EX-2.7
4
uil_exh2-7.htm
UIL EXHIBIT 2-7
SECURITIES PURCHASE AGREEMENT
EXHIBIT
2.7
EXECUTION
COPY
SECURITIES
PURCHASE AGREEMENT
by
and among
UIL
HOLDINGS CORPORATION,
XCELECOM,
INC.,
XXXXX
XXXXX-WAY ELECTRICAL
CONTRACTORS,
INC., as a wholly owned subsidiary of SAIDS LLC
and
SAIDS
LLC
December
29, 2006
TABLE
OF CONTENTS
|
1.
|
DEFINITIONS
|
1
|
| | | |
|
2.
|
PURCHASE
AND SALE OF THE COMPANY SHARES
|
6
|
| | | |
| |
(A)
Basic Transaction
|
6
|
| |
(B)
Purchase Price
|
6
|
| |
(C)
The Closing
|
6
|
| |
(D)
Deliveries at the Closing
|
6
|
| | | |
|
3.
|
REPRESENTATIONS
AND WARRANTIES CONCERNING THE SELLER
| |
| |
ENTITIES
AND THE BUYER
|
6
|
| | | |
| |
(A)
Representations and Warranties of the Seller Entities
|
6
|
| |
(B)
Representations and warranties of the Buyer
|
7
|
| | | |
|
4.
|
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY
|
9
|
| | | |
| |
(A)
Organization of the Company
|
9
|
| |
(B)
Capitalization
|
10
|
| |
(C)
Noncontravention
|
10
|
| |
(D)
Broker’s Fees
|
10
|
| |
(E)
Title to Assets
|
10
|
| |
(F)
Financial Statements
|
10
|
| |
(G)
Undisclosed Liabilities
|
11
|
| |
(H)
Events Subsequent to Most Recent Fiscal Month End
|
11
|
| |
(I)
Legal Compliance
|
12
|
| |
(J)
Tax Matters
|
12
|
| |
(K)
Real Property
|
13
|
| |
(L)
Intellectual Property
|
14
|
| |
(M)
Contracts
|
15
|
ii
| |
(N)
Guaranties
|
16
|
| |
(O)
Tangible Assets
|
16
|
| |
(P)
Litigation
|
16
|
| |
(Q)
Employees
|
16
|
| |
(R)
Employee Benefits
|
17
|
| |
(S)
Environmental, Health and Safety Matters
|
18
|
| |
(T)
Notes and Accounts Receivable
|
19
|
| |
(U)
Powers of Attorney
|
19
|
| |
(V)
Insurance
|
19
|
| |
(W)
Minute Books
|
19
|
| |
(X)
Disclosure
|
19
|
| |
(Y)
Disclaimer of Other Representations and Warranties
|
19
|
| | | |
|
5.
|
POST-CLOSING
CONVENTS
|
19
|
| | | |
| |
(A)
General
|
19
|
| |
(B)
Litigation Support
|
20
|
| |
(C)
Transition
|
20
|
| |
(D)
Collective Bargaining Agreements and Related Obligations
|
20
|
| |
(E)
Employee Benefits Plan
|
20
|
| |
(F)
Confidentiality
|
21
|
| |
(G)
Access to Information
|
21
|
| |
(H)
Nonassignable Contracts and Permits
|
22
|
| |
(I)
Surety Bonds
|
22
|
| |
(J)
Shared Claims
|
22
|
| |
(K)
Project Savings
|
23
|
| |
(L)
Gains Sharing
|
23
|
| |
(M)
Accounts Receivables and Retention Balances
|
23
|
iii
| |
(N)
Reporting; Meetings; Full Access
|
24
|
| |
(O)
Inventory
|
25
|
| |
(P)
Real Property Leases
|
25
|
| |
(Q)
MLK Project
|
25
|
| |
(R)
Sellers Project
|
26
|
| |
(S)
Buyer Performance
|
26
|
| |
(T)
Audit Programs
|
26
|
| | | |
|
6.
|
CONDITIONS
TO OBLIGATION TO CLOSE
|
27
|
| | | |
| |
(A)
Conditions to Obligation of the Buyer
|
27
|
| |
(B)
Conditions to Obligation of the Seller
|
28
|
| | | |
|
7.
|
REMEDIES
FOR BREACHES OF THIS AGREEMENT
|
29
|
| | | |
| |
(A)
Survival
|
29
|
| |
(B)
Indemnification Provisions for Benefits of the Buyer
|
29
|
| |
(C)
Indemnification Provisions for Benefits of the Seller Entities and
Their
Affiliates
|
29
|
| |
(D)
Limitations
|
30
|
| |
(E)
Losses Net of Insurance, Etc.
|
30
|
| |
(F)
Termination of Indemnification
|
30
|
| |
(G)
Procedures Relating to Indemnification
|
31
|
| |
(H)
Exclusive Remedy
|
31
|
| |
(I)
Collateral Sources
|
32
|
| |
(J)
Mitigation
|
32
|
| | | |
|
8.
|
TAX
MATTERS
|
32
|
| | | |
| |
(A)
Consolidated Return
|
32
|
| |
(B)
Tax Periods Ending on or Before the Closing Date
|
32
|
| |
(C)
Tax Periods Beginning Before and Ending After the Closing
Date
|
33
|
| |
(D)
Refund and Tax Benefits
|
33
|
iv
| |
(E)
Cooperation on Tax Matters
|
34
|
| |
(F)
Tax Sharing Agreements
|
34
|
| |
(G)
Transfer Taxes
|
34
|
| |
(H)
Representation
|
34
|
| |
(I)
Confidentiality
|
35
|
| | | |
|
9.
|
MISCELLANEOUS
|
35
|
| | | |
| |
(A)
Press Releases and Public Announcements
|
35
|
| |
(B)
No Third-Party Beneficiaries
|
35
|
| |
(C)
Entire Agreement
|
35
|
| |
(D)
Succession and Assignment
|
36
|
| |
(E)
Counterparts; Facsimile
|
36
|
| |
(F)
Headings
|
36
|
| |
(G)
Notices
|
36
|
| |
(H)
Governing Law
|
37
|
| |
(I)
Venue
|
37
|
| |
(J)
Waiver of Jury Trial
|
37
|
| |
(K)
Amendments and Waivers
|
37
|
| |
(L)
Severability
|
37
|
| |
(M)
Expenses
|
37
|
| |
(N)
Construction
|
37
|
| |
(O)
Incorporation of Exhibits and Schedules
|
38
|
| | | |
v
SECURITIES
PURCHASE AGREEMENT
SECURITIES
PURCHASE AGREEMENT, entered as of December 29, 2006, by and among SAIDS LLC,
a
New Jersey limited liability company, or its permitted assignee (the
“Buyer”),
UIL
Holdings Corporation, a Connecticut corporation (the “Parent”)
and
Xcelecom, Inc., a Connecticut corporation (the “Seller”
and
together with the Parent, the “Seller
Entities”).
Xxxxx/Brite-Way Electrical Contractors, Inc., as a wholly owned subsidiary
of
the Buyer, shall be a party to this Agreement for purposes of Sections 5 and
7
and unless otherwise indicated, references to the Company in such provisions
shall be deemed to be references to Xxxxx/Brite-Way Electrical Contractors,
Inc., as a wholly owned subsidiary of the Buyer. The Buyer, the Company and
the
Seller Entities are referred to collectively herein as the “Parties”
and
individually as a “Party”.
WHEREAS,
this Agreement contemplates a transaction in which the Buyer will purchase
from
the Seller, and the Seller will sell to the Buyer, all of the outstanding
capital stock of ABW (as
defined below) (the “Company”),
in
return for the consideration set forth herein.
NOW,
THEREFORE, in consideration of the premises and the mutual promises herein
made,
and in consideration of the representations, warranties and covenants herein
contained, the Parties agree as follows.
1. DEFINITIONS.
“ABW”
means
Xxxxx Briteway Electrical Contractors, Inc., a New Jersey corporation.
“Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
“Agreement”
means
this
Securities Purchase Agreement.
“Affiliate”
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
“Affiliated
Group”
means
any affiliated group within the meaning of Code §1504(a) or any similar group
defined under a similar provision of state, local, or foreign law.
“Annual
Financial Statements”
has
the
meaning set forth in Section 4(f) below.
“Approved
Budget”
has
the
meaning set forth in Section 5(k) below.
“Bank
Guarantee”
means
the guarantee of the Company under the Credit Facility.
“Benefit
Plans”
has
the
meaning set forth in Section 5(e)(i) below.
“Bonds”
has
the
meaning set forth in Section 5(i) below.
“Buyer”
has
the
meaning set forth in the preface above.
“Buyer
Projects”
means
the projects and jobs that are (a) in-process as of the date of this Agreement
which represent a portion of the backlog of the Company's work as of the Closing
Date and are listed in Section 1(a) of the Disclosure Schedule, or (b)
contracted for, and commenced, by ABW after
1
the
Closing Date, including any project or job resulting from a change order to
a
Seller Project that is not a Required Change Order.
“Buyer
Welfare Plans”
means
any welfare plan as defined in ERISA Section 3(1) which the Buyer maintains
or
to which the Buyer contributes on or after the Closing.
“Checking
Account”
means
the interest bearing bank account established by Buyer that will be used by
the
Company as the direct financial source to cover Reimbursable
Expenses.
“Closing”
has
the
meaning set forth in Section 2(c) below.
“Closing
Date”
has
the
meaning set forth in Section 2(c) below.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Collateral
Source”
has
the
meaning set forth in Section 7(e) below.
“Collective
Bargaining Agreement(s)”
has
the
meaning set forth in Section 4(m)(vii) below.
“Company”
has
the
meaning set forth in the preface above.
“Company
Balance Sheet”
means
a
periodic balance sheet produced by the Seller in respect of the Company in
accordance with past procedures and practices.
“Company
Share”
means
any share of the common stock, no par value, of ABW.
“Confidential
Information”
means
any written, oral or visual information in any medium concerning the businesses
and affairs of the Company or any Party that is not already generally available
to the public or, under the circumstances, should reasonably be considered
confidential or proprietary.
“Confidentiality
Agreement”
means
that certain confidentiality agreement by and between ABW and Xxxxxxxxxx
Electric Company, dated as of September 8, 2006.
“Construction
Management Agreement”
means
that certain Construction Management Agreement by and between Xxxxxxxxxx, LLC
and the Company dated as of October 12, 2006.
“Credit
Facility”
means
that Amended and Restated Credit Agreement, dated as of October 25, 2002, as
amended to date, among Bank of America, N.A., successor by merger to Fleet
National Bank (“Bank of America”) and the other lending institutions named
therein, the Seller and Bank of America, as agent for itself and such other
lending institutions.
“Disclosure
Schedule”
means
the disclosure schedules provided by the Seller Entities and attached hereto
as
Annex
A,
as the
same may be amended in accordance with the terms hereof.
“Employee”
has
the
meaning set forth in Section 4(r) below.
“Employee
Benefit Plan”
has
the
meaning set forth in Section 4(r)(i) below.
“Environmental,
Health, and Safety Requirements”
shall
mean all federal, state, local and foreign statutes, regulations, ordinances
and
similar provisions having the force or effect of law and all judicial and
administrative orders and determinations concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating
2
to
the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any Hazardous
Substances.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Financial
Statements”
has
the
meaning set forth in Section 4(f) below.
“GAAP”
means
United States generally accepted accounting principles as in effect from time
to
time.
“Hazardous
Substances”
shall
have the meaning set forth in Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act (“CERCLA”), 42 U.S.C. Section
9601(14).
“Imprest
Account”
means
the interest bearing bank account established by the Company pursuant to the
terms of this Agreement whereby the Parties shall deposit funds to be held
in
trust and transferred to the Checking Account.
“Income
Tax”
means
any federal, state, local, or foreign income or franchise tax, including any
interest, penalty, or addition thereto, whether disputed or not.
“Income
Tax Return”
means
any return, declaration, report, claim for refund, or information return or
statement relating to Income Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
“Indemnified
Party”
has
the
meaning set forth in Section 7(g) below.
“Indemnifying
Party”
has
the
meaning set forth in Section 7(g) below.
“Independent
Accountant”
means
a
recognized accounting firm jointly selected by Buyer and Seller; provided,
that if
Buyer and Seller cannot agree on an accounting firm, Buyer and Seller shall
each
select a nationally recognized accounting firm and such accounting firms will
jointly select an accounting firm.
“Intellectual
Property”
means
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
and
corporate names, together with all translations, adaptations, derivations,
and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all Internet domain names and universal
resource locators (“URLs”),
(e)
all mask works and all applications, registrations, and renewals in connection
therewith, (f) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (g) all computer
software (including data and related documentation), and (h) all copies and
tangible embodiments of each of the foregoing, in whatever form or
medium.
“Inventory”
means
the inventory of electrical supplies listed in Section 1(b) of the Disclosure
Schedule that is purchased by the Buyer on the Closing Date pursuant to the
terms of this Agreement.
3
“Knowledge,”
or
phrases of similar import, with respect to an individual, means an individual
shall be deemed to have knowledge of a particular fact or other matter if that
individual is actually aware of that fact or matter. With respect to a Person,
other than an individual, "Knowledge,"
or
phrases of similar import, means a Person shall be deemed to have knowledge
of a
particular fact or other matter if any individual who is serving as an executive
officer of that Person (or in any similar capacity) is actually aware of that
fact or other matter, provided that the Parent shall only be deemed to have
knowledge of a fact or other matter if the chief executive officer or chief
financial officer of the Parent is actually aware of such fact or other
matter.
“Material
Adverse Effect”
means
any change, event, fact, occurrence or effect (direct or indirect) which might
reasonably be expected to have a material adverse effect on the assets,
financial condition or results of operation of the Company, other than any
change, fact, circumstance or event (i) generally affecting the industry in
which the Company conducts its business, or resulting from general economic
or
market conditions or changes in accounting principles, laws, regulations, or
regulatory policies of general applicability (or interpretations thereof),
(ii)
resulting from actions or omissions of a Person taken with the prior written
consent of the Parties in contemplation of the transactions contemplated hereby,
or (iii) resulting from the announcement or execution of this Agreement or
the
transactions contemplated herein.
“Most
Recent Financial Statements”
has
the
meaning set forth in Section 4(f) below.
“Most
Recent Fiscal Month End”
has
the
meaning set forth in Section 4(f) below.
“Non-Union
Transferred Employees”
has
the
meaning set forth in Section 5(e)(i) below.
“Ordinary
Course of Business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
“Overlap
Period”
has
the
meaning set forth in Section 8(c) below.
“Parent”
has
the
meaning set forth in the preface above.
“Party”
or
“Parties”
has
the
meaning set forth in the preface above.
