EXHIBIT 2.1
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CONSOLIDATION CAPITAL CORPORATION,
CCC1 ACQUISITION CORP.,
SERVICE MANAGEMENT USA INC.,
AND
THE STOCKHOLDER NAMED THEREIN
MADE EFFECTIVE AS OF JANUARY 29, 1998
________________________________________________________________________________
________________________________________________________________________________
Table of Contents
Page
----
1. THE MERGER............................................................. 1
1.1 The Merger.................................................... 1
1.2 Effects of the Merger......................................... 1
1.3 Articles of Incorporation; Bylaws, Directors and Officers..... 2
2. CONVERSION AND EXCHANGE OF STOCK....................................... 2
2.1 Manner of Conversion.......................................... 2
2.2 Base Merger Consideration..................................... 3
2.3 Contingent Merger Consideration............................... 4
2.4 Exchange of Certificates and Payment of Cash.................. 6
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS................................ 7
3.1 Post-Closing Adjustment....................................... 7
3.2 Pledged Assets................................................ 8
4. CLOSING................................................................ 9
4.1 Location and Date............................................. 9
4.2 Effect........................................................ 9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER...... 9
5.1 Due Organization.............................................. 9
5.2 Authorization; Validity....................................... 10
5.3 No Conflicts.................................................. 10
5.4 Capital Stock of the Company.................................. 11
5.5 Transactions in Capital Stock................................. 11
5.6 Subsidiaries, Stock, and Notes................................ 11
5.7 Predecessor Status............................................ 11
5.8 Absence of Claims Against the Company......................... 11
5.9 Company Financial Conditions.................................. 12
5.10 Financial Statements.......................................... 12
5.11 Liabilities and Obligations................................... 12
5.12 Accounts and Notes Receivable................................. 13
5.13 Books and Records............................................. 13
5.14 Permits....................................................... 13
5.15 Real Property................................................. 14
5.16 Personal Property............................................. 16
5.17 Intellectual Property......................................... 17
5.18 Material Contracts and Commitments............................ 18
5.19 Government Contracts.......................................... 19
5.20 Insurance..................................................... 20
5.21 Labor and Employment Matters.................................. 20
5.22 Employee Benefit Plans........................................ 21
5.23 Conformity with Law; Litigation............................... 23
5.24 Taxes......................................................... 23
5.25 Absence of Changes............................................ 25
5.26 Deposit Accounts; Powers of Attorney.......................... 26
5.27 Environmental Matters......................................... 27
5.28 Relations with Governments.................................... 28
5.29 Disclosure.................................................... 28
5.30 CCC Prospectus; Securities Representations.................... 28
5.31 Affiliates.................................................... 28
5.32 Location of Chief Executive Offices........................... 28
5.33 Location of Equipment and Inventory........................... 28
6. REPRESENTATIONS OF CCC AND NEWCO....................................... 29
6.1 Due Organization.............................................. 29
6.2 CCC Common Stock.............................................. 29
6.3 Authorization; Validity of Obligations........................ 29
6.4 No Conflicts.................................................. 29
6.5 Capitalization of CCC and Ownership of CCC Stock.............. 30
7. COVENANTS.............................................................. 30
7.1 Tax Matters................................................... 30
7.2 Accounts Receivable........................................... 31
7.3 Title Insurance and Surveys................................... 31
7.4 Related Party Agreements...................................... 32
7.5 Cooperation................................................... 32
7.6 Conduct of Business Pending Closing........................... 33
7.7 Access to Information......................................... 33
7.8 Prohibited Activities......................................... 34
7.9 Notice to Bargaining Agents................................... 35
7.10 Sales of CCC Common Stock..................................... 35
7.11 CCC Stock Options............................................. 37
7.12 Distribution of Vehicles...................................... 37
7.13 Allocation of Corporate Overhead.............................. 37
7.14 Removal of Liens.............................................. 38
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO............... 38
8.1 Representations and Warranties; Performance of Obligations.... 38
8.2 No Litigation................................................. 38
8.3 No Material Adverse Change.................................... 38
8.4 Consents and Approvals........................................ 38
8.5 Opinion of Counsel............................................ 38
8.6 Charter Documents............................................. 39
8.7 Quarterly Financial Statements................................ 39
8.8 Due Diligence Review.......................................... 39
8.9 Delivery of Closing Financial Certificate..................... 39
8.10 FIRPTA Compliance............................................. 39
8.11 Employment Agreement.......................................... 39
8.12 Affiliate Agreements.......................................... 39
8.13 Stockholder's Release......................................... 40
8.14 Related Party Receivables..................................... 40
8.15 Working Capital Line.......................................... 40
8.16 Release of Corporate Guaranty................................. 40
8.17 Delivery of Assurance......................................... 40
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDER.................................................... 40
9.1 Representations and Warranties; Performance of Obligations.... 40
9.2 No Litigation................................................. 40
9.3 Consents and Approvals........................................ 41
9.4 Employment Agreement.......................................... 41
10. INDEMNIFICATION........................................................ 41
10.1 General Indemnification by the Stockholder.................... 41
10.2 Limitation and Expiration..................................... 42
10.3 Indemnification Procedures.................................... 42
10.4 Survival of Representations Warranties and Covenants.......... 44
10.5 Remedies Cumulative........................................... 44
10.6 Right to Set Off.............................................. 44
11. NONCOMPETITION......................................................... 44
11.1 Prohibited Activities......................................... 44
11.2 Damages....................................................... 45
11.3 Reasonable Restraint.......................................... 45
11.4 Severability; Reformation..................................... 45
11.5 Independent Covenant.......................................... 45
11.6 Materiality................................................... 46
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................. 46
12.1 Stockholder................................................... 46
12.2 CCC........................................................... 46
12.3 Damages....................................................... 46
13. GENERAL................................................................ 47
13.1 Termination.................................................. 47
13.2 Effect of Termination........................................ 47
13.3 Successors and Assigns....................................... 47
13.4 Entire Agreement; Amendment; Waiver.......................... 47
13.5 Counterparts................................................. 48
13.6 Brokers and Agents........................................... 48
13.7 Expenses..................................................... 48
13.8 Specific Performance; Remedies............................... 48
13.9 Notices...................................................... 48
13.10 Governing Law................................................ 49
13.11 Severability................................................. 49
13.12 Absence of Third Party Beneficiary Rights.................... 49
13.13 Further Representations...................................... 49
13.14 Accounting Terms............................................. 50
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
---------
entered into as of the 29th day of January, 1998, by and among Consolidation
Capital Corporation, a Delaware corporation ("CCC"), CCC1 Acquisition Corp., a
---
Delaware corporation and a newly-formed, wholly-owned subsidiary of CCC
("Newco"), and Service Management USA, Inc., a Virginia corporation (the
-----
"Company"), and Xxxx X. XxxXxxxxx (the "Stockholder").
-------- -----------
BACKGROUND
WHEREAS, prior to the execution of this Agreement, the Stockholder owned
(i) all of the outstanding capital stock of Diversified Management Services USA,
Inc., a Virginia corporation ("DMSUSA"), (ii) all of the outstanding membership
------
interests in Alliance Supply Co., LLC, a Virginia limited liability company
("ASC") , and (iii) as a result of the acquisition of certain membership
-----
interests in Interstate Building Services, LLC, a Virginia limited liability
company ("IBS") from the former holder of 30% of the outstanding membership
---
interests in IBS (the "Former IBS Member") previously not owned by the
-----------------
Stockholder, all of the outstanding membership interests in IBS.
WHEREAS, immediately prior to the execution of this Agreement, the
Stockholder transferred all of his ownership interests in each of DMSUSA, ASC
and IBS (the "Contributed Companies") to the Company (the "Restructuring
--------------------- -------------
Transactions"). The term "Company" as used herein shall, unless the context
------------
clearly indicates to the contrary, include the Contributed Companies as though
such entities had been wholly-owned subsidiaries of the Company for all relevant
periods and all references to financial statements, data or information of the
Company shall be deemed to mean pro-forma combined financial statements, data
and information of the Company and the Contributed Companies as though the
Restructuring Transactions had occurred at the beginning of the relevant period.
WHEREAS, the respective Boards of Directors of Newco and the Company deem
it advisable and in the best interests of Newco and the Company (each of which
are sometimes herein referred to as the "Constituent Corporations") and their
------------------------
respective stockholders that Newco merge with and into the Company (the
"Merger") pursuant to this Agreement, the Plan of Merger (defined below) and the
------
applicable provisions of the laws of the States of Delaware and Virginia.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
A. THE MERGER. At the Effective Time (as defined in Section 4.2), Newco
shall be merged with and into the Company pursuant to this Agreement and a plan
of merger (the "Plan of Merger") substantially in the form attached as SCHEDULE
--------------
1.1 hereto, and the separate corporate existence of Newco shall cease. The
Company, as it exists from and after the Effective Time, is sometimes referred
to as the "Surviving Corporation".
