are not repaid pursuant to their terms; (ii) Damages
described in Section 10.1(a)(iv), or (iii) Damages arising out of any breaches
of the covenants of CCC or Newco set forth in this Agreement or
representations and warranties made in Section 6.2 (CCC Common Stock), 6.5
(Capitalization), Section 6.6 (litigation), 6.8 (CCC Prospectus), or 6.9
(Registration Statement);
(b) the aggregate amount of any liability for Damages of the Shareholders,
on the one hand, or CCC and Newco, on the other hand, under this Article 10
shall not exceed 50% of the Merger Consideration except with regard to any
Damages that occur as a result of fraudulent misrepresentations or fraudulent
acts of the Shareholders, CCC or Newco, as applicable;
(c) the indemnification obligations under this Article 10, or under any
certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.3(c):
(i) (1) except as to representations, warranties, and covenants specified
in clause (i)(2) of this Section 10.3(c), the first anniversary of the Closing
Date, or
(2) (x) with respect to representations and warranties of the
Shareholders contained in Sections 5.22 (employee benefit plans), 5.24
(taxes), 5.27 (environmental matters), and the indemnification set forth in
Sections 10.1(a)(ii) (with respect to pre-closing covenants only),
10.1(a)(iii), 10.1(a)(iv), or 10.2(a)(ii) (with respect to pre-closing
covenants only) on (A) the date that is three (3) months after the expiration
of the longest applicable federal or state statute of limitation (including
extensions thereof agreed to by the party from whom indemnification is
sought), or (B) if there is no applicable statute of limitation, (i) four (4)
years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (ii) two (2) years after the Closing Date
for any other Claim covered by clause (i)(2)(B) of this Section 10.3(c), (y)
with respect to covenants of the Shareholders to be performed after the
Closing Date until fully performed and discharged, and (z) with respect to the
covenants or agreements of CCC and Newco to be performed after the Closing
Date until fully performed and discharged; or
(ii) with respect to a particular claim or demand, the final resolution of
such claim or demand (but not any other claim or demand) pending as of the
relevant dates described in clause (i) of this Section 10.3(c) (such claims
referred to as "Pending Claims");
36
(d) in no event will any CCC Indemnified Party be entitled to joint and
several indemnification hereunder for the breach by any Shareholder of the
provisions of Article 11 or Article 12 hereof; it being understood and agreed
that the CCC Indemnified Party shall be entitled to indemnification only from
the Shareholder breaching Article 11 or Article 12, as applicable.
(e) in no event will any CCC Indemnified Party be entitled to
indemnification hereunder for the breach of a representation, warranty or
covenant where the identical subject matter thereof has also resulted in
adjustment to the Base Merger Consideration pursuant to Section 2.2 hereof.
(f) the Shareholders shall have no liability under this Article 10 in
respect of any Damages the full value of which have been recouped by CCC as a
result of (i) the payment by the Shareholders to the Surviving Corporation or
CCC of uncollected Accounts Receivable pursuant to Section 7.2, (ii) CCC's not
having to pay to the Shareholders any portion of the Contingent Merger
Consideration because of any failure to achieve the targets set forth in
Section 2.3(a) (i) herein or (iii) any adjustment to the Base Merger
Consideration pursuant to Section 2.2 hereof.
(g) After the Effective Time, indemnification pursuant to this Section 10
shall be the sole and exclusive remedy of any Indemnified Party for any breach
of any representation, warranty, covenant or other agreement herein or
otherwise arising out of or in connection with the transactions contemplated
by this Agreement or the operations of the Company, whether such claim may be
asserted as a breach of contract, tort, a violation or breach of the 1933 Act
or the rules and regulations promulgated thereunder or otherwise, except with
regard to Damages that occur as a result of fraudulent misrepresentations or
fraudulent acts of the Company, the Shareholders, CCC or Newco, as applicable.