“Person”
means
an individual, a governmental entity (or any department, agency, or political
subdivision thereof), or a partnership, limited liability company, limited
liability partnership, corporation, association, joint stock company, trust,
joint venture, unincorporated organization or similar entity.
“Project
Savings”
has
the
meaning set forth in Section 5(k) below.
“Purchase
Price”
has
the
meaning set forth in Section 2(b) below.
“Representatives”
of any
Person means the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives of such
Person.
“Required
Change Order”
means,
with respect to a Seller Project, a directed change order required by the owner
or general contractor for such Seller Project whereby such project cannot be
completed unless such change order is accepted and performed.
“Requisite
Consents”
has
the
meaning set forth in Section 6(a)(v) below.
“Securities
Act”
means
the Securities Act of 1933, as amended.
4
“Security
Agreement”
means
the Guarantor Security Agreement, dated as of June 30, 2005, by ABW in favor
of
the Agent (as defined in the Credit Facility).
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Security
Interest”
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) mechanic's, materialmen's, and similar liens, (b) liens for
taxes
not yet due and payable or for taxes that the taxpayer is contesting in good
faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
“Seller”
has
the
meaning set forth in the preface above.
“Seller
401(k) Plan”
has
the
meaning set forth in Section 5(e) below.
“Seller
Entities”
has
the
meaning set forth in the preface above.
“Seller
Projects”
means
the projects and jobs that are in-process as of the date of this Agreement
which
represent a portion of the backlog of the Company's work as of the Closing
Date
and are listed in Section 1(c) of the Disclosure Schedule.
“Shared
Claims”
means
the project construction claims, actions, suits, proceedings, charges or
complaints initiated by the Company against general contractors, construction
managers, owners and other Third Parties that are (a) listed in Section 1(d)
of
the Disclosure Schedule, and (b) initiated after the Closing on behalf of the
Company with respect to Seller Projects in accordance with Section 5(j)
hereof.
“Shared
Claims Recovery Amount”
means
the aggregate amount actually paid by any Third Party to the Seller or ABW
in
satisfaction of a Shared Claim minus the aggregate expenses incurred by the
Company prior to the Closing and by the Seller after the Closing, as the case
may be, in connection with such Shared Claim.
“Subsidiary”
means
any corporation (or other entity) with respect to which a specified Person
or a
Subsidiary thereof owns a majority of the common stock (or analogous equity
interest, as applicable) or has the power to vote or direct the voting of
sufficient securities to elect a majority of members of the board of directors
(or analogous governing body, as applicable).
“Tax
Returns”
means
federal, state, foreign and local Tax reports, returns, information returns
and
other documents.
“Taxes”
or
“Tax”
shall
mean all taxes, assessments, charges, duties, fees, levies or other governmental
charges, including, without limitation, all federal, state, local, foreign
and
other income, franchise, profits, capital gains, capital stock, transfer, sales,
use, registration, value added, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of
any
kind whatsoever (whether payable directly or by withholding and whether or
not
requiring the filing of a Tax Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or Affiliated Group or of a contractual obligation to
indemnify any Person.
“Taxing
Authorities”
means
the Internal Revenue Service and any other federal, state or local authority
which has the right to impose Taxes on the Company or a Seller
Entity.
5
“Third
Party”
means
a
Person other than Buyer, Parent, Seller, ABW and any of their respective
Affiliates.
“Third
Party Claim”
has
the
meaning set forth in Section 7(g) below.
“Transferred
Employees”
has
the
meaning set forth in Section 5(e)(i) below.
“Union
Benefit Plan(s)”
has
the
meaning set forth in Section 4(r)(i) below.
“Union
Transferred Employees”
has
the
meaning set forth in Section 5(e)(i) below.
2. PURCHASE
AND SALE OF THE COMPANY SHARES.
(a) Basic
Transaction.
On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell to the Buyer, all of
its
Company Shares for the consideration specified below in this Section
2.
(b) Purchase
Price.
At the
Closing, the Buyer shall pay to the Seller immediately available funds in the
amount of Two Hundred and Fifty Thousand and 00/100 Dollars ($250,000), by
certified check or wire transfer to the Seller's designated account(s) (the
“Purchase
Price”).
The
Purchase Price shall be payable as provided in this Section 2.
(c) The
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of ABW in Whippany, NJ, or the offices of Xxxxx
Xxxxxxxxxxx, Xxx Xxxx Xxxxx - Xxxxx 0000, Xxx Xxxx, XX. The effective date
of
the Closing shall be 11:59 P.M. local time on December 31, 2006 (the
“Closing
Date”).
(d) Deliveries
at the Closing.
At the
Closing, (i) the Seller will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 6(a) below, (ii) the Buyer
will deliver to the Seller the various certificates, instruments, and documents
referred to in Section 6(b) below, (iii) the Seller will deliver to the Buyer
stock certificates representing all of its Company Shares, endorsed in blank
or
accompanied by duly executed assignment documents, and (iv) the Buyer will
deliver to the Seller the Purchase Price.
| 3. |
REPRESENTATIONS
AND WARRANTIES CONCERNING THE SELLER ENTITIES AND THE
BUYER.
|
(a) Representations
and Warranties of the Seller Entities.
Each of
the Seller Entities, jointly and severally, represents and warrants to the
Buyer
that except as set forth in the Disclosure Schedule, the statements contained
in
this Section 3(a) are correct and complete as of the date hereof.
(i) Organization.
Each of
the Seller Entities is duly incorporated and validly existing under the laws
of
the State of Connecticut.
(ii) Authorization
of Transaction. Each
of
the Seller Entities has corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement and all other agreements and transactions
contemplated hereby have been duly authorized by all required corporate
proceedings of each of the Seller Entities and no other corporate proceedings
are necessary to authorize this Agreement and such agreements contemplated
hereby and transactions contemplated hereby and thereby. This Agreement
constitutes the valid and legally binding obligation of each of the Seller
Entities, enforceable in accordance with its
6
terms
and
conditions,
except
to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws
affecting
the enforcement of creditors' rights generally and by general principles of
equity.
(iii) Government
Authorizations.
Except
as set forth in Section 3(a)(iii) of the Disclosure Schedule, neither Seller
Entity is required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in
order to consummate the transactions contemplated by this
Agreement.
(iv) Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which a Seller
Entity is subject or any provision of the charter or bylaws of a Seller Entity
or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement set forth in Section 4(m) of the
Disclosure Schedule, excluding
from the foregoing such requirements, conflicts, defaults, rights or violations
(1) that are not, individually or in the aggregate, reasonably likely to have
a
Material Adverse Effect and would not adversely affect, in any material respect,
the ability of the Seller Entities to consummate the transactions contemplated
by this Agreement or (2) that become applicable as a result of the business
or
activities in which the Buyer engages or proposes to be engaged, or as a result
of any acts or omissions by, or the legal status of or any facts pertaining
to,
the Buyer.
(v) Brokers'
Fees. Neither
Seller Entity has any liability or obligation to pay any fees or commissions
to
any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement.
(vi) Company
Shares.
The
Seller holds of record and owns beneficially the number of Company Shares set
forth in Section 4(b) below, consisting of all of the issued and outstanding
shares of ABW, free and clear of any restrictions on transfer (other than any
restrictions imposed by the Securities Act and state securities laws), taxes,
Security Interests, options, warrants, purchase rights, contracts, or
commitments. Neither Seller Entity is 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 capital stock of the Company (other than
this Agreement). Neither Seller Entity is a party to any voting trust, proxy,
or
other agreement or understanding with respect to the voting of any capital
stock
of the Company, and there are no shares, options, warrants, purchase rights
or
rights of legal or beneficial ownership of Company Shares in any other Person
which are not being transferred by the Seller Entities pursuant to this
Agreement.
(vii) Litigation. There
is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of the Seller Entities, threatened against or affecting the Seller
Entities before any court or arbitrator or any governmental body, agency or
official which challenges or seeks to prevent, enjoin, alter or delay, in any
material respect, the consummation of the transactions contemplated by this
Agreement.
(b) Representations
and Warranties of the Buyer.
The
Buyer
represents and warrants to the Seller Entities that the statements contained
in
this Section 3(b) are correct and complete as of the date
hereof.
7
(i) Organization
of the Buyer.
The
Buyer is a corporation duly organized and validly existing under the laws of
the
jurisdiction of its incorporation.
(ii) Authorization
of Transaction. The
Buyer
has corporate power and authority to execute and deliver this Agreement and
to
perform its obligations hereunder. The execution, delivery and performance
of
this Agreement and all other agreements and transactions contemplated hereby,
have been duly authorized by all required corporate proceedings of the Buyer
and
its Affiliates, and no other corporate proceedings are necessary to authorize
this Agreement and such agreements contemplated hereby and the transactions
contemplated hereby and thereby. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions,
except
to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(iii)
Government
Authorizations.
The
Buyer is not required to give any notice to, make any filing with, or obtain
any
authorization, consent, or approval of any government or governmental agency
in
order to consummate the transactions contemplated by this
Agreement.
(iv) Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Buyer is a party or by which it is bound
or to
which any of its assets is subject, except
for requirements, conflicts, defaults, rights or violations that, individually
or in the aggregate, would not materially impair the ability of Buyer to perform
its obligations hereunder.
(v) Brokers'
Fees.
The
Buyer has no liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this
Agreement.
(vi) Investment.
The
Buyer
is purchasing the Company Shares for its own account and is not acquiring the
Company Shares with a view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act. The Buyer
has
no present intention of selling, granting any participation in, or otherwise
distributing any of the Company Shares. None of the Buyer or its Affiliates
has
entered into any contract, undertaking, agreement or arrangement with any Person
for resale of any of the Company Shares. The Buyer acknowledges that the
offering of the Company Shares pursuant to this Agreement has not been and
will
not be registered under the Securities Act or any state securities or blue
sky
laws on the grounds that the offering and sale of the Company Shares
contemplated by this Agreement is exempt from registration pursuant to
exemptions available under such laws, and that the Seller's reliance upon such
exemptions is predicated in part upon the Buyer's representations set forth
in
this Agreement. The Buyer is an “accredited investor” within the meaning of
Regulation D promulgated under the Securities Act, and has the knowledge and
experience necessary to evaluate the merits and risks of an investment in the
Company Shares and the consummation of the transactions contemplated
hereby.
8
(vii) Litigation.
There
is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of the Buyer, threatened against or affecting the Buyer before any
court or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or delay the consummation
of the transactions contemplated by this Agreement.
(viii) Disclaimers.
The
Buyer acknowledges that other than as set forth in Section 4 of this Agreement,
neither the Parent, the Seller nor any of their respective shareholders or
Affiliates, or the Representatives thereof, makes or has made any representation
or warranty, either express or implied, as to the accuracy or completeness
of
any of the information provided or made available to the Buyer or its
shareholders or Affiliates, or the Representatives thereof.
(ix) Legal
Compliance.
The
Buyer is in compliance with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, and local governments (and all agencies thereof),
except where the failure to comply would not have a material adverse effect
upon
the ability of the Buyer to perform its obligations under this Agreement. The
Buyer holds and is in compliance with all permits, licenses, approvals, and
authorizations of governmental authorities, required for the conduct of its
business as currently conducted, except to the extent that any failure to so
hold or comply would not reasonably be expected to have a material adverse
effect upon the Buyer following the Closing. There are no required permits,
licenses, approvals or authorizations of governmental authorities required
to
consummate the transactions contemplated hereunder.
(xi) Adequate
Funds.
The
Buyer currently has and will at the Closing have sufficient cash and cash
equivalents and will have at the Closing sufficient immediately available funds,
in cash, to pay the Purchase Price, to provide the Company with sufficient
working capital and to pay any other amounts payable by the Buyer pursuant
to
this Agreement and to effect the transactions contemplated hereby.
| 4. |
REPRESENTATIONS
AND WARRANTIES CONCERNING THE COMPANY.
|
The
Parent and the Seller represent and warrant to the Buyer that except as set
forth in the Disclosure Schedule, each of the statements contained in this
Section 4 are correct and complete as of the date of this Agreement. The
exceptions, modifications and disclosures made in any Section of the Disclosure
Schedule are made for all purposes of this Agreement notwithstanding the fact
that no express cross-reference is made provided that the applicability of
any
disclosure to another section of the Disclosure Schedule is reasonably
apparent.
(a) Organization
of the Company.
The
Company is a corporation duly organized and validly existing under the laws
of
the jurisdiction of its incorporation and has
full
power and authority to carry on the businesses in which it is engaged and to
own, lease and use the properties owned, leased and used by it, except
where any such failure to be so organized or formed and existing or to have
such
power and authority would not individually or in the aggregate have a Material
Adverse Effect. The
Company
is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of
such
qualification would not have a Material Adverse Effect.
9
(b) Capitalization.
(i) Company.
The
authorized capital stock of the Company and the number of Company Shares issued
and outstanding are as set forth in Section 4(b) of the Disclosure Schedule.
All
of the issued and outstanding Company Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
Seller. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the capital stock of the
Company.
(ii)
Subsidiaries.
The
Company does not have any Subsidiaries and the Company does not otherwise own
or
control, directly or indirectly, any equity or similar interest or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in any Person. The Company is not party to any contract or agreement
to
acquire or purchase any other corporation or entity.
(c) Noncontravention.
Except
as set forth in Section 4(c) of the Disclosure Schedule, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Company is subject
or any provision of the charter or bylaws of the Company or (ii) conflict with,
result in a breach of, constitute a default under, or result in the acceleration
of any agreement, contract, lease, license, instrument, or other arrangement
to
which the Company is a party or by which it is bound or to which any of its
assets is subject, except where the violation, conflict, breach, default, or
acceleration would not have a Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated
by this Agreement. Except as set forth in Section 4(c) of the Disclosure
Schedule, the Company is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) Brokers'
Fees.
The
Company does not have any liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement.
(e) Title
to Assets.
Except
as set forth in Section 4(e) of the Disclosure Schedule, the Company has good
and marketable title to, or a valid leasehold interest in, the properties and
assets used by it, located on its premises, or shown on the Most Recent
Financial Statements, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business since
the
date of the Most Recent Financial Statements and except as provided in the
Security Agreement.
(f) Financial
Statements.
Copies
of the following financial statements are attached to Section 4(f) of the
Disclosure Schedule: (i) the unaudited balance sheet and statements of income,
shareholder equity, and cash flows as of and for the for the fiscal year ended
December 31, 2005 for the Company (the “Annual
Financial Statements”);
and
(ii) an unaudited balance sheet and statements of income, shareholder equity
and
cash flows, as of and for the nine months ended September 30, 2006 for the
Company (the “Most
Recent Financial Statements”
and,
together with the Annual Financial Statements, the “Financial
Statements”).