---------------------
B. EFFECTS OF THE MERGER. The Merger shall have the effects provided
therefor by the Virginia Stock Corporation Act and the Delaware General
Corporation Law (the "State Corporation Laws"). Without limiting the generality
----------------------
of the foregoing, and subject thereto, at the Effective Time (i) all the rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, and all property, real, personal and mixed, and all debts due on
whatever account, including without limitation subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to the Company or Newco shall be taken and deemed to be transferred to, and
vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, immunities, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Corporation, as they were of the Company and Newco, and (ii) all
debts, liabilities, duties and obligations of the Company and Newco, subject to
the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
C. ARTICLES OF INCORPORATION; BYLAWS, DIRECTORS AND OFFICERS. At the
Effective Time:
i. The Articles of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Articles of
Incorporation of the Company until thereafter amended in
accordance with the provisions therein and as provided by the
applicable provisions of the State Corporation Laws.
ii. The Bylaws of the Surviving Corporation from and after the
Effective Time shall be the Bylaws of the Company in effect
immediately prior to the Effective Time, continuing until
thereafter amended in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as
provided by the State Corporation Laws.
iii. The initial directors of the Surviving Corporation shall be: X.
Xxxxxxx Xxxx, Xxxxxxx X. Xxxxxxx and Xxxx X. XxxXxxxxx, in each
case until their successors are elected and qualified, and the
initial officers of the Surviving Corporation shall be the
officers of the Company immediately prior to the Effective Time,
with the addition of Xxxxxxx X. Xxxxxxx as Vice President and X.
Xxxxxxx Xxxx as Assistant Secretary of the Surviving Corporation,
in each case until their successors are duly elected and
qualified.
2. CONVERSION AND EXCHANGE OF STOCK
A. MANNER OF CONVERSION. At the Effective Time, by virtue of the Merger
and without any action on the part of CCC, Newco, the Company or the
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
2
i. Capital Stock of Newco. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and
outstanding and shall be converted into one share of validly
issued, fully paid and non-assessable Common Stock of the
Surviving Corporation. Each stock certificate of Newco
evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the
Surviving Corporation.
ii. Cancellation of Certain Shares of Capital Stock of the Company.
All shares of capital stock of the Company that are owned
directly or indirectly by the Company shall be canceled and no
stock of CCC or other consideration shall be delivered in
exchange therefor.
iii. Conversion of Capital Stock of the Company. Subject to Section
2.1(d), and Sections 2.2, 2.3, 2.4, 3.1 and 3.2, each issued and
outstanding share of Common Stock, par value $1.00 per share of
the Company ("Company Common Stock") (other than shares to be
--------------------
canceled pursuant to Section 2.1(b)), that is issued and
outstanding immediately prior to the Effective Time shall
automatically be canceled and extinguished and converted, without
any action on the part of the holder thereof, into the right to
receive at the time and in the amounts described in this
Agreement (i) an amount of cash equal to the cash portion of the
Base Merger Consideration (as defined in Section 2.2) divided by
the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time, (ii) that number of
shares of CCC common stock, $.001 par value ("CCC Common Stock"),
----------------
valued at the Merger Price (as defined in Section 2.2), that is
equal in value to the CCC Common Stock portion of the Base Merger
Consideration (as defined in Section 2.2) divided by the number
of shares of Company Common Stock outstanding immediately prior
to the Effective Time, (iii) an amount of cash equal to 50% of
each installment of the Contingent Merger Consideration (as
defined in Section 2.3(a)) divided by the number of shares of
Company Common Stock outstanding immediately prior to the
Effective Time, and (iv) that number of shares of CCC Common
Stock, valued at the appropriate Contingent Earn Out Period
Average Price (as defined in Section 2.3(b)), that is equal in
value to 50% of each installment of the Contingent Merger
Consideration divided by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time. All
such shares of Company Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the
consideration therefor upon the surrender of such certificate in
accordance with Section 2.3 of this Agreement.
iv. Fractional Shares. No fractional shares of CCC Common Stock
shall be issued, but if the Stockholder would otherwise be
entitled to receive a fraction of a share of CCC Common Stock,
the Stockholder shall receive from CCC an amount of cash equal to
the Merger Price, as defined in Section 2.2(a), multiplied by the
3
fraction of a share of CCC Common Stock to which the Stockholders
would otherwise be entitled.
B. BASE MERGER CONSIDERATION.
i. For purposes of this Agreement, the "Base Merger Consideration"
-------------------------
shall be $12,000,000, as adjusted pursuant to this Section 2.2
and Section 3.1. Of the Base Merger Consideration, $9,000,000
shall be paid in cash at Closing in immediately available funds.
The remaining $3,000,000 of the Base Merger Consideration shall
be paid in shares of CCC Common Stock valued at $21.00 per share
(the "Merger Price"). The 142,857 shares of CCC Common Stock to
------------
be issued in respect of the Base Merger Consideration (subject to
adjustment as provided in this Section 2.2 and Section 3.1) shall
be registered under the Securities Act of 1933, as amended (the
"1933 Act").
---------
ii. The Base Merger Consideration has been calculated based upon
several factors, including the assumption that the net worth of
the Company, calculated in accordance with generally accepted
accounting principles ("GAAP") consistently applied, but in any
----
event excluding any material increase in intangible assets of the
Company since December 31, 1997, shall be equal to or greater
than $3,200,000 (the "Net Worth Target") as of the Closing and
----------------
that earnings of the Company before interest and taxes, computed
in accordance with GAAP consistently applied throughout the
periods involved but adjusted to reflect the add-back of those
nonrecurring costs that are specified on SCHEDULE 5.9(B) hereto
("Adjusted EBIT"), for the twelve month period ended December 31,
-------------
1997 shall have been equal to or greater than $2,750,000 (the
"1997 Adjusted EBIT Target").
--------------------------
iii. If, on the Closing Financial Certificate (as defined in Section
8.9), the Certified Closing Net Worth (as defined in Section 8.9)
is less than the Net Worth Target, then the Base Merger
Consideration to be delivered to the Stockholder may, at CCC's
election, be reduced either (i) at the Closing, or (ii) after
completion of the Post-Closing Audit (as defined in Section 3.1),
by the difference between the Net Worth Target and the Certified
Closing Net Worth set forth on the Closing Financial Certificate
(which reduction shall be pro rata in cash and in CCC Common
Stock valued at the Merger Price in the same proportions as the
cash and CCC Common Stock components of the Base Merger
Consideration as provided in Section 2.2(a)).
iv. In addition to any reduction to the Base Merger Consideration
described in Section 2.2(c), if, on the Closing Financial
Certificate, the Certified Year End Adjusted EBIT (as defined in
Section 8.9) is less than the 1997 Adjusted EBIT Target, then the
Base Merger Consideration to be delivered to the Stockholder may,
at CCC's election, be reduced either (i) at the Closing, or (ii)
after completion of the Post-Closing Audit (as defined in Section
3.1), by the product of four multiplied by the difference between
the 1997 Adjusted EBIT Target and the Certified Year End Adjusted
EBIT set forth on the Closing Financial
4
Certificate (which reduction shall be pro rata in cash and in CCC
Common Stock valued at the Merger Price in the same proportions
as the cash and CCC Common Stock components of the Merger
Consideration as provided in Section 2.2(a)).
C. CONTINGENT MERGER CONSIDERATION.
i. For purposes of this Agreement, the "Contingent Merger
-----------------
Consideration" shall mean up to $13,000,000 representing up to
-------------
$6,000,000 payable upon the achievement of certain earnings
targets by the Company identified in Sections 2.3(a)(i) and (ii)
below (in the aggregate referred to herein as the "Actual EBIT
-----------
Earn Out") and up to $7,000,000 payable upon the achievement of
--------
certain revenue targets by the Company identified in Section
2.3(a)(iii) (in the aggregate referred to herein as the "Revenue
-------
Earn Out"). The Contingent Merger Consideration shall be payable
--------
in accordance with the provisions of this Section 2.3.
(1) $3,000,000 of the Actual EBIT Earn Out will be paid in a
lump sum if Price Waterhouse LLP ("'CCC's Accountant")
-----------------
determines that both (A) the Company's unadjusted earnings
before interest and taxes, computed in accordance GAAP
consistently applied throughout the period involved, and
including for this purpose as expenses of the Company all
amounts accrued under the employment agreement between CCC
and the Stockholder ("Actual EBIT") for the 120 day period
-----------
after the Closing (such 120 day period of time being
referred to as the "Initial Earn Out Period") is at least $
-----------------------
1,000,000, and (B) the Company's sales for the Initial Earn
Out Period are at least equal to the Company's sales for the
first 120 day period of 1997. For purposes of determining
Actual EBIT for the Initial Earn Out Period only, such term
shall mean the unadjusted earnings before interest and
taxes, computed in accordance GAAP consistently applied of
the Company and any company which was acquired directly by
the Company or becomes a direct or indirect wholly-owned
subsidiary during such Initial Earn Out Period.