10.4 INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any CCC Indemnified Party or Shareholder Indemnified
Party, as applicable (in either case, an "Indemnified Party") has a Claim
against any party obligated to provide indemnification pursuant to this
Article 10 (individually and collectively, the "Indemnifying Party") which
does not involve a Claim being asserted against or sought to be collected by a
third party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such Claim, specifying the nature of such Claim and the
amount or the estimated amount thereof to the extent then feasible (the "Claim
Notice"). If the Indemnifying Party does not notify the Indemnified Party
within thirty days after the date of delivery of the Claim Notice that the
Indemnifying Party disputes such Claim, with a statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 10.4(a), the Indemnified Party shall respond in a
written statement to the objection within thirty days and, for sixty days
thereafter, attempt in good faith to agree upon the rights of the respective
parties with respect to such Claim (and, if the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties).
(b) (i) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice including a copy of the claim if such claim was made in
writing to the Indemnifying Party. The Indemnifying Party shall have thirty
days from the date of delivery of the Claim Notice to notify the Indemnified
Party (A) whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third Party Claim, and, if so, the basis
for such a dispute, and (B) if such party does not dispute liability, whether
or not the Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend against the Third Party Claim, provided that the
Indemnified Party is hereby authorized (but not obligated) to file any motion,
answer or other pleading and to take any other action which the Indemnified
Party shall deem necessary or appropriate to protect the Indemnified Party's
interests.
37
(ii) In the event that the Indemnifying Party timely notifies the
Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Parties' obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense.
The Indemnified Party shall cooperate with the Indemnifying Party's defense
against any third-party claim. If the Indemnifying Party elects not to defend
the Indemnified Party against a Third Party Claim, whether by failure of such
party to give the Indemnified Party timely notice as provided herein or
otherwise, then the Indemnified Party, without waiving any rights against such
party, may settle or defend against such Third Party Claim in the Indemnified
Party's sole discretion and the Indemnified Party shall be entitled to recover
from the Indemnifying Party the amount of any settlement or judgment and, on
an ongoing basis, all indemnifiable costs and expenses of the Indemnified
Party with respect thereto, including interest from the date such costs and
expenses were incurred.
(iii) If at any time, in the reasonable opinion of the Indemnified Party,
notice of which shall be given in writing to the Indemnifying Party, any Third
Party Claim seeks material prospective relief which could have an adverse
effect on the assets, liabilities, financial condition or results of
operations of the Indemnified Party (or on the Surviving Corporation but only
if the Indemnified Party is CCC and/or Newco in such an instance), the
Indemnified Party shall have the right to control or assume (as the case may
be) the defense of any such Third Party Claim; provided, however, that the
Indemnified Party will not settle any such Third Party Claim without the prior
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control,
the defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) Subject to the provisions of Section 10.3, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.4 of
any actual, threatened or possible claim or demand which may give rise to a
right of indemnification hereunder shall not relieve the Indemnifying Party of
any liability which the Indemnifying Party may have to the Indemnified Party
unless the failure to give such notice materially and adversely prejudices the
Indemnifying Party.
(d) The parties will make appropriate adjustments for any Tax benefits, Tax
detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that the
Indemnified Party shall be obligated to make reasonable efforts to continue
pursuing any payment pursuant to the terms of any insurance policy or to
assign its rights under such policy to the Indemnifying Party.
10.5 SURVIVAL OF REPRESENTATIONS WARRANTIES. The representations of each of
the Company, the Shareholders, CCC and Newco will survive the Closing until,
and will expire upon, the termination of the indemnification obligations as
provided in Section 10.3(e).
10.6 RIGHT TO SET OFF. CCC shall have the right, but not the obligation, to
set off, in whole or in part, against the Pledged Assets, amounts finally
determined under Section 10.4 to be owed to CCC by the Shareholders under
Section 10.1 hereof.
