STOCK PURCHASE AGREEMENT
DATED AS OF MARCH __, 2000
BETWEEN
DUALSTAR TECHNOLOGIES CORPORATION
AND
M/E CORP.
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF SHARES AND CLOSING..............................................................10
Section 1.1 Purchase and Sale of Stock....................................................................10
Section 1.2 Closing.......................................................................................11
Section 1.3 Stockholders' Meeting.........................................................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASER..............................................12
Section 2.1 Organization and Qualification................................................................12
Section 2.2 Authority and Absence of Conflict.............................................................12
Section 2.3 Approvals.....................................................................................13
Section 2.4 Purchase for Investment.......................................................................13
Section 2.5 Access to Information.........................................................................13
Section 2.6 Conduct of Business of the Purchaser..........................................................13
Section 2.7 Material Misstatements or Omissions...........................................................13
Section 2.8 Brokers.......................................................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER..................................................14
Section 3.1 Organization and Qualification................................................................14
Section 3.2 Authority and Absence of Conflict.............................................................14
Section 3.3 Ownership of Capital Stock....................................................................15
Section 3.4 Preemptive Right..............................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY................................................15
Section 4.1 Organization and Qualification................................................................15
Section 4.2 Authority and Absence of Conflict.............................................................15
Section 4.3 Corporate Records.............................................................................17
Section 4.4 Capital Stock; Subsidiaries...................................................................17
Section 4.5 Financial Statements..........................................................................17
Section 4.6 Tax Matters...................................................................................17
Section 4.7 Real Property and Leaseholds..................................................................19
Section 4.8 Title to Assets...............................................................................19
Section 4.9 Property, Plant and Equipment.................................................................19
Section 4.10 Accounts Receivable..........................................................................19
Section 4.11 Contracts....................................................................................19
Section 4.12 Compliance with Law..........................................................................19
Section 4.13 Permits and Other Operating Rights...........................................................19
Section 4.14 Litigation...................................................................................20
Section 4.15 ERISA Matters................................................................................20
Section 4.16 Labor and Employment Matters.................................................................22
Section 4.17 Insurance Coverage...........................................................................23
Section 4.18 Conduct of Business..........................................................................24
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Section 4.19 Certain Transactions.........................................................................25
Section 4.20 Liabilities and Obligations..................................................................25
Section 4.21 Intentionally Omitted........................................................................26
Section 4.22 Brokers......................................................................................26
Section 4.23 Absence of Certain Payments..................................................................26
Section 4.24 No Outstanding Indebtedness..................................................................26
Section 4.25 Significant Customers........................................................................26
Section 4.26 Bank Accounts................................................................................26
Section 4.27 Material Adverse Effect......................................................................26
ARTICLE V CONDUCT OF BUSINESS PRIOR TO CLOSING; OTHER COVENANTS..................................................26
Section 5.1 Conduct of Business of the Company Pending the Closing........................................26
Section 5.2 Conduct of Business of the Purchaser..........................................................29
Section 5.3 Preparation of Proxy Statement................................................................29
Section 5.4 Access to Information; Confidentiality........................................................30
Section 5.5 No Solicitation...............................................................................30
Section 5.6 Directors' and Officers' Indemnification and Insurance........................................31
Section 5.7 Further Action; Best Efforts..................................................................31
Section 5.8 Public Announcements..........................................................................32
Section 5.9 Transactional Costs...........................................................................32
Section 5.10 Repayment of Company Indebtedness............................................................32
Section 5.11 Board of Directors and Officers of the Company...............................................32
ARTICLE VI CONDITIONS PRECEDENT TO THE CLOSING.................................................................33
Section 6.1 Conditions to the Obligations of Each Party to Consummate the Transactions....................33
Section 6.2 Conditions to Obligations of Purchaser........................................................33
Section 6.3 Conditions to the Obligations of the Seller...................................................35
ARTICLE VII TAX MATTERS........................................................................................36
Section 7.1 Tax Return Filings; Payment of Taxes; Indemnification.........................................36
Section 7.2 Procedures Relating to Indemnification of Tax Claims..........................................37
Section 7.3 Refunds and Credits...........................................................................38
Section 7.4 Cooperation...................................................................................38
Section 7.5 Elections; Consents and Other Actions.........................................................38
Section 7.6 Transfer Taxes................................................................................38
Section 7.7 Section 338(h)(10) Election...................................................................39
Section 7.8 FIRPTA Certificates...........................................................................40
Section 7.9 Relationship to Article VIII..................................................................40
ARTICLE VIII SURVIVAL; INDEMNIFICATION...........................................................................40
Section 8.1 Indemnification...............................................................................40
Section 8.2 Notice and Defense of Third Party Claims......................................................41
Section 8.3 Notice of Other Claims........................................................................42
Section 8.4 Limitations of Indemnification................................................................42
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Section 8.5 Survival and No Waiver of Representations.....................................................43
Section 8.6 Limitation of Other Indemnification Rights....................................................43
Section 8.7 Exclusive Remedy..............................................................................44
ARTICLE IX PUBLICITY; CONFIDENTIALITY; BOOKS AND RECORDS.......................................................44
Section 9.1 Publicity.....................................................................................44
Section 9.2 Confidentiality...............................................................................44
Section 9.3 Books and Records.............................................................................45
Section 9.4 Survival......................................................................................45
ARTICLE X NOTICES..............................................................................................45
Section 10.1 Notices......................................................................................45
ARTICLE XI GOVERNING LAW; FORUM..................................................................................46
Section 11.1 GOVERNING LAW; FORUM.........................................................................47
ARTICLE XII BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES..............................................47
Section 12.1 Binding Effect; Assignment; Third Party Beneficiaries........................................47
ARTICLE XIII ENTIRE AGREEMENT..................................................................................47
Section 13.1 Entire Agreement.............................................................................47
ARTICLE XIV MATERIALITY AND IMMATERIALITY......................................................................48
Section 14.1 Materiality and Immateriality................................................................48
ARTICLE XV TERMINATION, AMENDMENT AND WAIVER.....................................................................48
Section 15.1 Termination..................................................................................48
Section 15.2 Effect of Termination........................................................................49
Section 15.3 Fees and Expenses............................................................................49
Section 15.4 Amendment....................................................................................49
Section 15.5 Waiver.......................................................................................49
Section 15.6 Procedure for Termination, Amendment, Extension or Waiver....................................50
ARTICLE XVI HEADINGS; COUNTERPARTS...............................................................................50
Section 16.1 Headings; Counterparts.......................................................................50
ARTICLE XVII SEVERABILITY........................................................................................50
Section 17.1 Severability.................................................................................50
ANNEXES AND EXHIBITS
Annex I Company Stock
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Exhibit __ Amended and Restated Articles of Incorporation of the Company
Exhibit __ Amended and Restated Bylaws of the Company
Exhibit __ Amended and Restated Articles of Incorporation of the Purchaser
Exhibit __ Amended and Restated Bylaws of the Purchaser
Exhibit __ Non-Competition Agreement
Exhibit __ Purchaser Note
Exhibit __ Security Agreement
Exhibit __ Form of Opinion of Seller's Counsel
Exhibit __ Form of Opinion of Purchaser's Counsel
Exhibit __ Form of Seller Release
Exhibit __ Form of Employment Contract
Exhibit __ List of Persons re: Knowledge Definition
DISCLOSURE SCHEDULES
1.1 Authorized and Outstanding Capital Stock of the Company
2.3 Approvals--Governmental and Other
4.1 Jurisdiction of Incorporation
4.2(d) Consents
4.3 Corporate Records
4.4 Capital Stock; Subsidiaries
4.5 Financial Statements
Exhibit A: Audited Financial Statements
Exhibit B: Interim Financial Statements
4.6 Certain Tax Matters
4.13 Permits and Operating Rights
4.15 ERISA Matters
4.16 Labor and Employment Matters
4.17 Insurance Coverage
4.18 Conduct of Business
4.20 Undisclosed Material Liabilities
4.26 Bank Accounts
4.27 Bank Accounts
4.28 Investments
5.5 Board of Directors and Officers of the Company
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STOCK PURCHASE AGREEMENT dated as of March __, 2000 (this
"AGREEMENT") between DualStar Technologies Corporation, a corporation validly
existing under the laws of Delaware (herein referred to as the "SELLER"), and
M/E Corp., a corporation validly existing under the laws of Delaware (herein
referred to as the "PURCHASER"). Unless the context requires otherwise,
capitalized terms used in this Agreement or in any schedule hereto, and not
otherwise defined herein or therein, shall have the respective meanings set
forth below in "Definitions."
W I T N E S S E T H:
WHEREAS, the Seller owns all of the shares of capital stock of
each of High-Rise Electric, Inc., a Delaware corporation ("HIGH RISE"),
Centrifugal Associates, Inc., a New Jersey corporation ("Centrifugal"), and
Mechanical Associates, Inc., a New York corporation ("MECHANICAL"; High Rise,
Centrifugal and Mechanical are sometimes referred to herein individually as an
"ACQUIRED ENTITY", and collectively as the "Company");
WHEREAS, High Rise is engaged in the business of providing
electrical contracting services to various types of customers and in other
construction-related activities;
WHEREAS, Centrifugal and Mechanical are engaged in the
business of providing mechanical contracting services to various types of
customers;
WHEREAS, the Seller will sell the Company Stock to the
Purchaser in exchange for an aggregate Purchase Price of $16,000,000;
NOW, THEREFORE, in consideration of the premises,
representations and warranties and the mutual covenants and agreements contained
herein and other good, valuable and sufficient consideration, the receipt of
which is hereby acknowledged, each of the Parties, intending to be legally
bound, hereby agrees as follows:
DEFINITIONS
A. As used in this Agreement and the Schedules delivered
pursuant to this Agreement, the following definitions shall apply:
"338(h)(10) ELECTION" means any valid, timely and effective
election under Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the
Treasury Regulations and any comparable election under state or local tax law
with respect to the Company.
"1933 ACT" means the Securities Act of 1933, as amended.
"ACCOUNTING FIRM" means the accounting firm selected by the
Parties to resolve any dispute arising pursuant to Section 7.1(c) hereof. In the
event that the Parties are unable to agree on an accounting firm, one will be
selected pursuant to an appropriate arbitration proceeding according to the
then-current commercial rules and supervision of the American Arbitration
Association.
"ACQUIRED ENTITY" has the meaning set forth in the recitals.
"ACQUISITION" means the acquisition of the Company Stock by
the Purchaser from the Seller as contemplated by this Agreement.
"ACTION" means any action, complaint, petition, suit or other
proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Authority.
"AFFILIATE" means, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person. The
term "control" (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"AGREEMENT" means this Agreement, as amended or supplemented,
together with all Exhibits, Annexes and Schedules attached or incorporated by
reference.
"ANCILLARY AGREEMENTS" means the Purchaser Note, the Security
Agreement, _____________________________________.
"APPROVAL" means any license, franchise, permit, approval,
authorization, consent, qualification or registration, or any waiver of any of
the foregoing, required to be obtained from, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental
Authority or any other Person.
"ANNUAL FINANCIAL STATEMENTS" means the unaudited consolidated
balance sheets of C/M and the unaudited balance sheets of High Rise, in each
case, as of the end of such Acquired Entities' fiscal years for the year ended
1998 and the related unaudited statement of income, shareholders' equity and
cash flows for the year then ended.
"BALANCE SHEET DATE" means December 31, 1999.
"BLACKACRE" has the meaning set forth in Section 6.1(e).
"BOARD OF DIRECTORS" means the board of directors of the
Seller.
"BUSINESS" means with respect to High Rise, the business of
High Rise, consisting primarily of providing electrical contracting services to
various types of customers, and with respect to each of Centrifugal and
Mechanical, the business of each such company, in each case, consisting
primarily of providing mechanical contracting services to various types of
customers.
"BYLAWS" means a corporation's bylaws, code of regulations or
equivalent document.
"CENTRIFUGAL" has the meaning set forth in the recitals.
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"CHARTER" means a corporation's articles of incorporation,
certificate of incorporation or equivalent organizational documents.
"CLAIM" means any Action, cause of action, claim, demand,
demand letter, lien, notice of noncompliance or suit, commenced or threatened.
"CLOSING" has the meaning set forth in Section 1.2(a).
"CLOSING DATE" has the meaning set forth in Section 1.2(a).
"C/M" has the meaning set forth in Section 4.5.
"CMA" means Centrifugal/Mechanical Associates, Inc., a
Delaware corporation.
"CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"COMMONLY CONTROLLED ENTITY" has the meaning set forth in
Section 4.15(c).
"COMPANY" has the meaning set forth in the recitals.
"COMPANY COUNSEL" means Xxxxxxx & Xxxxx L.L.P., special
counsel to the Company and the Seller.
"COMPANY PERMITS" means each of the Acquired Entities' and
each of their respective subsidiaries' permits, licenses, easements, variances,
exemptions, orders and Approvals required by applicable Law or Order to conduct
the business of each such Acquired Entity or subsidiary as it is now being
conducted, by the property or contract rights of third Persons material to the
conduct of each of the Acquired Entities' Business as it is now being conducted
or to permit the current occupancy of the Real Property.
"COMPANY STOCK" means the issued and outstanding shares of
capital stock of the Acquired Entities.
"CONFIDENTIAL INFORMATION" means all nonpublic data, reports,
records and other information of any kind, received by a Receiving Party or by
the Affiliates, shareholders, directors, partners, officers, employees, agents,
representatives, consultants or lenders of a Receiving Party from a Delivering
Party or from the Affiliates, shareholders, partners, directors, officers,
employees, agents, representatives, consultants or lenders of a Delivering
Party.
"CONSENT" means any consent, approval, license, authorization,
order, filing, permit, registration or qualification of or with any Person.
"DECREES" means all orders, judgments or decrees of any
Governmental Authority, administrative agency or court of competent
jurisdiction, specifically applicable to an Acquired Entity or subsidiary
thereof or the conduct of the Business of an Acquired Entity or the business
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of a subsidiary thereof, or by which an Acquired Entity or subsidiary thereof or
any of its properties is bound or affected.
"DELIVERING PARTY" means a Party or the Affiliates,
shareholders, partners, directors, officers, employees, agents, representatives,
consultants or lenders of such Party which delivers Confidential Information to
the Receiving Party.
"ENCUMBRANCE" means any charge, encumbrance, lien, mortgage,
pledge, option, right of first refusal, equity, adverse claim or restriction or
other security interest of any nature or kind whatsoever, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
"ERISA" has the meaning set forth in Section 4.15(a).
"EVENT OF INDEMNIFICATION" means the untruth, inaccuracy or
breach of any representation, warranty, agreement or covenant of any Party
contained in this Agreement or in any certificate, schedule, list, exhibit,
agreement, document or other writing delivered pursuant hereto or in connection
with the Transactions, and any Claim or Liability for any fee, commission,
compensation or other payment by any broker, finder or similar agent, or
Liability with respect thereto, who claims to have been, or who was in fact,
engaged by or on behalf of the Seller, an Acquired Entity or the Purchaser in
connection with the Transactions.
"FAIRNESS OPINION" has the meaning set forth in Section
6.1(d).
"FINAL PRE-CLOSING PERIOD" means the taxable period beginning
on _________ and ending on or prior to the Closing Date.
"FOREIGN PENSION PLAN" has the meaning set forth in Section
4.15(e).
"GAAP" means generally accepted accounting principles in the
United States, consistently applied throughout the periods indicated.
"GCL" has the meaning set forth in Section 1.3.
"GOVERNMENTAL AUTHORITY" means any foreign, federal or
national, state or provincial, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission,
department, board, bureau, agency or instrumentality, political subdivision,
court, tribunal, official arbitrator or arbitral body.
"HIGH RISE" has the meaning set forth in the recitals.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"INDEBTEDNESS" of an Acquired Entity means (i) all obligations
for borrowed money or with respect to deposits or advances of any kind, however
evidenced, including but not limited to principal and interest, (ii) all
obligations for the deferred purchase price of property or
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services, except for current accounts payable relating to trade payables arising
in the ordinary course of business and not overdue, (iii) all obligations as an
account party under any letter of credit or in respect of bankers' acceptances
or surety bonds or similar suretyships to the extent due and payable, (iv) all
obligations of any third party secured by property or assets of such Acquired
Entity, a subsidiary thereof or the Seller, as applicable (regardless of whether
such Acquired Entity, subsidiary or the Seller is liable for the repayment of
such obligations), (v) all guarantees of obligations by such Acquired Entity,
subsidiary or the Seller, as applicable and (vi) all obligations, contingent or
otherwise under any capitalized lease.