September 30, 2006 is sometimes referred to herein as the “Most
Recent Fiscal Month End.”
The
Financial
10
Statements
(including the notes thereto) have been prepared in accordance with GAAP on
a
consistent basis through the periods presented in the
Financial
Statements and present fairly, in all material respects, the financial condition
of the Company (as applicable) as of such dates and the results
of
operations of the Company (as applicable) for such periods; provided,
however,
that
the Most Recent Financial Statements are subject to normal
year-end
adjustments which are not reasonably expected to be material in the aggregate
and lack footnotes and other presentation items. The
Financial
Statements contain all labor and material and equipment costs of the Company
with respect to Seller Projects which have been incurred but
not
paid
on or prior to the Closing Date.
(g) Undisclosed
Liabilities.
Except
(i) for liabilities and obligations incurred in the Ordinary Course of Business
since the date of the Most Recent Financial Statements, (ii) as otherwise
disclosed herein or in Section 4(g) of the Disclosure Schedules, and (iii)
as
and to the extent disclosed or reserved against in the balance sheet of the
Company for the Most Recent Fiscal Month End, since the Most Recent Fiscal
Month
End, the Company has not incurred any liabilities or obligations (whether
direct, indirect, accrued or contingent) that would, individually or in the
aggregate, be required to be reflected or reserved against in a balance sheet
of
the Company prepared in accordance with GAAP.
(h) Events
Subsequent to Most Recent Fiscal Month End.
Since
the
Most Recent Fiscal Month End, there has not been any event or occurrence that
has had, or is reasonably likely to have, a Material Adverse Effect and the
Company has not:
(i)
become legally obligated to sell, assign or otherwise transfer any of its
material assets or properties, other than in the Ordinary Course of
Business;
(ii)
made
any acquisition of all of the capital stock (whether by merger or otherwise)
or
all or substantially all of the assets of any Person;
(iii)
subjected any material asset to a Security Interest;
(iv)
amended or authorized any amendment to its charter or bylaws;
(v)
incurred any indebtedness for borrowed money from a non-affiliated Person or
incurred any liability (contingent or otherwise) in excess of $10,000, other
than trade payables incurred in the Ordinary Course of Business;
(vi)
declared or made any payment or distribution to the Seller, other than in
connection with the Seller advancing funds to, and sweeping cash of, the Company
pursuant to the Seller’s cash management system with Bank of America in the
Ordinary Course of Business;
(vii)
issued, sold, pledged, disposed of, or encumbered any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire any shares of the capital
stock of the Company;
(viii)
made any change to its accounting policies, principles or practices other than
as required by law or changes in GAAP;
(ix)
made
any loans to any Persons other than advances for business expenses in the
Ordinary Course of Business;
11
(x)
entered into, adopted, amended or terminated any bonus, profit sharing,
compensation or stock option/ownership plan, severance or other Employee Benefit
Plan or other arrangement for the benefit of any director, officer or employee,
or increased in any manner the compensation or fringe benefits of any director
or officer, other than as required under any employment agreement listed in
Section 4(m) of the Disclosure Schedule;
(xi)
waived any right in any contract listed in Section 4(m) of the Disclosure
Schedule, the waiver of which would reasonably be expected to materially detract
from the value of such contract to the Company;
(xii)
become obligated to take any of the actions specified in subparagraphs (i)
through (xi) above; or
(xiii)
incurred any account payable which is not listed in the Disclosure
Schedule.
(i) Legal
Compliance.
The
Company is in compliance in all material respects with
all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
and local governments (and all agencies thereof). Except as set forth in Section
4(i) of the Disclosure Schedule, the Company holds and is in compliance in
all
material respects with
all
permits, licenses, approvals, and authorizations of governmental authorities
required for the conduct of its business as currently conducted.
(j) Tax
Matters.
(i) Except
as
set forth in Section 4(j)(i) of the Disclosure Schedule, all federal Income
Tax
Returns required to be filed in respect of the Company’s Affiliated Group prior
to the Closing Date have been filed and all Income Taxes shown thereon have
been
paid.
All such
Income Tax Returns were correct and complete in all material respects. All
material Income Taxes owed by a Seller Entity or the Company (whether or not
shown on any Tax Return) have been paid. Except as described above in this
subparagraph (i), neither the Parent, the Seller nor the Company is currently
the beneficiary of any extension of time within which to file any Income Tax
Return. No written claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) The
Company has filed all state and local Income Tax Returns that it was required
to
file prior to the date hereof, and has paid or has identified and reserved
on
the Most Recent Financial Statements adequate funds for the payment of all
Income Taxes shown thereon as owing.
(iii) The
Company has not waived any statute of limitations in respect of Income Taxes
or
agreed to any extension of time with respect to an Income Tax assessment or
deficiency.
12
(iv) The
Company has withheld and paid all Taxes required to have been withheld and
paid
by it, except payroll taxes which are not due as of the Closing Date and which
have been accurately reflected as liabilities on the Most Recent Financial
Statements.
(v) There
is
no dispute or claim concerning any material liability in respect of any Tax
of a
Seller Entity or the Company either (A) claimed or raised by any authority
in
writing or (B) as to which the Seller Entities have Knowledge.
(vi) Neither
the Parent, the Seller nor the Company has filed a consent under Code § 341(f)
concerning collapsible corporations. Neither the Parent, the Seller nor the
Company has been a United States real property holding corporation within the
meaning of Code § 897(c)(2) during the applicable period specified in Code
§897(c)(1)(A)(ii). To the Knowledge of the Seller Entities, the Seller Entities
and the Company have disclosed on their respective federal Income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal Income Tax within the meaning of Code § 6662. Neither the Parent, the
Seller nor the Company is a party to any Tax allocation or sharing agreement
which will not be terminated on or before the Closing Date.
(vii) The
unpaid Taxes of the Company did not, as of the Most Recent Fiscal Month End,
materially exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Financial Statements (rather
than in any notes thereto).
(k) Real
Property.
(i) The
Company does not own any real property (the “Real
Property”).
(ii) Section
4(k)(ii) of the Disclosure Schedule lists and briefly describes all parcels
of
Real Property leased or subleased to the Company by any other Person. The Seller
Entities have made available to the Buyer correct and complete copies of the
leases and subleases listed in Section 4(k)(ii) of the Disclosure Schedule
and:
(A) each
such
lease or sublease is legal, valid, binding, enforceable, and in full force
and
effect;
(B)
the
consummation of the transactions contemplated hereby is not an event of default
under any such lease or sublease;
(C)
the
Company is not, and to the Knowledge of the Seller Entities, no other party
to
any such lease or sublease is, in breach or default and no event has occurred
which, with notice or lapse of time, would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D)
the
Company has not, and to the Knowledge of the Seller Entities, no other party
to
any such lease or sublease, has repudiated any provision thereof;
(E)
there
are
no oral agreements or forbearance programs in effect as to any such lease or
sublease; and
(F) the
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold or subleasehold.
13
(l) Intellectual
Property.
(i)
The
Company has not interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of third parties in any material
respect, and neither Seller Entity has received any written charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of the Seller Entities, no third party has interfered
with, infringed upon, misappropriated, or violated any material Intellectual
Property rights of the Company in any material respect.
(ii) Section
4(l)(ii) of the Disclosure Schedule identifies each patent and trademark
registration which has been issued to the Company with respect to any of its
Intellectual Property, identifies each pending patent or trademark application
which the Company has made with respect to any of its Intellectual Property,
and
identifies each material license, agreement, or other permission which the
Company has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). Section 4(l)(ii) of the Disclosure
Schedule also identifies each material trade name or unregistered trademark
used
by the Company in connection with any of its businesses. With respect to each
item of Intellectual Property required to be identified in Section 4(l)(ii)
of
the Disclosure Schedule:
(A) the
Company possesses all right, title, and interest in and to the item, free and
clear of any Security Interest, license, or other restriction;
(B) the
item
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge; and
(C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or, to the Knowledge of the Seller Entities, is threatened
which challenges the legality, validity, enforceability, use, or ownership
of
the item.
(iii) Section
4(l)(iii) of the Disclosure Schedule lists and briefly describes all licenses,
sublicenses, agreements, and permissions (as amended to date), with respect
to
each material item of Intellectual Property that any third party owns and that
the Company presently uses pursuant to license, sublicense, agreement, or
permission, except for “Shrink-wraps” and similar widely available binary code
and commercial end-user licenses. The Company is in material compliance with
the
terms of such Shrink-wrap licenses. With respect to each item of Intellectual
Property required to be identified in Section 4(l)(iii) of the Disclosure
Schedule:
(A) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) the
Company is not, and to the Knowledge of the Seller Entities, no other party
to
the license, sublicense, agreement, or permission is in material breach or
default and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification,
or
acceleration thereunder; and
(C) the
Company has not, and to the Knowledge of the Seller Entities, no other party
to
the license, sublicense, agreement, or permission has repudiated any material
provision thereof.
14
(iv) All
Intellectual Property created at the
Company
or any predecessor in interest, or by any employee or consultant working for
the
Company,
has been assigned to the Company and such assignor is contractually obligated
to
assist the Company in registering any such Intellectual Property
rights.
(m) Contracts.
With
respect to each of the contracts listed in Section 4(m) of the Disclosure
Schedule: (A)
the
agreement is legal, valid, binding, enforceable, and in full force and effect
as
to the Company; (B) neither the Company nor, to the Knowledge of the Seller
Entities, any other party is in material breach or default, and to the Knowledge
of the Seller Entities, no event has occurred which with notice or lapse of
time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) to the Knowledge
of
the Seller Entities, no party has repudiated any material provision of the
agreement. Section 4(m) of the
Disclosure Schedule lists the following contracts and other agreements in effect
on the date hereof to which the
Company
is a party:
(i) any
agreement (or group of related agreements) for the lease of real or personal
property to or from any Person providing for lease payments in excess of $10,000
per annum;
(ii) any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of more than one year or involve consideration in excess of
$10,000;
(iii) any
agreement (or group of related agreements) under which the Company has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $10,000 or under which it has imposed
a Security Interest on any of its assets, tangible or intangible, other than
the
Bank Guarantee and the Security Agreement, which will be released at
Closing;
(iv) any
written agreement concerning confidentiality or noncompetition;
(v) any
agreement with a Seller Entity or another Affiliate of the Company;
(vi) any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit
of its current or former directors, officers, and employees;
(vii) any
collective bargaining agreement (each a “Collective
Bargaining Agreement”
and
collectively the “Collective
Bargaining Agreements”);
(viii) any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $10,000
or
providing severance benefits;
(ix) any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(x) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Material Adverse Effect; or
15
(xi) any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $10,000 in
the
aggregate.
(n) Guaranties.
The
Company is a guarantor under the Credit Facility, the lien of which will be
released at the Closing. Except as set forth in the immediately preceding
sentence, the Company is not a guarantor of any liability or obligation
(including indebtedness) of any other Person.
(o) Tangible
Assets.
The
Company owns or leases all buildings, machinery, equipment, and other tangible
assets reasonably necessary for the conduct of its business as presently
conducted.
(p) Litigation.
Section
4(p) of the Disclosure Schedule sets forth each instance in which the
Company
is subject to any outstanding injunction, judgment, order, decree, ruling,
or
charge. Except as set forth in Section 4(p) of the Disclosure Schedule, there
are no actions or suits, or any administrative, arbitration or other proceedings
pending, or, to the Knowledge of the Seller Entities, threatened, against
the
Company,
or any of its properties, assets and business operations, as of the date hereof,
by or before any court, governmental or regulatory authority or by any third
party.
(q) Employees.
(i) Except
as
provided in Section 4(q)(i) of the Disclosure Schedule, there is no charge,
action, complaint, or proceeding pending, or to the Knowledge of the Seller
Entities, threatened, against the
Company
relating to the alleged violation of any applicable state or federal labor
or
employment law or regulation, including any charge or complaint filed by any
employee or labor organization with the National Labor Relations Board, the
Equal Employment Opportunities Commission, or any other governmental
agency.
(ii) There
is
no pending strike,
slow-down, picketing, or work stoppage by employees of the Company, nor is
there
any pending lockout by the
Company
of any its employees.
(iii) There
is
no pending organizing activity or petition for certification by or on behalf
of
any labor organization with respect to employees of the
Company.
To the Knowledge of the Seller Entities, the Company is not in material
violation of any union contract or project labor agreement to which it is a
signatory or party.
16
(r) Employee
Benefits.
(i) Attached
hereto in Section 4(r) of the Disclosure Schedule is a true and complete list
of
each “employee benefit plan,” as defined in Section 3(3) of ERISA, each bonus,
incentive, profit sharing, deferred compensation, excess benefit, supplemental
retirement, change-in-control, employment contract, stock purchase, stock
ownership, stock option, stock appreciation, supplemental unemployment,
vacation, sick-day, severance and other material employee benefit or fringe
benefit plan, program or arrangement that provides benefits or compensation
in
respect of any employee or former employee of the
Company
or the beneficiaries or the dependents of any such employee or former employee
(hereinafter individually, an “Employee”
and
collectively, the “Employees”)
or
under which any Employee is or may become eligible to participate or derive
a
benefit and that is or has been maintained or established by the
Company,
(collectively, the “Employee
Benefit Plans”).
Also
attached hereto in Section 4(r) of the Disclosure Schedule is a true and
complete list of each employee benefit plan, as defined in Section 3(3) of
ERISA, to which the Company is obligated to contribute pursuant to a Collective
Bargaining Agreement (each a “Union
Benefit Plan”,
and
collectively the “Union
Benefit Plans”).
(ii) A
copy of
each Employee Benefit Plan and Union Benefit Plan listed in Section 4(r) of
the
Disclosure Schedule, the summary plan descriptions and in the case of an
unwritten Employee Benefit Plan, a written description thereof, the most recent
determination letter received from the Internal Revenue Service, the most recent
annual report (IRS Form 5500), and all related trust agreements, insurance
contracts, and other funding arrangements which implement each such Employee
Benefit Plan has been furnished or made available to the Buyer.
(iii) Each
single employer Employee Benefit Plan that is intended to be a tax-qualified
deferred compensation plan under Section 401(a) of the Code has either received
a determination letter from the Internal Revenue Service to the effect that
it
meets the requirements of said Code Section and that its related trust is exempt
from taxation under Section 501(a) of the Code, or is an adopter of a “prototype
plan” and an opinion letter has been issued to the prototype sponsor of the plan
on which the Company is entitled to rely.