(2) The entire unpaid amount of the Actual EBIT Earn Out will be
paid in a lump sum if CCC's Accountant determines that both
(A) the Company's Actual EBIT for the 12 month period after
the Closing (such 12 month period of time being referred to
as the "Subsequent Earn Out Period") is at least $3,000,000
--------------------------
and (B) the Company's sales for the Subsequent Earn Out
Period are at least equal to the Company's sales for 1997.
If the condition set forth in Clause (B) above is satisfied
but CCC's Accountant determines that the Company's Actual
EBIT for the Subsequent Earn Out Period is greater than
$2,700,000 but less than $3,000,000, then the entire unpaid
amount of the Actual EBIT Earn Out will be paid in a lump
sum less an amount equal to (X) the total amount of the
Actual EBIT Earn Out multiplied by (Y) a fraction, the
numerator of which shall be equal to the difference between
$3,000,000 and the
5
Company's Actual EBIT for the Subsequent Earn Out Period and
the denominator of which shall be $3,000,000.
(3) The Revenue Earn Out will be paid in $1,000,000 increments
for each $25 million by which the revenue of the Company
during the twenty four month period following the closing
(such period of time being referred to as the "Extended Earn
-------------
Out Period") exceeds the aggregate revenue levels of the
----------
Company during the 12 month period ended December 31, 1997,
provided however, that the total amount of the Contingent
Merger Consideration payable under this clause (iii) shall
not exceed $7,000,000. For purposes of calculating the
revenue of the Company during the Extended Earn out Period
under this clause (iii), the revenue of the Company during
the Extended Earn Out Period shall include (A) the revenues
of any of companies which are acquired by the Company and
which are recognized by such acquired company in accordance
with GAAP consistently applied during the Extended Earn Out
Period but after the date of acquisition of the company by
the Company, (B) the revenues of any of the companies listed
on SCHEDULE 2.3 (A) (III) hereto (the "Identified
----------
Acquisition Candidates") which are acquired by CCC or any
----------------------
direct or indirect wholly-owned subsidiary of CCC and which
are recognized by such acquired Identified Acquisition
Candidate during the Extended Earn Out Period but after the
date of acquisition of the Identified Acquisition Candidate
by CCC or any direct or indirect wholly-owned subsidiary of
CCC, and (C) the revenues of any Other Acquisition Candidate
(hereinafter defined) which are recognized by such Other
Acquisition Candidate in accordance with GAAP consistently
applied during the Extended Earn Out Period but after the
date of acquisition of the Other Acquisition Candidate. An
"Other Acquisition Candidate" shall mean a company which (x)
---------------------------
was acquired by CCC or any direct or indirect wholly-owned
subsidiary of CCC due to contacts initially directed to, or
made by, CCC or any direct or indirect wholly-owned
subsidiary of CCC, (y) was ultimately acquired in part due
to the efforts of the Stockholder, and (z) had revenues of
less than $50 million during the 12 calendar months
immediately preceding the acquisition of such company by CCC
or any direct or indirect wholly-owned subsidiary of CCC.
In no event shall the revenues of a company acquired by CCC
or any direct or indirect wholly-owned subsidiary of CCC
(other than the Company) be included in the revenues of the
Company for purposes of this clause (iii) unless such
acquired company was either an Identified Acquisition
Candidate or an Other Acquisition Candidate.
ii. Each installment of the Contingent Merger Consideration described
in SECTION 2.3 (A) will be paid 50% in cash and 50% in shares of
CCC Common
6
Stock and shall be paid promptly following the determination of
EBIT or revenues, as appropriate, by CCC's Accountants, which
shall be made in a timely fashion. For purposes of determining
the number of shares of CCC Common Stock that are issuable as
part of the Contingent Merger Consideration, the value of each
such share shall be equal to the applicable Earn Out Period
Average Price. The "Earn Out Period Average Price" for any
-----------------------------
installment means the quotient of (i) the sum of the closing
price of a share of CCC Common Stock on each trading day from and
including the date that is five trading days prior to the date
that the Stockholder receives such installment of the Contingent
Merger Consideration to and including the last trading day prior
to the day on which the Stockholder receives such installment of
Contingent Merger Consideration, divided by (ii) five.
D. EXCHANGE OF CERTIFICATES AND PAYMENT OF CASH.
i. CCC to Provide Cash and Common Stock. In exchange for the
outstanding shares of capital stock of the Company, CCC shall
cause to be made available to the Stockholder the Base Merger
Consideration (including cash in an amount sufficient for payment
in lieu of fractional shares pursuant to Section 1.3(d)), as
adjusted pursuant to Section 2.2 and Section 3.1. The
certificates evidencing the CCC Common Stock component of the
Base Merger Consideration and the Contingent Merger Consideration
(together, the "Merger Consideration") shall bear appropriate
--------------------
legends pursuant to the terms of this Agreement and the Affiliate
Agreement (as described in Section 8.12), and CCC shall be
entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement and
the Affiliate Agreement.
ii. Certificate Delivery Requirements. At the Effective Time, the
Stockholder shall deliver to CCC the certificates (the
"Certificates") representing Company Common Stock, accompanied by
-------------
blank stock powers duly executed by the Stockholder and with all
necessary transfer tax and other revenue stamps, acquired at the
Stockholder's expense, affixed and canceled. The Stockholder
shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so
delivered shall forthwith be canceled. Until delivered as
contemplated by this Section 2.4(b), each Certificate shall be
deemed at any time after the Effective Time to represent the
right to receive upon such surrender the number of shares of CCC
Common Stock and the amount of cash as provided by this Article 2
and the applicable provisions of the State Corporation Laws.
iii. No Further Ownership Rights in Capital Stock of the Company. All
CCC Common Stock and cash to be delivered (including CCC Common
Stock delivered pursuant to Section 3.2(b) but withheld) upon the
surrender for exchange of shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been
delivered in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and following the Effective Time
the Certificates shall have no further rights to, or ownership
in, shares of capital stock of the Company. There shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of Company Common Stock
which were outstanding immediately prior to the
7
Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Section 2.4.
iv. Lost, Stolen or Destroyed Certificates. If any certificates
evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, then CCC shall cause payment to be made in
exchange for such lost, stolen or destroyed certificates, upon
the making of an affidavit of that fact by the holder thereof,
such shares of CCC Common Stock and cash as provided in Section
2.1; provided, however that CCC may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any
claim that may be made against CCC with respect to the
certificates alleged to have been lost, stolen or destroyed.
v. No Liability. Notwithstanding anything to the contrary in this
Section 2.4, none of the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Company Common
Stock for any amount paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
A. POST-CLOSING ADJUSTMENT.
i. The Base Merger Consideration shall be subject to adjustment
after the Closing Date as specified in this Section 3.1.
ii. Within one hundred twenty (120) days following the Effective
Time, CCC shall cause CCC's Accountant to audit the Surviving
Company's books to determine the accuracy of the information set
forth on the Closing Financial Certificate (the "Post-Closing
------------
Audit"). The parties acknowledge and agree that for purposes of
-----
determining the net worth of the Company as of the Closing Date,
the value of the assets of the Company shall, except with the
prior written consent of CCC, be calculated as provided in the
last paragraph of Section 8.9. The Stockholder shall cooperate
and shall use his reasonable efforts to cause the officers and
employees of the Company to cooperate with CCC and CCC's
Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to CCC's Accountant to
facilitate the completion of the Post-Closing Audit within the
aforementioned time period. Without limiting the generality of
the foregoing, within two weeks after the Closing the Stockholder
shall provide CCC's Accountants with the information and/or
documents reasonably requested by them. In the event that CCC's
Accountant determines that the actual Company net worth as of the
Closing Date was less than the Net Worth Target, or that the
actual Adjusted EBIT for the year ended December 31, 1997 was
less than the 1997 Adjusted EBIT Target, CCC shall deliver a
written notice (the "Financial Adjustment Notice") to the
---------------------------
Stockholder setting forth (i) the
8
determination made by CCC's Accountant of the actual Company net
worth (the "Actual Company Net Worth") and the actual Adjusted
------------------------
EBIT for the year ended December 31, 1997 (the "Actual Adjusted
---------------
EBIT" ), (ii) the amount of the Merger Consideration that would
----
have been payable at Closing pursuant to Section 2.2(c) had the
Actual Company Net Worth and Actual Adjusted EBIT been reflected
on the Closing Financial Certificate instead of the Certified
Closing Net Worth and Certified Adjusted Year End EBIT,
respectively, and (iii) the amount by which the number of shares
issued as the Merger Consideration would have been reduced at
Closing had the Actual Company Net Worth been used in the
calculations pursuant to Section 2.2(c) (the "Merger
------
Consideration Adjustment"). In determining the Actual Company
------------------------
Net Worth for purposes of the Post-Closing Audit, CCC's
Accountant shall not take into account any liabilities associated
with the Identified Sales Tax Liabilities (defined below). The
term "Identified Sales Tax Liabilities" means any liability
(including penalties and other costs) due to the failure of the
Company to withhold or have withheld or pay or have paid over to
the proper governmental authorities any sales taxes required to
have been withheld and paid over, or the failure of the Company
to comply with all information reporting and backup withholding
requirements, including maintenance of required records with
respect thereto.