11. NONCOMPETITION
11.1 PROHIBITED ACTIVITIES. Except as described on SCHEDULE 11.1 hereto or
as otherwise provided in an employment agreement with CCC or a subsidiary of
CCC, the Surviving Corporation or any other subsidiary of CCC, each
Shareholder agrees that for a period of two years following the Closing Date,
he/she shall not:
(a) engage, as an officer, director, shareholder, owner, partner, member,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in
38
any electrical contracting (including, without limitation, construction,
maintenance and/or design) business selling any products or services in direct
competition with CCC or any of its subsidiaries within 100 miles of any office
of any electrical services division of CCC or any office of any of its
subsidiaries (the "Territory");
(b) call upon any person who is, at that time, within the Territory, an
employee of CCC or any subsidiary of CCC in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of the
employ of CCC or any subsidiary of CCC;
(c) call upon any person within the Territory who is, at that time, or has
been, within one year prior to that time, a customer of CCC or any subsidiary
of CCC, for the purpose of soliciting or selling products or services in
direct competition with CCC or any subsidiary of CCC within the Territory;
(d) call upon any person who is, at the time, or has been, within one year
prior to that time, a customer of CCC and/or any subsidiary or affiliate of
CCC with whom the Shareholder has had personal contact for the purpose of
soliciting or selling products or services in direct competition with CCC
and/or any subsidiary or affiliate of CCC; or
(e) on the Shareholder's behalf or on behalf of any competitor, call upon
any person as a prospective acquisition candidate who was, to the
Shareholder's knowledge, either called upon by CCC or a subsidiary of CCC as a
prospective acquisition candidate or was the subject of an acquisition
analysis by CCC or any subsidiary of CCC. The Shareholder, to the extent
lacking the knowledge described in the preceding sentence, shall immediately
cease all contact with any prospective acquisition candidate upon being
informed, in writing, that CCC or any subsidiary of CCC had so called upon
such candidate or made an acquisition analysis thereof.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any Shareholder subject to this Article 11 from acquiring as an
investment not more than one percent of the outstanding voting capital stock
of a competing business, whose stock is traded on a national securities
exchange or through the automated quotation system of a registered securities
association.
11.2 DAMAGES. Because of the difficulty of measuring economic losses to CCC
and the Surviving Corporation as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to CCC and the Surviving Corporation for which they would have no other
adequate remedy, each Shareholder subject to this Article 11 agrees that, in
the event of a breach by them of the foregoing covenant, the covenant may be
enforced by CCC or the Surviving Corporation by, without limitation,
injunctions and restraining orders.
11.3 REASONABLE RESTRAINT. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Shareholders
subject to this Article 11 in light of the activities and business of CCC on
the date of the execution of this Agreement and the current and future plans
of CCC and the Surviving Corporation (as successors to the businesses of the
Company).
11.4 SEVERABILITY; REFORMATION. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention
of the parties that such restrictions be enforced to the fullest extent which
the court deems reasonable, and the Agreement shall thereby be reformed.
11.5 INDEPENDENT COVENANT. All of the covenants in this Article 11 shall be
construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the
Shareholders against the Company, the Surviving Corporation or CCC, whether
predicated on this Agreement or otherwise, shall not constitute a defense to
the enforcement of such covenants. It is specifically agreed that the period
of two years stated above, shall be computed by excluding from such
computation any time during which any Shareholder subject to this Article 11
is in violation of any provision of this Article 11 and any time during
39
which there is pending in any court of competent jurisdiction any action
(including any appeal from any judgment) brought by any person, whether or not
a party to this Agreement, in which action CCC or the Surviving Corporation
seeks to enforce the agreements and covenants of the Shareholders set forth in
this Article 11 or in which any person contests the validity of such
agreements and covenants or their enforceability or seeks to avoid their
performance or enforcement; provided, however, that if any Shareholder is
found not to be in violation of the agreements or covenants in any such
activity the period during which the action was pending shall not be excluded
from such computation.
11.6 MATERIALITY. CCC, the Company and each Shareholder hereby agree that
the covenants set forth in this Article 11 are a material and substantial part
of the transactions contemplated by this Agreement, and that no portion of the
Base Merger Consideration or the Contingent Merger Consideration shall be paid
for or allocated to the covenants set forth in this Article 11.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 CONFIDENTIALITY.