(iv) Each
of
the single employer Employee Benefit Plans listed in Schedule 4(r) of the
Disclosure Schedule (A) complies in all material respects with the requirements
of all applicable laws, including, without limitation, ERISA and the Code,
and
(B) has at all times been maintained and operated in compliance in all material
respects with its terms and the requirements of all applicable laws, including
without limitation ERISA and the Code. The Company is not obligated to create,
modify or terminate any Employee Benefit Plan listed in Section 4(r) of the
Disclosure Schedule, and no condition or circumstance exists that would prevent
the amendment or termination of any Employee Benefit Plan listed in Section
4(r)
of the Disclosure Schedule, other than any plan that is a multiemployer pension
plan .
(v) Neither
Seller Entity nor the Company, has incurred any liability to the Pension Benefit
Guaranty Corporation (other than contributions to the plan and premiums to
the
Pension Benefit Guaranty Corporation, which in either event are not in default)
or any withdrawal liability within the meaning of Section 4201 of ERISA, or
any
other liability pursuant to Title I or IV of ERISA or the penalty, excise tax
or
joint and several
17
liability
provisions of the Code relating to employee benefit plans, in any such case
relating to any Employee Benefit Plan or Union Benefit Plan.
(vi) Except
as
set forth on Section 4(r) of the Disclosure Schedule, the Company has made
all
required contributions on a timely basis as of the Closing, or properly accrued
such amounts on the financial statements of the Company for the year in which
the Closing occurs.
(vi) The
consummation of the transaction in accordance with its terms will not result
in
a withdrawal or partial withdrawal.
(vii) The
Company represents and warrants that it has not, and does not provide for any
post-employment medical benefits to the extent any former employee or former
owner (including retirees and semi-retired employees or their dependents have
participated in Company Employee Welfare Plans, except as specifically required
under Section 4980B of the Code with respect to continuation of
coverage.
(viii) No
such
single employer Company Employee Benefit Plan has incurred any accumulated
funding deficiency (within the meaning of ERISA or the Code).
(ix) There
has
been no complete or partial termination of any Company Employee Benefit Plan.
(x) Except
as
set forth in Section 4(r)(x) of the Disclosure Schedule, none of the Company
Employee Benefit Plans provides for additional or accelerated payments or other
consideration to be made on account of the transactions contemplated
hereby.
(xi) No
suit,
action, claim, proceeding, investigation or arbitration has been made or
instituted or, to the Knowledge of the Sellers, threatened, with respect to
any
Company Employee Benefit Plan or any assets thereof; except for routine claims
for benefits made in accordance with the terms thereof.
(s) Environmental,
Health, and Safety Matters.
(i) Except
as
disclosed in Section 4(s) of the Disclosure Schedule, the Company has complied
in all material respects with all Environmental, Health, and Safety
Requirements.
(ii) To
the
Knowledge of the Seller Entities, none of the following exists at any property
or facility operated by the Company: (A) underground storage tanks, (B) friable
asbestos or friable-asbestos-containing material, (C) materials or equipment
containing polychlorinated biphenyls, or (D) landfills, surface impoundments,
or
disposal areas.
(iii) To
the
Knowledge of the Seller Entities, the Company has not treated, stored, disposed
of, transported, handled, or released any substance the treatment, storage,
disposal, transport, handling or release of which is governed or otherwise
regulated by any Environmental, Safety or Health Requirement, including without
limitation any Hazardous Substance.
(iv) To
the
Knowledge of the Seller Entities, the Company does not own any property or
facility contaminated by any substance referred to in Paragraph 4(s)(iii) above,
such as to give rise to Adverse Consequences, including any liability for
response costs,
18
corrective
action costs, personal injury, property damage, natural resources damages or
attorney fees, pursuant to CERCLA or any other Environmental, Health, and Safety
Requirements.
(t) Notes
and Accounts Receivable.
All
notes and accounts receivable of the Company are reflected properly on its
books
and records. All accounts receivable reflected on the balance sheet at the
Most
Recent Fiscal Month End or on such books have been generated in the Ordinary
Course of Business and reflect bona fide obligations for the payment of goods
or
services provided by the Company.
(u) Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of the
Company.
(v) Insurance.
The
Company has been covered during the past six (6) years by insurance in scope
and
amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. The Seller has delivered or made available
to
the Buyer complete and correct copies of all such policies together with all
riders and amendments thereto. Such policies are in full force and effect,
and
all premiums due thereon have been paid. The Company has complied in all
material respects with the terms and provisions of such policies. Section 4(v)
of the Disclosure Schedule describes any self-insurance arrangements affecting
the Company.
(w) Minute
Books.
The
minute books of the Company, which have been made available to the Buyer, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. At the Closing, all of those books
and
records will be in the possession of the Buyer.
(x) Disclosure.
The
representation and warranties of the Seller Entities contained in this Agreement
including the Disclosure Schedule, do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated herein
or
necessary in order to make the statements and information contained herein,
in
light of the circumstances in which they were made, not misleading.
(y) Disclaimer
of Other Representations and Warranties.
Except
as expressly set forth in Section 3(a) and this Section 4, neither the Seller
Entities nor any of their respective Affiliates or Representatives make any
representation or warranty, express or implied, at law or in equity, with
respect to any
of
its or their respective assets, liabilities or operations or the Company,
including, without limitation, representations and warranties of merchantability
or fitness for any particular purpose, title, or non-infringement, and any
such
other representations or warranties are hereby expressly
disclaimed.
5. POST-CLOSING
COVENANTS.
The
Parties agree as follows with respect to the period following the Closing.
(a) General.
In case
at any time after the Closing any further action is necessary or desirable
to
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled
to
indemnification therefor under Section 7 below). The Seller Entities acknowledge
and agree that from and after the Closing, the Buyer will be entitled to
possession of all documents, books, records, agreements, and financial data
of
any sort relating solely to the Company, provided that the Seller Entities
may
retain copies of such documents, books, records, agreements, and financial
data
to the extent necessary to perform its obligations
19
under
Section 5(j) hereof. The Buyer agrees to provide the Seller Entities with
reasonable access to all documents, books and records of the Company for
purposes of the preparation of the Closing Date Balance Sheet and any Tax
Returns by the Seller Entities after the Closing and for any other reasonable
purpose.
(b) Litigation
Support.
In the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act
or
transaction on or prior to the Closing Date involving the Company, other than
a
Shared Claim, each of the other Parties will cooperate with such Party, its
Affiliates and their counsel in the contest or defense, make available their
personnel and provide such testimony and access to their books and records
as
shall be reasonably necessary in connection with the contest or defense, all
at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 7 below).
(c) Transition.
Except
as otherwise provided herein, the Seller Entities will refer all customer
inquiries relating to the Company to the Buyer from and after the
Closing.
(d) Collective
Bargaining Agreements and Related Obligations.
Effective as of the Closing Date, the Buyer shall cause the Company to take
all
actions necessary for it, and the Company, to be a successor employer and to
assume all liabilities under the Collective Bargaining Agreements, to continue
to contribute to all Union Benefit Plans and to comply with the terms of such
agreements.
(e) Employee
Benefit Plans.
(i) Except
as
set forth below in this Section 5(e), the Buyer will cause the Company to
continue to employ the non-union employees of ABW as of the Closing Date (the
“Non-Union
Transferred Employees”)
and
the collectively bargained employees of ABW (the “Union
Transferred Employees”
and
together with the Non-Union Transferred Employees, the “Transferred
Employees”),
with
the understanding that such employment shall be “at will” for all employees
other
than those with employment agreements set forth in Section 4(m)(vii) of the
Disclosure Schedule and other than as may be required by the terms of any
Collective Bargaining Agreement. The Buyer and the Company will use reasonable
best efforts to enroll or cause the enrollment of all Non-Union Transferred
Employees in the I E Xxxxxxx 102 Health Plan. To the extent that the Collective
Bargaining Agreements contain provisions pertaining to employee benefits, the
Company shall provide the Union Transferred Employees with benefits that are
identical to those required to be provided under the terms of such Collective
Bargaining Agreements, as the same shall be amended from time to time. To the
extent that the Employee Benefit Plans of the Company shall by their terms
allow
or to the extent required by any Collective Bargaining Agreement with respect
to
the Union Transferred Employees, the Buyer shall cause the Company to treat
all
service and compensation credited to each such Transferred Employee with the
Seller and its Affiliates as if such service and compensation had been rendered
to, and paid by, the Company for all purposes under the Company’s benefit plans,
arrangements, and policies. The
Buyer
shall cause the Company to assume responsibility for the vacation time and
sick
leave benefits due to the Transferred Employees as of the Closing Date that
are
dedicated to the Seller Projects, provided, however, that such costs may be
deemed costs to complete the Seller Projects.
20
(ii) The
Seller shall be responsible and liable for the expense of all workers’
compensation claims that arise out of any injury sustained by an employee of
the
Company prior to the Closing Date. The Buyer or the Company shall be liable
for
the expense of all other workers’ compensation claims
incurred
on or after the Closing Date.
(iii) The
Seller shall, subject to the consummation of the transactions contemplated
by
this Agreement, take whatever action is reasonably necessary or appropriate
to
terminate as of the Closing Date (except as otherwise set forth in this
Agreement), the participation of the Company with respect to the Transferred
Employees in all Employee Benefit Plans of the Seller Entities.
(iv) Effective
as of the Closing Date, the Transferred Employees shall no longer make
contributions or receive matching contributions in the Seller’s 401(k) Plan (the
“Seller
401(k) Plan”),
and
Seller shall have taken all such action prior to the Closing Date as may be
reasonably required to achieve this result. Each Transferred Employee shall,
as
of the Closing Date, become fully vested in his or her account balance under
the
Seller’s 401(k) Plan.
(v) Transferred
Employees shall receive credit under the Buyer Welfare Plans for co-payments,
deductibles, and out-of-pocket maximums to the extent satisfied by the
Transferred Employees during the plan year in which the Closing Date occurs
and
to the extent required in any Collective Bargaining Agreement.
(f) Confidentiality.
The
Parties will treat and hold as such all of the Confidential Information of
the
other Parties, refrain from using any such Confidential Information except
in
connection with this Agreement, and deliver promptly to the Buyer or the Seller
Entities, as the case may be, or destroy (and certify the destruction in
writing), at the request and option of the Buyer or the Seller Entities, as
applicable, all tangible embodiments (and all notes, summaries and copies)
of
such Confidential Information which are in its possession. In the event that
any
Party is requested or required (by oral question or request for information
or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process) to disclose any Confidential Information of another
Party, that Party will notify the applicable Party promptly of the request
or
requirement so that the applicable Party may seek an appropriate protective
order or waive compliance with the provisions of this Section 5(f). If, in
the
absence of a protective order or the receipt of a waiver hereunder, any Party
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal, that Party may disclose the Confidential Information to the
tribunal; provided,
however,
that
the disclosing Party shall use its reasonable best efforts to obtain, at the
reasonable request of the applicable Party, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the applicable Party shall
designate.
(g) Access
to Information.
In
addition to any other information or audit rights hereunder, for a period of
six
(6) years after the Closing Date, upon reasonable notice, the Parties agree
to
furnish or cause to be furnished to each other and their respective
Representatives access, during normal business hours, to such information
(including records pertinent to the Company) and assistance relating to the
Company as is reasonably necessary for financial reporting and accounting
matters, the valuation of any claim for indemnification under Section 7 hereof,
the preparation and filing of any Tax Returns, reports or forms or the defense
of any Tax claim or assessment; provided,
however,
that
such access does not unreasonably disrupt the normal operations of the Party
or
Parties furnishing cooperation; provided
further,
however,
that
the Party requesting cooperation shall pay the reasonable out-of-pocket costs
incurred by the Party or Parties furnishing cooperation.
21
(h) Nonassignable
Contracts and Permits.
To the
extent that any contract or permit (including any consent, approval or
authorization of any governmental authority) for which assignment to the Buyer
is provided for in this Agreement is not assignable without the consent of
another Person, including an applicable governmental authority, this Agreement
shall not constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof. The Seller
Entities and the Buyer shall continue to use their commercially reasonable
efforts to obtain the consent of such other Person to the assignment of any
such
contract or permit to the Buyer in all cases in which such consent is or may
be
required for such assignment. If such consent shall not be obtained, the Seller
Entities and the Buyer shall cooperate with each other in any reasonable
arrangement designed to provide the Buyer with the benefits under any such
contract or permit to the extent lawful and the Buyer shall be obligated to
perform the obligation with respect thereto, any other provision of this
Agreement to the contrary notwithstanding.
(i) Surety
Bonds. The
Seller Entities shall be responsible for payment to each surety with respect
to
the obligations of each of the Seller Entities, the Company and each of their
respective Affiliates, under all surety bonds in respect of the Seller Projects
only (“Bonds”).
If,
after the Closing Date, the Buyer or the Company requests or seeks a change
order with respect to a Seller Project, and such change order is not a Required
Change Order, then Buyer and the Company shall either (i) cause the owner or
general contractor for such Seller Project to open a new project or job directly
with the Buyer or the Company and such project or job shall be deemed a Buyer
Project for all purposes hereunder, or (ii) abandon such change order. The
Buyer
shall be responsible for payment to each surety with respect to the Company's
obligations under all surety bonds in respect of the Buyer Projects.
(j)
Shared
Claims.
From
and after the Closing Date, the Seller shall be responsible for managing and
pursuing Shared Claims in Seller's sole discretion. The Seller shall be
responsible for all legal expenses, fees, project management costs or consulting
costs incurred by it arising from such Shared Claims. The Buyer shall not incur,
nor permit the Company to incur, any expenses relating to such Shared Claims
without the prior written consent of the Seller. If, after the Closing Date,
the
Buyer or the Company desires to initiate a project construction claim, action,
suit, proceeding, charge or complaint against a general contractor, construction
manager, owner or other Third Party with respect to a Seller Project, then
prior
to taking any action with respect thereto, Buyer shall discuss the merits of
such claim, action, suit, proceeding, charge or complaint with Parent. Parent
shall determine in its sole discretion whether to pursue such claim, action,
suit, proceeding, charge or complaint and shall consider in good faith Buyer's
recommendations, including Buyer's evaluation of the merits and selection of
counsel. If any such claim, action, suit, proceeding, charge or complaint is
initiated by Seller or the Parent, then such claim, action, suit, proceeding,
charge or complaint shall be deemed a Shared Claim for all purposes hereunder.
The Buyer hereby agrees to cooperate with the Seller and the Seller Entities
and
their counsel, make available their personnel (including the personnel of ABW)
and provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the pursuit of any Shared Claim. The
Seller may pursue, settle or abandon any Shared Claim in its sole discretion.