iii. The Merger Consideration Adjustment shall take account of the
reduction, if any, to the Merger Consideration already taken
pursuant to Section 2.2(c)(i).
iv. The Stockholder shall have thirty (30) days from the receipt of
the Financial Adjustment Notice to notify CCC if the Stockholder
disputes such Financial Adjustment Notice. If CCC has not
received notice of such a dispute within such 30-day period, CCC
shall be entitled to receive from the Stockholder (which may, at
CCC's sole discretion, be from the Pledged Assets as defined in
Section 3.2) the Merger Consideration Adjustment. If, however,
the Stockholder has delivered notice of such a dispute to CCC
within such 30-day period, then CCC's Accountant shall select an
independent accounting firm that has not represented any of the
parties hereto within the preceding two (2) years to review the
Surviving Corporation's books, Closing Financial Certificate and
Financial Adjustment Notice (and related information) to
determine the amount, if any, of the Merger Consideration
Adjustment. Such independent accounting firm shall be confirmed
by the Stockholder and CCC within five (5) days of its selection,
unless there is an actual conflict of interest. The independent
accounting firm shall be directed to consider only those
agreements, contracts, commitments or other documents (or
summaries thereof) that were either (i) delivered or made
available to CCC's Accountant in connection with the transactions
contemplated hereby, or (ii) reviewed by CCC's Accountant during
the course of the Post-Closing Audit. The independent accounting
firm shall make its determination of the Merger Consideration
Adjustment, if any, within thirty (30) days of its selection. The
determination made by the independent accounting firm shall be
final and binding on the parties hereto, and upon such
determination, CCC shall be entitled to receive from the
Stockholder (which may, at CCC's sole discretion,
9
be from the Pledged Assets as defined in Section 3.2) the Merger
Consideration Adjustment. The costs of the independent accounting
firm shall be borne by the party (either CCC or the Stockholder)
whose determination of the Company's net worth at Closing, or
actual Adjusted EBIT for the year ended December 31, 1997,
whichever is in dispute, was further from the determination of
the independent accounting firm, or equally by CCC and the
Stockholder in the event that the determination by the
independent accounting firm is equidistant between the Certified
Closing Net Worth and the Actual Company Net Worth or the
Certified Adjusted Year End EBIT and the Actual Adjusted EBIT,
whichever is in dispute.
B. PLEDGED ASSETS.
i. As collateral security for the payment of any post-Closing
adjustment to the Merger Consideration under Section 3.1, or any
indemnification obligations of the Stockholder pursuant to
Article 10, the Stockholder shall, and by execution hereof does
hereby, transfer, pledge and assign to CCC, for the benefit of
CCC, a security interest in the following assets (the "Pledged
-------
Assets"):
------
(1) that number of shares of CCC Common Stock (the "Pledged
-------
Shares") with a value, based on the Merger Price, equal to
------
fifteen percent (15%) of the Base Merger Consideration as
the same may have been adjusted pursuant to Section 2.2 or
Section 3.1 hereof, and the certificates and instruments, if
any, representing or evidencing the Stockholder's Pledged
Assets;
(2) all securities hereafter delivered to the Stockholder with
respect to or in substitution for the Stockholder's Pledged
Assets, all certificates and instruments representing or
evidencing such securities, and all cash and non-cash
dividends and other property at any time received,
receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and in the event the
Stockholder receives any such property, the Stockholder
shall hold such property in trust for CCC and shall
immediately deliver such property to CCC to be held
hereunder as Pledged Assets; and
(3) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing
property.
ii. Each certificate, if any, evidencing the Stockholder's Pledged
Assets issued in his name in the Merger shall be delivered to CCC
directly by the transfer agent, such certificate bearing no
restrictive or cautionary legend other than those imprinted by
the transfer agent at CCC's request. The Stockholder shall, at
the Closing, deliver to CCC, for each such certificate, a stock
power duly signed in blank by him. Any cash comprising the
Stockholder's Pledged Assets shall be withheld by CCC from
distribution to the Stockholder.
10
iii. The Stockholder shall be entitled to exercise any voting powers
incident to the shares of CCC Common Stock constituting the
Pledged Assets and to receive and retain all cash dividends paid
thereon.
iv. The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 3.1
and any indemnification obligations of the Stockholder pursuant
to Article 10 until the date which is one year after the
Effective Time (the "Release Date"). Promptly following the
------------
Release Date, CCC shall return or cause to be returned to the
Stockholder the Pledged Assets, less Pledged Assets having an
aggregate value equal to the amount of (i) any post-Closing
adjustment to the Merger Consideration under Section 3.1, (ii)
any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10), (iii) any indemnification
obligations of the Stockholder pursuant to Article 10, and (iv)
any amount sufficient in the judgment of CCC's Accountant to
fully satisfy the amount of any Identified Sales Tax Liabilities.
For purposes of the preceding sentence and Article 10, the CCC
Common Stock held as Pledged Assets shall be valued at (x) the
Merger Price with respect to any post-Closing adjustment to the
Merger Consideration under Section 3.1 and (y) the average of the
closing price on the Nasdaq National Market per share of CCC
Common Stock for the five trading days prior to the satisfaction
of an indemnification obligation (the "Market Value") with
------------
respect to indemnification obligations pursuant to Article 10.
4. CLOSING
A. LOCATION AND DATE. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
-------
the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, on January 30, 1998, providing that
all conditions to Closing contained in Articles 8 and 9 herein shall have been
satisfied or waived, or at such other time and date as CCC, the Company and the
Stockholder may mutually agree, which date shall be referred to as the "Closing
-------
Date."
----
B. EFFECT. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the State
Corporation Laws (the "Merger Documents"), together with any required officers'
----------------
certificates, shall be filed with the Secretary of the State of Delaware and the
State Corporation Commission of Virginia In accordance with the provisions of
the State Corporation Laws. The Merger shall become effective upon such filings
or at such later time as may be specified in such filings (the "Effective
---------
Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
To induce CCC and Newco to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Stockholder,
jointly and severally, represents and warrants to CCC and Newco as follows (for
purposes of this Agreement, the phrases "knowledge of the Company" or the
------------------------
11
"Company's knowledge," or words of similar import, mean the knowledge of the
--------------------
Stockholder and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
A. DUE ORGANIZATION. Each of the Company and the Contributed Companies,
which are all of the subsidiaries of the Company identified on SCHEDULE 5.6(A)
hereto (the "Subsidiaries") was, a corporation duly organized, validly existing
------------
and in good standing under the laws of the jurisdiction of its incorporation and
is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own, operate and
lease its properties and to carry on its business in the places and in the
manner as now conducted except where the failure to be so authorized, qualified
or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company ("Material Adverse Effect"). SCHEDULE 5.L hereto contains a list of all
-----------------------
jurisdictions in which the Company is authorized or qualified to do business.
Each of the Company and the Subsidiaries is in good standing as a foreign
corporation in each jurisdiction it which it does business. The Company has
delivered to CCC true, complete and correct copies of the Articles of
Incorporation and Bylaws (or comparable document) of the Company and each
Subsidiary. Such Articles of Incorporation and Bylaws are collectively
referred to as the "Charter Documents." The Company is not in violation of any
-----------------
Charter Documents. The minute books of the Company have been made available to
CCC (and have been delivered, along with the Company's original stock ledger and
corporate seal, to CCC) and are correct and, except as set forth in SCHEDULE
5.1, complete in all material respects. The Restructuring Transactions have
been consummated in accordance with applicable law.
B. AUTHORIZATION; VALIDITY. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. The Company has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
The Stockholder has the full legal right and authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the performance by the Company of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company and the Stockholder and this Agreement has
been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and the
Stockholder, enforceable in accordance with its terms.
C. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
i. conflict with, or result in a breach or violation of, any of the
Charter Documents;
ii. conflict with, or result in a default (or an event that would
constitute a default but for the requirement of notice or lapse
of time or both) under, any document, agreement or other
instrument to which the Company or the Stockholder is a
12
party or by which the Company or the Stockholder is bound, or
result in the creation or imposition of any lien, charge or
encumbrance on any of the Company's properties pursuant to (i)
any law or regulation to which the Company or the Stockholder or
any of their respective property is subject, or (ii) any
judgment, order or decree to which the Company or the Stockholder
is bound or any of their respective property is subject;
iii. result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the
Company; or
iv. violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or the Stockholder is subject or
by which the Company or the Stockholder is bound including,
without limitation, the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx"), together with all rules and
regulations promulgated thereunder.
D. CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists of 1,000 shares of common stock, par value $1.00 per share, of
which 1,000 shares are issued and outstanding. All of the issued and
outstanding shares of the capital stock of the Company have been duly authorized
and validly issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholder free and clear of all Liens (defined below).
All of the issued and outstanding shares of the capital stock of the Company
were offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares was issued in violation of any preemptive rights.