(a) None of the parties hereto will use or disclose to third parties (except
as may be necessary for the consummation of the transactions contemplated
hereby, or as required by law, including, without limitation, in connection
with legal proceedings relating to this Agreement and the transactions
contemplated hereby, or otherwise pursuant to subpoena or the request of a
governmental authority, and then only with prior notice to the other parties
hereto, including delivery of a copy of the subpoena or request, if
applicable) this Agreement, any information (including, without limitation,
financial information) received from any other party hereto or its agents in
the course of investigating, negotiating and performing the transactions
contemplated by this Agreement or any confidential information of the Company
or the Surviving Corporation received or that any such party receives in the
future relating to the Company or the Surviving Corporation (such as lists of
customers, operational policies and pricing and cost policies that are
valuable, special and unique assets of the Company or the Surviving
Corporation or the business of the Company or the Surviving Corporation;
provided, however, that each party may disclose such information to such
party's officers, directors, employees, lenders, advisors, attorneys and
accountants who need to know such information in connection with the
consummation of the transactions contemplated by this Agreement and who are
informed by such party of the confidential nature of such information. Nothing
shall be deemed to be confidential information that: (1) is already in such
party's possession, provided that such information is not known by such party
to be subject to another confidentiality agreement with or other obligation of
secrecy to the other party hereto or another party, or (2) becomes generally
available to the public other than as a result of a disclosure by such party
or such party's officers, directors, employees, lenders, advisors, attorneys
or accountants, or (3) becomes available to such party on a non-confidential
basis from a source other than the other party hereto or its advisors,
provided that such source is not known by such party to be bound by a
confidentiality agreement with or other obligation of secrecy to the other
party hereto or another party, or (4) is developed independently by either
party without resort to the confidential information of the other party. In
the event this Agreement is terminated and the transactions contemplated
hereby abandoned, each party will return to the other party all written
confidential information (including all documents, work papers and other
written confidential material) obtained by the such party from any other
party, or developed by such party based on confidential information, in
connection with the transactions contemplated by this Agreement.
(b) No party shall publish any press release or make any other public
announcement concerning this Agreement or the transactions contemplated hereby
without the prior written consent of each other party, which shall not be
withheld unreasonably; provided, however, that nothing contained in this
Agreement shall prevent any party, after notification to each other party,
from making any filings with governmental authorities that, in its judgment,
may be required or advisable in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
12.2 DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they
40
would have no other adequate remedy, CCC, the Surviving Corporation and the
Shareholders agree that, in the event of a breach by any of them of the
foregoing covenant, the covenant may be enforced against them by injunctions
and restraining orders. Nothing herein shall be construed as prohibiting any
party from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
13. GENERAL
13.1 TERMINATION. This Agreement may be terminated at any time prior to the
Closing Date solely:
(a) by mutual written consent of the Boards of Directors of CCC and the
Company; or
(b) by the holders of a majority of the voting stock of the Company and the
Company as a group on the one hand, or by CCC, on the other hand, if the
Closing shall not have occurred on or before May 30, 1998, provided that the
right to terminate this Agreement under this Section 13.1(b) shall not be
available to either party (with the Shareholders and the Company deemed to be
a single party for this purpose) whose material misrepresentation, breach of
warranty or failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Closing to occur on or before
such date; or
(c) by the holders of a majority of the voting stock of the Company and the
Company as a group on the one hand, or by CCC, on the other hand, if there is
or has been a material breach, failure to fulfill or default on the part of
the other party (with the Shareholders and the Company deemed to be a single
party for this purpose) of any of the representations and warranties contained
herein or in the due and timely performance and satisfaction of any of the
covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date; or
(d) by the holders of a majority of the voting stock of the Company and the
Company as a group on the one hand, or by CCC, on the other hand, if there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or there shall be any action taken, or
any statute, rule or regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any governmental entity which would make
the consummation of the Merger illegal; or
13.2 EFFECT OF TERMINATION. (a) In the event of termination of this
Agreement by either or both of CCC and/or the holders of the majority of the
voting stock of the Company and the Company (with such Shareholders and the
Company deemed to be a single party for purposes of this Section 13.2)
pursuant to Section 13.1, prompt written notice thereof shall forthwith be
given to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
any of the parties hereto, but subject to and without limiting any of the
rights of the parties specified herein in the event a party is in default or
breach in any material respect of its obligations under this Agreement. If
this Agreement is terminated as provided herein:
(i) None of the parties hereto nor any of their respective partners,
directors, officers, shareholders, employees, agents, or affiliates shall have
any liability or further obligation hereunder except with respect to Article
12 and Article 13; and
(ii) All filings, applications and other submissions relating to the
transactions contemplated hereby as to which termination has occurred shall,
to the extent practicable, be withdrawn from the agency or other person to
which made.