"INDEMNITEE" means any Party and its respective officers,
directors, employees, partners, shareholders, agents, representatives, and its
respective permitted successors and assigns, who may be entitled to
indemnification under Article VIII of this Agreement.
"INDEMNITOR" means any Party who may be obligated under
Article VIII of this Agreement to provide indemnification to an Indemnitee.
"INDEMNITY AGREEMENT" means the agreement of the parties
hereto to indemnify each other pursuant to Section 8.1 hereof.
"INDEMNITY NOTICE" means the written notice from the
Indemnitee to the Indemnitor in the event that the Indemnitee reasonably
believes that it has a Claim in respect of which indemnity may be sought based
on the Indemnity Agreement, which claim is not in respect of a Third Party
Claim, stating the nature and basis of such Claim.
"INDEMNITY RESPONSE" means the response in writing from the
Indemnitor to the Indemnitee given pursuant to Section 8.3(b) hereof.
"INDEPENDENT THIRD PARTY" means a firm of independent
accountants of national reputation.
"INTERCOMPANY INDEBTEDNESS" means the Seller's outstanding
indebtedness to the Acquired Entities pursuant to _______, dated as of _______
[DualStar to complete].
"INTERIM BALANCE SHEET DATE" means [December 31, 1999].
"INTERIM FINANCIAL STATEMENTS" means true and correct copies
of the unaudited consolidated balance sheet of C/M and the unaudited balance
sheet of High Rise, in each case, as of December 31, 1999 and the related
unaudited statements of income, shareholders' equity and cash flows for the six
months ended December 31, 1999.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" when used with respect to the Seller means the
actual knowledge of the persons identified in Exhibit __ hereto.
"LAW" means any statute, rule, regulation, administrative
requirement, code or ordinance of any Governmental Authority.
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"LEASED REAL ESTATE" means all material parcels of real
property leased or subleased to an Acquired Entity as of the date hereof.
"LETTER OF INTENT" has the meaning set forth in Section
6.1(e).
"LIABILITIES" means any and all debts, liabilities and
obligations of any nature whatsoever, whether accrued or fixed, absolute or
contingent, mature or unmatured, or determined or not determinable. When used
with respect to any Acquired Entity or subsidiary thereof, "Liabilities" shall
include, without limitation, all such Liabilities owed to suppliers,
contractors, subcontractors and any other such Persons who have provided or are
providing goods or services to such Acquired Entity or subsidiary.
"LOSSES" means any and all losses, costs, damages,
liabilities, assessments and expenses (including interest, penalties and
reasonable attorney's fees) ("LOSS ITEMS") sustained, suffered or incurred by
any Indemnitee, whether or not involving any Third Party Claim less (i) any
amounts received by such Indemnitee under insurance policies with respect to
Loss Items and (ii) any aggregate net tax benefit realized by the Indemnitee
arising from the incurrence or payment of any such Loss Item.
"XXXXXXXXX NOTE" means the Amended and Restated Promissory
Note dated as of December 1, 1999 from the seller in favor of Xxxxxxxxx L.L.C.
"XXXXXXXXX PLEDGE" means the pledge to Xxxxxxxxx L.L.C. and
grant to Xxxxxxxxx L.L.C. of a security interest in the outstanding shares of
capital stock and other equity interests held by the Seller of each of the
Acquired Entities in connection with the Xxxxxxxxx Note.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the condition (financial or otherwise), results of operations, assets,
liabilities or business of the Company and its subsidiaries, taken as a whole;
provided that any such effect resulting from any change in economic conditions
generally or in the industries in which the Company operates shall not be
considered when determining whether a material adverse effect has occurred.
"MECHANICAL" has the meaning set forth in the recitals.
"NON-COMPETITION AGREEMENT" means the agreements not to
compete entered into by the Purchaser and Seller in the form attached hereto as
Exhibit __.
"NOTICE OF SUPERIOR PROPOSAL" has the meaning set forth in
Section 5.5(b).
"ORDER" means any consent or other type of decree, injunction,
stipulation, determination, judgment, order, ruling, arbitration award,
assessment or writ.
"OWNED REAL ESTATE" means all parcels of real property owned
in fee by an Acquired Entity as of the date hereof.
"PARTIES" means the Purchaser and the Seller.
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"PENSION PLAN" has the meaning set forth in Section 4.15(e).
"PERMITTED LIENS" means:
(a) Encumbrances for Taxes not yet due or which are being
contested in good faith by appropriate proceedings, provided that adequate
reserves in accordance with GAAP with respect to contested Taxes are maintained
on the books of an Acquired Entity or any of their respective subsidiaries;
(b) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other social security legislation;
(c) easements, rights-of-way, restrictions and other similar
encumbrances previously incurred in the ordinary course of business which, in
respect of real property and assets of the Company taken as a whole, are not
material, and which, in the case of such encumbrances on the real property of an
Acquired Entity or any of their respective subsidiaries, do not detract from the
value of any such real property or interfere with any present use of such
properties or assets;
(d) statutory and contractual Encumbrances on the property of
an Acquired Entity or any of their respective subsidiaries in favor of the
applicable landlord securing the relevant underlying lease;
(e) Carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 90 days or which are
being contested in good faith by appropriate proceedings, except for such liens
which are filed of record and for which adequate reserves are reflected on the
books and records of an Acquired Entity or any of their respective subsidiaries;
and
(f) deposits to secure the performance of bids, contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
consistent with past practices and in the ordinary course of business.
"PERSON" shall include any individual, trust, trustee, firm,
corporation, partnership, limited liability company, joint venture, joint stock
company, Governmental Authority or other entity, whether acting in an
individual, fiduciary or any other capacity.
"PLAN" has the meaning set forth in Section 4.15(a).
"PRE-CLOSING PERIOD" means all taxable periods ending on or
prior to the Closing Date.
"PROXY STATEMENT" means a collective reference to the letter
to stockholders, notice of meeting, proxy statement and form of proxy (including
any amendments or supplements thereto and any schedules required to be filed
with the SEC in connection therewith) to be distributed to stockholders of the
Seller in connection with the Transactions.
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"PURCHASE PRICE" means $16,000,000, consisting of (i)
$3,000,000 in cash and (ii) the Purchaser Note.
"PURCHASER" means M/E Corp., a Delaware corporation.
"PURCHASER'S COUNSEL" means Xxxxxxx Xxxx & Xxxxx LLP, special
counsel to the Purchaser.
"PURCHASER NOTE" means a ten-year senior secured promissory
note of the Purchaser payable to the Seller in the principal amount of
$13,000,000, bearing interest at the rate of 10% per annum, in the form attached
hereto as Exhibit __.
"REAL PROPERTY" means the Owned Real Estate and Leased Real
Estate.
"RECEIVING PARTY" means a Party or the Affiliates,
shareholders, partners, directors, officers, employees, agents, representatives,
consultants or lenders of such Party which receives Confidential Information
from a Delivering Party.
"RELEVANT GROUP" means the Acquired Entities and any
affiliated group as defined in Section 1504 of the Code of which an Acquired
Entity is or was a member and any combined, consolidated, unitary or similar
group of which an Acquired Entity is or was a member.
"REPRESENTATIVES" means Persons acting on behalf of the
Seller, the Company or the Purchaser as the context requires, including without
limitation their respective independent accountants, investment bankers and
counsel.
"SALE(S)" means the sale, lease, transfer, assignment or other
disposition of any of the assets of an Acquired Entity or any subsidiary
thereof.
"SECURITY AGREEMENT" means the security agreement made by the
Purchaser in favor of the Seller, substantially in the form of Exhibit __
hereto.
"SEC" means the Securities and Exchange Commission.
"SELLER" means DualStar Technologies Corporation, a Delaware
corporation.
"SELLER COMMON STOCK" means the common stock, $.01 par value
per share, of the Seller.
"STOCKHOLDERS' MEETING" has the meaning set forth in Section
1.3.
"SUPERIOR PROPOSAL" means any bona fide Takeover Proposal
which the Board of Directors determines in its good faith reasonable judgment to
be more favorable to the Seller's stockholders than the Transactions.
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"SURVIVAL DATE" means (i) with respect to the representations
and warranties described in Section 4.6, the date on which the applicable
statute of limitations has expired, including any extensions thereto, but in no
event longer than 7 years after the date hereof, (ii) with respect to Section
4.12, the date on which the applicable statute of limitations has expired,
including any extensions thereto, (iii) with respect to the representations and
warranties described in Section 3.2, 3.3, 3.4 and 4.2 hereof, indefinitely, and
(iv) with respect to any other Event of Indemnification, 12 months after the
date hereof.
"TAKEOVER PROPOSAL" means any acquisition or purchase of a
substantial amount of the properties or assets of the Company or the Seller, or
any merger, consolidation, business combination, sale of substantially all
properties and/or assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company or the Seller (other than the transactions
contemplated hereby) or any other transaction the consummation of which would
reasonably be expected to impede, interfere with, prevent or materially delay
the consummation of the Transactions, or any agreement to, or public
announcement by the Seller or any other Person of a proposal, plan or intention
to do any of the foregoing.
"TAX(ES)" means taxes, fees, levies, duties, tariffs, imposts,
and governmental impositions or charges of any kind in the nature of (or similar
to) taxes, payable to any federal, state, local or foreign Taxing Authority,
including, without limitation, (i) income, franchise, profits, gross receipts,
ad valorem, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
employment, social security, workers' compensation, unemployment compensation,
utility, severance, production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, and (ii) interest, penalties, additional
taxes and additions to tax imposed with respect thereto.
"TAX CLAIM" means any audit or claim for Taxes made by any
Taxing Authority in writing, which, if successful, might result in an indemnity
payment pursuant to Article VII hereof.
"TAX INDEMNIFIED PARTY" means the Party entitled to
indemnification for Taxes pursuant to Article VII hereof.
"TAX INDEMNIFYING PARTY" means the Party who is obligated to
indemnify the other Party for Taxes pursuant to Article VII hereof.
"TAX LAWS" means the Code, federal, state, county, local or
foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"TAX RETURN" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
(if any) issued by, a Taxing Authority in connection with any Tax (including,
but not limited to, returns required in connection with any Plans).
"TAX STATEMENT" has the meaning set forth in Section 7.1(c).
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"TAXING AUTHORITY" means any Governmental Authority
responsible for the imposition or collection of any Taxes, whether domestic or
foreign.
"TERMINATION FEE" has the meaning set forth in Section
15.3(a).
"THIRD PARTY CLAIM" means a Claim resulting from the assertion
of liability by third parties.
"TRANSACTIONAL COSTS" means all of a Party's legal,
accounting, brokers', finders', advisory and other reasonable fees and
out-of-pocket costs and expenses incurred as a result of this Agreement or the
Transactions.
"TRANSACTIONS" means collectively the Acquisition and the
other transactions contemplated in this Agreement.
"TRANSFER TAXES" means any sales, use, transfer, documentary,
real property transfer, recording, gains, stamp, registration, stock transfer
and any other similar taxes and fees.
"TRIGGERING EVENT" has the meaning set forth in Section
15.3(a).
"WARN ACT" means the Worker Adjustment and Retraining
Notification Act.
"WELFARE PLAN" has the meaning set forth in Section 4.15(a).
B. Certain References.
Accounting Terms. All accounting terms not otherwise defined
herein shall have the meanings provided under GAAP on the date hereof.
Herein; Hereof; Hereunder. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular Article or other subdivision.
Pronouns. Any masculine personal pronoun herein shall be
considered to include the corresponding feminine or neuter personal pronoun, as
the context requires, and vice versa.
ARTICLE I
PURCHASE AND SALE OF SHARES AND CLOSING
Section 1.1 Purchase and Sale of Stock.
(a) Purchase and Sale. Upon the terms and subject to the
conditions contained in this Agreement and in reliance upon the representations,
warranties, covenants and agreements contained in this Agreement, on the Closing
Date, the Seller shall sell, convey and transfer to the Purchaser and the
Purchaser shall purchase from the Seller all of the Company Stock as described
on Annex I hereto, free and clear of all Encumbrances except for the Xxxxxxxxx
Pledge.
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(b) Purchase Price. The Purchase Price for the Company Stock
shall be $16,000,000 (Sixteen Million Dollars), consisting of (i) $3,000,000 in
cash and (ii) the Purchaser Note.
(c) Allocation of Purchase Price. The Purchase Price shall be
allocated $_______ to the capital stock of Centrifugal and Mechanical and
$________ to the capital stock of High Rise.
Section 1.2 Closing.
(a) Closing. The closing (the "CLOSING") of the Transactions
shall take place at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx, 00000, commencing at 10:00 a.m. local time on or before
[__________] (the "CLOSING DATE"), provided that all of the conditions set forth
in Article VI have been satisfied or waived by the party entitled to grant such
waiver, or at or on any other mutually agreeable place, time or date, or if no
date has been agreed to, on any date specified by one party to the other upon
five days' notice following satisfaction or waiver by the party entitled to
grant such waiver of the latest to occur of the conditions set forth in Article
VI.
(b) Deliveries of Purchase Price and Share Certificates. If
all conditions set forth in Article VI are satisfied or waived by the party
entitled to grant such waiver, at the Closing (i) the Purchaser shall deliver to
the Seller the cash portion of the Purchase Price contemplated by Section 1.1(b)
by either bank draft or certified check made to the order of the Seller, (ii)
the Purchaser shall deliver to the Seller the Purchaser Note and (iii) the
Seller shall deliver or cause to be delivered to the Purchaser certificates
representing the Company Stock, duly endorsed in blank by the Seller, or
accompanied by blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the Seller's expense, affixed and cancelled.
Section 1.3 Stockholders' Meeting. The Seller will take all
action necessary in accordance with and subject to applicable law and its
Charter and Bylaws to convene a meeting of its stockholders (the "STOCKHOLDERS'
MEETING") as soon as practicable after the date of this Agreement to consider
and vote upon the adoption and authorization of this Agreement and the approval
of the Transactions. Subject to the fiduciary duties of the Board of Directors,
the Seller shall (a) prepare, file with the SEC and send to its stockholders a
Proxy Statement which shall include the recommendation of the Board of Directors
that holders of Seller Common Stock adopt and authorize this Agreement and the
Transactions and (b) use its reasonable best efforts to obtain the adoption and
authorization of this Agreement and the Transactions by the stockholders of the
Seller.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASER
The Purchaser represents and warrants to the Seller as
follows:
Section 2.1 Organization and Qualification. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Purchaser has the requisite corporate power and
authority to (i) own, lease and operate its properties, (ii) carry on its
business as it is now being conducted and (iii) consummate the Transactions. The
Purchaser is duly qualified or licensed and in good standing as a foreign
corporation authorized to do business under the laws of each jurisdiction where
the character of the properties owned, leased or used by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a material adverse effect on the closing of the
Transactions.
Section 2.2 Authority and Absence of Conflict.
(a) The Purchaser has the requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other agreements and instruments to be executed and delivered by the
Purchaser hereunder or in connection herewith and to carry out its obligations
hereunder and thereunder. The execution and delivery by the Purchaser of this
Agreement and the other agreements and instruments to be executed and delivered
by the Purchaser hereunder or in connection herewith and the closing of the
Transactions by the Purchaser have been duly authorized by all requisite
corporate action required on the part of the Purchaser. This Agreement and the
other agreements and instruments to be executed and delivered by the Purchaser
hereunder or in connection herewith have been duly executed or when executed
will be duly executed by the Purchaser and constitute (or upon execution, will
constitute) the valid and legally binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
except insofar as enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws which may affect creditors' rights and remedies
generally and by principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(b) The execution and delivery by the Purchaser of this
Agreement and the other agreements and instruments to be executed and delivered
by the Purchaser hereunder or in connection herewith, the closing of the
Transactions by the Purchaser, and compliance with the provisions hereof and
thereof do not and will not violate, or conflict with, or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) or create an Encumbrance on
the capital stock of the Purchaser including, without limitation, under any of
the terms, conditions or provisions of the Charter, Bylaws, or other similar
organizational documents of the Purchaser.