There are no voting agreements or voting trusts with respect to any of the
outstanding shares of the capital stock of the Company. For purposes of this
Agreement, "Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
federal and state securities laws), or preferential arrangement of any kind or
nature whatsoever (including any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
E. TRANSACTIONS IN CAPITAL STOCK. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Company to issue, sell or
otherwise cause to become outstanding any shares of capital stock. The Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the
Merger, CCC will be the record and beneficial owner of all outstanding capital
stock of the Company and rights to acquire capital stock of the Company.
13
F. SUBSIDIARIES, STOCK, AND NOTES.
i. Except as set forth on SCHEDULE 5.6(A), the Company has no
subsidiaries.
ii. Except as set forth on SCHEDULE 5.6(B), the Company does not
presently own, of record or beneficially, or control, directly or
indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation,
association or business entity, nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or
other noncorporate entity.
iii. Except as set forth on SCHEDULE 5.6(C), there are no promissory
notes that have been issued to, or are held by, the Company.
G. PREDECESSOR STATUS. SCHEDULE 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from which the Company previously acquired significant assets. The Company has
never been a subsidiary or division of another corporation, nor has it been a
part of an acquisition that was later rescinded.
H. ABSENCE OF CLAIMS AGAINST THE COMPANY. No Stockholder has any claims
against the Company.
I. COMPANY FINANCIAL CONDITIONS.
i. The Company's net worth (i) as of the end of its most recent
fiscal year was not less than $3,200,000, and (ii) as of the
Closing will not be less than the Net Worth Target. For purposes
of this Section 5.9(a), calculation of amounts as of the Closing
shall be made in accordance with the last paragraph of Section
8.9.
ii. The Company's earnings before interest and taxes (after the
addition of "add-backs" set forth on SCHEDULE 5.9(B)) for its
most recent fiscal year ended December 31, 1997 was not less than
$2,750,000.
J. FINANCIAL STATEMENTS. SCHEDULE 5.10 includes true, complete and
correct copies of the Company's internally prepared balance sheet (the "Company
-------
Balance Sheet") as of December 31, 1997 (the end of its most recently completed
-------------
fiscal year, which is referred to herein as the "Balance Sheet Date"), and
------------------
income statement for the year ended December 31, 1997 (collectively referred to
herein as the "Company Financial Statements"). The Company Financial Statements
----------------------------
have been prepared in accordance with GAAP consistently applied. Each balance
sheet included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
income statements included in the Company Financial Statements presents fairly
the results of its operations for the periods indicated thereon. Since the dates
of the Company Financial Statements, there have been no material changes in the
Company's accounting policies other than as requested by CCC to conform the
Company's accounting policies to GAAP.
14
K. LIABILITIES AND OBLIGATIONS.
i. The Company is not liable for or subject to any liabilities
except for:
(1) those liabilities reflected on the Company Balance Sheet and
not previously paid or discharged;
(2) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract,
commitment or agreement specifically disclosed on any
SCHEDULE to this Agreement or not required to be disclosed
thereon because of the term or amount involved or otherwise;
and
(3) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past
practice, which liabilities are not, individually or in the
aggregate, material.
ii. The Company has delivered to CCC, in the case of those
liabilities which are not fixed or are contested, a reasonable
estimate of the maximum amount which may be payable.
iii. SCHEDULE 5.11(C) also includes a summary description of all plans
or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any real property
or existing business, to which management of the Company has made
any material expenditure in the two-year period prior to the date
of this Agreement, which if pursued by the Company or the
Surviving Corporation would require additional material
expenditures of capital.
iv. For purposes of this Section 5.11, the term "liabilities" shall
include without limitation any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, either
accrued, absolute, contingent, mature, unmatured or otherwise and
whether known or unknown, fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured. SCHEDULE
5.11(D) contains a complete list of all indebtedness of the
Company.
L. ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to CCC a
complete and accurate list, as of a date not more than two (2) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to employees and the
Stockholder), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories (collectively, the "Accounts
--------
Receivable"). Within five (5) business days of the Closing Date, the Company
----------
will deliver to CCC a complete and accurate list, as of a date not more than two
(2) business days prior to the Closing Date, of the Accounts Receivable. All
Accounts Receivable represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. The Accounts
Receivable are current and collectible net of any respective reserves shown on
15
the Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within ninety (90)
days after the day on which it first became due and payable, except that certain
Accounts Receivable which are identified on SCHEDULE 5.12 will be collected in
full, without any set-off, within six (6) months after the day on which it first
became due and payable. There is no contest, claim, or right of set-off, other
than rebates and returns in the ordinary course of business, under any contract
with any obligor of an Account Receivable relating to the amount or validity of
such Account Receivable.
M. BOOKS AND RECORDS. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
N. PERMITS. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
-------
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any Permit.
O. REAL PROPERTY.
i. For purposes of this Agreement, "Real Property" means all
-------------
interests in real property including, without limitation, fee
estates, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, and rights of way, and all
buildings and other improvements thereon, owned or used by the
Company, together with any additions thereto or replacements
thereof.
ii. SCHEDULE 5.15(B) contains a complete and accurate description of
all Real Property (including street address, legal description
(where known), owner, and Company's use thereof) and, to the
Company's knowledge, any Liens. SCHEDULE 5.15(B) indicates
whether the Real Property is owned or leased and specifies which
leases are between the Company and the Stockholder (the "Related-
-------
Party Leases"). The Real Property listed on SCHEDULE 5.15
------------
includes all interests in real property necessary to conduct the
business and operations of the Company.
16
iii. Except as set forth in SCHEDULE 5.15(C):
(1) The Company has good and marketable undivided and insurable
title to the Real Property free and clear of any Liens other
than (A) liens for current taxes not yet due and payable,
(B) easements, covenants, conditions, restrictions, and
title defects that have been approved by CCC, as set forth
on SCHEDULE 5.15(C), and (C) liens securing indebtedness for
borrowed money that CCC or one of its affiliates shall elect
at Closing to assume, as set forth on SCHEDULE 5.15(C)
(collectively, "Permitted Encumbrances").
----------------------
(2) The legal descriptions for the Real Property contained in
the respective deeds thereof describe the properties fully
and adequately. All structures, facilities and improvements
to the Real Property ("Structures") are located within the
----------
boundary lines of the Real Property and no structures,
facilities or other improvements on any parcel adjacent to
the Real Property encroach onto any portion of the Real
Property. The Structures do not encroach on any easement
which burdens any portion of the Real Property, and none of
the Real Property serves any adjacent parcel for any purpose
inconsistent with the use of the Real Property.
(3) The Company has good and valid rights of ingress and egress
to and from all Real Property from and to the public street
systems for all usual street, road and utility purposes.
(4) All structures and all structural, mechanical and other
physical systems thereof that constitute part of the Real
Property, including but not limited to the walls, roofs and
structural elements thereof and the heating, ventilation,
air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment,
systems and facility included therein, and other material
items at the Real Property (collectively, the "Tangible
--------
Assets"), are free of defects and in good operating
------
condition and repair. For purposes of this Section, a
defect shall mean a condition relating to the structures or
any structural, mechanical or physical system which requires
an expenditure of more than $1,000 to correct. No
maintenance or repair to the Real Property, Structures or
any Tangible Asset has been unreasonably deferred. There is
no water, chemical or gaseous seepage, diffusion or other
intrusion into said buildings, including any subterranean
portions, that would impair beneficial use of the Real
Property, Structures or any Tangible Asset.
(5) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any
applicable law or by the use and operation of the Real
Property in the conduct of the business of the Company's
17
business are installed to the property lines of the Real
Property, are connected pursuant to valid permits to
municipal or public utility services or proper drainage
facilities, are fully operable and are adequate to service
the Real Property in the operation of the Company's business
and to permit full compliance with the requirements of all
laws in the operation of such business. No fact or
condition exists which could result in the termination or
material reduction of the current access from the Real
Property to existing roads or to sewer or other utility
services presently serving the Real Property.
(6) The Real Property and all present uses and operations of the
Real Property comply with all applicable statutes, rules,
regulations, ordinances, orders, writs, injunctions,
judgments, decrees, awards or restrictions of any government
entity having jurisdiction over any portion of the Real
Property (including, without limitation, applicable
statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health, employment and
employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions,
----
easements, disposition agreements and similar matters
affecting the Real Property. The Company has obtained all
approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits)
required in connection with the construction, ownership,
use, occupation and operation of the Real Property.
(7) Except as set forth on the surveys previously made available
to CCC, none of the Structures, the appurtenances thereto or
the equipment therein or the operation or maintenance
thereof, or the conduct of the Company's business, violates
any restrictive covenant or encroaches on any property owned
by others or any easement, right of way or other Lien or
restriction affecting such Real Property in any respect.
The Real Property and its continued use, occupancy and
operation as used, occupied and operated in the conduct of
the Company's business does not constitute a nonconforming
use and is not the subject of a special use permit under any
applicable Law.