Any proceeds or settlement of a Shared Claim shall be allocated as follows:
(a)
until such time as the Shared Claims Recovery Amount plus the Project Savings
equals $4,000,000 and Parent/Seller has received any and all amounts of the
Shared Claims Recovery Amount and the Project Savings to which it is entitled
under this Agreement, one hundred percent (100%) to the Parent/Seller, and
(b)
at all times thereafter, in accordance with Section 5(l) below. The Parties
hereby acknowledge that Seller shall be entitled to first recover all expenses
incurred by the Company and the Seller Entities in connection with all Shared
Claims. If, after the Closing Date, the Buyer proposes to pursue or initiate
a
claim with respect to a Seller Project against a Third Party, and the Seller
or
Parent declines to pursue or
22
initiate
such claim, then the Buyer may cause the Company to file such a claim in the
name of the Company, provided that (i) the Buyer and the Company agree to
indemnify and hold the Seller and Parent harmless from any and all costs,
losses, expenses, attorneys fees and counterclaims arising therefrom, (ii)
any
amounts collected from such Third Party are divided equally between the Buyer
and the Parent and are not be deemed to be a part of the Shared Claims Recovery
Amount, and (iii) the Buyer's or Company's costs with respect to such claim
are
not a Reimbursable Expense (as defined in Exhibit
B).
(k) Project
Savings.
Attached hereto as Exhibit A is an estimated budget agreed upon by the Parties
of the cost to complete each of the Seller Projects (the "Approved
Budget").
The
Approved Budget shall be used by the Parties to monitor the progress of the
work
on the Seller Projects. If a Required Change Order is issued after the date
hereof, then the Approved Budget shall be adjusted to reflect such Required
Change Order. Upon completion of all of the Seller Projects, which is expected
to occur in the fourth quarter of calendar year 2007, the Buyer shall provide
the Seller Entities with the customary documentation of all costs to complete
the Seller Projects. Such documentation and costs shall be subject to the audit
program set forth in Section 5(q) and the Seller Entities' audit rights set
forth in Exhibit
C.
If all
of the Seller Projects are completed at a cost of less than the amount that
is
provided for in the Approved Budget, then such savings (the "Project
Savings")
shall
be shared by the Buyer and the Parent and allocated as follows: (a) until such
time as the Shared Claims Recovery Amount plus the Project Savings equals
$4,000,000 and Parent/Seller has received any and all amounts of the Shared
Claims Recovery Amount and the Project Savings to which it is entitled under
this Agreement, one hundred percent (100%) to the Parent/Seller, and (b) at
all
times thereafter, in accordance with Section 5(l) below.
(l) Gains
Sharing.
Subject
to Sections 5(j) and (k), the Shared Claims Recovery Amount and the Project
Savings shall be shared. From and after the date that the Shared Claims Recovery
Amount plus the Project Savings equals $4,000,000 and the Parent/Seller has
received any and all amounts of the Shared Claims Recovery Amount and the
Project Savings to which it is entitled under this Agreement, the Shared Claims
Recovery Amount and the Project Savings shall be shares at a rate of 50% to
the
Parent/Seller and 50% to the Buyer. The portion of the Shared Claims Recovery
Amount that is required to be paid, if any, to the Parent/Seller (if ABW or
the
Buyer receives the recovery or settlement) and the Buyer (if Parent receives
the
recovery or settlement) with respect to any Shared Claim shall be distributed
by
the receiving party within thirty (30) days after such party receives such
Shared Claims Recovery Amount. The portion of the Project Savings payable to
the
Parent/Seller hereunder shall be distributed by the Buyer within fifteen days
following the Parent's verification of the Project Savings as provided in
Section 5(k) above, but no later than March 1, 2008, or such later date as
the
Buyer and the Parent may mutually agree in writing. No Project Savings shall
be
distributed, although earned, if the funds to pay such distribution have not
been received by the Company or the Buyer from an owner, general contractor
or
other Third Party with respect to the Seller Projects.
(m) Accounts
Receivables and Retention Balances.
(i) Management
of the collection of the accounts receivable and retention balances for the
Seller Projects shall be the sole responsibility of the Buyer. The Buyer does
not warrant or guaranty the collection of any such amounts. The Buyer, through
itself or through the Company after the Closing, shall, acting solely as agent
for Seller, use commercially reasonable and lawful efforts to collect all
accounts receivables and retention balances for the Seller Projects. For
purposes of this Section 5(m), commercially reasonable efforts means exerting
such effort and employing such resources as would normally be exerted or
employed by an electrical contractor within
23
the
construction industry, taking into account the size of the receivable or
balance, when utilizing reasonable business judgment in order to collect such
amount as quickly as is reasonably possible, but in no event less than the
efforts expended by Buyer in connection with the collection of its own accounts
receivable. All amounts received upon collection shall be deposited into the
Imprest Account and subject to the terms and conditions of Exhibit
B
attached
hereto. Neither the Company nor the Buyer will commingle any amounts collected
under this Section 5(m) with any other funds of the Buyer or the Company,
including any amounts collected with respect to Buyer Projects Any such amounts
deposited in the Imprest Account shall be applied to Seller Project costs on
a
first in first out basis whereby deposited funds shall be used to satisfy the
Seller Project obligations that are first due.
(ii) The
Buyer
and the Company shall not incur legal expenses or engage a Third Party to
collect accounts receivables or retention balances without first obtaining
the
prior written approval of the Seller or the Parent. The Buyer or the Company
shall identify the Third Party to be engaged for such purpose, including any
legal counsel, and the Parent shall consent in writing to the terms of any
such
engagement. Upon obtaining such consent and approval, the Parent shall be
responsible for the costs of such Third Party. The Buyer and the Company shall
not settle, write off or write down any outstanding amount at less than stated
value or offer any type of discount without first obtaining the prior written
approval of the Seller or the Parent.
(iii) In
no
event shall the Buyer (A) induce or influence any account-debtor to refrain
from
making any payments to the Seller or to make payments to the Buyer or the
Company prior to making payments to the Seller, (B) compromise, release or
modify any account such that any payments to the Seller thereunder are reduced
or jeopardized, or (3) otherwise adversely effect the Seller’s rights to
proceeds from the accounts.
(iv) Seller
shall be responsible for any and all income taxes on accounts receivable and
retention balances collected by the Buyer or the Company on behalf of the Seller
with respect to Seller Projects.
(v) The
Seller agrees that as the Company collects the accounts receivable and deposits
them in the Imprest Account, that the liability of the Company to the Seller
for
such accounts receivable will be reduced, released and waived on a dollar-
for-
dollar basis. The Company shall have no liability to the Seller for any account
receivable if it is not collected and all accounts receivable not collected
on
or prior to March 31, 2008 will be transferred and assigned to the Seller and
all liability of the Company to the Seller as to such accounts receivable are
then deemed waived, released and discharged as among the Buyer, the Company
and
the Seller. If the Parent desires to engage the Buyer or the Company to continue
to collect such accounts receivable, the Parent and the Buyer shall negotiate
the terms of such collection efforts in good faith. Security and bid deposits
as
of the Company as of the Closing Date shall be treated in the same manner as
accounts receivable in this Section 5(m).
(n) Reporting;
Meetings; Full Access.
The
Buyer acknowledges the Seller's financial obligations with respect to the Seller
Projects and the Seller's interest in monitoring the Seller Projects after
the
Closing Date. The Buyer therefore agrees to implement the following processes
and to grant the Seller Entities the following rights with respect to the Seller
Projects:
(i) The
Buyer
will permit Representatives of the Seller Entities to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
24
business
operations of the Buyer, to all premises, properties, personnel, books, records,
contracts, and documents of or pertaining to the Buyer and relating to the
Seller Projects; provided,
however,
that
(i) neither the Seller Entities, its Affiliates, or any of their respective
Representatives shall, directly or indirectly, contact any employee, vendor
or
customer of the Buyer without the prior written consent of the Buyer, and (ii)
in granting such access, the Buyer shall not be required to take any action
that
would constitute a waiver of any legal privilege.
(ii) The
Buyer
shall deliver to the Seller its monthly cost and project reports for the
immediately preceding month and any other documentation, books or records
reasonably requested by the Seller Entities for the purposes of monitoring
the
costs and expenses of the Seller Projects.
(iii) The
Buyer
and the Seller shall meet at least once per calendar quarter during the period
that any Seller Project is in progress to discuss the status of the Seller
Projects. Such meeting shall be held in person or via telephone conference
at a
time and a place mutually agreed upon by the Buyer and the Seller. The Buyer
hereby agrees to cooperate with the Seller Entities in good faith and give
the
Seller Entities an opportunity to advise and consult with respect to such Seller
Projects for the purpose of managing costs and expenses.
(o) Inventory.
The
Company and Buyer shall not use Inventory for any purpose other than to perform
the Seller Projects. The Company and the Buyer may not include any Inventory
used for a Seller Project as a Reimbursable Expense (as defined in Exhibit
B).
Notwithstanding the foregoing, from and after June 30, 2007, Buyer and the
Company shall use reasonable best efforts to contact three electrical supply
houses to sell all remaining Inventory in arms length transactions at the
highest commercial value offered by such houses. The purchase price for any
such
Inventory shall be deposited into the Imprest Account.
(p) Real
Property Leases.
Except
as set forth in this Section 5(p), the Seller shall be responsible for the
real
property leases (including all operating costs of such real property, to the
extent required by the terms of such real property lease and if not contained
in
the rental) set forth in Section 4(k)(ii) of the Disclosure Schedule. The Seller
shall use reasonable efforts to enter into an agreement with the landlord for
the real property located at 000 Xxxxxxxxx Xxxxxxx, Xxxxxxxx, XX (the
"Whippany
Property")
whereby the Whippany Property will be subleased or the lease for such property
terminated. No later than January 31, 2007, the Seller shall notify the Buyer
if
it has entered into such agreement and whether the Buyer and the Company must
vacate the Whippany Property and if so, state the date by which the Company
and
the Buyer must so vacate. The date of vacation shall not be prior to December
31, 2007, unless the Parent and the Buyer shall otherwise agree in writing
to an
earlier date. If the Seller does not instruct the Company to vacate the Whippany
Property , the Company and the Buyer may use such property, to the extent
permitted by the landlord, solely for purposes of performing its obligations
under this Agreement, including performance of the Seller Projects. Upon
completion of the Seller Projects, the Company and the Buyer shall promptly
vacate the Whippany Property unless otherwise agreed by the Parent. The Seller
will maintain and pay the premiums for any and all insurance covering the
Whippany Property and the property located at 0X Xxxxx Xxxx Xxxxx, Xxxxxxxxxxx,
XX, in the same amounts and types as the Company maintained prior to the Closing
Date with respect to such property.
(q) MLK
Project.
Since
January 1, 2006, there has been no activity by the Company on the project known
as the Xxxxxxx Xxxxxx Xxxx/Xxxxxxxxx Elementary School project ("MLK")
and
the Seller considers such project abandoned. During the period commencing on
the
25
date
hereof and ending on December 31, 2007, the Seller shall use commercially
reasonable efforts to obtain written acknowledgement by the owner or the general
contractor for such project that the Company is not required to perform any
work
thereon and that such project has been abandoned. If at any time after the
date
hereof, the Company is notified that it must perform its obligations under
that
certain contract between Xxxxxx Construction Corporation and Briteway Electrical
Contractors, Inc, dated February, 2004, for the performance of electrical
construction services with respect to MLK, the Buyer and the Company shall
promptly consult with the Parent and the Buyer and the Parent shall determine
a
course of action in good faith. The Buyer and the Parent shall agree to either
perform the work under such contract or notify the owner or general contractor,
as the case may be, that such project has been abandoned and that the Company
will not perform such work. If the Parties agree to perform such work, then
the
Buyer and the Seller shall agree on the terms in which such project shall be
completed. Such terms shall be substantially similar to the terms set forth
in
this Agreement, including without limitation, creation of an imprest account,
funding of expenses by the Parent, payment of an appropriate fee to the Buyer
and performance of the work by the Buyer or the Company. If any action, suit,
claim or proceeding is initiated in connection with the MLK, the Parent shall
control such action, suit, claim or proceeding and be responsible for the costs
associated therewith. If MLK must be performed, the budget for the Seller
Projects shall be increased to include the costs of performing MLK.
(r) Seller
Projects.
Section
1(c) of the Disclosure Schedule contains a complete list of the Seller Projects.
If subsequent to the date of Closing, one or more other projects of the Company
not contained on the list set forth in the Disclosure Schedule, but which are
or
were projects in existence prior to the date of the Closing, are discovered,
then those projects shall be added to the list of Seller Projects. The Parties
acknowledge that the budgets and estimates of the costs to complete the Seller
Projects as set forth in the Disclosure Schedule are subject to increases as
provided in this Agreement. Subject to Buyer's and the Company's compliance
with
the terms of this Agreement after the date hereof, the Seller agrees that if
the
costs of the completion of the Seller Projects exceeds the amounts set forth
in
the Disclosure Schedule, the Seller shall pay such excess amount in accordance
with the terms and conditions of this Agreement.
(s) Buyer
Performance.
Each of
the Buyer and the Company shall use its best efforts to complete the Seller
Projects on schedule, on or prior to December 31, 2007, within the Approved
Budget, using the methods accepted by licensed professional electricians and
in
a workmanlike manner consistent with industry practices and in accordance with
the applicable construction contract, as amended from time to time. The Buyer
shall be solely responsible for all Buyer Projects, including all financial,
performance and indemnification obligations relating thereto. The Buyer or
the
Company may engage a construction manager to assist in the completion of the
Seller Projects, who may be an Affiliate of the Buyer; provided,
however,
in no
event shall such engagement relieve the Buyer or the Company of any of its
obligations to the Seller Entities under this Agreement; and provided, further,
however, that the cost of any such construction manager's fee is included in
the
construction management fee of $3,300,000 set forth on Exhibit B. If the Seller
Projects are not completed on or prior to December 31, 2007, the Buyer and
the
Parent shall negotiate in good faith a revised schedule of completion and the
manner in which the Seller Projects will be financed and completed.
(t) Audit
Program.
The
Parties hereto shall comply with the terms and provisions of the audit program
set forth on Exhibit
C
attached
hereto. The Buyer and the Company do not warrant to the Seller that the Seller
Projects will be completed at the costs set forth in Section 1(c) of the
Disclosure Schedule and, subject to the terms and conditions of this Agreement,
the Buyer and the Company shall have no liability for cost overruns on such
projects.
26
6. CONDITIONS
TO OBLIGATION TO CLOSE.
(a) Conditions
to Obligation of the Buyer.