(c) The execution and delivery by the Purchaser of this
Agreement and the other agreements and instruments to be executed and delivered
by the Purchaser hereunder or in
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connection herewith, the closing of the Transactions by the Purchaser, and
compliance by the Purchaser with the provisions hereof and thereof do not and
will not (i) violate, or conflict with, or result in a breach of any provisions
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of the Purchaser under, any note, bond,
mortgage, indenture, deed of trust, license, agreement, lease, permit, franchise
or other instrument or obligation to which the Purchaser is a party or by which
the Purchaser or any of its properties are bound or affected, or (ii) violate
any Order or Law applicable to the Purchaser or by which any of its properties
is bound or affected.
Section 2.3 Approvals.
(a) Schedule 2.3 hereto contains a list of all Approvals of
Governmental Authorities that are required to be given by or obtained by the
Purchaser in connection with the closing of the Transactions by the Purchaser,
except where the failure to give or to obtain such Approvals, individually or in
the aggregate, would not reasonably be expected to have a material adverse
effect upon the closing of the Transactions.
(b) Schedule 2.3 hereto contains a list of all Approvals that
are required to be given by or obtained by the Purchaser from any and all third
parties in connection with the closing of the Transactions by the Purchaser. The
Purchaser has obtained all Approvals which are required to be given by or
obtained by the Purchaser in connection with the closing of the Transactions
from any and all third parties except where the failure to give or to obtain
such Approvals, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect upon the closing of the Transactions.
Section 2.4 Purchase for Investment. The Purchaser is
purchasing the Company Stock for its own account and with no intention of
distributing or reselling such Company Stock or any part thereof in any
transaction that would be in violation of the securities law of the United
States or any state.
Section 2.5 Access to Information. The Purchaser has had such
access to information regarding the Acquired Entities and Acquired Entities'
officers, and has had an opportunity to ask such questions of the Seller and the
Acquired Entities' officers to enable the Purchaser to make an informed
investment decision with respect to the Transactions.
Section 2.6 Conduct of Business of the Purchaser. The
Purchaser has not engaged in any activities of any nature except in connection
with the Transactions.
Section 2.7 Material Misstatements or Omissions. No
representation, warranty or statement by the Purchaser in this Agreement or in
any Exhibit or Schedule furnished or to be furnished by the Purchaser pursuant
hereto, or in connection with the Transactions, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading. None of
the information furnished or to be furnished by the Purchaser for inclusion or
incorporation by reference in the
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Proxy Statement, at the date of mailing to stockholders and at the time of the
Stockholders' Meeting, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 2.8 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based on arrangements made by or on behalf of the
Purchaser or any of its affiliates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER
The Seller represents and warrants to the Purchaser as
follows:
Section 3.1 Organization and Qualification. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Seller has the requisite corporate power and
authority to (i) own, lease and operate its properties, (ii) carry on its
business as it is now being conducted and (iii) consummate the Transactions. The
Seller is duly qualified or licensed and in good standing as a foreign
corporation authorized to do business under the laws of each jurisdiction where
the character of the properties owned, leased or used by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have a Material Adverse Effect.
Section 3.2 Authority and Absence of Conflict.
(a) The Seller has the requisite power and authority to
execute, deliver and perform its obligations under this Agreement and the other
agreements and instruments to be executed and delivered by the Seller hereunder
or in connection herewith, and to carry out its obligations hereunder and
thereunder. This Agreement and the other agreements and instruments to be
executed and delivered by the Seller hereunder or in connection herewith
constitute (or upon execution, will constitute) the valid and legally binding
obligations of the Seller, enforceable against the Seller in accordance with
their respective terms, except insofar as enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws which may affect
creditors' rights and remedies generally and by principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery by the Seller of this Agreement
and the other agreements and instruments to be executed and delivered by the
Seller hereunder or in connection herewith, the closing of the Transactions by
the Seller, and compliance by Seller with the provisions hereof and thereof do
not and will not (i) violate, or conflict with, or result in a breach of any
provisions of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of
termination, cancellation, modification or acceleration of the performance
required by or a loss of a material benefit under, or result in the creation of
any Encumbrance upon any of the capital stock of an Acquired Entity
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or subsidiary thereof or any other properties or assets of an Acquired Entity or
subsidiary thereof under, any note, bond, mortgage, indenture, deed of trust,
license, agreement, lease, permit, franchise or other instrument or obligation
to which the Seller, an Acquired Entity or subsidiary thereof is a party or by
which its properties are bound or affected, except in any such case (A) for any
such violation, conflict, breach, default, termination, cancellation,
modification, acceleration, loss or creation that would not reasonably be
expected to have a Material Adverse Effect or (B) for the effect of such
execution, delivery, closing and compliance on the Surety Bonds set forth in
Schedule 3.2(b) hereto, or (ii) violate any Order or Law applicable to the
Seller, an Acquired Entity or a subsidiary thereof or by which any of the
properties of the Seller, an Acquired Entity or subsidiary thereof is bound or
affected except as would not reasonably be expected to have a Material Adverse
Effect.
Section 3.3 Ownership of Capital Stock. The Seller is the sole
beneficial and record owner of the Company Stock, free and clear of any
Encumbrances, except for the Xxxxxxxxx Pledge, or preemptive rights. Other than
this Agreement, (i) the Seller is not a party to or bound by any voting trust
agreements, proxies or other contracts or arrangements restricting or relating
to the Company Stock, except for the Xxxxxxxxx Note and the Xxxxxxxxx Pledge;
and (ii) the Seller is not a party to any option, warrant, purchase right or
other contract or commitment that could require the Seller to sell, transfer or
otherwise dispose of any Company Stock, except for the Xxxxxxxxx Note and the
Xxxxxxxxx Pledge.
Section 3.4 Preemptive Right. The Seller does not have, or
hereby waives, any preemptive or other right to acquire additional shares of
Company Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Seller represents and warrants to the Purchaser as
follows:
Section 4.1 Organization and Qualification. Each of the
Acquired Entities and its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, as described on Schedule 4.1 hereto. Each of the Acquired
Entities and its subsidiaries has the requisite corporate power and authority
necessary to (i) own, lease and operate its properties, (ii) carry on its
business as it is now being conducted and (iii) consummate the Transactions.
Each of the Acquired Entities and its subsidiaries is duly qualified or licensed
and in good standing as a foreign corporation authorized to do business under
the laws of each jurisdiction where the character of the properties owned,
leased or used by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not reasonably be expected to have a
Material Adverse Effect.
Section 4.2 Authority and Absence of Conflict.
(a) Each of the Acquired Entities and its subsidiaries has the
requisite corporate power and authority necessary to execute, deliver and
perform its obligations under the
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agreements and instruments to be executed and delivered by it hereunder or in
connection herewith and to carry out its obligations hereunder and thereunder.
The execution and delivery by each of the Acquired Entities and its subsidiaries
of the agreements and instruments to be executed and delivered by it hereunder
or in connection herewith have been duly authorized by all requisite corporate
action required on the part of each such entity. The agreements and instruments
to be executed and delivered by each of the Acquired Entities and its
subsidiaries hereunder or in connection herewith have been duly executed by such
entity and constitute (or upon execution, will constitute) the valid and legally
binding obligations of each such entity enforceable against it in accordance
with their respective terms, except insofar as enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws which may affect
creditors' rights and remedies generally and by principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
(b) The execution and delivery by each of the Acquired
Entities and its subsidiaries of the agreements and instruments to be executed
and delivered by it hereunder or in connection herewith, the closing of the
Transactions and compliance by each of the Acquired Entities and its
subsidiaries with the provisions thereof do not and will not violate, or
conflict with, or result in a breach of any provisions of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default), or create an Encumbrance upon the capital stock of any
such Acquired Entity or subsidiary thereof (other than in connection with the
Transactions), under any of the terms, conditions or provisions of the Charter
or Bylaws of the Acquired Entities and their respective subsidiaries.
(c) The execution and delivery by each of the Acquired
Entities and its subsidiaries of the agreements and instruments to be executed
and delivered hereunder or in connection herewith, the closing of the
Transactions and compliance with the provisions thereof do not and will not (i)
violate, or conflict with, or result in a breach of any provisions of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination,
cancellation, modification or acceleration of the performance required by or a
loss of a material benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of any Acquired Entity or subsidiary
thereof under, any note, bond, mortgage, indenture, deed of trust, lease,
material license, agreement, permit, franchise or other instrument or obligation
to which such entity is a party or by which any of its properties are bound or
affected, except in any such case (A) for any such violation, conflict, breach,
default, termination, cancellation, modification, acceleration, loss or creation
that would not reasonably be expected to have a Material Adverse Effect or (B)
for the effect of such execution, delivery, closing and compliance on the Surety
Bonds [DualStar to review]; or (ii) violate any Order or any Law applicable to
any Acquired Entity or subsidiary thereof or by which any of its properties is
bound or affected except as would not reasonably be expected to have a Material
Adverse Effect.
(d) Except (i) as may be required under the HSR Act and (ii)
for any Consents where the failure to obtain such Consents would not reasonably
be expected to have a Material Adverse Effect, no Consent of or with any court,
Governmental Authority or third Person is required to be obtained by any
Acquired Entity in connection with the execution and delivery of this Agreement
by the Seller or the consummation by the Company of the Transactions.
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Section 4.3 Corporate Records. The corporate records of each
Acquired Entity and subsidiary thereof accurately reflect all material action
taken and authorizations made at meetings of the board of directors or any
committee thereof and at any shareholder meetings of such Acquired Entity or
subsidiary.
Section 4.4 Capital Stock; Subsidiaries.
(a) The authorized capital stock, all of which is validly
issued, fully paid, and non-assessable, the par value per share and the number
of issued and outstanding shares and treasury shares of each of the Acquired
Entities is set forth on Schedule 4.4 hereto.
(b) There are no outstanding options, warrants, agreements,
rights (including without limitation, preemptive rights or rights of conversion
or exchange), contracts, calls, puts, demands, or commitments of any character
relating to any shares of capital stock of or any other equity interest in any
Acquired Entity.
(c) No Acquired Entity has any direct or indirect equity or
ownership interest in any business and owns no subsidiaries other than the
ownership by each of Centrifugal and Mechanical of 50% of the capital stock of
CMA.
Section 4.5 Financial Statements.
(a) Attached as Exhibit A to Schedule 4.5 hereto are true and
correct copies of the Annual Financial Statements. The Annual Financial
Statements have been prepared in accordance with GAAP. The balance sheets
included in the Annual Financial Statements present fairly in all material
respects, in accordance with GAAP, the financial condition of (i) Centrifugal
and Mechanical (collectively, "C/M") and (ii) High Rise, in each case, as of its
date, and the statements of operations included in the Annual Financial
Statements present fairly, in accordance with GAAP, the results of operations of
C/M and High Rise as of the dates of such statements and for the period covered
thereby.
(b) Attached as Exhibit B to Schedule 4.5 hereto are true and
correct copies of the Interim Financial Statements. Such Interim Financial
Statements were prepared in a manner consistent with the Annual Financial
Statements, and fairly present the consolidated results of C/M's operations and
the results of High Rise's operations for the periods indicated, except that
such statements are subject to normal and non-recurring quarterly and year-end
adjustments, as applicable, which were not or are not expected to be material in
amount. The books and records of the C/M and High Rise from which the Annual
Financial Statements and Interim Financial Statements were prepared were
complete and accurate at the time of such preparation.
Section 4.6 Tax Matters.
(a) Except as set forth on Schedule 4.6 hereto, since
[__________]: (i) all Tax Returns required to be filed with any Taxing Authority
on or before the date hereof by or with respect to each of the Acquired Entities
have been duly and timely filed, and each such Tax Return is true, correct and
complete in all material respects; (ii) all Taxes due and payable by any
Acquired Entity, if any, whether or not shown on any Tax Return, have been
timely paid; (iii)
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there are no other Taxes that would be due by any Acquired Entity if asserted by
a Taxing Authority, except with respect to which such Acquired Entity is
maintaining adequate reserves in accordance with GAAP or contesting in good
faith; and (iv) each Acquired Entity duly and timely withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, shareholder or other third
party.
(b) Except as set forth on Schedule 4.6 hereto since
[__________]: (i) no unpaid (or unreserved in accordance with GAAP) deficiencies
for Taxes have been claimed, proposed or assessed by any Taxing Authority with
respect to any Acquired Entity; (ii) there are no pending or threatened audits,
investigations or claims for or relating to any liability in respect of Taxes of
any Acquired Entity; (iii) no Acquired Entity has requested any extension of
time within which to file any currently unfiled Tax Return; (iv) no extension of
a statute of limitations relating to any Taxes or Tax Returns is in effect or
effective with respect to any Acquired Entity; and (v) no Acquired Entity has
entered into any sale leaseback or any leveraged lease transaction.
(c) Except as set forth on Schedule 4.6 hereto: (i) there are
no liens for Taxes (other than for current Taxes not yet due and payable for
which adequate reserves have been made under GAAP) upon the assets of any
Acquired Entity; (ii) there are no private letter rulings in respect of any Tax
pending between any Acquired Entity and any Taxing Authority; (iii) no Acquired
Entity has ever been a member of an affiliated group within the meaning of
Section 1504(a) of the Code or filed or been included in a combined,
consolidated or unitary return of any Person; (iv) no Acquired Entity is
currently under any contractual obligation to indemnify any Person with respect
to Taxes or is a party to any tax sharing agreement or any other agreement
providing for payments by such Acquired Entity with respect to Taxes; (v) no
Acquired Entity will be required, as a result of a change in method of
accounting for (A) any taxable period ending on or before the date hereof or (B)
any taxable period that includes (but does not end on) the date hereof, but only
to the extent of the portion of such period that ends on the date hereof, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of foreign law) in taxable income for any taxable period after the
date hereof; (vi) no Acquired Entity is a party to any agreement, contract,
arrangement or plan that would result after the Closing (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any excess parachute payments within the meaning of Section 280G
of the Code; (vii) Schedule 4.6 hereto lists all income Tax Returns filed by or
on behalf of each Acquired Entity for the taxable periods ended on or after
[_________] and indicates those income Tax Returns that have been audited and
those that currently are the subject of audit; (viii) no Acquired Entity has
made an election nor is any Acquired Entity required to treat any of its assets
as owned by another person within the meaning of Section 168(f) of the Code (or
any corresponding provision of state, local or foreign law); (ix) no Acquired
Entity is a party to any joint venture, partnership or other arrangement or
contract which could be treated as a partnership for federal income tax
purposes; (x) all material elections with respect to Taxes affecting the Company
as of the date hereof are disclosed on the Tax Returns previously delivered to
the Purchaser or on the Annual Financial Statements; (xi) none of the Acquired
Entities are a consenting party within the meaning of Section 341(f) of the Code
(or any corresponding provision of state, local or foreign law); and (xii) with
respect to periods
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commencing on or after the Balance Sheet Date, no Acquired Entity has incurred
any material liability for Taxes (other than in the ordinary course of
business).
Section 4.7 Real Property and Leaseholds. No Acquired Entity
holds any Owned Real Estate or Leased Real Estate except as set forth on
Schedule 4.7. [DualStar to confirm.]
Section 4.8 Title to Assets. Each Acquired Entity and each of
its subsidiaries has good and valid title to all of the material properties and
material assets owned by it reflected in the Annual Financial Statements or
acquired after the Balance Sheet Date (except inventory and other properties
disposed of in the ordinary course of business since the Balance Sheet Date and
accounts or notes receivable paid since the Balance Sheet Date), free and clear
of all Encumbrances, except for Permitted Liens.
Section 4.9 Property, Plant and Equipment. All items of
property, plant and equipment leased or owned by the Acquired Entities and each
of their respective subsidiaries in connection with the operation of its
business as currently conducted are reflected in Exhibit B to Schedule 4.5.