(8) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building,
zoning or other land use regulatory proceedings, lawsuits or
administrative actions relating to any portion of the Real
Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof, nor has
the Company or the Stockholder received notice of any
pending or threatened special assessment proceedings
affecting any portion of the Real Property.
18
(9) No portion of the Real Property or the Structures has
suffered any damage by fire or other casualty which has not
heretofore been completely repaired and restored to its
original condition.
(10) There are no parties other than the Company in possession of
any of the Real Property or any portion thereof, and there
are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the
Real Property or any portion thereof.
(11) There are no outstanding options or rights of first refusal
to purchase the Real Property, or any portion thereof or
interest therein. The Company has not transferred any air
rights or development rights relating to the Real Property.
(12) There are no service contracts or other agreements relating
to the use or operation of the Real Property.
(13) No portion of the Real Property is located in a wetlands
area, as defined by Laws, or in a designated or recognized
flood plain, flood plain district, flood hazard area or area
of similar characterization. No commercial use of any
portion of the Real Property will violate any requirement of
the United States Corps of Engineers or Laws relating to
wetlands areas.
(14) All real property taxes and assessments that are due and
payable with respect to the Real Property have been paid or
will be paid at or prior to Closing.
(15) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to
which the Company leases from any other party any real
property, including all amendments, renewals, extensions,
modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the
"Leases") are valid and in full force and effect. The
-------
Company has provided CCC with true and complete copies of
all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material
correspondence related thereto, including all correspondence
pursuant to which any party to any of the Leases declared a
default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. The
Leases and the Company's interests thereunder are free of
all Liens.
(16) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the
transactions contemplated hereby.
19
(17) The rents payable by the Company under the Related-Party
Leases are at fair market value and all other terms of such
leases are commercially reasonable as though negotiated in
arm's length transactions.
(18) The Company is not subject to liabilities of any nature
whatsoever, including without limitation, tax and
environmental liabilities, resulting from or arising out of
or in connection with the Company being included in the
chain of title with respect to the real property located in
Stow, Ohio, which the Company currently leases pursuant to
the Related-Party Lease identified on SCHEDULE 5.15(B).
P. PERSONAL PROPERTY.
i. SCHEDULE 5.16(A) sets forth a complete and accurate list of all
personal property included on the Company Balance Sheet and all
other personal property owned or leased by the Company with a
current book value in excess of $5,000 both (i) as of the Balance
Sheet Date and (ii) acquired since the Balance Sheet Date,
including in each case true, complete and correct copies of
leases for material equipment and an indication as to which
assets are currently owned, or were formerly owned, by the
Stockholder or business or personal affiliates of the Stockholder
or of the Company.
ii. The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company
as they are currently being conducted.
iii. All of the trucks and other material machinery and equipment of
the Company, including those listed on SCHEDULE 5.16(A), are in
good working order and condition, ordinary wear and tear
excepted. All leases set forth on SCHEDULE 5.16(A) are in full
force and effect and constitute valid and binding agreements of
the Company, and the Company is not in breach of any of their
terms. All fixed assets used by the Company that are material to
the operation of its business are either owned by the Company or
leased under an agreement listed on SCHEDULE 5.16(A).
Q. INTELLECTUAL PROPERTY.
i. The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the
registered and unregistered Marks listed on SCHEDULE 5.17(A).
Such SCHEDULE lists (i) all of the Marks registered in the United
States Patent and Trademark Office ("PTO") or the equivalent
---
thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company
now owns or uses in connection with its business. Except with
respect to those Marks shown as licensed on SCHEDULE 5.17(A), the
Company owns all of the registered and unregistered trademarks,
service marks, and trade names that it uses. The Marks listed on
20
SCHEDULE 5.17(A) will not cease to be valid rights of the Company
by reason of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated
hereby. For purposes of this Section 5.17, the term "Xxxx" shall
mean all right, title and interest in and to any United States or
foreign trademarks, service marks and trade names now held by the
Company, including any registration or application for
registration of any trademarks and services marks in the PTO or
the equivalent thereof in any state of the United States or in
any foreign country, as well as any unregistered marks used by
the Company, and any trade dress (including logos, designs,
company names, business names, fictitious names and other
business identifiers) used by the Company in the United States or
any foreign country.
ii. The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights
in the Patents listed on SCHEDULE 5.17(B)(I) and in the Copyright
registrations listed on SCHEDULE 5.17(B)(II). Such Patents and
Copyrights constitute all of the Patents and Copyrights that the
Company now owns or is licensed to use. The Company owns or is
licensed to practice under all patents and copyright
registrations that the Company now owns or uses in connection
with its business. For purposes of this Section 5.17, the term
"Patent" shall mean any United States or foreign patent to which
the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by
the Company; the term "Copyright" shall mean any United States or
foreign copyright owned by the Company as of the date of this
Agreement, including any registration of copyrights, in the
United States Copyright Office or the equivalent thereof in any
foreign county, as well as any application for a United States or
foreign copyright registration made by the Company.
iii. The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights
in the trade secrets, franchises, or similar rights
(collectively, "Other Rights") listed on SCHEDULE 5.17(C). Those
------------
Other Rights constitute all of the Other Rights that the Company
now owns or is licensed to use. The Company owns or is licensed
to practice under all trade secrets, franchises or similar rights
that it owns, uses or practices under.
iv. The Marks, Patents, Copyrights, and Other Rights listed on
SCHEDULES 5.17(A), 5.17(B)(I), 5.17(B)(II), AND 5.17(C) are
referred to collectively herein as the "Intellectual Property."
---------------------
The Intellectual Property owned by the Company is referred to
herein collectively as the "Company Intellectual Property." All
-----------------------------
other Intellectual Property is referred to herein collectively as
the "Third Party Intellectual Property." Except as indicated on
SCHEDULE 5.17(C), the Company has no obligations to compensate
any person for the use of any Intellectual Property nor has the
Company granted to any person any license, option or other rights
to use in any manner any Intellectual Property, whether requiring
the payment of royalties or not.
21
v. The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any Third Party
Intellectual Property license, sublicense or agreement described
in SCHEDULE 5.17(A), (B), or (C). No claims with respect to the
Company Intellectual Property or Third Party Intellectual
Property are currently pending or, to the knowledge of the
Company, are threatened by any person, nor, to the Company's
knowledge, do any grounds for any claims exist: (i) to the effect
that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license
by the Company infringes on any copyright, patent, trademark,
service xxxx or trade secret; (ii) against the use by the Company
of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and
applications used in the Company's business as currently
conducted by the Company; (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual
Property or other trade secret material to the Company; or (iv)
challenging the Company's license or legally enforceable right to
use of the Third Party Intellectual Property. To the Company's
knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by
any third party. Neither the Company nor any of its subsidiaries
(x) has been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents, trademarks, service
marks, or copyrights and which has not been finally terminated or
been informed or notified by any third party that the Company may
be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by, the
Company or any of its subsidiaries of any trade secret, patent,
trademark, service xxxx, or copyright of another.
vi. All Intellectual Property in the form of computer software that
is utilized by the Company in the operation of its business is
capable of processing data between and within the twentieth and
twenty-first centuries.
R. MATERIAL CONTRACTS AND COMMITMENTS.
i. SCHEDULE 5.18(A) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses
or permits, written or oral, to which the Company is a party or
by which it or its properties are bound (including without
limitation, joint venture or partnership agreements, contracts
with any labor organizations, employment agreements, consulting
agreements, loan agreements, indemnity or guaranty agreements,
bonds, mortgages, options to purchase land, liens, pledges or
other security agreements) (i) to which the Company and any
affiliate of the Company or any officer, director or stockholder
of the Company are parties ("Related Party Agreements"); or (ii)
------------------------
that may give rise to obligations or liabilities exceeding,
during the current term thereof, $10,000, or that may generate
revenues or income exceeding, during the current term thereof,
$10,000 (collectively with the Related Party Agreements, the
"Material Contracts"). For purposes of the preceding sentence,
-------------------
in the event a
22
contract, commitments, or other agreement is terminable by either
party thereto following a period after notice of termination has
been delivered to the other party thereunder, the current term of
such contract, commitments, or other agreement is deemed to be
such period. The Company has made available to CCC for its
inspection true, complete and correct copies of the Material
Contracts. The Company has complied with all of its commitments
and obligations and is not in default under any of the Material
Contracts, and no notice of default has been received with
respect to any thereof, and there are no Material Contracts that
were not negotiated at arm's length.
ii. Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company and is in full
force and effect and is not subject to any default thereunder by
any party obligated to the Company pursuant thereto. The Company
has obtained all necessary consents, waivers and approvals of
parties to any Material Contracts that are required in connection
with any of the transactions contemplated hereby, or are required
by any governmental agency or other third party or are advisable
in order that any such Material Contract remain in effect without
modification after the Merger and without giving rise to any
right to termination, cancellation or acceleration or loss of any
right or benefit ("Third Party Consents"). All Third Party
--------------------
Consents are listed on SCHEDULE 5.18(B).
iii. The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which the Stockholder
owns a material interest, or (ii) guaranteed by the Company for
the benefit of any Person in which the Stockholder owns a
material interest, are set forth in SCHEDULE 5.18(C).
iv. The pledge, hypothecation or mortgage of all or substantially all
of the Company's assets (including, without limitation, a pledge
of the Company's contract rights under any Material Contract)
will not, except as set forth on SCHEDULE 5.18(D), (i) result in
the breach or violation of, (ii) constitute a default under,
(iii) create a right of termination under, or (iv) result in the
creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of the Company (other than a lien
created pursuant to the pledge, hypothecation or mortgage
described at the start of this Section 5.18(d)) pursuant to any
of the terms and provisions of, any Material Contract to which
the Company is a party or by which the property of the Company is
bound.