The
obligation of the Buyer to consummate the transactions to be performed by it
in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct at and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date
which need only be true and correct as of such date) except for such failures of
representations and warranties to be true and correct (without giving effect
to
any materiality qualification or standard contained in any such representations
and warranties) which would not reasonably be expected to have, individually
or
in the aggregate, a Material Adverse Affect;
(ii) the
Seller Entities shall have performed and complied in all material respects
with
all of the covenants of the Seller Entities hereunder that are required to
be
performed or complied with prior to the Closing;
(iii) the
Seller Entities shall have delivered to the Buyer a certificate to the effect
that each of the conditions specified above in Sections 6(a)(i) and (ii) is
satisfied in all respects;
(iv) no
action, suit, or proceeding (other than any action, suit or proceeding to which
Section 5(b) refers or relates, or any Shared Claim) shall be pending before
any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent or
materially delay consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to
be rescinded following consummation, (C) materially and adversely affect the
right of the Buyer to own the Company Shares and to control the Company, or
(D)
materially and adversely affect the right of the
Company
to own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(v) the
Parties and the Company shall have received all of the authorizations, consents,
and approvals of third parties as set forth in Exhibit
D
(collectively, the “Requisite
Consents”);
provided,
however,
that
the foregoing condition to the obligation of the Buyer shall not apply to any
failure to obtain any such authorization, consent or approval that arises from
the Buyer’s breach of any representation, warranty or covenant hereunder or the
Buyer’s withdrawal of its application for any such authorization, consent or
approval;
(vi)
the
Seller
shall have delivered to the Buyer on or before the Closing Date a non-foreign
person affidavit as required by Section 1445 of the Code;
(vii) the
Buyer
will have received (A) UCC, judgment lien and tax lien searches with respect
to
the Company, the results of which indicate no liens on the assets of the Company
other than those acceptable to the Buyer in its reasonable discretion, and
(B)
evidence that the Security Agreement and the Bank Guarantee have been
terminated;
(viii) the
Buyer
shall have received the current updated corporate record book, including without
limitation, bylaws, stock transfer ledger, minutes, resolutions, consents,
and
all other corporate documents of the
Company;
27
(ix) the
Construction Management Agreement shall have been terminated on terms mutually
agreeable by the Buyer and the Seller, and the parties shall have executed
mutual releases in connection with such termination; and
(x)
all
actions to be taken by the Seller Entities in connection with the consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the
Buyer.
The
Buyer
may waive any condition specified in this Section 6(a) if it executes and
delivers a writing so stating at or prior to the Closing.
(b) Conditions
to Obligation of the Seller.
The
obligation of the Seller Entities to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the
representations and warranties set forth in Section 3(b) above shall be true
and
correct in all material respects at and as of the Closing Date;
(ii) the
Buyer
shall have performed and complied in all material respects with all of the
covenants of the Buyer hereunder that are required to be performed or complied
with prior to the Closing;
(iii) the
Buyer
shall have delivered to the Seller Entities a certificate to the effect that
each of the conditions specified above in Sections 6(b)(i) and (ii) is satisfied
in all respects;
(iv) no
action, suit, or proceeding (other than any action, suit or proceeding to which
Section 5(b) refers or relates, or any Shared Claim) shall be pending before
any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent or
materially delay consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this Agreement
to
be rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(v) the
Parties and the Company shall have received all of the Requisite
Consents;
(vi) the
Construction Management Agreement shall have been terminated on terms mutually
agreeable by the Buyer and the Seller, and the parties shall have executed
mutual releases in connection with such termination; and
(vii) all
actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to the Seller
Entities.
The
Seller Entities may waive any condition specified in this Section 6(b) if they
execute and deliver a writing so stating at or prior to the
Closing.
28
7. REMEDIES
FOR BREACHES OF THIS AGREEMENT.
(a) Survival.
Unless
otherwise specifically provided herein, all of the covenants, representations
and warranties of the Seller Entities contained in this Agreement shall survive
the Closing and continue in full force and effect for a period of six (6) years
thereafter; provided,
however,
that
(i) the representations and warranties contained in Sections 4(a), 4(b), 4(d),
4(e), 4(j), 4(r) and 4(s) shall continue in full force and effect until sixty
(60) days after the expiration of the applicable statute of limitation with
respect to such matters. The covenants, representations and warranties of the
Buyer contained in this Agreement shall survive the Closing and continue in
full
force and effect for a period of six (6) years thereafter. This Section 7 shall
survive so long as any covenant, representation, warranty or indemnification
obligation of any Party survives hereunder.
(b) Indemnification
Provisions for Benefit of the Buyer.
(i) Subject
to the limitations contained in this Section 7, after Closing the Seller
Entities hereby jointly and severally agree, to the fullest extent permitted
by
law, to indemnify the Buyer and its officers and directors, shareholders and
Affiliates against, and hold them harmless from, all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses and expenses of experts, other than punitive
damages, lost profit, or consequential, special or incidental damages (a
“Loss”),
suffered or incurred by any such indemnified party and caused by, resulting
from, or based upon or arising out of the following circumstances and events:
(A) any breach of any representation or warranty of the Seller Entities
contained in this Agreement, (B) any breach of any covenant of the Seller
Entities contained in this Agreement which by its terms requires performance
after the Closing Date,
(C) any
Income Taxes of the
Company
attributable to taxable periods ending prior to or on the Closing Date,
including liabilities of the
Company
under consolidated, combined or unitary income or franchise Tax Returns and
liabilities related to the Tax Returns
of the
Seller Entities, but excluding any Taxes for which there is an adequate accrual
or reserve on the Closing Date Balance Sheet or any
Taxes
attributable to transactions not in the Ordinary Course of Business occurring
after the Closing which are effectuated or initiated by the Buyer
or the
Company, (D) Taxes related to the Overlap Period to the extent allocable to
the
period ending on the Closing Date as set forth in Section 7(c), (E) any product
sold or any services performed by the
Company
prior to the Closing Date, (F), any Third Party Claim relating to wages or
other
compensation of any current or former Employees of ABW,
any
Employee Benefit Plan or any Environmental,
Safety or Health Requirement,
in each
case arising from events that occurred prior to the Closing Date, (G) any
year-end adjustment to the Most Recent Financial Statements greater than $10,000
(and only to the extent of such excess), (H) claims and counterclaims initiated
against the Buyer with respect to a Shared Claim, and (I) any act of fraud,
intentional tort or willful misconduct by any Seller Entity or the
Company
prior to the Closing.
(ii) The
Buyer
acknowledges and agrees that neither the Seller Entities nor any of their
Affiliates shall have any liability under any provision of this Agreement for
any Loss to the extent that such Loss directly results from the willful
misconduct, negligence or fraud of the Buyer or the Company.
(c) Indemnification
Provisions for Benefit of the Seller Entities and their
Affiliates.
Subject
to the limitations contained in this Section 7, after the Closing, the Buyer
and
the Company, jointly and severally, shall (only as to post Closing occurrences),
indemnify the Parent, the Seller and their respective officers, directors,
shareholders and Affiliates against,
29
and
hold
them harmless from, any Loss suffered or incurred by any such indemnified party
caused by, resulting from, arising out of, or relating to (i) any breach of
any
representation or warranty of the Buyer or the Company contained in this
Agreement,
(ii) any breach of any covenant of the Buyer or the Company (only as to post
Closing occurrences) contained in this Agreement which by its terms requires
performance after the Closing Date, (iii) any
claim, proceeding or suit which relates to actions taken by the Buyer or
the
Company
at any time after the Closing with regard to the employment of the
Company's employees; (v) the operation of the business of the Company and the
ownership of the assets of the Company following the Closing Date, including
the
Buyer's performance of the Seller Projects or the Buyer Projects; (vi) conduct
arising or occurring subsequent to the Closing Date whereby the Company violated
any Laws relating to employee benefit plans and the fiduciary responsibilities
of an employer thereunder; and (vii) any Tax attributable to (A) the Taxable
periods that begin after the Closing Date, (B) the portion of any Tax
attributable to the Overlap Period to the extent allocable to the period
commencing after the Closing Date as set forth in Section 7(c) and (C) any
Tax
periods that end on or before the Closing Date if such Tax is attributable
to
transactions
not in the Ordinary Course of Business occurring after the Closing Date which
are effectuated or initiated by the Buyer or the
Company.
(d) Limitations.
(i) From
and
after December 31, 2007, the Seller Entities shall not be liable under Section
7
for Losses hereunder unless the aggregate of all Losses for which the Seller
Entities would, but for this Section 7(d), be liable on a cumulative basis
is an
amount in excess of $10,000, and in such event, indemnification shall be made
by
the Seller Entities in the amount of such excess. After the date hereof but
prior to December 31, 2007, the Seller Entities shall be liable, to the extent
permitted under this Article 7, including for Losses less than
$10,000.
(ii) Absent
fraud or knowing and intentional material misrepresentations, the aggregate
amount payable by the Seller Entities to the Buyer and the Company under this
Agreement, including pursuant to Section 7(b) above, shall not exceed the cost
to complete the Seller Projects plus $4,000,000.
(e) Losses
Net of Insurance, Etc.
The
amount of any Loss for which indemnification is provided under this Section
7
shall be net of (i) in the case of Section 7(b), any accruals or reserves
on the Closing Date Balance Sheet, (ii) any
amounts
recovered by the Indemnified
Party pursuant to any indemnification by or indemnification agreement with
any
third party, (iii) any insurance proceeds or other cash receipts or sources
of
reimbursement received
as an offset against such Loss
(and no
right of subrogation shall accrue to any insurer or third party indemnitor
hereunder) (each such source named in clauses (i), (ii) and (iii), a
“Collateral
Source”),
and
(iv) the fees, costs and expenses of defending or pursuing any claim against
a
Collateral Source. If the amount to be netted hereunder from any payment
required under
Sections 7(b) or 7(c) is determined after payment by the indemnifying party
of
any amount otherwise required to be paid to an Indemnified Party pursuant to
this Section 7, the Indemnified Party shall repay to the indemnifying party,
promptly after such determination, any amount that the indemnifying party
would
not
have had to pay pursuant to this Section 7 had such determination been made
at
the time of such payment, along with the fees, costs and expenses, if any,
of
pursuing such claim. Unless
prohibited by law, the Parties agree that any indemnification payment made
hereunder shall be treated as an adjustment to the Purchase Price.
(f) Termination
of Indemnification.
The
obligations to indemnify
and hold
harmless a Person pursuant to Section 7(b) and Section 7(c), shall terminate
when the applicable representation, warranty or covenant terminates pursuant
to
Section 7(a); provided,
however,
that
30
as
to
clauses (b) and (c) above, such obligations to indemnify and hold harmless
shall
not terminate with respect to any item as to which the Person to be indemnified
shall have, before the expiration of the applicable period, previously made
a
claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the Party providing
the indemnification;
and
provided,
further,
that
any such claim shall be deemed to have been withdrawn and waived one year after
being made, unless (A) court proceedings shall have commenced with respect
to
such claim within such one (1) year period, or (B) such claim shall have been
waived or satisfied within such one year period.
(g) Procedures
Relating to Indemnification.
A Party
seeking indemnification pursuant to Section 7(b) or Section 7(c), (an
“Indemnified
Party”)
shall
give prompt notice to the Party from whom such indemnification is sought (the
“Indemnifying
Party”)
of the
assertion of any claim or assessment, or the commencement of any action, suit,
audit or proceeding, by a third party in respect of which indemnity may be
sought hereunder (a “Third
Party Claim”)
and
will give the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request; provided,
however,
that no
failure to give such notice shall relieve the Indemnifying Party of any
liability hereunder (except to the extent the Indemnifying Party has suffered
actual prejudice thereby). Thereafter, the Indemnified Party shall deliver
to
the Indemnifying Party, within twenty (20) business days after the Indemnified
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim.
The
Indemnifying Party shall have the right, exercisable by written notice (the
“Notice”)
to the
Indemnified Party within twenty (20) days of receipt of notice from the
Indemnified Party of the commencement of or assertion of any Third Party Claim,
to assume and control the defense of such Third Party Claim, using counsel
selected by the Indemnifying Party and reasonably acceptable to the Indemnified
Party. Should the Indemnifying Party so elect to assume the defense of a Third
Party Claim, the Indemnifying Party will not be liable to the Indemnified Party
for legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof. Regardless of whether the Indemnifying Party elects
to
assume the defense of any such Third Party Claim, (a) the Indemnified Party
shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnifying Party's prior written
consent, which shall not be unreasonably withheld, delayed or conditioned and
(b) the Indemnifying Party will not admit any liability, consent to the entry
of
any judgment or enter into any settlement or compromise with respect to such
Third Party Claim, without the prior written consent of the Indemnified Party,
which shall not be unreasonably withheld, delayed or conditioned, unless such
settlement or judgment involves only the payment of money damages by the
Indemnifying Party and does not involve an injunction or other equitable relief
that may affect an Indemnified Party and includes an unconditional release
of
the Indemnified Party.
The
Indemnifying Party or the Indemnified Party, as the case maybe, shall in any
event have the right to participate, at its own expense, in the defense of
any
Third Party Claim which the other is defending. Whether or not the Indemnifying
Party chooses to defend or prosecute any claim involving a third party, all
the
Parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested in connection therewith. Such cooperation shall include reasonable
access during normal business hours afforded to the Indemnifying Party to,
and
reasonable retention by the Indemnified Party of, records and information which
are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information
and
explanation of any material provided hereunder, and the Indemnifying Party
shall
reimburse the Indemnified Party for all its reasonable out-of-pocket expenses
in
connection therewith.
(h) Exclusive
Remedy.
Each
of
the Parties hereto agrees that its sole and exclusive remedy after the Closing
with respect to any and all claims relating to this Agreement, the
31
Company,
the events giving rise to this Agreement and the transactions provided for
herein or contemplated hereby, shall be pursuant to the indemnification
provisions contained in this Section 7.
(i) Collateral
Sources.
Indemnification for any claims under this Section 7 shall not be available
to
any Indemnified Party unless such Indemnified Party uses commercially reasonable
efforts to seek recovery from any Collateral Source for such claim before making
any claim for indemnification by the Indemnifying Party. Any Indemnifying Party
may, in its sole discretion, require any Indemnified Party to grant an
assignment of the right of such Indemnified Party to assert a claim against
any
Collateral Source if the Indemnifying Party has first fully satisfied the claim
by the Indemnified Party. In the event of such assignment, the Indemnifying
Party will pursue such claim at its own expense.
(j) Mitigation.