Section 4.10 Accounts Receivable. An accurate list of the
accounts and notes receivable of each of the Acquired Entities and each of their
respective subsidiaries as of December 31, 1999, including all such amounts
which are not reflected in the balance sheet as of the Balance Sheet Date and
including receivables from and advances to employees and the Seller, is
reflected on Exhibit B to Schedule 4.5 hereto.
Section 4.11 Contracts. A correct and accurate list of all
written contracts necessary or material to the conduct of each Acquired Entity's
Business and the business of each subsidiary of an Acquired Entity as presently
conducted is reflected on Exhibit B to Schedule 4.11. To the Seller's knowledge,
all such contracts are in full force and effect and are valid and enforceable
obligations of each such Acquired Entity or subsidiary thereof. No Acquired
Entity or subsidiary thereof has received written notice of any plan or
intention of any other party to any such contract to exercise any right to
cancel or terminate any such contract.
Section 4.12 Compliance with Law. The Business of each
Acquired Entity and each subsidiary thereof is and has been conducted in
compliance in all material respects with and does not violate, and no Acquired
Entity or subsidiary thereof is in conflict with, or in material default or
violation of, any Decrees, Laws or Orders, and, to the Seller's Knowledge,
neither the Seller nor any Acquired Entity or subsidiary thereof has received
any notice from any Governmental Authority alleging any such lack of compliance,
violation, conflict or default.
Section 4.13 Permits and Other Operating Rights. The Company
has made and/or possesses all Company Permits required by applicable Law or
Order or by the property or contract rights of third Persons to be made and/or
possessed by the Company which are material to the conduct of each Acquired
Entity's Business and the business of each subsidiary of such Acquired Entity as
it is now being conducted and are necessary to conduct each such Business or
business upon the consummation of the Transactions (including upon any change of
control of
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the Company, an Acquired Entity or subsidiary thereof) or to permit the
continued occupancy of the Real Property in accordance with its current use.
Each of the Acquired Entities and its subsidiaries is in compliance in all
material respects with the terms of the Company Permits. All Company Permits are
listed in Schedule 4.13 hereto. Except as specifically provided in Schedule 4.13
hereto, to the Seller's knowledge, the consummation of the Transactions will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to an Acquired Entity or subsidiary thereof by, any
such Company Permits or other rights.
Section 4.14 Litigation. The list of Actions pending or, to
the Seller's Knowledge, Claims threatened against or other facts or
circumstances, that could result in any material Claims against an Acquired
Entity or subsidiary thereof or any of its properties or any other entities by
or on behalf of the Company, whether at law, in equity or in any arbitration
proceeding, set forth in Exhibit B to Schedule 4.5 have been reflected in the
Interim Financial Statements in accordance with GAAP.
Section 4.15 ERISA Matters.
(a) Schedule 4.15 identifies each retirement, pension,
savings, bonus, stock purchase, profit sharing, stock option, deferred
compensation, severance or termination pay, insurance, death, medical, hospital,
dental, vision care, drug, sick leave, disability, salary continuation,
vacation, incentive or other compensation plan or arrangement or other employee
benefit (each a "PENSION PLAN") that any Acquired Entity or its subsidiaries
currently maintains or to which such Acquired Entity or subsidiary thereof
currently contributes for the benefit of any of its employees or former
employees (or dependents or beneficiaries thereof) (or as to which the such
Acquired Entity or subsidiary thereof may otherwise have any liability,
including, but not limited to, any pension plan as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
any welfare plan as defined in Section 3(1) of ERISA (a "WELFARE PLAN"), whether
funded, insured or self-funded or whether written or oral (each of the foregoing
contained in this Section 4.15 (a), a "PLAN").
(b) Each Plan has been administered in all material respects
in accordance with its terms. Each Acquired Entity, the subsidiaries thereof and
all Plans are in compliance in all material respects with the applicable
provisions of ERISA, the Code, all other applicable laws and each such Plan
which is intended to meet the requirements of a "qualified plan" under Code ss.
401(a) has been determined by the IRS to be a qualified plan (in form) by the
issuance of a favorable determination letter by the IRS. There is no pending or,
to the knowledge of the Acquired Entities or any of their respective
subsidiaries, threatened legal action, suit or claim relating to the Plans. No
Acquired Entity or subsidiary thereof has engaged in a transaction in connection
with which such Acquired Entity or subsidiary would be subject to either a civil
penalty pursuant to Section 502(i) or ERISA or tax pursuant to Section 4975 of
the Code. No action, suit, proceeding, hearing or investigation with respect to
the administration of the investment of the assets of any such Plan (other than
routine claims for benefits) is pending or threatened. All contributions and
other payments required to be made by any Acquired Entity or subsidiary thereof
to any Plan as of the Closing Date, or with respect to any period ending prior
to the Closing Date, have (or will have) been made, on or prior to the Closing
Date.
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(c) None of the Pension Plans is subject to Title IV of ERISA
or Section 412 of the Code and no Acquired Entity, subsidiary thereof or other
Person that, together with such Acquired Entity or subsidiary, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each such
Person, including such Acquired Entity or subsidiary, a "COMMONLY CONTROLLED
ENTITY"), currently contributes to, or within the last six years had an
obligation to contribute to, a Pension Plan subject to Title IV of ERISA or
Section 412 of the Code.
(d) No Acquired Entity, subsidiary thereof or any Commonly
Controlled Entity is required to contribute to any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) or has withdrawn from any multiemployer
plan where such withdrawal has resulted or would result in any "withdrawal
liability" (within the meaning of Section 4201 of ERISA) or "mass withdrawal
liability" within the meaning of PBGC Regulation 4219.2 that has not been fully
paid.
(e) No Acquired Entity, subsidiary thereof or any Commonly
Controlled Entity maintains or is required to contribute to any plan, fund
(including, without limitation, any superannuation fund) or other similar
program established or maintained outside the United States of America primarily
for the benefit of employees of an Acquired Entity or subsidiary thereof
residing outside the United States of America, which fund or similar program
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code (a "FOREIGN
PENSION PLAN").
(f) No benefits under any Plan set forth in Schedule 4.15
shall become accelerated as a result the transactions contemplated by this
Agreement.
(g) Except as required under Section 4980B of the Code, no
Acquired Entity or subsidiary thereof has an obligation to provide
post-retirement health or life benefits.
(h) Each Plan may be amended or terminated at any time after
the Closing Date without liability to any Acquired Entity or subsidiary thereof.
(i) The Seller has heretofore delivered or made available to
the Purchaser correct and complete copies of each of the following:
(i) Each Plan and all amendments thereto; the trust
instrument and/or insurance contracts, if any, forming a part of such
Plan and all amendments thereto;
(ii) The most recent IRS Form 5500 and all schedules
thereto, if any;
(iii) The most recent determination letter issued by
the IRS regarding the qualified status of each such Pension Plan;
(iv) The most recent accountant's report, if any; and
(v) The most recent summary plan description, if any.
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Section 4.16 Labor and Employment Matters.
(a) Schedule 4.16 hereto includes (i) an accurate list of each
collective bargaining or similar agreement and any work rules or practices
agreed to with any labor organization or employee association applicable to
employees of the Acquired Entities or any of their respective subsidiaries; (ii)
an accurate and complete list of each employment contract to which an Acquired
Entity or a subsidiary thereof is a party or by which it is bound for personal
services or employment which is not terminable on thirty (30) days' (or less)
notice by such Acquired Entity or subsidiary thereof without penalty or
obligation to make payments related to such termination; (iii) an accurate list
of each plan, contract, arrangement or scheme under which fringe benefits
(including, but not limited to, severance benefits, vacation plans or programs,
sick leave plans or programs and related benefits) are afforded to employees of
an Acquired Entity or subsidiary thereof, (iv) except to the extent provided
pursuant to Section 4.16(c) below, an accurate and complete list of each
non-represented employee with his or her name, title, annual compensation and
brief job description. Except as described in Schedule 4.16, no individual will
accrue or receive additional payments, benefits, service or accelerated rights
to payment of benefits as a result of the Transactions (either alone or combined
with any other event or transaction).
(b) Except to the extent set forth in Schedule 4.16 hereto, to
the Knowledge of Seller, (i) there is no labor strike or lockout pending or
affecting any Acquired Entity or subsidiary thereof and since the date of
incorporation of each of the Acquired Entities and each of their respective
subsidiaries, there has not been any such action; (ii) no union claims to
represent the employees of any Acquired Entity or subsidiary thereof; (iii) none
of the employees of an Acquired Entity or subsidiary thereof is represented by
any labor organization and neither the Seller, an Acquired Entity or any
subsidiary thereof has any knowledge of any current union organizing activities
among its employees, nor does any question concerning representation exist
concerning such employees; (iv) each of the Acquired Entities and its
subsidiaries has at all times been in material compliance with all obligations
under the National Labor Relations Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as
amended, the Occupational Safety and Health Act of 1970, as amended, and all
other federal, state and local labor or labor related laws applicable to persons
employed in connection with the Company, including, without limitation, those
laws, rules and regulations relating to wages, hours, health and safety, payment
of Social Security withholding and other taxes, maintenance of workers' payment
of Social Security withholding and other taxes, maintenance of workers'
compensation insurance, labor and employment relations and employment
discrimination, and is not engaged in any unfair labor practices as defined in
the National Labor Relations Act or other applicable law, ordinance or
regulation; (v) there is no unfair labor practice charge or complaint against
any Acquired Entity or subsidiary thereof pending or threatened before the
National Labor Relations Board or any similar state or foreign agency; (vi)
there is no grievance arising out of any collective bargaining agreement or
other grievance procedure; (vii) there is no charge with respect to or relating
to any Acquired Entity or subsidiary thereof pending before the Equal Employment
Opportunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (viii) no Acquired Entity or subsidiary thereof
has received notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws, including, but not
limited
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to, health and safety laws, to conduct an investigation with respect to or
relating to such Acquired Entity or subsidiary thereof and no such investigation
is in progress nor has any such investigation been conducted during the last
five years; (ix) there are no complaints, lawsuits or other proceedings pending
or threatened in any forum by or on behalf of any present or former employee of
any Acquired Entity or subsidiary thereof, any applicant for employment or
classes of the foregoing alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship; (x) since the enactment of the WARN Act, no
Acquired Entity or subsidiary thereof has effectuated (A) a plant closing (as
defined in the WARN Act) affecting any site of employment or one or more
facilities or operating units within any site of employment or facility of such
Acquired Entity or subsidiary; or (B) a mass layoff (as defined in the WARN Act)
affecting any of its sites of employment or facilities; nor has any Acquired
Entity or subsidiary thereof been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application
of any similar state, local or foreign law or regulation; (xi) none of the
employees of an Acquired Entity or subsidiary thereof has suffered an employment
loss (as defined in the WARN Act) during the 180-day period prior to the date of
this Agreement; (xii) each facility or location of each of the Acquired Entities
and each subsidiary thereof has been operated as a single site of employment (as
defined in the WARN Act) at all times since the enactment of the WARN Act; and
(xiii) none of the Acquired Entities, their respective subsidiaries or any other
party to any contract, agreement, plan, arrangement, scheme or written policy,
rules or procedures set forth in Schedule 4.16 hereto is in default of with
respect to any material term or condition thereof, nor has any event occurred
which through the passage of time or the giving of notice, or both, would
constitute such a default thereunder.
(c) Schedule 4.16 hereto sets forth an accurate and complete
list of all officers, directors and key employees the Acquired Entities and
their subsidiaries, listing all employment agreements with such officers,
directors and key employees and the rate of compensation (and the portions
thereof attributable to salary, bonus and other compensation, respectively) of
each of such persons as of (i) the Balance Sheet Date and (ii) the date hereof.
No Acquired Entity or subsidiary thereof has any employment agreements except
for the persons listed on Schedule 4.16 hereto.
Section 4.17 Insurance Coverage. Schedule 4.17 hereto sets
forth (i) the third party insurance policies of the Acquired Entities and their
respective subsidiaries, including but not limited to policies relating to fire
and casualty, general liability, title, business interruption, product
liability, sprinkler and water damage, business automobile, workers compensation
and employers liability, employee dishonesty and crime, boiler and machinery,
domestic and international cargo/transit, umbrella liability, employee benefits
liability, employment practices liability, fiduciary liability, directors' and
officers' liability (including company reimbursement coverages), errors and
omissions liability, and any and all "wrap-up" policies relating to any kind of
liability, and (ii) any agreements pursuant to which an Acquired Entity or
subsidiary thereof is a named insured on policies of third parties covering
product liability claims against such Acquired Entity or subsidiary. All
material insurance policies with respect to the property, assets, operations and
business of each Acquired Entity and subsidiary thereof are in full force and
effect and have not been cancelled. There has been no period since January 1,
1996 when
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any Acquired Entity or subsidiary thereof has had a lapse of insurance coverage
related to the matters set forth in clause (i) of the first sentence of this
Section 4.17. There are no pending, or, to the Knowledge of the Seller,
threatened Claims listed therein with respect to which the insurance carrier has
denied coverage or has advised an Acquired Entity or subsidiary thereof that it
is defending such claim under reservation of rights which are not reflected in
Exhibit B to Schedule 4.5.
Section 4.18 Conduct of Business. Except as otherwise
permitted or contemplated by this Agreement, since the date of the Interim
Financial Statements, each Acquired Entity and its subsidiaries has conducted
its Business (or business, as applicable) in the ordinary course consistent with
past practice or otherwise properly related to the conduct of its Business (or
business, as applicable), and there has not been any of the following which
individually or in the aggregate would, except if otherwise indicated, result in
liabilities or payments by the Acquired Entities and their respective
subsidiaries in an amount equal to or greater than $150,000 in the aggregate:
(a) material adverse change in the condition (financial or
otherwise), results of operations, assets, works-in-progress, liabilities, or
business of the Acquired Entities and their respective subsidiaries taken as a
whole;
(b) sale, assignment, disposition, transfer, pledge, mortgage
or lease of any asset of an Acquired Entity or subsidiary thereof (other than in
the ordinary course of business and consistent with past practice);
(c) increase in the compensation or fringe benefits payable or
to become payable by an Acquired Entity or subsidiary thereof, or any other form
of payment, including without limitation loans, to any of its directors,
officers or salaried employees, other than routine increases made in the
ordinary course of business and consistent with past practice;
(d) change by an Acquired Entity or subsidiary thereof in its
accounting principles, methods or practices (including, without limitation, any
change in depreciation or amortization policies or rates or any change in the
policies pertaining to the recognition of revenue or the discharge of accounts
payable or accounting for inventories, but excluding any changes required by
applicable accounting pronouncements);
(e) damage, destruction or loss with respect to any of the
properties or assets of the Acquired Entities and their respective subsidiaries
whether or not covered by insurance, individually or in the aggregate, in excess
of $[10,000], net of third party insurance;
(f) declaration or payment by an Acquired Entity or subsidiary
thereof of any dividend or distribution of any assets of any kind whatsoever to
any of its shareholders, including without limitation, distributions in
redemption of or as the purchase price for any capital stock or equity interest,
or in discharge or cancellation, in whole or in part, of any Indebtedness,
whether in payment of principal, interest or otherwise, except as otherwise
contemplated in this Agreement;
- 24 -
(g) written or other binding commitment by an Acquired Entity
or subsidiary thereof to make capital expenditures for additions to property,
plant or equipment in an amount in excess of $[150,000] in the aggregate (in
respect of the Company);
(h) notice from any material supplier or customer of an
Acquired Entity or subsidiary thereof that it will cease doing business with
such Acquired Entity or subsidiary;
(i) issuance, sale or disposition of any capital stock or
other equity interest in an Acquired Entity or subsidiary thereof or any
options, warrants or other rights to purchase any such capital stock or equity
interest or any securities convertible into or exchangeable for such capital
stock or equity interest or other change in the issued and outstanding
capitalization of such Acquired Entity or subsidiary;
(j) incurrence or assumption of, or subjection to, whether
directly or by way of guarantee or otherwise, any Indebtedness or other
Liability, including purchase money indebtedness in excess of $150,000 in the
aggregate, except trade or business obligations or Liabilities incurred in the
ordinary course of business consistent with past practice;
(k) materially adverse changes to the business organization of
an Acquired Entity or subsidiary thereof, the goodwill toward an Acquired Entity
or subsidiary thereof of suppliers, customers, independent contractors,
employees and others with whom business relationships exist, and the
availability of the services of the present officers and the services of those
employed by an Acquired Entity or subsidiary thereof;
(l) subjection of any of the assets of an Acquired Entity or
subsidiary thereof to any additional Encumbrance (other than Permitted Liens);
(m) resignation of any officer or salaried key employee of an
Acquired Entity or subsidiary thereof; or
(n) agreement by an Acquired Entity or subsidiary thereof
involving any of the foregoing.