(b)(i) If this Agreement is terminated pursuant to Section 13.1 and any
party shall be in material breach of any of its obligations, representations,
warranties or covenants set forth in this Agreement, the other party shall
have the right to pursue all legal or equitable remedies for breach of
contract or otherwise, and
41
(ii) Without limiting the generality of the foregoing, or any applicable
law, neither CCC and Newco, on the one hand, nor the Company and the
Shareholders, on the other hand, may rely on the failure of any condition
precedent set forth in Articles 8 and 9 to be satisfied as a ground for
termination of this Agreement by such party if such failure was caused by such
party's (or parties') failure to act in good faith, or a breach of or failure
to perform its representations, warranties, covenants or other obligations in
accordance with the terms hereof.
13.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of CCC and the other parties hereto, and the heirs and legal
representatives of the Shareholders.
13.4 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all
previous agreements and understandings between or among the parties regarding
the subject matter hereof, whether written or oral, are superseded by this
Agreement. This Agreement shall not be amended or modified except by a written
instrument duly executed by each of the parties hereto. Any extension or
waiver by any party of any provision hereto shall be valid only if set forth
in an instrument in writing signed on behalf of such party.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered (which deliveries may be made by telefax)
shall be deemed to be an original, and all of which counterparts taken
together shall constitute but one and the same instrument.
13.6 BROKERS AND AGENTS. CCC and Newco (as a group) and the Company and each
Shareholder (as a group) each represents and warrants to the other that except
as set forth in SCHEDULE 13.6, it/they has/have not employed any broker or
agent in connection with the transactions contemplated by this Agreement and
agrees to indemnify the other against all losses, damages or expenses relating
to or arising out of claims for fees or commission of any broker or agent
employed or alleged to have been employed by such party.
13.7 EXPENSES. CCC has paid and will pay the fees, expenses and
disbursements of CCC and Newco and their agents, representatives, accountants
and counsel incurred in connection with the subject matter of this Agreement.
Subject to Section 7.5(d) hereof, the Shareholders (and not the Company) have
paid and will pay the fees, expenses and disbursements of the Shareholders,
the Company, and their agents, representatives, financial advisers,
accountants and counsel incurred in connection with the subject matter of this
Agreement. At the election of the Shareholders, any of the foregoing fees
contemplated under this SECTION 13.7 payable by them will be paid by CCC or
the Company and not the Shareholders, provided that the aggregate amount of
the Base Merger Consideration is reduced by the amount of such expenses with
any such reduction to have no effect on the calculation of the Actual Earn Out
EBIT or the payment of the Contingent Merger Consideration.
13.8 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that the
other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in
addition to any other remedies which may be available upon the breach of any
such covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise
to obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 NOTICES. Any notice, request, claim, demand, waiver, consent, approval
or other communication which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered personally or
42
sent by telefax (with confirmation of receipt), by registered or certified
mail, postage prepaid, or by recognized courier service, as follows:
If to CCC, Newco or the Surviving Corporation to:
Consolidation Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Executive Vice President, General Counsel and Secretary
(Telecopy: 202/261-6020)
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
(Telecopy: 215/963-5299)
If to any Shareholder to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇ Electric, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(Telecopy: 801/487-0639)
with a required copy to:
▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
P.O. Box 45385
Salt Lake City, UT 84145
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
(Telecopy: 801/532-7543)
or to such other address as the person to whom notice is to be given may
have specified in a notice duly given to the sender as provided herein. Such
notice, request, claim, demand, waiver, consent, approval or other
communication shall be deemed to have been given as of the date so delivered,
telefaxed, mailed or dispatched and, if given by any other means, shall be
deemed given only when actually received by the addressees.
13.10 GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of the conflicts of laws provisions thereof that
would require the application of the substantive laws of any other
jurisdiction.
13.11 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 11.4.
13.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
43
13.13 FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges and
represents that it has been represented by its own legal counsel in connection
with the transactions contemplated by this Agreement, with the opportunity to
seek advice as to its legal rights from such counsel. Each party further
represents that it is being independently advised as to the tax consequences
of the transactions contemplated by this Agreement.