Notwithstanding
any other provision of this Agreement to the contrary, any Indemnified Party
shall use commercially reasonable efforts to mitigate all Losses, relating
to a
claim under these indemnification provisions, including availing itself of
any
defenses, limitations, rights of contribution, claims against third Persons
and
other rights at law or equity. The Indemnified Party’s commercially reasonable
efforts shall include the reasonable expenditure of money to mitigate or
otherwise reduce or eliminate any Loss for which indemnification would otherwise
be due, and the Indemnifying Party shall, to the extent that an Indemnified
Party’s Loss exceeds the amounts described in Section 7(d)(i), reimburse the
Indemnified Party for its reasonable expenditures (except for any portion of
the
wages, salary, benefits, overhead or other costs attributable to the Indemnified
Party and its officers, directors, employees, agents) in undertaking the
mitigation and shall, to such extent, take such expenses into account in
calculating the aggregate amount of the liability of the Seller Entities for
the
Buyer’s indemnifiable Losses or the Buyer’s liability for the indemnifiable
Losses of the Seller Entities, as the case may be.
8. TAX
MATTERS.
The
following provisions shall govern the allocation of responsibility as between
the Buyer and the Seller Entities for certain tax matters following the Closing
Date:
(a) Consolidated
Return.
The
Seller Entities shall cause the
Company
to be included in the consolidated Income Tax Returns of the Seller Entities
for
all periods ending on or prior to the Closing Date for which the
Company
is required to be so included and the Seller Entities shall cause to be prepared
and timely filed any other federal, state, foreign or local Income Tax Return
required or permitted to be filed by the
Company
for all periods ending on or prior to the Closing Date. Any such Income Tax
Returns that include periods ending on or before the Closing Date shall, insofar
as they relate to the
Company,
be on a basis consistent with the last previous such Tax Returns filed with
respect to the
Company,
unless the Buyer or the Seller Entities conclude that there is no reasonable
basis for such position under applicable law. Neither the Seller Entities nor
the
Company
(prior to the Closing Date) shall file or cause to be filed any amended Tax
Return or claims for refund with respect to the
Company
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed. Neither the Buyer nor
the
Company
(after the Closing Date) shall file or cause to be filed any amended Tax Return
or claims for refund with respect to any period ending on or before the Closing
Date without the prior written consent of the Seller Entities, which consent
shall not be unreasonably withheld, conditioned or delayed.
(b) Tax
Periods Ending on or Before the Closing Date.
The
Buyer shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the
Company
other than Income Tax Returns for all periods ending on or prior to the Closing
Date which are required to be filed after the Closing Date. The Buyer shall
provide the Seller Entities with a draft of each
32
such
Tax
Return described in the preceding sentence at least thirty (30) days prior
to
the due date for filing such Tax Return. At least fifteen (15) days prior to
the
due date for the filing of such Tax Return, the Seller Entities shall notify
the
Buyer of the existence of any reasonable objection the Seller Entities may
have
to any items set forth on such draft Tax Return. If after consulting in good
faith the Seller Entities and the Buyer are unable to resolve such objections,
such objections shall be resolved by treating items on such returns in a manner
consistent with the past practices of the Company with respect to such items
unless otherwise required by law. The Seller Entities shall pay such Taxes
of
the
Company
with respect to such periods within fifteen (15) days after demand by the Buyer
or the
Company
of such Taxes to the extent such Taxes are not reserved on the Closing Date
Balance Sheet.
(c) Tax
Periods Beginning Before and Ending After the Closing
Date.
The
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the
Company
for Tax periods which begin before the Closing Date and end after the Closing
Date (the “Overlap
Period”),
and
the Buyer shall timely pay, or cause to be paid, all Taxes shown as due on
any
such Tax Returns. The Buyer shall provide the Seller Entities with a draft
of
each such Overlap Period Tax Return at least thirty (30) days prior to the
due
date for filing such Tax Return. At least fifteen (15) days prior to the due
date for the filing of such Tax Return, the Seller Entities shall notify the
Buyer of the existence of any reasonable objection the Seller Entities may
have
to any items set forth on such draft Tax Return. If after consulting in good
faith the Seller Entities and the Buyer are unable to resolve such objections,
such objections shall be resolved by treating items on such returns in a manner
consistent with the past practices of the Company with respect to such items
unless otherwise required by law. The Seller Entities shall pay directly upon
demand from the Buyer with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reserved on the Closing
Date Balance Sheet. For purposes of this Section 8, in the case of any Taxes
that are imposed on a periodic basis and are payable for an Overlap Period,
the
portion of such Tax which relates to the portion of such taxable period ending
on the Closing Date shall (i) in the case of any Taxes other than Income Taxes
or sales and use Taxes, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number
of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (ii) in the case
of any Tax based upon or related to Income Tax or sales and use Tax, be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company.
(d) Refunds
and Tax Benefits.
Any Tax
refunds that are received by the Buyer or the
Company,
and any amounts credited against Tax to which the Buyer or the
Company
become entitled, that relate to Tax periods or portions thereof ending on or
before the Closing Date shall be for the account of the Seller Entities, and
the
Buyer shall pay over to the Seller Entities any such refund or the amount of
any
such credit within thirty (30) days after receipt or entitlement thereto. In
addition, to the extent that a claim for refund or a proceeding results in
a
payment or credit against Tax by a Taxing Authority to the Buyer or the
Company
of any amount accrued on the Closing Balance Sheet, the Buyer shall pay such
amount to the Seller Entities within thirty (30) days after receipt or
entitlement thereto.
33
(e) Cooperation
on Tax Matters.
(i) The
Buyer
and the Seller Entities shall cooperate fully, as and to the extent reasonably
requested by the other Parties, in connection with the filing of Tax Returns
pursuant to this Section 8 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer and
the Seller Entities agree (A) to retain all books and records with respect
to
Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and,
to the extent notified by the Buyer or the Seller Entities, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any Taxing Authority, and (B) to give the other
Parties reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if another Party so requests, the
Buyer or the Seller Entities, as the case may be, shall allow the other party
to
take possession of such books and records.
(ii) The
Buyer
and the Seller Entities further agree, upon request, to use commercially
reasonable efforts to obtain any certificate or other document from any Taxing
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(iii) The
Buyer
and the Seller Entities further agree, upon request, to provide the other party
with all information that either party may be required to report pursuant to
Section 6043 of the Code and all Treasury Department Regulations promulgated
thereunder.
(f) Tax
Sharing Agreements.
All tax
sharing agreements or similar agreements with respect to or involving
the
Company
shall be terminated as of the Closing Date and, after the Closing Date,
the
Company
shall not be bound thereby or have any liability thereunder.
(g) Transfer
Taxes.
All
transfer, documentary, sales, use, stamp, registration and other such Taxes
and
fees (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement (including
any
state gains tax, transfer tax and any similar tax imposed in any state or
subdivision), shall be paid by the Buyer when due, and the Buyer will, at its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, the Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and
other
documentation.
(h) Representation.
(i) The
Seller Entities shall have the right to represent the interests of the
Company
in any Tax audit or administrative or court proceeding relating to Tax Returns
for any periods or portions thereof ending on or prior to the Closing Date.
Following the Closing, in the event of an audit of any Tax Return of the Seller
Entities or with respect to which either of the Seller Entities has any
liability, the Buyer shall promptly notify the Seller Entities of such audit
and
the Buyer shall execute, or cause the Company to execute, powers of attorney
under applicable laws authorizing the designated representative of the Seller
Entities to represent the
Company
with respect thereto. The Buyer shall make available or shall cause the
Company
to make available to the Seller Entities, at the expense of the Seller Entities,
any and all books and
34
records
of the
Company
and other documents requested by the Seller Entities and shall make available
employees of the
Company
reasonably necessary to enable the Seller Entities to defend any audit or other
proceeding with respect to any such Tax Returns.
(ii) The
Seller Entities shall not enter into any settlement of or otherwise compromise
any Tax matter that materially affects or may materially affect the Tax
liability of the Buyer or the
Company
for any period ending after the Closing Date, including the portion of the
Overlap Period that is after the Closing Date, without the prior written consent
of the Buyer, which consent shall not be unreasonably withheld, conditioned
or
delayed. The Seller Entities shall use commercially reasonable efforts to keep
the Buyer fully and timely informed with respect to the commencement, status
and
nature of any Tax matter. The Seller Entities shall allow the Buyer, at its
sole
expense, to make comments to the representative of the Seller Entities,
regarding the conduct of or positions taken in any such proceeding, and consider
such comments in good faith.
(iii) Except
as
otherwise provided above, the Buyer shall have the sole right to control any
audit or examination by any Taxing Authority, initiate any claim for refund
or
amend any Tax Return, and contest, resolve and defend against any assessment
for
additional Taxes, notice of Tax deficiency or other adjustment of Taxes of,
or
relating to, the income, assets or operations of the
Company
for all taxable periods ending after the Closing Date; provided,
however,
that
the Buyer shall not, and shall cause its Affiliates (including the Company)
not
to, enter into any settlement of any contest or otherwise compromise any issue
with respect to the portion of the Overlap Period ending on or prior to the
Closing Date and shall not amend any Tax Return with respect to any period
ending on or prior to the Closing Date without the prior written consent of
the
Seller Entities, which consent shall not be unreasonably withheld, conditioned
or delayed.
(i) Confidentiality.
Any
information obtained under this Section 8 shall be kept confidential in
accordance with Section 5(f), except as may be otherwise necessary in connection
with filing any Tax Return (or amended Tax Return) or refund claim, determining
any Tax liability or right to a refund, conducting or defending any audit or
other proceeding with respect to Taxes or otherwise effectuating the terms
of
this Agreement.
9. MISCELLANEOUS.
(a) Press
Releases and Public Announcements.
No
Party shall issue any press release or make any public announcement relating
to
the subject matter of this Agreement, prior to the Closing, without the prior
written approval of the Buyer and the Seller Entities; provided,
however,
that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use
commercially reasonable efforts to advise the other Parties prior to making
the
disclosure).
(b) No
Third-Party Beneficiaries.
Except
as provided by Sections 7(b) and 7(c), this Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire
Agreement.
This
Agreement (including the documents referred to herein), together with the
Confidentiality Agreement which shall remain in full force and effect in
accordance with its terms until the Closing, constitutes the entire agreement
among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof. The
35
Construction
Management Agreement be and hereby is terminated and of no further force or
effect, and neither party thereto shall have any rights or obligations
thereunder to the other party.
(d) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Buyer and the
Seller Entities.
(e) Counterparts;
Facsimile.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
instrument. Facsimile execution and delivery of this Agreement is legal, valid
and binding execution and delivery for all purposes.
(f) Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices.
All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notices or payments required to be delivered to the Seller
Entities after the Closing shall be delivered to the Parent and any consent
or
approval required to be sought of the Seller Entities after the Closing shall
be
sought of and given by the Parent. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth
below:
|
If
to the Parent or the Seller:
|
Copy
to
(which shall not constitute notice):
|
| | |
|
UIL
Holdings
Corporation
|
Xxxxxx
and
Xxxx LLP
|
|
000
Xxxxxx
Xxxxxx
|
000
Xxxxxxxx
Xxxxxx
|
|
Xxx
Xxxxx, XX
00000
|
Xxxxxxxx,
XX
00000
|
|
Attn:
Chief
Financial Officer
|
Attn:
Xxxxxxx
X. Xxxxxxx, Esq.
|
| | |
| If
to the
Buyer: | Copy to
(which shall not constitute notice): |
| | |
|
SAIDS
LLC
|
Xxxxx
Xxxxxxxxxxx LLP
|
|
00
XXXXX XXXX
|
Xxx
Xxxx Xxxxx - Xxxxx 0000
|
|
XXXXX
XXXXX, XX
|
Xxx
Xxxx, XX 00000
|
|
Attn:
Xxxxx
Xxxxxxxxxx, Xx.
|
Attn.
Xxxxxx X. Xxxxxxxx, Esq.
|
| | |
36
Any
Party
may send any notice, request, demand, claim, or other communication hereunder
to
the intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless
and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of
New York without giving effect to any choice or conflict
of
law provision or rule (whether of the State of
New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of
New York.
(i) Venue.
EACH OF
THE PARTIES HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE EXCLUSIVE PERSONAL
JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN AND FOR THE SOUTHERN
DISTRICT OF
NEW YORK IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT,
(B)
AGREES THAT IT SHALL NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION
BY
MOTION OR OTHER REQUEST FOR LEAVE FROM ANY SUCH COURT AND (C) AGREES THAT IT
SHALL NOT BRING ANY ACTION RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN
A
FEDERAL OR STATE COURT SITTING IN AND FOR THE SOUTHERN DISTRICT OF
NEW
YORK.
(j) Waiver
of Jury Trial.
EACH
PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT
OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Seller Entities. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to
any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(l) Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction.
(m) Expenses.
Each of
the Parties will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(n) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean “including
without limitation”.
37
(o) Incorporation
of Exhibits and Schedules.
The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
[Signature
page follows.]
38
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
| |
By:
/s/
Xxxxx Xxxxxxxxxx, Xx.
|
| |
Name:
Xxxxx
Xxxxxxxxxx, Xx.
|
| |
Title:
Executive
Vice President
|
| |
By:
/s/
X.X. Xxxxxxxx
|
| |
Name:
X.X.
Xxxxxxxx
|
| |
Title:
EVP
& CFO
|
| |
By:
/s/
Xxxx X. Xxxxxx
|
| |
Name:
Xxxx
X. Xxxxxx
|
| |
Title:
President
|
| |
XXXXX
BRITEWAY ELECTRICAL
|
| |
CONTRACTORS,
INC., as a wholly owned
|
| |
subsidiary
of the Buyer
|
| |
By:
/s/
Xxxxxxx X. Xxxxx
|
| |
Name:
Xxxxxxx
X. Xxxxx
|
| |
Title:
President
|
39
Exhibit
A
Approved
Budget
The
Approved Budget is the Cost to Complete the Projects set forth in Section 1(c)
of the Disclosure Schedule.
1
Exhibit
B
Construction
Management Services
CONSTRUCTION
MANAGEMENT SERVICES
From
and
after the Closing Date, the Company shall assume and be responsible for the
performance of all obligations under Seller Projects, subject to the Seller's
financial obligations to the Buyer relating to Seller Projects as described
in
this Exhibit B (the "Services"). Seller consents to the employment by the
Company of a construction manager which is owned or controlled by a Person
who
is related to or affiliated with Persons that own the Buyer, provided that
in no
event shall any construction management fees be passed through to the Parent
or
the Seller Entities. The Company may pay such construction manager a fee,
however such fee shall be paid by the Company from the fee of $3,300,000 set
forth below. It is the intention of the Parties that the Seller shall pay for
the costs of completing the Seller Projects in the manner described in the
Agreement, including the exhibits thereto, but if additional funds are required,
Seller shall be responsible to pay such increased costs, subject to the terms
and conditions of this Agreement. Seller or Company shall be responsible to
confirm that as of the date of the Closing all insurance for the Company is
paid
up until January 31, 2007 and that the Buyer has been named as an additional
insured on those insurance policies.