Section 4.19 Certain Transactions. Except as reflected in
Exhibit B to Schedule 4.5 hereto, neither the Seller nor any of the past or
present officers or directors of any Acquired Entity is presently a party to any
transaction with an Acquired Entity (other than for services as employees,
officers and directors), including without limitation any contract, agreement or
other arrangement (i) providing for the furnishing of services to or by, (ii)
providing for the rental of real or personal property to or from, or (iii)
otherwise requiring payments to or from, in each case, the Seller or any such
officer or director, any member of the family of the Seller or any such officer
or director or any corporation, partnership, trust or other entity in which the
Seller or any such officer or director has a substantial interest or is an
officer, director, trustee or partner.
Section 4.20 Liabilities and Obligations. Except as disclosed
in the balance sheet of each Acquired Entity as of the Balance Sheet Date
previously furnished the Purchaser, there are no Liabilities, whether absolute,
accrued, contingent or otherwise, of an Acquired
- 25 -
Entity, that would be required to be reflected on, or reserved against, in a
consolidated balance sheet of the Company in accordance with GAAP, except for
(i) liabilities which, singly or in the aggregate, are immaterial in amount or
nature, and (ii) liabilities incurred subsequent to the date of such financial
statement by an Acquired Entity in the ordinary course of business consistent
with past practice.
Section 4.21 Intentionally Omitted.
Section 4.22 Brokers. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the Seller
or any Acquired Entity.
Section 4.23 Absence of Certain Payments. To the best
Knowledge of the Seller, no Acquired Entity nor any of its affiliates, officers,
directors, employees or agents or other people acting on behalf of any of them
has (i) engaged in any activity prohibited by the United States Foreign Corrupt
Practices Act of 1977 or any other similar law, regulation, decree, directive or
order of any other country and (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
To the best Knowledge of the Seller, no Acquired Entity nor any of its
affiliates, directors, officers, employees or agents or other persons acting on
behalf of any of them has accepted or received any unlawful contributions,
payments, gifts or expenditures.
Section 4.24 No Outstanding Indebtedness. No Acquired Entity
has any outstanding Indebtedness, except as set forth in Exhibit B to Schedule
4.5 hereto.
Section 4.25 Significant Customers. An accurate and complete
list of all customers (persons or entities) representing 10% or more of annual
revenues of either High Rise or CMA for any period covered by any of the Annual
Financial Statements and the Interim Financial Statements is reflected on
Exhibit B to Schedule 4.5 hereto.
Section 4.26 Bank Accounts. Schedule 4.26 hereto sets forth a
complete and accurate list of each bank account, including the account number,
name and address of the bank where such account is maintained, that is in the
name of an Acquired Entity or any of their respective subsidiaries or is used in
the operation of such Acquired Entity's Business.
Section 4.27 Material Adverse Effect. Since the Balance Sheet
Date, no Material Adverse Effect has occurred or is continuing.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO CLOSING; OTHER COVENANTS
Section 5.1 Conduct of Business of the Company Pending the
Closing. Except as contemplated by this Agreement, the Seller shall cause the
Acquired Entities and their respective subsidiaries to, during the period from
the date of this Agreement to the Closing Date, (i) act and carry on their
respective businesses in the ordinary course of business and, to the
- 26 -
extent consistent therewith, use reasonable efforts, to preserve intact their
current business organizations, keep available the services of their current key
officers and employees and preserve the goodwill of those engaged in material
business relationships with them, (ii) maintain and keep their properties and
equipment in good repair, working order and condition, consistent with current
condition, except for ordinary wear and tear, (iii) use their reasonable best
efforts to keep in full force and effect insurance comparable in amount and
scope of coverage to that now maintained by each of them, and (iv) perform in
all material respects all of its obligations under all contracts and commitments
applicable to its business or properties (subject to each Acquired Entity's
right to enter into comparable substitute arrangements, consistent with past
practice, on terms generally no less favorable to it than those in effect on the
date hereof). Without limiting the generality of the foregoing, the Seller shall
use its reasonable best efforts to cause the Acquired Entities and their
respective subsidiaries during the period from the date of this Agreement to the
Closing Date, except as expressly contemplated by this Agreement, not to take
any of the following actions without the prior written consent of the Purchaser:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its outstanding capital stock
(other than cash dividends by a wholly-owned subsidiary of an Acquired Entity to
an Acquired Entity), (ii) split, combine or reclassify any of its outstanding
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 outstanding capital
stock (except to increase the authorized number of shares of Seller Common Stock
from 25,000,000 to 50,000,000) or (iii) purchase, redeem or otherwise acquire
any outstanding capital stock of such Acquired Entity or any of its
subsidiaries, or any rights, warrants or options to acquire any such capital
stock;
(b) authorize for issuance, issue, deliver, sell or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber any shares of its capital stock, or any securities
convertible, exchangeable or exercisable into, or any rights, warrants or
options to acquire, any such capital stock, or other equity equivalents
(including without limitation stock appreciation rights);
(c) (i) increase or accelerate the compensation or fringe
benefits of any of its directors, officers or employees, except for increases in
salary or wages of employees of the Acquired Entities or their respective
subsidiaries in the ordinary course of business in accordance with past
practice, (ii) grant any severance or termination pay not currently required to
be paid on the date hereof, (iii) enter into any employment agreement with any
present or former director or officer or senior employee, or, other than in the
ordinary course of business consistent with past practice and terminable without
severance or other termination payment on 30 days' notice or less, any other
employee of any Acquired Entity or any of its subsidiaries, or (iv) establish,
adopt, enter into or amend or terminate any plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or
employees of any Acquired Entity or its subsidiaries;
(d) amend its Charter (except to increase the authorized
number of shares of Seller Common Stock from 25,000,000 to 50,000,000), Bylaws
or other comparable charter or
- 27 -
organizational documents or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the entity structure or ownership of any
of the Acquired Entities or their respective subsidiaries;
(e) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the stock, assets
or properties of (including through the exercise of any right of first refusal
or the exercise of any option to purchase or convert), or by any other manner,
any business or any corporation, partnership, joint venture, association or
other business organization or division thereof, or (ii) any material assets or
properties, except in the ordinary course of business consistent with past
practice;
(f) sell or otherwise dispose of any of its properties or
assets, except in the ordinary course of business for cash consideration equal
to fair market value at the time of such sale or other disposition as determined
by the board of directors of such Acquired Entity in good faith;
(g) lease, license, mortgage or otherwise encumber any of its
properties or assets, except in the ordinary course of business consistent with
past practice;
(h) amend, supplement or modify any material contract, except
in the ordinary course of business, or relinquish, forgive or cancel any
material debt or claim or waive any rights of material value;
(i) make any capital expenditure or commitment to make any
such expenditure or defer making any budgeted capital expenditure, except in the
ordinary course of business consistent with past practice;
(j) incur, prepay, or commit to incur any indebtedness for
borrowed money or guarantee any such indebtedness of another Person (other than
guarantees by an Acquired Entity in favor of the Purchaser or Affiliates of the
Purchaser, CMA, or any of its wholly-owned subsidiaries or by any of its
subsidiaries in favor of the Purchaser, Affiliates of the Purchaser, or an
Acquired Entity) in excess of $100,000 in the aggregate, except in the ordinary
course of business consistent with past practice;
(k) issue or sell any debt securities or warrants or other
rights to acquire any debt securities of an Acquired Entity or any of their
respective subsidiaries, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing, except in the ordinary course of business consistent with past
practice;
(l) change any accounting principle, method or practice used
by it or any change in the classification of assets, recognition of income or
expenses or the depreciation or amortization policies or rates theretofore
applied, unless required by the SEC or the FASB;
(m) make any material Tax election or settle or compromise any
income Tax liability in excess of $150,000 in the aggregate or defer the payment
of any material Taxes that come due;
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(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
To the extent any of the Acquired Entities or any of their
respective subsidiaries has done anything in contravention of the acts required
or proscribed, as applicable, in this Section 5.1 without the prior written
consent of the Purchaser, the Seller will promptly inform the Purchaser, by
telephone (with confirmation of details in writing) of such action in
contravention.
Section 5.2 Conduct of Business of the Purchaser. The
Purchaser has not engaged, and during the period from the date of this Agreement
to the Closing Date, the Purchaser shall not engage, in any activities of any
nature except as provided in, or in connection with the Transactions.
Section 5.3 Preparation of Proxy Statement. The Seller shall
promptly (and in any event within 30 days from the date hereof) file or cause to
be filed with the SEC a preliminary Proxy Statement relating to the
Transactions. In connection therewith, the Purchaser will fully cooperate with
the Seller and its counsel in the preparation by the Seller of the Proxy
Statement and in obtaining the stockholder approvals sought thereunder. The
Seller shall respond as promptly as practicable to any comments of the SEC on
the preliminary Proxy Statement, and cause the Proxy Statement, and any
amendment or supplement thereto, to be mailed to the Seller's stockholders at
the earliest practicable time. The Seller will notify Purchaser as promptly as
practicable of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Purchaser with copies of
all correspondence between the Seller or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Transactions. If at any time prior to the Closing Date any
event shall occur which should be set forth in an amendment of, or a supplement
to, the Proxy Statement, the Seller will promptly advise Purchaser, such an
amendment or supplement to be mailed to the Seller's stockholders within five
business days after the same is cleared by the SEC (or as promptly as
practicable thereafter). The Seller and Purchaser each agree to correct any
information provided by such party for use in the Proxy Statement which shall
have become false or misleading. Prior to the filing or distribution of the
Proxy Statement and any amendments or supplements thereto, Purchaser and its
counsel shall be given an opportunity to review and comment upon such documents.
- 29 -
Section 5.4 Access to Information; Confidentiality.
(a) From the date hereof to the Closing Date, the Seller
shall, and shall cause its subsidiaries to, afford the officers, employees,
auditors and other agents of the Purchaser, full and free access at all
reasonable times to its officers, employees, properties, offices, plants and
other facilities and to its contracts, commitments, books and records, and shall
furnish the Purchaser and such other Persons all such documents and such
financial, operating and other data and information regarding the Seller and its
subsidiaries as the Purchaser, through its officers, employees or agents may
from time to time reasonably request in order to conduct such due diligence
review of the Company and its subsidiaries and their business, assets or
properties as Purchaser shall determine to be necessary or appropriate. Without
limiting the foregoing, from time to time, at the request of Purchaser, the
Seller will cause the officers of the Acquired Entities and CMA to keep the
officers of the Purchaser informed as to the affairs of such entities and to
arrange for meetings with the management of each such entity from time to time
upon the Purchaser's request.
(b) The Purchaser will hold, and will cause its Affiliates and
the directors, officers, employees, agents, advisors (including attorneys,
accountants and financial advisors of the Purchaser and its Affiliates), or
representatives of such agents, advisors, to hold in confidence, all documents
and information concerning the Seller and its subsidiaries and any other Person
in which any of the Seller's subsidiaries has an ownership interest furnished to
any such Person in connection with the Transactions.
Section 5.5 No Solicitation.
(a) The Seller shall not, nor shall the Seller authorize or
permit any of its subsidiaries to, nor shall it authorize or permit any of their
respective officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by them to,
solicit or initiate, or encourage, or take any other action to facilitate or
encourage (including by way of furnishing any information or having discussions
concerning the business, properties or assets of the Acquired Entities or any of
their respective subsidiaries), the submission of inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Takeover Proposal, or enter into or maintain or continue discussions or
negotiate with any Person in furtherance of such inquiries or to obtain a
Takeover Proposal; provided, however, that the foregoing shall not prohibit the
Seller and its advisors, following receipt of an unsolicited Takeover Proposal,
to provide information to the Person making such Takeover Proposal and
participate in discussions or negotiations concerning such Takeover Proposal
following delivery of the notice required by Section 5.5(c) regarding such
Takeover Proposal, in each case to the extent the Board of Directors shall have
concluded in good faith that such action is required for the Board of Directors
to comply with its fiduciary duties under applicable law.
(b) Neither the Board of Directors nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Purchaser, the approval or recommendation by the Board of Directors
or any such committee of this Agreement or the Transactions, (ii) approve or
recommend, or propose to approve or recommend, any
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Takeover Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, in the event the Board of Directors
receives a Takeover Proposal that, in the exercise of its fiduciary obligations
(as determined in good faith by the Board of Directors), it determines to be a
Superior Proposal, the Board of Directors may (subject to the following
sentences) withdraw or modify its approval or recommendation of this Agreement
or the Transactions, approve or recommend any such Superior Proposal, enter into
an agreement with respect to such Superior Proposal or terminate this Agreement,
in each case at any time after the second business day following Purchaser's
receipt of written notice (a "NOTICE OF SUPERIOR PROPOSAL") advising Purchaser
that the Board of Directors has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal. The Board of Directors may also withdraw
or modify its approval or recommendation of this Agreement or the Transactions
and terminate this Agreement if Xxxxxx & Co.'s fairness opinion shall have been
withdrawn. In the event that the Seller shall enter into any agreement relating
to a Takeover Proposal, such agreement shall provide for the payment to the
Purchaser of the Termination Fee, upon the consummation of the transaction
contemplated by the Superior Proposal. This Section 4.5 shall not prohibit
accurate disclosure by the Seller in any document that is required to be filed
with the SEC.
(c) In addition to the obligations of the Seller set forth in
paragraph (b), the Seller shall promptly advise Purchaser orally and in writing
of any Takeover Proposal, or any inquiry with respect to or which could lead to
any Takeover Proposal, the material terms and conditions of such Takeover
Proposal or inquiry, and the identity of the person making any such Takeover
Proposal or inquiry. The Seller will keep the Purchaser reasonably informed of
the status and details of any such request, Takeover Proposal or inquiry.
(d) Notwithstanding anything contained in this Agreement to
the contrary, actions by the Board of Directors that are taken in accordance
with this Section 5.5 shall not constitute a breach of this Agreement by the
Seller.
Section 5.6 Directors' and Officers' Indemnification and
Insurance. On or prior to the Closing Date, the Bylaws of the Purchaser and the
Acquired Entities shall contain provisions no less favorable with respect to
indemnification than are currently set forth in the Bylaws of the Acquired
Entities, which provisions shall not be amended, repealed or otherwise modified
for a period of six years from the Closing Date in any manner that would
adversely affect the rights thereunder of individuals who at the Closing Date
were current or former directors, officers, agents, or employees of the Acquired
Entities or otherwise entitled to indemnification pursuant to the Bylaws of the
Seller or one of its subsidiaries.
Section 5.7 Further Action; Best Efforts. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable best efforts to take, or cause to be taken, all appropriate action,
and to do or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to facilitate to satisfaction and make effective
each condition to the consummation of the Transactions, including but not
limited to (i) cooperating in the preparation and filing of the Proxy Statement,
any required filings under the HSR Act, and any amendments to any thereof, (ii)
using its reasonable best efforts to make all required regulatory filings and
applications and to obtain all licenses and permits, consents,
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waivers of rights of first refusal and similar rights, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with any Acquired Entity or its subsidiaries as are
necessary for the consummation of the Transactions, or to permit such licenses
and permits, consents, waivers of rights of first refusal and similar rights,
approvals, authorizations, qualifications, orders and contracts to continue in
effect without modification after the Closing Date and (iii) subject to its
contractual obligations hereunder and the other terms and conditions of this
Agreement, using its reasonable best efforts to cause each of its
representations and warranties set forth herein to be true, correct and complete
in all material respects on the Closing Date as if made on such date. In
addition, the Seller shall cause senior management of the Company and its
subsidiaries to cooperate in good faith with representatives of the Purchaser in
identifying transition issues and formulating plans and strategies to address
any such issues.