S. GOVERNMENT CONTRACTS.
i. Except as set forth on SCHEDULE 5.19, the Company is not a party
to any government contracts.
ii. The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of
the United States Government or any state or local government,
nor, to the knowledge of the Company, has any suspension or
debarment action been threatened or commenced. There is no
23
valid basis for the Company's suspension or debarment from
bidding on contracts or subcontracts for any agency of the United
States Government or any state or local government.
iii. Except as set forth in SCHEDULE 5.19, the Company has not been,
nor is it now being, audited, or investigated by any government
agency, or the inspector general or auditor general or similar
functionary of any agency or instrumentality, nor, to the
knowledge of the Company, has such audit or investigation been
threatened.
iv. The Company has no dispute pending before a contracting office
of, nor any current claim (other than the Accounts Receivable)
pending against, any agency or instrumentality of the United
States Government or any state or local government, relating to a
contract.
v. The Company has not, with respect to any government contract,
received a cure notice advising the Company that it is or was in
default or would, if it failed to take remedial action, be in
default under such contract.
vi. The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal,
report, claim, or any other information relating to a contract to
any agency or instrumentality of the United States Government or
any state or local government.
vii. No employee, agent, consultant, representative, or affiliate of
the Company is in receipt or possession of any competitor or
government proprietary or procurement sensitive information
related to the Company's business under circumstances where there
is reason to believe that such receipt or possession is unlawful
or unauthorized.
viii. Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
T. INSURANCE. SCHEDULE 5.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to CCC true, complete and correct copies of all current
insurance policies, all of which are in full force and effect. All premiums
payable under all such policies have been paid and the Company is otherwise in
full compliance with the terms of such policies. Such policies of insurance are
of the type and in amounts customarily carried by persons conducting businesses
similar to that of the Company. The insurance carried by the Company with
respect to its properties, assets and business is, to the Company's knowledge,
with financially sound insurers. To the knowledge of the Company, there have
been no threatened terminations of, or material premium increases with respect
to, any of such policies.
24
U. LABOR AND EMPLOYMENT MATTERS. With respect to employees of and
service providers to the Company:
i. the Company is and has been in compliance in all material
respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws
respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and
is not engaged in any unfair labor practice;
ii. there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending
or, to the Company's knowledge, threatened, before the National
Labor Relations Board or any other comparable authority;
iii. there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to
the Company's knowledge, threatened, against or directly
affecting the Company;
iv. to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the
past three years;
v. no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's
knowledge, no claims therefor exist or have been threatened;
vi. the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or
currently being negotiated by the Company; and
vii. all persons classified by the Company as independent contractors
do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported
their compensation on IRS Forms 1099 when required to do so.
V. EMPLOYEE BENEFIT PLANS. Attached hereto as SCHEDULE 5.22 are complete
and accurate copies of all employee benefit plans, all employee welfare benefit
plans, all employee pension benefit plans, all multi-employer plans and all
multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2), (37)
and (40), respectively, of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), which are currently maintained and/or sponsored by the
-----
Company, or to which the Company currently contributes, or has or has had an
obligation to contribute in the past, present or future (including, without
limitation, employment agreements and any other agreements containing "golden
parachute" provisions and deferred compensation agreements), together with
copies of any trusts related thereto and a classification of employees
25
covered thereby (collectively, the "Plans"). SCHEDULE 5.22 sets forth all of the
Plans that have been terminated within the past three years.
-----
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
---------------
Internal Revenue Code of 1986, as amended (the "Code") have been determined by
----
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are included as part of SCHEDULE 5.22. To the extent that any
Qualified Plans have not been amended to comply with applicable law, the
remedial amendment period permitting retroactive amendment of such Qualified
Plans has not expired and will not expire within 120 days after the Closing
Date. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or tax returns) have been timely filed
or distributed. None of: (i) the Stockholder; (ii) any Plan; or (iii) the
Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company does not currently have (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
----
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" with the
Company (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred directly or
indirectly by the Company. Further:
i. there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without
notice to and issuance of a favorable determination letter by the
Internal Revenue Service;
ii. no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
iii. there have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
iv. the valuation of assets of any Qualified Plan subject to Title IV
of ERISA, as of the Closing Date, shall exceed the actuarial
present value of all accrued pension benefits under any such
Qualified Plan in accordance with the assumptions contained in
the Regulations of the PBGC governing the funding of terminated
defined benefit plans;
26
v. with respect to Plans which qualify as "group health plans" under
Section 5000(b)(1) of the Internal Revenue Code and Sections
607(1) and 733(a) of ERISA and related regulations, the Company
and the Stockholder have complied (and on the Closing Date will
have complied), in all respects with all reporting, disclosure,
notice, election, coverage and other benefit requirements imposed
under Sections 4980B and 9801-9833 of the Internal Revenue Code
and Sections 601-734 of ERISA as and when applicable to such
plans, and the Company has no (and will incur no) direct or
indirect liability and is not (and will not be) subject to any
loss, assessment, excise tax, penalty, loss of federal income tax
deduction or other sanction, arising on account of or in respect
of any direct or indirect failure by the Company or the
Stockholder, at any time prior to the Closing Date, to comply
with any such federal or state requirement, which is capable of
being assessed or asserted before or after the Closing Date
directly or indirectly against the Company or the Stockholder
with respect to such group health plans;
vi. the Company is not now nor has it been within the past five years
a member of a "controlled group" as defined in ERISA Section
4001(a)(14);
vii. there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Stockholder's
knowledge, there is no threatened litigation, arbitration or
disputed claim, settlement or adjudication proceeding, or any
governmental or other proceeding, or investigation with respect
to any Plan, or with respect to any fiduciary, administrator, or
sponsor thereof (in their capacities as such), or any party in
interest thereof;
viii. the Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for
all Plans, and no material funding changes or irregularities are
reflected thereon which would cause such Financial Statements to
be not representative of most prior periods; and
ix. the Company has not incurred liability under Section 4062, 4063
or 4064 of ERISA.
W. CONFORMITY WITH LAW; LITIGATION.
i. Except as set forth on SCHEDULE 5.23(A), the Company is not in
violation of any law or regulation or under any order of any
court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality
having jurisdiction which would have a Material Adverse Effect on
the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses,
orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which might have a Material
Adverse Effect on the Company.
27
ii. No Stockholder has, at any time: (i) committed any criminal act
(except for minor traffic violations); (ii) engaged in acts of
fraud, dishonesty, gross negligence or moral turpitude; (iii)
filed for personal bankruptcy; or (iv) been an officer, director,
manager, trustee or controlling shareholder of a company that
filed for bankruptcy or Chapter 11 protection.
iii. Except as set forth on SCHEDULE 5.23(C), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of
the Company, threatened against or affecting the Company at law
or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by
a court or administrative agency or by arbitration) against the
Company or against any of its properties or business.
X. TAXES.
i.
(1) The Company has timely filed all Tax Returns due on or
before the Closing Date and all such Tax Returns are true,
correct and complete in all respects.
(2) The Company has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return.
(3) The amount of the Company's liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the
current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Company Balance Sheet, and the
amount of the Company's liability for unpaid Taxes for all
periods or portions thereof ending on or before the Closing
Date will not exceed the amount of the current liability
accruals for Taxes (excluding reserves for Deferred Taxes)
as such accruals are reflected on the books and records of
the Company on the Closing Date.
(4) There are no ongoing examinations or claims against the
Company for Taxes, and no notice of any audit, examination
or claim for Taxes, whether pending or threatened, has been
received.
(5) The Company has a taxable year ended on December 31, in each
year since its inception on November 1, 1994.
(6) The Company currently utilizes the cash method of accounting
for income Tax purposes and such method of accounting has
not changed since its inception on November 1, 1994.
28
(7) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been
withheld and paid over, and complied with all information
reporting and backup withholding requirements, including
maintenance of required records with respect thereto.
(8) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of
Taxes and (C) the Tax Returns of the Company for the last
five fiscal years have been delivered to CCC.
(9) There are (and as of immediately following the Closing there
will be) no Liens on the assets of the Company relating to
or attributable to Taxes.
(10) To the Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes
which, if adversely determined, would result in any Lien on
the assets of the Company or otherwise have an adverse
effect on the Company or its business.
(11) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this
Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise
to any payment (or portion thereof) that would not be
deductible pursuant to Sections 280G, 404 or 162 of the
Code.