FEES
AND PAYMENTS
A. The
Parent/Seller will pay the Buyer a construction management fee of $3,300,000
in
consideration of the performance of the Services in the following
manner:
|
Payment
Date
|
Amount
|
|
|
|
|
January
2, 2007
|
$1,650,000
|
|
April
2, 2007
|
$825,000
|
|
July
2, 2007
|
$660,000
|
|
October
1, 2007
|
$165,000
|
|
Total:
|
$3,300,000
|
B. During
the period in which Buyer or the Company are performing Services, five (5)
business days prior to the last business day of each month, the Buyer shall
notify the Parent of (i) the expected month-end balance in the Imprest Account
(which includes collected accounts receivables), (b) the expected month-end
balance in the Checking Account, (c) the estimated Reimbursable Expenses for
the
immediately following month based on the Approved Budget, and (d) the amount
of
funds to be deposited by the Parent in the Imprest Account. After the Closing
Date, the Company shall pay the Seller Project costs through the Checking
Account. On or around the first day of each month, the Company shall transfer
funds from the Imprest Account to the Checking Account in an amount necessary
to
maintain the Checking Account minimum set forth in the table below. On or prior
to the first business day of each month, the Parent/Seller shall transfer to
the
Imprest Account the funds requested by the Company that
1
are
necessary to meet the Imprest Account Minimum set forth below. In no event
shall
the Company transfer funds to the Checking Account in excess of the Approved
Budget amount for such month without the prior written consent of the Parent.
Any transfer of such excess amount shall be deemed a material breach of this
Agreement.
During
the term of this Agreement, the balances of the Imprest Account and the Checking
Account shall be no less than the minimum amounts set forth below:
|
As
of Date
|
Imprest
Account
|
Checking
Account
|
Total
|
|
January
1, 2007
|
$12,600,000
|
$4,774,695.28
which is the accounts payable, accrued expenses, taxes and liabilities
of
the Company as of December 31, 2006
|
$17,374,695.28
|
|
February
1, 2007
|
$8,000,000
|
$4,000,000
|
$12,000,000
|
|
March
1, 2007
|
$8,000,000
|
$4,000,000
|
$12,000,000
|
|
April
1, 2007
|
$8,000,000
|
$4,000,000
|
$12,000,000
|
|
May
1, 2007
|
$8,000,000
|
$3,000,000
|
$11,000,000
|
|
June
1, 2007
|
$6,000,000
|
$2,000,000
|
$8,000,000
|
|
July
1, 2007
|
$6,000,000
|
$2,000,000
|
$8,000,000
|
|
August
1, 2007
|
$4,000,000
|
$2,000,000
|
$6,000,000
|
|
September
1, 2007
|
$4,000,000
|
$1,000,000
|
$5,000,000
|
|
October
1, 2007
|
$2,000,000
|
$1,000,000
|
$3,000,000
|
|
November
1, 2007
|
$2,000,000
|
$1,000,000
|
$3,000,000
|
|
December
1, 2007
|
$2,000,000
|
$1,000,000
|
$3,000,000
|
|
December
31, 2007
|
$0
|
$0
|
$0
|
If
for
any reason the Seller Projects are completed and the Imprest Account or the
Checking Account has an outstanding balance, such balance shall be promptly
delivered to the Parent/Seller. It is the Seller's obligation to fund the costs
to complete the Seller Projects and if additional funds are required in excess
of the Approved Budget, the Seller agrees to provide such funding in accordance
with, and subject to, the terms and conditions of the Agreement, including
without limitation Section 5(r).
If
the
Seller Projects are not completed by December 31, 2007, the Buyer and the Parent
shall negotiate in good faith and agree upon an updated schedule and the minimum
balances for the Imprest Account and the Checking Account.
2
C. For
purposes of this Agreement, "Reimbursable Expenses" means the commercially
reasonable expenses and costs actually paid or incurred by the Buyer or the
Company to complete the Seller Projects of any nature whatsoever, including,
but
not limited to: (i) costs for field labor, direct costs, construction management
fees and costs for communications (including telephone bills, telephone charges,
cell phones, radios, faxes, stationery, postage, overnight courier services,
duplicating services), travel expenses, any expenses of the field office, and
any expenses otherwise incurred by the Buyer on account of the performance
of
the work on the Seller Projects not incurred as part of the general overhead
of
the construction management; (ii) all costs and expenses of the Buyer for all
employees of the Buyer, all "consultants" of the Buyer, and other persons
employed by the Buyer specifically for the purposes of the Seller Projects.
This
will include all wages, salaries and direct payments to the individuals, all
payroll taxes, benefits programs, unemployment insurance, welfare funds,
pensions, insurance, medical and dental or hospitalization benefits, vacation
benefits, or other benefits, bonus payments, buyouts and salaries paid to or
on
account of the employee or "consultants," all payments for travel time and
expenses paid to the employee or "consultants," all reasonable travel expenses
of employees or "consultants" of the Buyer incurred in the discharge of duties
connected with the performance of the Seller Projects; all supplies of whatever
nature; tools, equipment and services required for the work, water, power and
fuel, winter protection, blueprints, printing, photographs, field office
supplies, stationery and similar items, rental of property for storage, field
office and other purposes, royalties for patents that may be involved in the
work; all federal, state, municipal or other taxes based upon labor performed
and material furnished directly by the Buyer, including, but not limited to,
general business, gross receipts, occupational of license taxes, fees for
permits and licenses; state, municipal or other taxes imposed on the Buyer's
fee
that are based on factors other than net taxable income, and all premiums on
insurance carried by the Buyer for construction of the Seller Projects; all
reasonable counsel fees and legal expenses incurred by the Buyer in connection
with any matter arising out of the performance of the Seller Projects; and
(iii)
all other reasonable and necessary expenses which the Buyer may incur in
performing its work on the Seller Projects. The Parties agree that home/office
allocation shall be apportioned in the following manner: (a) if Buyer or Company
personnel are fully dedicated to and work directly on a Seller Project, then
the
cost of such personnel shall be included as a Reimbursable Expense; (b) if
Buyer
or Company personnel are not fully dedicated to a Seller Project but perform
a
function on behalf of the Company that is necessary or useful to the performance
of such projects (e.g., accounting or finance), then the costs of such personnel
shall be deemed a Reimbursable Expense in an amount equal to (1) the total
cost
of such person for such month, multiplied by (2) a fraction, the numerator
of
which is the actual cost of Seller Projects for such month and the denominator
of which is the actual cost of Seller Projects for such month plus all other
actual project costs of Buyer and its Affiliates for such month for which such
personnel provide services.
D. In
addition to the audit program set forth on Exhibit C, the Seller shall have
the
right to audit all Reimbursable Expenses and the Buyer shall make available
its
and the Company's books, records and personnel to the Seller and its
representatives for such purpose upon reasonable notice and during normal
business hours. The Seller shall not be required to make any reimbursement
that
it is contesting in good faith however, the Seller must pay to the Company,
through funding of the Imprest Account, any portion or part of the reimbursement
which the Seller does not dispute. In order to assure a mutual interest in
a
prompt resolution of any dispute, the Seller must deposit with an escrow agent
acceptable to both parties an amount equal to all sums which the Seller
disputes; with that money to remain in escrow until the dispute is resolved.
If
the parties cannot agree to an escrow agent at the time, the attorney for the
Buyer shall act as escrow agent or may designate another New Jersey attorney
to
act as the escrow agent.
E. All
funds
deposited in the Imprest Account and the Checking Account shall be trust funds
exclusively for the use of the payment for work, labor and services performed
on
the Seller Projects.
3
AUDIT
RIGHTS
In
addition to the audit program set forth on Exhibit C, the Seller shall have
the
right to have an independent certified public accountant or other independent
third party to examine the relevant books and records of the Company, the Buyer
and their respective Affiliates, and to engage the personnel of the Company,
the
Buyer and their respective Affiliates, during normal business hours to verify
that appropriate accounting and payments have been made with respect to the
Seller. In the event a determination is made that the Seller has overpaid,
the
Buyer or the Company shall promptly pay to the Seller the amount by which the
Company was overpaid along with interest at a rate of interest equal to one
percent (1%) per month (or the highest rate permitted by law, if lower). The
fees and expenses of the accountant or other third party performing any
verification pursuant to this Exhibit A hall be paid by the Seller; provided,
that, if
a determination is made that Seller or the Parent overpaid by ten percent (10%)
or more, then the Buyer and the Company shall promptly reimburse the Seller
for
the costs of such verification. If the Seller shall fail to pay the amounts
necessary to complete the Seller Projects as set forth in this Agreement, then
the Seller shall pay interest at a rate of interest equal to one percent (1%)
per month (or the highest rate permitted by law, if lower) on all such overdue
amounts until paid.
DISPUTES
Any
dispute between the Buyer and the Seller shall first be referred to mediation
within thirty (30) days of notice thereof to be held in the State of
New York.
If the parties cannot agree to a mediator or mediation process at that time,
such mediation shall be held pursuant to the Construction Industry Rules of
Mediation, as shall be published by the American Arbitration Association on
the
date the issue arises. The completion of that mediation by the parties shall
be
a condition precedent to any further action by either party under this Agreement
relating to the Services. The foregoing shall not prohibit either Party from
seeking equitable relief in a court of competent jurisdiction.
4
Exhibit
C
Audit
Program
Audit
Objectives
The
audit
objective is to ensure that the terms of the Agreement are being complied with
in terms of:
| a. |
payments
under the Agreement
|
| b. |
calculations
of such payments
|
| d. |
true-ups
of estimated to actual cost
|
| e. |
propriety
of Reimbursable Expenses
|
| g. |
supporting
records (accounting, personnel, etc) to substantiate project costs
and
other reimbursable costs
|
| h. |
handling
of the Imprest Account and Checking
Account
|
| i. |
maintenance
of system of internal controls over financial
reporting
|
Audit
Program
1.
Obtain
the documentation of the agreed upon budgets for each project under the
Agreement, including the Approved Budget, Work in Progress (WIP) schedule,
Accounts Receivable, approved and pending change orders, claims, field work
orders, work schedule, etc.
2.
Ensure
continuing access to the following data (daily, weekly, monthly, ad
hoc):
| a. |
Payroll
detail, including certified payroll
|
| b. |
Job
site records including sign-in sheets and tool box meeting
records
|
| g. |
Job
activity analysis report
|
| i. |
Purchase
orders and invoices
|
| j. |
Records
of collection activity
|
| l. |
Claims,
change orders (and pending change
orders)
|
| m. |
Detailed
records of estimates of manpower loading over the course of the project
(need to retain historical
information)
|
3.
Monthly, select 6 projects for review. Include two jobs that are substantially
complete, one that is 75 - 90% complete, and three that are less than
75%
complete. These numbers may be adjusted over time. The selection should be
a mix of jobs that are performing better than budget and those performing at
or
below budget.
4.
For
each job, substantiate the following:
a.
Payroll
i.
Trace
the payroll detail from the JAA to the monthly WIP. Tie the appropriate detail
to the certified payroll, where it exists.
1
ii.
Review the laborers to the time cards, and to attendance at meetings. Request
the sign-in sheets from the general contractor, if appropriate.
iii.
It
is agreed that the costs of certain overhead personnel such as project managers,
estimators, warehouse personnel, purchasing agents, office staff,
and
management
and
supervisory personnel may be charged to the job as direct labor.
iv.
Verify that payroll costs are accrued.
v.
Validate number of crew on job on a monthly basis to the man power loading
estimates originally developed and question variances.
b.
Materials
i.
Trace
the material costs to invoices, purchase orders, and receiving records for
the
proper job and job location. For materials received on the job,
ensure
they have been included in job costs.
ii.
Identify materials already used on the job and stored materials. Determine
whether the controls over stored materials are sufficient.
iii.
Discuss with the project manager the materials that will not be used and how
they will dispose - inventory, salvage, return to vendor, scrap,
etc.
c.
Physical Inspection
Walk
certain job sites and be alert for:
condition,
including completion status
number
of
laborers
materials,
including stored materials, etc.
equipment,
vehicles, etc. deployed on site
d.
Subcontractor Costs
i.
Review
subcontractor agreements for scope, payment terms, etc. Determine the services
rendered to date and the invoicing of those services.
ii.
Verify receipt of lien waivers as payments are settled.
e.
Other
Direct Job Costs
i.
Review
other direct job costs such as trailers, trucks, construction equipment, tools
and xxxxx materials.
ii.
As
applicable, trace to cost records such as invoices or a schedule of charges,
as
appropriate.
iii.
For
vehicles and equipment, validate to records indicating location on the job
site.
iv.
For
purchased tools, ascertain the handling of tools when they are no longer needed
on the project.
5.
For
each project selected, review the handling of:
| · |
pending
charge or change orders
|
| · |
charge
and change orders
|
2
6.
Review
trends in Accounts Payable including:
| · |
payment
to vendors on a timely basis
|
| · |
taking
advantage of discounts, when
offered
|
| · |
related
party xxxxxxxx outside of the standard construction management
payments
|
| · |
be
sensitive of payments handled outside the purchase order
process.
|
7.
Review
inventory trends and levels and perform test counts.
8.
Obtain
and review the Accounts Receivable aging report.
| a. |
Select
customers and confirm A/R by
project.
|
| b. |
Review
application of payments using cash receipts
report.
|
| c. |
For
customers with balances over 90 days, obtain documentation around
the
collection process.
|
9.
Payments to construction manager.
| b. |
reimbursable
expenses (in accordance with format selected, ensuring legitimacy
of such
items
|
10.
Tie
the basis for any payments under 9a to records such as WIP schedules/charges,
signed documents, other supporting accounting records. Determine
that
this is done only on a “pay when paid” basis.
11.
Review the handling of the imprest account. Verify that the estimates developed
appear reasonable and are trued up to actuals on a timely basis.
12.
Determine that records are being maintained in accordance with the record
retention schedule.
13.
Ensure that any new work is accounted for outside of this
agreement.
14.
Insurance coverages - identify any charges for insurance coverage from
construction managers and determine that it covers only what is necessary under
the agreement.
15.
Hold
regular meetings with the principals involved to discuss issues and progress
made. This could include the CEO, CFO, Controller, Purchasing Manager, and
key
project managers.
3
Exhibit
D
Required
Consents
Hanover
Business Associates, L.L.C., as landlord for the property located in Whippany,
New Jersey. Such consent shall not be obtained prior to the Closing. If the
Company or the Buyer incur any cost or expense as a result of the failure of
the
Seller to deliver such consent, the Seller agrees that all such costs and
expenses shall be a cost of Seller Projects.
1
Annex
A
Disclosure
Schedule
[See
attached]
122009.13
2