Section 5.8 Public Announcements. The Seller and the Purchaser
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the Transactions, shall provide
each other the opportunity to review and comment upon, any such press release or
public statement, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
any listing agreement with any securities exchange on which the Seller's
securities are listed.
Section 5.9 Transactional Costs. Except as specifically
provided in this Section 15.3, each Party shall be responsible for all of its
Transactional Costs. The Parties shall promptly pay and discharge such
Transactional Costs and each Party shall promptly reimburse any other Party for
any amounts which such other Party may have expended on its behalf in the
payment of such Transactional Costs.
Section 5.10 Repayment of Company Indebtedness. The Purchaser
shall pay off or otherwise refinance, at the time of Closing, all Indebtedness
listed on Exhibit B to Schedule 4.5 hereto.
Section 5.11 Board of Directors and Officers of the Company.
The Purchaser agrees that so long as the Purchaser Note remains outstanding, (i)
Xx. Xxxxxxx Xxxxx shall remain a member of the board of directors of the
Purchaser and (ii) the Purchaser shall provide to Xx. Xxxxx director and officer
liability insurance protection with an aggregate limitation on liability of no
less than $____ million and having customary terms, provisions, conditions and
exclusions.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
Section 6.1 Conditions to the Obligations of Each Party to
Consummate the Transactions. The respective obligations of each Party to
consummate the Transactions shall be subject to the satisfaction at or prior to
the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Transactions
shall have been adopted by the affirmative vote of the holders of a majority of
the outstanding shares of Seller Common Stock entitled to vote thereon.
(b) Other Approvals. All Consents, Approvals, authorizations
or permits of, actions by, or filings with or notifications to, and all
expiration of waiting periods imposed by, any Governmental Authority shall have
been filed, occurred or been obtained and shall be in full force and effect.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Transactions shall be in effect, no action or
proceeding shall have been commenced by any Governmental Authority seeking any
injunction, restraining order or other order which seeks to prohibit
consummation of the Transactions, and no action or proceeding shall have been
commenced by any Governmental Authority seeking material damages in connection
with the Transactions shall be pending; provided, however, that the parties
invoking this condition shall use reasonable efforts to have any such action,
proceeding, order or injunction vacated. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Transactions, which makes the consummation of the Transactions
illegal.
(d) Opinion of Financial Advisor. The opinion of [Xxxxxx &
Co.] addressed to the Board of Directors (the "FAIRNESS OPINION"), to the effect
that the consideration to be received in the Acquisition by the Seller is fair
to the Seller's stockholders, shall not have been withdrawn.
(e) Investment by Blackacre in Seller. All conditions
precedent to the transactions contemplated by the letter of intent (the "LETTER
OF INTENT"), dated as of December 21, 1999, among the Seller, Blackacre Capital
Management, L.L.C. and certain of its affiliates (collectively, "BLACKACRE")
under which Blackacre would invest approximately $46.2 million in the Company,
shall have been satisfied. [To be revised to reflect definitive documentation.]
(f) Ancillary Agreements. The Ancillary Agreements shall have
been executed by all parties thereto on terms and conditions satisfactory to the
Purchaser, to consummate the Transactions.
Section 6.2 Conditions to Obligations of Purchaser. The
obligation of the Purchaser to consummate the Transactions is further subject to
the satisfaction of the following conditions prior to the Closing Date unless
waived by the Purchaser:
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(a) Representations and Warranties. (i) The representations
and warranties of the Seller set forth in Article IV of this Agreement shall be
true, correct and complete in all material respects as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except in each case (x) that those representations and warranties which
address matters only as of a particular date shall remain true, correct and
complete in all material respects as of that date and (y) as otherwise
contemplated by this Agreement, and (ii) the Purchaser shall have received a
certificate signed on behalf of the Seller by the chief executive officer and
the chief financial officer of the Seller to such effect.
(b) Performance of Obligations of the Seller. The Seller shall
have performed in all material respects all material obligations, required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Purchaser shall have received a certificate signed on behalf of the Seller by
the chief executive officer and the chief financial officer of the Seller to
such effect.
(c) Xxxxxxxxx Pledge. On the Closing Date, Seller shall use
the proceeds of the [Blackacre Investment] to repay to Xxxxxxxxx L.L.C. the
Xxxxxxxxx Note.
(d) Closing Deliveries.
(i) The Purchaser shall have received the favorable
opinion of Company Counsel, dated the Closing Date, addressed to the Purchaser
substantially in the form attached as Exhibit __.
(ii) The Purchaser shall receive the stock
certificates representing the Company Stock, as set forth in Section 1.2 hereof,
and evidence, satisfactory to the Purchaser, of the cancellation of the
Xxxxxxxxx Pledge.
(iii) Any directors of the Acquired Entities, other
than those identified on Schedule 5.5, shall have resigned as directors of such
Acquired Entities and the directors listed on Schedule 5.5 shall appoint the
persons on Schedule 5.5 to fill the vacancies of the board of directors of the
Acquired Entities in accordance with the Charter and Bylaws of each such
Acquired Entity.
(iv) The Company shall have entered into Employment
Agreements with [executives], which shall be for a term of employment lasting at
least 2 years, in the form attached hereto as Exhibit ______.
(v) The Purchaser shall have received a copy of a
certificate of the Secretary of State of the jurisdiction of incorporation of
each of the Acquired Entities, dated reasonably near the Closing Date, in each
case listing the charter of each of the Acquired Entities and each amendment
thereto on file in his office and certifying that (w) such charter is a true and
correct copy thereof, (x) such amendments are the only amendments to such
charter on file in his office, (y) such Acquired Entity has paid all franchise
taxes to the date of such certificate and (z) such Acquired Entity is duly
incorporated and in good standing under the laws of the State of its
jurisdiction of incorporation.
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(vi) The Purchaser shall have received a certificate
of each Acquired Entity, signed on behalf of such Acquired Entity by its
President and its Secretary, dated the Closing Date, certifying as to (x) the
absence of any amendments to the Charter of such Acquired Entity since the date
of the Secretary of State's certificate referred to in Subsection (v) of this
Section 6.2(d), (y) a true and correct copy of the Bylaws of such Acquired
Entity as in effect on the date on which the resolutions authorizing the
transaction were adopted and on the Closing Date and (z) the due incorporation
and good standing or valid existence of such Acquired Entity as a corporation
organized under the Laws of the jurisdiction of its incorporation and the
absence of any proceeding for the dissolution or liquidation of such Acquired
Entity.
(vii) None of the supplements to the Disclosure
Schedule contemplated by Section 8.5 shall, in the good faith judgment of
Purchaser, contain any disclosure that reflects a material adverse change in the
results of operations, business, financial condition, liabilities or prospects
of the Acquired Entities considered as a whole.
Section 6.3 Conditions to the Obligations of the Seller. The
obligation of the Seller to consummate the Transactions is subject to the
satisfaction of the following unless waived by the Seller:
(a) Representations and Warranties. The representations and
warranties of the Purchaser set forth in this Agreement shall be true, correct
and complete in all material respects as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and the Seller shall have
received a certificate signed on behalf of the Purchaser by the President of the
Purchaser to such effect.
(b) Performance of Obligations of the Purchaser. The Purchaser
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Seller shall have received a certificate signed on behalf of the Purchaser by
the President of the Purchaser to such effect.
(c) Surety Bonds. The Purchaser shall have obtained and shall
have delivered to the Seller (i) releases for the Seller from all surety bonds
issued to the Acquired Entities or (ii) new surety bonds in substitution of any
and all surety bonds issued to the Acquired Entities at its sole cost and
expense.
(d) Closing Deliveries.
(i) The Seller shall have received the favorable
opinion of Purchaser's Counsel, dated the Closing Date, addressed to the Seller,
substantially in the form attached as Exhibit __.
(ii) The Seller and the Company shall have received a
copy of resolutions adopted by the board of directors of the Purchaser
authorizing the Transactions, reasonably acceptable to Company Counsel,
certified by an authorized officer of the Purchaser.
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(iii) The Seller shall have received from the
Purchaser the Purchase Price.
(iv) The Company shall have received from the Seller
a receipt acknowledging satisfaction and discharge of the Intercompany
Indebtedness.
(v) The Seller shall have received from the Purchaser
a receipt acknowledging satisfaction and discharge of all Indebtedness listed on
Exhibit B to Schedule 4.5 hereto.
ARTICLE VII
TAX MATTERS
Section 7.1 Tax Return Filings; Payment of Taxes;
Indemnification.
(a) The Acquired Entities shall (i) prepare and file, or cause
to be prepared and filed, on a timely basis, all Tax Returns of the Acquired
Entities for all Pre-Closing Periods and such Tax Returns shall be provided for
the Purchaser's prior approval at least 15 days prior to the date on which such
Tax Returns are due to be filed, which approval shall not be unreasonably
withheld or delayed, and (ii) without derogation of Section 7.9 below, pay, or
cause to be paid, all Taxes shown to be due on such Pre-Closing Period Tax
Returns. To the extent any Tax Return prepared by the Seller pursuant to the
preceding sentence is required to be filed by any Acquired Entity, the Seller
shall deliver such return to such Acquired Entity no later than ten (10)
business days prior to the date such return is due and shall cause such Acquired
Entity to file such return on a timely basis. If the Purchaser disputes any
portion of any Tax Return provided to the Purchaser for approval, the provisions
of the last three sentences (other than a provision for payment) of Section
7.1(c) shall apply, with such changes as may be appropriate within the context
of this Section 7.1(a). Notwithstanding anything in this Agreement to the
contrary, the Seller shall pay, without derogation of Section 7.8 below, and
shall indemnify the Purchaser and its affiliates and hold them harmless from and
against any liability for Taxes imposed on the Acquired Entities for all
Pre-Closing Periods, including, without limitation, (w) all Taxes attributable
to the Transactions, (x) all Taxes, if any, imposed on the Acquired Entities
pursuant to Treasury Regulation Section 1.1502-6 or any similar provision of
state, local or foreign law as a result of any Acquired Entity being a member of
any Relevant Group, and (y) all liability for Taxes resulting from a 338(h)(10)
Election, as contemplated by Section 7.7 hereof. Each of the Company, the
Purchaser and the Seller shall comply with the tax reporting requirements of
Section 1.351-3 of the Code subject to gain, if any, recognized on the receipt
of cash or other property under Section 351(b) of the Code.
(b) Subject to paragraph (c) below, the Purchaser shall
prepare and file, or cause to be prepared and filed, on a timely basis all Tax
Returns of or which include the Company for all taxable periods other than a Tax
Return for a Pre-Closing Period due to be filed on or prior to the Closing and
shall pay or cause to be paid all Taxes shown to be due on such Tax Returns.
Subject to paragraph (c) below and Section 7.6 of this Agreement, the Purchaser
shall pay, and shall indemnify the Seller and its affiliates and hold them
harmless from and
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against any liability for Taxes of the Company for all taxable periods other
than a Pre-Closing Period.
(c) For purposes of this Section 7.1, if, for federal, state,
local or foreign Tax purposes, the taxable period of any of the Acquired
Entities that includes the Closing Date does not terminate on the Closing Date
("STRADDLE PERIOD"), the parties hereto will, to the extent permitted by
applicable law, elect with the relevant Governmental Authority to treat a
portion of any such Straddle Period as a short taxable period ending on the
Closing Date and such short taxable period shall be treated as a Pre-Closing
Period for purposes of this Agreement. In any case where applicable law does not
permit such an election to be made then, for purposes of this Agreement, Taxes
with respect to any of the Acquired Entities for the Straddle Period shall be
allocated to the Pre-Closing Period using an interim-closing-of-the-books
method, except that (i) exemptions, allowances or deductions that are calculated
on an annual basis shall be apportioned on a per diem basis and (ii) real
property Taxes shall be allocated in accordance with Section 164(d) of the Code.
In the case of any Straddle Period described in the preceding sentence, the
Purchaser shall prepare and shall provide the Seller with copies of the
completed Tax Returns for such period at least fifteen (15) business days before
the due date thereof (giving effect to any extensions thereto), accompanied by a
statement calculating in reasonable detail the amount of Taxes shown on such Tax
Return that are chargeable to the Seller pursuant to this Section 7.1 (the "TAX
Statement"). If the Seller disputes the amount calculated in the Tax Statement
or the amount of any income allocated to it on any Tax Return for a Straddle
Period, the Seller and the Purchaser shall consult and resolve in good faith any
issues arising as a result of the review thereof. If the parties are unable to
resolve any dispute within five (5) business days after the Seller's receipt of
such Straddle Period Tax Return or Tax Statement, such dispute shall be resolved
by the Accounting Firm. The Seller shall pay to the Purchaser an amount equal to
the Taxes shown on the Tax Statement as being chargeable to the Seller within
five (5) business days before the due date (including extensions thereof) for
payment of Taxes with respect to such Tax Statement. If the Seller has disputed
such amount, appropriate adjustments shall be made to the amount paid by the
Seller in order to reflect the decision of the Accounting Firm in immediately
available funds not later than five (5) business days after such decision has
been rendered. Any decision of the Accounting Firm shall be final and binding on
the Parties.
Section 7.2 Procedures Relating to Indemnification of Tax
Claims.
(a) If a notice of any Tax Claim is received by a Tax
Indemnified Party, such Tax Indemnified Party shall promptly notify the Tax
Indemnifying Party in writing of such Tax Claim within a reasonably sufficient
period of time to allow the Tax Indemnifying Party effectively to participate in
the contest or to contest such Tax Claim, and in reasonable detail to apprise
the Tax Indemnifying Party of the nature of the Tax Claim, and provide copies of
all correspondence and documents received by it from the relevant Taxing
Authority in connection with or related to such Tax Claim. Failure to give
prompt notice of a Tax Claim hereunder shall not affect the Tax Indemnifying
Party's obligation under Section 7.1, except to the extent that the Tax
Indemnifying Party is materially prejudiced by such failure to give prompt
notice.
(b) With respect to any Tax Claim which might result in an
indemnity payment to the Purchaser pursuant to Section 7.1(a), the Seller shall
at its election control all
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audits and proceedings taken in connection with such Tax Claim and, without
limiting the foregoing, may in their sole discretion and at their sole expense
pursue or forego any and all administrative appeals, proceedings, hearings and
conferences with any Taxing Authority with respect thereto, and may, in their
sole discretion, either pay the Tax claimed and xxx for a refund where
applicable law permits such refund suits or contest such Tax Claim. If the
Seller elects to control a contest pursuant to this Section 7.2, the Seller
shall keep the Purchaser advised and shall pursue such contest in good faith.
(c) With respect to any Tax Claim not described in the
preceding paragraph which might result in an indemnity payment to the Seller
pursuant to Section 7.2, the Purchaser shall control all proceedings in
accordance with provisions that are parallel to those in the first preceding
paragraph.
Section 7.3 Refunds and Credits. Any refunds and credits of
Taxes of the Acquired Entities with respect to (a) any Pre-Closing Period shall
be for the account of the Seller, and if received or utilized by the Purchaser,
any of its affiliates or the Acquired Entities, shall be paid to the Seller
within five (5) business days after the Purchaser, any of its affiliates or the
Acquired Entities receive such refund or utilize such credit, (b) any taxable
period beginning after the Closing Date shall be for the account of the
Purchaser, and if received or utilized by the Seller, or any of its affiliates,
shall be paid by the Seller to the Purchaser within five (5) business days after
the Seller, or any of its affiliates, receive such refund or utilizes such
credit, and (c) any Straddle Period shall be apportioned between the Seller and
the Purchaser in the same manner as such Taxes originally had been allocated
pursuant to Section 7.1 hereof unless such refund or credit expressly apportions
such credit or payment in a different manner.
Section 7.4 Cooperation. The Seller and the Purchaser shall
reasonably cooperate, and shall cause their respective affiliates, officers,
employees, agents, auditors and representatives reasonably to cooperate, in
preparing and filing all Tax Returns (including amended returns and claims for
refund), including, without limitation, the issuance of a power of attorney, if
necessary, maintaining and making available to each other all records necessary
in connection with Taxes and in resolving all disputes and audits with respect
to all taxable periods relating to Taxes.