13.14 REPRESENTATIVE. Each of the Shareholders hereby appoints ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ as his exclusive agent and attorney-in-fact to act on his behalf with
respect to any and all matters, claims, controversies, or disputes arising out
of the terms of this Agreement (the "Representative"). Each Shareholder
further agrees that upon the vote of the Shareholders holding a majority of
the stock of the Company immediately preceding the Closing (the "Shareholder
Approval") the Representative shall have the power to take any and all actions
which the Representative believes are necessary or appropriate or in the best
interests of the Shareholders, as fully as if the Shareholders were acting on
their own behalf, including without limitation, consenting to, and settling
any and all claims, disputes or controversies arising hereunder (including
without limitation the calculation and payment of the Merger Consideration),
conducting all negotiations with and otherwise dealing with CCC and the
Surviving Corporation and engaging counsel, accountants and other
representatives in connection with the foregoing matters. CCC and the
Surviving Corporation shall have the right to rely on any actions taken or
omitted to be taken by the Representative as being the act or omission of the
Shareholders, without the need for any inquiry, and any such actions or
omissions shall be binding upon the Shareholders. The Shareholders shall have
the right to change the identity of the Representative upon Shareholder
Approval and shall deliver to CCC and the Surviving Corporation prompt written
notice of any such change of identity, which upon receipt by CCC and the
Surviving Corporation will effect said change. The Shareholders agree to hold
the Representative free and harmless from and indemnify the Representative
against any and all loss, damage or liability which he may sustain as a result
of any action taken in good faith hereunder, including, without limitation,
any legal fees and expenses.
13.15 UNANIMOUS WRITTEN CONSENT OF SHAREHOLDERS. The execution of this
Agreement by all of the Shareholders shall constitute unanimous written
consent of all of the shareholders of the Company approving the Articles of
Merger within the meaning of the State Corporate Laws.
[Execution Page Following]
44
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CONSOLIDATION CAPITAL CORPORATION
/s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
By:__________________________________
▇. ▇▇▇▇▇▇▇ ▇▇▇▇
CCC 12 ACQUISITION CORPORATION
/s/ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
By:__________________________________
▇. ▇▇▇▇▇▇▇ ▇▇▇▇
CONSOLIDATION CAPITAL CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By:__________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
45
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇▇▇
_____________________________________
▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
46
INDEX OF DEFINED TERMS
1933 Act....................................................................
1997 Adjusted EBIT Target...................................................
Accounts Receivable.........................................................
Actual Adjusted EBIT........................................................
Actual Company Net Worth....................................................
Actual Earn Out EBIT........................................................
Adjusted EBIT...............................................................
Affiliate...................................................................
Affiliates..................................................................
Agreement...................................................................
Articles of Merger..........................................................
Audited Financials..........................................................
Balance Sheet Date..........................................................
Base Merger Consideration...................................................
CCC.........................................................................
CCC Charter Documents.......................................................
CCC Common Stock............................................................
CCC Indemnified Parties.....................................................
CCC Indemnified Party.......................................................
CCC Prospectus..............................................................
CCC's Accountant............................................................
CCC's knowledge.............................................................
Certificates................................................................
Certified Closing Net Worth.................................................
Certified Year-End EBIT.....................................................
Certified Year-End Net Worth................................................
Charter Documents...........................................................
Claim Notice................................................................
Claims......................................................................
Closing.....................................................................
Closing Date................................................................
Closing Financial Certificate...............................................
COBRA.......................................................................
Code........................................................................
Company.....................................................................
Company Common Stock........................................................
Company Financial Statements................................................
Company Hazardous Materials Activities......................................
Company=s knowledge.........................................................
Constituent Corporations....................................................
Contingent Merger Consideration.............................................
Contingent Merger Consideration Payment Date................................
controlled group............................................................
Damages.....................................................................
DOJ.........................................................................
Earn Out EBIT Notice........................................................
Earn Out Period Average Price...............................................
Effective Time..............................................................
employee benefit plan.......................................................
Environmental Permits.......................................................
47
Equipment...................................................................
ERISA.......................................................................
Financial Adjustment Notice.................................................
First Year Earn Out Amount..................................................