Section 7.5 Elections; Consents and Other Actions. Without the
prior written consent of the other Parties, none of the Seller, the Acquired
Entities or the Purchaser shall make or change any election, file an amended Tax
Return or surrender any right to claim a refund of Taxes, consent to any
extension or waiver of the statute of limitations applicable to any Tax claim or
assessment relating to the Acquired Entities, take any other action or omit to
take any action, if such election, change, amendment, surrender, consent or
other action or omission would have the effect of increasing the Tax liability
of the Acquired Entities, the Purchaser or any affiliate of the Purchaser.
Section 7.6 Transfer Taxes. The Seller shall be responsible
for, and shall pay, all Transfer Taxes arising out of or in connection with the
Transactions, and shall indemnify and hold harmless the Company and the
Purchaser with respect to such Transfer Taxes. The Seller shall prepare and file
all necessary documentation and Tax Returns with respect to such Transfer
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Taxes, and the Purchaser shall join in the execution, or cause the Acquired
Entities to join in the execution, of any such documentation or Tax Returns if
required by applicable law.
Section 7.7 Section 338(h)(10) Election.
(a) The Seller and the Purchaser shall jointly make the
338(h)(10) Election on a timely basis in accordance with all rules and
regulations applicable to the 338(h)(10) Election. As soon as practicable after
the Closing, the Seller and the Purchaser shall mutually prepare a Form 8023,
with all attachments, and the Seller shall sign such Form 8023. Also, the
Purchaser and the Seller shall cooperate with each other to take all actions
necessary and appropriate (including timely filing such additional forms,
returns, elections, schedules and other documents on a joint or separate basis)
as may be required to effect and preserve a timely 338(h)(10) Election in
accordance with the provisions of Section 1.338(h)(10)-1 of the Treasury
Regulations (or any comparable provisions of state or local tax law) or any
successor provisions. The Seller and the Purchaser shall report the purchase by
the Purchaser of the Shares pursuant to this Agreement consistent with the
338(h)(10) Election and shall take no position inconsistent therewith in any Tax
Return or any proceeding before any Taxing Authority.
(b) In connection with the 338(h)(10) Election, not later than
70 days after the Closing, the Seller and the Purchaser shall, together and in
good faith, determine and agree upon the "Modified Aggregate Deemed Sale Price"
of the Company (within the meaning of, and in accordance with the Treasury
Regulations and any comparable provisions of state or local tax law). Each of
the Seller and the Purchaser can terminate in writing at any time negotiations
with respect to the "Modified Aggregate Deemed Sale Price" within 70 days after
the Closing. In the event of such termination, the Seller and the Purchaser
shall, not later than 10 days after such termination, submit all such disputed
items for resolution to the Accounting Firm which shall resolve the disputed
items within 20 days thereafter. The parties' agreement on the amount of the
"Modified Aggregate Deemed Sales Price" and the Accounting Firm's resolution of
disputed items with respect thereto shall be final and binding on the parties.
In connection with the 338(h)(10) Election, not later than 60 days after the
later of the parties' agreement as to the amount of the "Modified Aggregate
Deemed Sales Price" or the Accounting Firm's resolution of disputed items with
respect thereto, the Purchaser shall reasonably determine the proper allocations
(the "ALLOCATIONS") of the "Modified Aggregate Deemed Sale Price" among the
assets of the Acquired Entities and such subsidiaries (in accordance with
Section 338(b)(5) of the Code and the Treasury Regulations promulgated
thereunder and comparable provisions of state or local tax law) and shall submit
a statement (the "SECTION 338 STATEMENT") to the Seller setting forth the
foregoing. The Seller may dispute the Purchaser's determination of the
Allocations within 40 days ("40 DAY REVIEW") of delivery of the Section 338
Statement to the Seller if the Seller reasonably believes that the Purchaser's
determinations are unreasonable. In the event of such a dispute, the parties
shall commence negotiations. If either party terminates such negotiations, or if
the parties cannot resolve any such dispute within 40 days of such delivery by
the Purchaser to the Seller, the dispute shall be submitted no later than 10
days thereafter for resolution to the Accounting Firm which shall make its
determination within 20 days after submission to it of the dispute in the
following manner. In the event that the Accounting Firm determines that the
Purchaser's determinations of the Allocations were reasonable then the Purchaser
and the Seller shall be bound by such determinations. Otherwise, the Purchaser
and the Seller shall be bound
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by the Accounting Firm's own determinations. In the event that the parties
cannot resolve any disputes over such modifications within 20 days after the
receipt of [the Final Purchase Price Adjustment Statement,] the disputes shall
be submitted no later than 10 days thereafter for resolution to the Accounting
Firm which shall make its determination within 20 days after submission to it of
the dispute in the manner discussed above. The Seller and the Purchaser shall
(i) be bound by the final determination of the "Modified Aggregate Deemed Sale
Price" and such Allocations for purposes of determining any Taxes, unless
otherwise required by law, (ii) prepare and file their Tax Returns on a basis
consistent with such final determination of the "Modified Aggregate Deemed Sale
Price" and such Allocations, subject to adjustment to reflect the Seller's
selling expenses as a reduction of sales proceeds, and (iii) take no position
inconsistent with such determination of the "Modified Aggregate Deemed Sales
Price" and Allocations on any applicable Tax Return or in any proceeding before
any Taxing Authority. No Tax Returns reflecting the Allocations shall be filed
prior to the later of (i) the last day of the 40 Day Review and (ii) if any
items with respect to the Allocations are in dispute, the Accounting Firm's
resolution of such disputed items, except as otherwise required by law. In the
event that any of the Allocations is disputed by any Taxing Authority, the party
receiving notice of the dispute shall promptly notify the other party hereto
concerning resolution of the dispute.
Section 7.8 FIRPTA Certificates. The Seller shall deliver to
the Purchaser on the Closing Date duly completed and executed certifications of
non-foreign status pursuant to Section 1.1445-2(b)(2) of the Treasury
regulations.
Section 7.9 Relationship to Article VIII. To the extent that
Article VIII is inconsistent with this Article VII, Article VII shall govern all
matters relating to Taxes.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
The Seller and the Purchaser each make the following covenants
that are applicable to them, respectively:
Section 8.1 Indemnification. Subject to the limitations on
indemnification contained in Section 8.4 below from and after the Closing,
(a) The Seller covenants and agrees that it will indemnify and
hold harmless the Purchaser from and against (i) any and all Losses incurred by
the Purchaser or the Acquired Entities arising from or in connection with any
Event of Indemnification and (ii) any and all Losses arising from or in
connection with any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the Seller
with any broker, finder or investment banker; and
(b) The Purchaser covenants and agrees that it will indemnify
and hold harmless the Seller from and against (i) any and all Losses incurred by
the Seller arising from or in connection with any Event of Indemnification and
(ii) any and all Losses arising from or in connection with any brokerage,
finder's or other fee or commission in connection with the
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Transactions based upon arrangements made by or on behalf of the Purchaser with
any broker, finder or investment banker.
Section 8.2 Notice and Defense of Third Party Claims. The
obligations and liabilities of any Indemnitor with respect to Claims resulting
from a Third Party Claim shall be subject to the following terms and conditions:
(a) The Indemnitee shall give prompt written notice to the
Indemnitor of any Third Party Claim that might give rise to a Claim by the
Indemnitee against the Indemnitor based on the indemnity agreement contained in
Section 8.1 above, stating the nature and basis of such Third Party Claim, and
the amount thereof to the extent known, but failure to give such prompt notice
shall not affect an Indemnitor's obligations hereunder except to the extent that
the defense of such a Third Party Claim by such Indemnitor has been actually and
materially prejudiced thereby. Such notice shall be accompanied by copies of all
relevant documentation in the possession of the Indemnitee or any of its
Affiliates (other than the Indemnitor) with respect to such Third Party Claim,
including without limitation any summons, complaint or other pleading which may
have been served or any written demand received.
(b) Subject to Section 8.4 hereof, the Indemnitor shall have
the right in good faith and at its own cost and expense, to take reasonable
steps to cure, remediate, mitigate, remedy or otherwise handle any event or
circumstance which gives rise to a Loss (including, but not limited to events
and circumstances which can be cured, remediated, mitigated or remedied through
the expenditure of money and events and circumstances which give rise to a Loss
which can be measured in terms of money), regardless of whether such Loss arises
out of a breach of or default under any representation, warranty, covenant or
agreement contained in this Agreement or otherwise. Such right shall include,
without limitation, (i) the right to investigate any such event or circumstance,
(ii) the right to cure, mitigate, remediate, remedy and otherwise handle any
such event or circumstance on such terms and conditions and by such means as the
Indemnitor may determine, in its reasonable discretion, and (iii) the right to
defend, contest or otherwise oppose any such Third Party Claim with legal
counsel selected by the Indemnitor (which legal counsel shall be reasonably
acceptable to the Indemnitee); provided, however, that in the event that the
Indemnitor shall not have expressly acknowledged in writing that the Indemnitee
will be indemnified with respect to such Third Party Claim in accordance with
this Agreement, such legal counsel shall be selected by the Indemnitee, and
provided, further, that such Indemnitor's right to defend, contest or otherwise
oppose any such Third Party Claim shall be limited to those situations where the
Indemnitor shall have expressly acknowledged in writing that the Indemnitee will
be indemnified with respect to such Third Party Claim in accordance with this
Agreement. The Indemnitor shall promptly inform the Indemnitee of all material
developments related to any such event or circumstance. The Indemnitee shall
have the right, but not the obligation, to participate, at its own cost and
expense, in the defense, contest or other opposition of any such Third Party
Claim through legal counsel selected by it and shall have the right, but not the
obligations to assert any and all cross-claims or counterclaims which it may
have. Any of the above notwithstanding, if the defendants in any Third Party
Claim include both the Indemnitor and the Indemnitee, and the Indemnitee has
been advised by its counsel that there are legal defenses available to the
Indemnitee which are different from or in addition to those available to the
Indemnitor, the Indemnitee shall have the right to employ its own counsel (in
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addition to any local counsel, if applicable) in such Third Party Claim, and, in
such event, the reasonable fees and expenses of such counsel shall be borne by
the Indemnitor.
(c) Subject to the provisions of Section 8.2(b), so long as
the Indemnitor is diligently and in good faith performing its obligations under
Section 8.2(b), the Indemnitee shall not compromise or settle any such Claim
without the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld; provided, however, that in the event that the Indemnitor
shall not have expressly acknowledged in writing that the Indemnitee will be
indemnified with respect to such Third Party Claim in accordance with this
Agreement, then the Indemnitee shall have the full right to defend against any
such Third Party Claim and shall be entitled to settle or agree to pay in full
such Third Party Claim.
(d) Subject to Section 8.2(c) above, neither the Indemnitor
nor the Indemnitee shall make any settlement of any Third Party Claim without
the written consent of the other, which consent shall not be unreasonably
withheld.
Section 8.3 Notice of Other Claims.
(a) In the event that the Indemnitee reasonably believes that
it has a Claim in respect of which indemnity may be sought based on the
indemnity agreement contained in Section 8.1 above, which claim is not in
respect of a Third Party Claim, the Indemnitee shall give an Indemnity Notice to
the Indemnitor. Each Indemnity Notice shall set forth with reasonable
specificity those items in respect of which the Indemnity Notice has been sent,
as well as the summary basis upon which each such item is founded.
(b) The Indemnitor shall, within twenty-five (25) business
days after receipt of any Indemnity Notice, respond in writing in an Indemnity
Response and set forth with reasonable specificity those items in the Indemnity
Notice to which the Indemnitor does not agree as well as the summary basis upon
which such disagreement is founded. Within twenty-five (25) business days
following the delivery of the Indemnity Response to the Indemnitor,
representatives of the Indemnitee and Indemnitor shall meet to attempt to
resolve through good faith negotiations the applicable indemnification claims.
Such representatives shall negotiate in good faith for twenty-five (25) business
days in an attempt to reach a settlement of any such disputed matter. In the
event that such representatives are not able to reach a settlement of any such
disputed matter, the Indemnitee may pursue any and all claims for indemnity
against the Indemnitor, subject to the provisions of this Article VIII.
Section 8.4 Limitations of Indemnification.
(a) The Indemnitor shall not be liable under this Agreement in
respect of any Event of Indemnification unless an Indemnitee gives written
notice to the Indemnitor providing a good faith description of the circumstances
relating to such Event of Indemnification (to the extent such circumstances are
then known), on or before the Survival Date with respect thereto. The Seller and
the Purchaser shall forward a copy of each such notice received by it to each
Indemnitor. Notwithstanding anything herein to the contrary, if written notice
of an Event of Indemnification has been given by the Indemnitee to the
Indemnitor in accordance with Article
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VIII of this Agreement on or before the applicable Survival Date, then the
Indemnitee's right to indemnification with respect to such Event of
Indemnification shall survive until any resulting Claims shall have been finally
resolved.
(b) The notice given to the Indemnitor pursuant to Section
8.2(a) and the Indemnity Notice given pursuant to Section 8.3 shall contain the
Indemnitee's reasonable good faith estimate of the maximum amount of
indemnification claimed based on the facts and circumstances then known to the
Indemnitee. From time to time, at the written request of the Indemnitor, the
Indemnitee shall update its reasonable good faith estimate of the maximum amount
of indemnification claimed based on the facts and circumstances then known to
the Indemnitee.
(c) No indemnification shall be required to be made under
Section 8.1 hereof until the aggregate amount of all claims under such Section
exceeds $250,000 (the "BASKET"), in which case the Indemnitors shall be liable
for the full amount of such claims but then, in the case of indemnification by
the Seller, only, (A) with respect to Losses specifically relating to High Rise,
for all such Losses up to an aggregate amount equal to $_______ and (B) with
respect to Losses specifically relating to Centrifugal, Mechanical or CMA, up to
an aggregate amount equal to $________, except in either instance in case of (x)
fraud or (y) indemnification sought for breaches of Sections 3.2, 3.3 and 4.2,
4.6 and 4.15 in which case the Seller shall be liable for the full amount of
such claims but then only for all such Losses up to an aggregate amount equal to
the Purchase Price; provided, however, in the case of indemnification pursuant
to Section 8.1(a)(ii) or 8.1(b)(ii), the Basket shall not apply.
Section 8.5 Survival and No Waiver of Representations. All
representations and warranties of the Parties contained in this Agreement or in
any certificate, schedule, list, exhibit, agreement, document or other writing
delivered pursuant hereto or in connection with the Transactions shall survive
the Closing until the applicable Survival Date. No investigation by a Party
shall affect the representations, warranties, covenants and agreements of the
other Parties under this Agreement or in any certificate, schedule, list,
exhibit, agreement, document or other writing delivered pursuant hereto or in
connection with the Transactions furnished or to be furnished to the other
Parties and such representations, warranties, covenants and agreements shall not
be affected or deemed waived by reason of the Closing or of the fact that the
other Party knew or should have known that any of the same is or might be
inaccurate in any respect, unless specifically disclosed in the Schedules as
amended or supplemented at or prior to Closing and delivered pursuant to this
Agreement.
Section 8.6 Limitation of Other Indemnification Rights.
Notwithstanding anything to the contrary in the Charter, Bylaws, agreements or
other instruments of the Acquired Entities, the Indemnitor shall not have any
right to indemnification or other recovery thereunder or otherwise (whether as
an officer, director, stockholder or in any other capacity) from the Company
(except pursuant to any applicable Director and Officer liability insurance, if
any) with respect to any matter to the extent that the Indemnitor is liable, or
would be liable but for the limitations on indemnification contained herein, to
the Indemnitee for indemnification under this Article VIII with respect to such
matter.
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Section 8.7 Exclusive Remedy. Except in the case of fraud, the
provisions contained in this Article VIII shall provide the sole and exclusive
remedy with respect to any and all breaches or misrepresentations with respect
to representations and warranties contained herein of the Seller or the
Purchaser under this Agreement.
ARTICLE IX
PUBLICITY; CONFIDENTIALITY; BOOKS AND RECORDS
Section 9.1 Publicity. No Party shall, or permit its
affiliates to, issue any publicity, release or announcement concerning the
execution and delivery of this Agreement, the provisions hereof or the
Transactions without the prior written approval of the form and content of such
publicity, release or announcement by the other Party hereto; provided, however,
that no such approval shall be required when such publicity, release or
announcement is required by (i) any applicable Law, (ii) any applicable rules or
regulations of a national or foreign stock exchange or the Automated Quotation
System maintained by the National Association of Securities Dealers, Inc. or
(iii) any order, writ, judgment, award, edict or decree of any court of
competent jurisdiction or any governmental or quasi-governmental agency,
authority or instrumentality of competent jurisdiction; and, provided further,
that, prior to issuing any publicity, release or announcement without such prior
written approval, the Party issuing, or whose Affiliate is issuing, such
publicity, release or announcement, to the extent practicable, shall have given
reasonable prior notice to the other Party of such intended issuance.
Section 9.2 Confidentiality.
(a) Except as otherwise provided herein, the Receiving Party
shall not use (and shall not permit its Affiliates, shareholders, directors,
officers, partners, employees, agents, representatives, consultants or lenders
to use) Confidential Information for its (or their own) or any third party's
benefit and shall (and shall cause its Affiliates, shareholders, partners,
directors, officers, employees, agents, representatives, consultants and lenders
to) maintain the confidentiality of Confidential Information. If the Receiving
Party or any of its Affiliates, subsidiaries, shareholders, directors, officers,
partners, employees, agents, representatives, consultants or lenders is required
to disclose Confidential Information by or to any court of competent
jurisdiction or any governmental or quasi-governmental agency, authority or
instrumentality of competent jurisdiction, the Receiving Party shall, prior to
such disclosure, immediately notify the Delivering Party of such requirement and
all particulars related to such requirement. The Delivering Party shall have the
right, at its expense, to object to such disclosure and to seek confidential
treatment of any Confidential Information to be so disclosed on such terms as it
shall determine.
(b) The restrictions set forth in Section 9.2(a) hereof shall
not apply to the use or disclosure of Confidential Information to the extent,
but only to the extent, (i) permitted or required pursuant to any other
agreement between or among the Parties (or their respective Affiliates), (ii)
necessary by a Party (or its Affiliates) in connection with exercising its (or
their) rights or performing its (or their) duties or obligations under this
Agreement or any other agreements, instruments and documents contemplated hereby
or thereby or the other agreements
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described in clause (i) of this Section 9.2(b), (iii) contemplated by the last
two (2) sentences of Section 9.2(a) or (iv) that such Confidential Information
(A) is or has become generally available to the public through no fault or
neglect of the Receiving Party, (B) was received in good faith on a
non-confidential basis from a third party who disclosed such Confidential
Information without violating any obligations of secrecy or confidentiality or
(C) was already possessed by the Receiving Party at the time of receipt as shown
by prior dated written records. The restrictions set forth in Section 9.2(a)
shall not apply to the use or disclosure by the Company or any of its Affiliates
of Confidential Information which consists of data, reports, records and
information relating to the Company's business or the ownership, leasing or use
of the properties owned, leased or used by Company or any of its Affiliates and
which is used or disclosed in connection with the conduct of the Company's
business.
Section 9.3 Books and Records. Unless otherwise consented to
in writing by the Seller and the Purchaser, as applicable, the Purchaser agrees,
following the Closing, to cause each of the Acquired Entities to maintain for a
period of not less than six (6) years after the Closing Date, all material
records relating to such Acquired Entity with respect to: (a) acquisitions or
dispositions; (b) existing or terminated contracts of a significant nature; (c)
real and personal property ownership records; (d) accounting records used in the
preparation of the Annual Financial Statements; and (e) such other records as
would be retained for six (6) years pursuant to the present record retention
program of the Company, including computer-generated records. For a period of
six (6) years following the Closing, Representatives of the Seller may, subject
to applicable obligations of confidentiality, review such records during normal
working hours and shall have the right at their own expense to make copies of
any such records. Following the Closing and for the full period of any statute
of limitations, Purchaser will retain or cause to be retained all Tax Returns
and any records or information related to such preparation, or any audit,
examination, proceeding or determination of the Acquired Entities and the Seller
may, subject to applicable obligations of confidentiality, review such Tax
Returns during normal working hours. The Purchaser shall not cause or permit the
destruction or other disposition of such Tax Returns without offering to
surrender to the Seller such Tax Returns or portions thereof. Thereafter, the
Purchaser shall not cause or permit the destruction or other disposition of such
books and records without first offering to surrender to the Seller such books
and records or any portion thereof.
Section 9.4 Survival. Sections 9.1 and 9.2 shall survive the
termination of this Agreement for any reason and the closing of the
Transactions.
ARTICLE X
NOTICES
Section 10.1 Notices. All notices, requests, demands, claims
and other communications required or permitted to be given pursuant to this
Agreement shall be given in writing, shall be transmitted by personal delivery
or by registered or certified mail, return receipt requested, postage prepaid,
by overnight courier or by facsimile (followed by prompt physical delivery of
such written notice or other document), and shall be addressed as follows:
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When the Seller is the intended recipient:
DualStar Technologies Corporation
00-00 00xx Xxxxxx
Xxxx Xxxxxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000
With a copy to:
Xxxx Xxxxxxxxxxx, Esq.
Xxxxxxx & Xxxxx L.L.P.
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
When the Purchaser is the intended recipient:
M/E Corp.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
A Party may designate a new address to which notices required
or permitted to be given pursuant to this Agreement shall thereafter be
transmitted by giving written notice to that effect to the other Party. Each
notice transmitted in the manner described in this Article X shall be deemed to
have been given, received and become effective for all purposes at the time it
shall have been (i) delivered to the addressee as indicated by the return
receipt (if transmitted by mail) or the affidavit of the messenger (if
transmitted by personal delivery) or (ii) presented for delivery to the
addressee as so indicated during normal business hours, if such delivery shall
have been refused for any reason.
ARTICLE XI
GOVERNING LAW; FORUM
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Section 11.1 GOVERNING LAW; FORUM. THE VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE LAWS, RULES OR
PRINCIPLES OF THE STATE OF NEW YORK REGARDING CONFLICT OF LAWS). EACH PARTY
AGREES THAT ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
BREACH OR THREATENED BREACH OF THIS AGREEMENT MAY BE COMMENCED AND PROSECUTED IN
A COURT IN THE UNITED STATES DISTRICT COURT IN THE STATE OF NEW YORK, COUNTY OF
NEW YORK, OR IF SUCH COURT WILL NOT ACCEPT JURISDICTION, IN ANY COURT OF
COMPETENT CIVIL JURISDICTION SITTING IN THE STATE OF NEW YORK. EACH PARTY
CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE PERSONAL JURISDICTION OF ANY COURT IN
THE STATE OF NEW YORK IN RESPECT OF ANY SUCH PROCEEDING. EACH PARTY CONSENTS TO
SERVICE OF PROCESS UPON IT WITH RESPECT TO ANY SUCH PROCEEDING BY REGISTERED
MAIL, RETURN RECEIPT REQUESTED, AND BY ANY OTHER MEANS PERMITTED BY APPLICABLE
LAWS AND RULES. EACH PARTY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING IN ANY COURT IN THE STATE OF
NEW YORK AND ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH
PROCEEDING IN ANY COURT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
ARTICLE XII
BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES
Section 12.1 Binding Effect; Assignment; Third Party
Beneficiaries. This Agreement shall be binding upon the Parties and their
respective successors, assigns, heirs, executors, administrators and other legal
representatives and shall inure to the benefit of the Parties and their
respective successors, permitted assigns, heirs, executors, administrators and
other legal representatives. No Party shall assign any of its rights or delegate
any of its duties under this Agreement (by operation of law or otherwise)
without the prior written consent of the other Party, except that the Purchaser
may assign this Agreement as collateral to its lenders and such lenders or their
assigns may exercise their rights and remedies with respect to indemnification
claims pursuant to Article VIII. Except as contemplated in Section 8.1, no
Person shall be, or be deemed to be, a third party beneficiary of this
Agreement. Any assignment of rights or delegation of duties under this Agreement
by a Party without the prior written consent of the other Party, if such consent
is required hereby, shall be void.
ARTICLE XIII
ENTIRE AGREEMENT
Section 13.1 Entire Agreement. This Agreement and the
Schedules and Exhibits attached hereto constitute the entire agreement among the
Parties, and cancel and
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supersede all of the previous or contemporaneous agreements, representations,
warranties and understandings (whether oral or written), with respect to the
subject matter hereof.
ARTICLE XIV
MATERIALITY AND IMMATERIALITY
Section 14.1 Materiality and Immateriality. None of the
threshold dollar amounts listed herein shall be deemed an admission that an
amount greater than such threshold is material or that an amount less than such
threshold is immaterial.
ARTICLE XV
TERMINATION, AMENDMENT AND WAIVER
Section 15.1 Termination. This Agreement may be terminated and
the Transactions may be abandoned at any time prior to the Closing Date,
notwithstanding approval thereof by the stockholders of the Seller:
(a) by the Purchaser for any reason, including, without
limitation, if at any time it shall become aware of any adverse matter regarding
the Acquired Entities or any of its subsidiaries, in its sole and absolute
discretion; or
(b) by the Purchaser, upon a breach of any representation,
warranty, covenant or agreement on the part of the Seller set forth in this
Agreement, or if any such representation or warranty of the Seller shall have
been or become untrue, in each case such that the conditions set forth in
Section 6.2(a) or Section 6.2(b), as the case may be, would be incapable of
being satisfied (following notice and failure to cure within 20 days of such
notice);
(c) by the Seller, upon a breach of any representation,
warranty, covenant or agreement on the part of the Purchaser set forth in this
Agreement, or if any such representation or warranty of the Purchaser shall have
been or become untrue, in each case such that the conditions set forth in
Section 6.3(a) or Section 6.3(b), as the case may be, would be incapable of
being satisfied (following notice and failure to cure within 20 days of such
notice);
(d) by either the Seller or the Purchaser, if any permanent
injunction or action by any Governmental Authority preventing the consummation
of the Transactions shall have become final and nonappealable;
(e) by either the Seller or the Purchaser if the Transactions
shall not have been consummated on or prior to June 30, 2000;
(f) by either the Seller or the Purchaser, if the approval of
the stockholders of the Seller of this Agreement and the Transactions required
for the consummation of the Acquisition shall not have been obtained by reason
of the failure to obtain the required vote at a duly held meeting of
stockholders or at any adjournment thereof;
- 48 -
(g) by the Purchaser, if (i) following the receipt by the
Seller or an Acquired Entity of a Takeover Proposal, the Board of Directors or
any committee thereof shall have withdrawn or modified its approval or
recommendation of this Agreement or the Transactions in any manner which is
adverse to the Purchaser or shall have resolved to do the foregoing; or (ii) the
Board of Directors shall have approved or have recommended to the stockholders
of the Seller a Superior Proposal or shall have resolved to do the foregoing;
and
(h) by the Seller in accordance with Section 5.5.
Section 15.2 Effect of Termination. In the event of the
termination of this Agreement pursuant to Section 15.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto except as set forth in Section 15.3 and Section 5.4(b); provided,
however, that nothing herein shall relieve any party from liability for any
willful and material breach hereof.
Section 15.3 Fees and Expenses.
(a) Unless this Agreement is terminated by the Seller and the
Purchaser shall have failed to perform in any material respects its obligations
under this Agreement, (x) if this Agreement is terminated pursuant to Section
15.1(f) (but only if a Takeover Proposal has been received prior to such vote
or, prior to the receipt of a Takeover Proposal, the Board of Directors has
withdrawn or modified, or proposed to withdraw or modify, in a manner adverse to
Purchaser, the approval or recommendation of this Agreement and the
Transactions), Section 15.1(g) or Section 15.1(h), or (y) (i) if at any time on
or after the date of this Agreement until six (6) months following the
termination of this Agreement, any person or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act (other than Purchaser or any of its
Affiliates) shall have acquired, directly or indirectly, the Company, all or
substantially all its properties or assets or more than 50% of the shares of
Seller Common Stock then outstanding (other than as contemplated by this
Agreement) or (ii) if the Company enters into any agreement with respect to any
Superior Proposal prior to the one-year anniversary of the termination of this
Agreement (each such event described in clauses (x) and (y) of Section 15.3(a)
being hereinafter referred to as a "TRIGGERING EVENT"), the Seller shall pay, or
cause to be paid, to Purchaser a fee of $1,000,000 (the "TERMINATION FEE"), in
same day funds.
Section 15.4 Amendment. No addition to, and no cancellation,
renewal, extension, modification or amendment of, this Agreement shall be
binding upon a Party unless such addition, cancellation, renewal, extension,
modification or amendment is set forth in a written instrument which states that
it adds to, amends, cancels, renews, extends or modifies this Agreement and
which is executed and delivered by, or on behalf of, by an officer of, or
attorney-in-fact for, such Party.
Section 15.5 Waiver. No waiver of any provision of this
Agreement shall be binding upon a Party unless such waiver is expressly set
forth in a written instrument which is executed and delivered by such Party or
on behalf of such Party by an officer of, or attorney-in-fact for, such Party.
Such waiver shall be effective only to the extent specifically set forth in such
written instrument. Neither the exercise (from time to time and at any time) by
a Party of,
- 49 -
nor the delay or failure (at any time or for any period of time) to exercise,
any right, power or remedy shall constitute a waiver of the right to exercise,
or impair, limit or restrict the exercise of, such right, power or remedy or any
other right, power or remedy at any time and from time to time thereafter. No
waiver of any right, power or remedy of a Party shall be deemed to be a waiver
of any other right, power or remedy of such Party or shall, except to the extent
so waived, impair, limit or restrict the exercise of such right, power or
remedy.
Section 15.6 Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 15.1, an
amendment of this Agreement pursuant to Section 15.4 or an extension or waiver
pursuant to Section 15.5 shall, in order to be effective, require in the case of
the Seller, action by the Board of Directors or the duly authorized designee of
the Board of Directors.
ARTICLE XVI
HEADINGS; COUNTERPARTS
Section 16.1 Headings; Counterparts. The headings set forth in
this Agreement have been inserted for convenience of reference only, shall not
be considered a part of this Agreement and shall not limit, modify or affect in
any way the meaning or interpretation of this Agreement. This Agreement may be
signed in any number of counterparts, each of which (when executed and
delivered) shall constitute an original instrument, but all of which together
shall constitute one and the same instrument. This Agreement shall become
effective and be deemed to have been executed and delivered by each of the
Parties at such time as counterparts shall have been executed and delivered by
each of the Parties, regardless of whether each of the Parties has executed the
same counterpart. It shall not be necessary when making proof of this Agreement
to account for any counterpart other than a sufficient number of counterparts
which, when taken together, contain signatures of all of the Parties.
ARTICLE XVII
SEVERABILITY
Section 17.1 Severability. If any provision of this Agreement
shall hereafter be held to be invalid, unenforceable or illegal in whole or in
part, in any jurisdiction under any circumstances for any reason, (i) such
provision shall be reformed to the minimum extent necessary to cause such
provision to be valid, enforceable and legal while preserving the intent of the
Parties as expressed in, and the benefits to the Parties provided by, this
Agreement or (ii) if such provision cannot be so reformed, such provision shall
be severed from this Agreement and an equitable adjustment shall be made to this
Agreement (including, without limitation, addition of necessary further
provisions to this Agreement) so as to give effect to the intent as so expressed
and the benefits so provided. Such holding shall not affect or impair the
validity, enforceability or legality of such provision in any other jurisdiction
or under any other circumstances. Neither such holding nor such reformation or
severance shall affect or impair the legality, validity or enforceability of any
other provision of this Agreement.
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IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement as of the date first above written.
DUALSTAR TECHNOLOGIES CORPORATION
By:
------------------------------------------
Name:
Title:
M/E CORP.
By:
------------------------------------------
Name:
Title:
- 51 -
ANNEX I
COMPANY STOCK
-------------------------------- ------------------------ ----------------------
Issuer Number of Shares Class of Shares
-------------------------------- ------------------------ ----------------------
High-Rise Electric, Inc.
Centrifugal Associates, Inc.
Mechanical Associates, Inc.
-------------------------------- ------------------------ ----------------------
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