FTC.........................................................................
golden parachute............................................................
group health plans..........................................................
Hazardous Material..........................................................
Identified Sales Tax Liabilities............................................
Indemnification Threshold...................................................
Indemnified Party...........................................................
Indemnifying Party..........................................................
Intellectual Property.......................................................
Interim Balance Sheet.......................................................
Interim Period Average......................................................
Inventory...................................................................
knowledge of CCC............................................................
knowledge of Newco..........................................................
knowledge of the Company....................................................
leased Real Property........................................................
liabilities.................................................................
Lien........................................................................
Material Adverse Effect.....................................................
Material Contracts..........................................................
Maximum Earn Out Amount.....................................................
Merger......................................................................
Merger Consideration........................................................
Merger Consideration Adjustment.............................................
Merger Documents............................................................
Merger Price................................................................
multiemployer pension plan..................................................
Net Worth Target............................................................
New Accounting Firm.........................................................
Newco.......................................................................
Newco's knowledge...........................................................
PBGC........................................................................
Pending Claims..............................................................
Permits.....................................................................
Permitted Encumbrances......................................................
Person......................................................................
Plans.......................................................................
Pledged Assets..............................................................
Post-Closing Audit..........................................................
Prime Rate..................................................................
Qualified Plans.............................................................
Registration Statement......................................................
Related Party...............................................................
Related Party Agreements....................................................
Release Date................................................................
reportable events...........................................................
Representative..............................................................
Required Consents...........................................................
48
Revised Earn Out EBIT.......................................................
Second Year Earn Out Amount.................................................
SECURITIES ACT..............................................................
Shareholder.................................................................
Shareholder Approval........................................................
Shareholder Indemnified Parties.............................................
Shareholders................................................................
State Corporate Laws........................................................
Surviving Corporation.......................................................
Tax.........................................................................
Tax Return..................................................................
tax-free reorganization.....................................................
Territory...................................................................
Third Party Claim...........................................................
UCC.........................................................................
Year-End Net Worth..........................................................
49
SCHEDULES
1.1 Articles of Merger
1.2(c) Directors and Officers of Surviving Corporation
5.1 Due Organization
5.3 No Conflicts
5.4 Capital Stock of the Company
5.5 Transactions in Capital Stock
5.6(a) Subsidiaries
5.6(b) Other Holdings of Company
5.6(c) Promissory Notes
5.7 Predecessor Status
5.8 Shareholder Claims
5.10 Financial Statements
Liabilities and Obligations; Capital Expenditures; Indebtedness as
5.11 of the Balance Sheet Date
5.12 Accounts and Notes Receivable
5.14 Permits
5.15(c) Real Property
5.15(c)(i) Liens securing indebtedness for borrowed money that CCC or one of
its affiliates has agreed to assume at Closing.
5.16(a) Personal Property
5.17 Intellectual Property
5.18(a) Material Contracts
5.18(c) Outstanding balances on all loans or credit agreements
Breaches/defaults/terminations/liens on Material Contracts caused
5.18(d) by transaction
5.19 Government Contracts
5.20 Insurance
5.21 Labor and Employment Matters
5.22 Employment Benefit Plans
5.23(a) Conformity with Law
5.23(b) Litigation
5.25 Absence of Changes
5.26 Deposit Accounts; Powers of Attorney
5.27(a) Hazardous Material
5.27(b) Hazardous Materials Activity
5.27(c) Environmental Permits
5.31 "Affiliates" under the 1933 Act
5.32 Location of chief executive offices
5.33 Location of Equipment and Inventory
6.4 No Conflicts (CCC and Newco)
7.4 Related Party Agreements
7.6 Conduct of Business Pending Closing
7.8 Prohibited Activities
8.12 Related Party Receivables and Agreements
11.1 Prohibited Activities
13.6 Brokers and Agents
50
EXHIBITS
1.2(a) Articles of Incorporation of Newco
1.2(b) Bylaws of Newco
8.5 Opinion of Counsel
8.9 Employment Agreement
8.10 Affiliate Agreements
8.11 Shareholders' Releases
51
SCHEDULE 1.2(C)
DIRECTORS
▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
OFFICERS
President--▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President--▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary/Treasurer--▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
52