(12) The Company is not, and has not been at any time, a party to
a tax sharing, tax indemnity or tax allocation agreement,
and the Company has not assumed the tax liability of any
other person under contract.
(13) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other
federal income tax deductions is accurately reflected on the
Company's tax books and records.
ii.
(1) The Company has, since its inception on November 1, 1994,
been an S corporation within the meaning of Section 1361 of
the Code.
(2) The Company does not have a net recognized built-in gain
within the meaning of Section 1374 of the Code
iii. For purposes of this Agreement:
(1) the term "Tax" shall include any tax or similar governmental
charge, impost or levy (including without limitation income
taxes, franchise taxes, transfer taxes or fees, sales taxes,
use taxes, gross receipt taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes,
29
property taxes, withholding taxes, payroll taxes, minimum
taxes or windfall profit taxes) together with any related
penalties, fines, additions to tax or interest imposed by
the United States or any state, county, local or foreign
government or subdivision or agency thereof; and
(2) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice,
form, estimate or declaration of estimated tax relating to
or required to be filed with any governmental authority in
connection with the determination, assessment, collection or
payment of any tax.
Y. ABSENCE OF CHANGES. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on SCHEDULE 5.25, there has not been:
i. any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the
Company;
ii. any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the
Company;
iii. any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests
or any grant of any options, warrants, calls, conversion rights
or commitments;
iv. any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of the capital
stock of the Company;
v. any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any
of its officers, directors, the Stockholder, employees,
consultants or agents, except for ordinary and customary bonuses
and salary increases for employees in accordance with past
practice;
vi. any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a
Material Adverse Effect;
vii. any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person,
including without limitation the Stockholder and his affiliates;
viii. any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without
limitation any indebtedness or obligation of the Stockholder and
his affiliates, provided that the Company may negotiate and
adjust bills in the course of good faith disputes with customers
in a manner consistent with past practice;
30
ix. any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the Company or requiring consent of any
party to the transfer and assignment of any such assets, property
or rights;
x. any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company;
xi. any waiver of any material rights or claims of the Company;
xii. any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is
a party;
xiii. any transaction by the Company outside the ordinary course of
business;
xiv. any capital commitment by the Company, either individually or in
the aggregate, exceeding $25,000;
xv. any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the
Company or the revaluation by the Company of any of its assets;
xvi. any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any
asset (other than liens arising under existing lease financing
arrangements which are not material and liens for Taxes not yet
due and payable);
xvii. any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction,
commitment or other right or obligation requiring aggregate
payments by the Company in excess of $5,000;
xviii. any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the
Company or guaranteeing of any debt securities of others;
xix. the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or
investigation of, the Company or any of its affairs; or
xx. negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the
preceding clauses (a) through (s) (other than negotiations with
CCC and its representatives regarding the transactions
contemplated by this Agreement).
31
Z. DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
i. the name of each financial institution in which the Company has
any account or safe deposit box;
ii. the names in which the accounts or boxes are held;
iii. the type of account;
iv. the name of each person authorized to draw thereon or have access
thereto; and
v. the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company
and a description of the terms of such power.
AA. ENVIRONMENTAL MATTERS.
i. Hazardous Material. Other than as set forth on SCHEDULE 5.27(A),
no underground storage tanks and no amount of any substance that
has been designated by any Governmental Entity or by applicable
federal, state, local or other applicable law to be radioactive,
toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and
the regulations promulgated pursuant to said laws, but excluding
office and janitorial supplies properly and safely maintained (a
"Hazardous Material"), are present in, on or under any property,
------------------
including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated,
occupied or leased. SCHEDULE 5.27(A) identifies all underground
and aboveground storage tanks, and the capacity, age, and
contents of such tanks, located on Real Property owned or leased
by the Company.
ii. Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed
its employees or others to, Hazardous Materials in violation of
any law in effect on or before the Closing Date, nor has the
Company disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (collectively, "Company
-------
Hazardous Materials Activities") in violation of any rule,
------------------------------
regulation, treaty or statute promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material
Activity.
iii. Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the
----------------------
32
Company's Hazardous Material Activities and other business of the
Company as such activities and business are currently being
conducted. All Environmental Permits are in full force and
effect. The Company (A) is in compliance in all material respects
with all terms and conditions of the Environmental Permits and
(B) is in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter
issued, entered, promulgated or approved thereunder. To the
Company's knowledge, there are no circumstances that may prevent
or interfere with such compliance in the future. SCHEDULE
5.27(D) includes a listing and description of all Environmental
Permits currently held by the Company.
iv. Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of the Company, threatened
concerning any Environmental Permit, Hazardous Material or any
Company Hazardous Materials Activity. There are no past or
present actions, activities, circumstances, conditions, events,
or incidents that could involve the Company (or any person or
entity whose liability the Company has retained or assumed,
either by contract or operation of law) in any environmental
litigation, or impose upon the Company (or any person or entity
whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability
including, without limitation, common law tort liability.
BB. RELATIONS WITH GOVERNMENTS. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
CC. DISCLOSURE. The Company has delivered to CCC and Newco true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested by CCC. Without limiting any exclusion, exception or other limitation
contained in any of the representations and warranties made herein, this
Agreement, the schedules hereto and all other documents and information
furnished to CCC and its representatives pursuant hereto do not and will not
include any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading. If the Stockholder
becomes aware of any fact or circumstance which would change a representation or
warranty of the Stockholder in this Agreement or any representation made on
behalf of the Company, the Stockholder shall immediately give notice of such
fact or circumstance to CCC. However, such notification shall not relieve the
Company or the Stockholder of their respective obligations under this Agreement,
and at the sole option of CCC, the truth and accuracy of any and all warranties
and representations of the Stockholder, at
33
the date of this Agreement and as of the Closing date, shall be a precondition
to the consummation of this transaction.
DD. CCC PROSPECTUS; SECURITIES REPRESENTATIONS. The Stockholder has
received and reviewed a copy of the prospectus dated December 30, 1997 including
all supplements thereto (as supplemented, the "CCC Prospectus") contained in
--------------
CCC's shelf registration statement on Form S-1 (File No. 333-42317). The
Stockholder (a) has such knowledge, sophistication and experience in business
and financial matters that he are capable of evaluating the merits and risks of
an investment in the shares of CCC Common Stock, (b) fully understands the
nature, scope, and duration of the limitations on transfer contained herein, in
the Affiliate Agreement (if applicable), and under applicable law, and (c) can
bear the economic risk of any investment in the shares of CCC Common Stock and
can afford a complete loss of such investment. The Stockholder has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of CCC
concerning the business, operations and financial condition of CCC. The
Stockholder has no contract, undertaking, agreement or arrangement, written or
oral, with any other person to sell, transfer or grant participation in any
shares of CCC Common Stock to be acquired by such Stockholder in the Merger. The
Stockholder acknowledges and agrees that CCC has not and will not provide the
Stockholder or any other party with a prospectus for the Stockholder's use in
selling CCC Common Stock.
EE. AFFILIATES. The Stockholder is the only person who is, in the
reasonable judgment of the Company and the Stockholder, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate")
---------
promulgated under the 1933 Act.
FF. LOCATION OF CHIEF EXECUTIVE OFFICES. SCHEDULE 5.32 sets forth the
location of the Company's chief executive offices.
GG. LOCATION OF EQUIPMENT AND INVENTORY. All Inventory and Equipment held
on the date hereof by the Company is located at one of the locations shown on
SCHEDULE 5.33 or at the location of one of the Company's customers. For
purposes of this Agreement, (a) the term "Inventory" shall mean any "inventory"
as such term is defined in the Uniform Commercial Code as in effect on the date
hereof in the State of Virginia (the "Virginia U.C.C.") owned by the Company as
---------------
of the date hereof, and, in any event, shall include, but shall not be limited
to, all merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods, supplies,
incidentals, packaging materials, labels, materials and any other items used or
usable in manufacturing, processing, packaging or shipping same; in all stages
of production, and all proceeds therefrom; and (b) the term "Equipment" shall
mean any "equipment" as such term is defined in the Virginia U.C.C. owned by the
Company as of the date hereof, and, in any event, shall include, but shall not
be limited to, all machinery, equipment, furnishings, fixtures and vehicles
owned by the Company, wherever located, together with all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto.
34
6. REPRESENTATIONS OF CCC AND NEWCO
To induce the Company and the Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of CCC and Newco
represents and warrants to the Company and the Stockholder as follows:
A. DUE ORGANIZATION. Each of CCC and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted, except where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect. Copies of the Certificate of
Incorporation and the Bylaws, each as amended, of CCC and Newco (collectively,
the "CCC Charter Documents") have been made available to the Company. Neither
---------------------
CCC nor Newco is in violation of any CCC Charter Document. Newco is newly-
formed, wholly-owned subsidiary of CCC, which, other than those accruing to it
under this Agreement, has no assets and no liabilities.
B. CCC COMMON STOCK. The shares of CCC Common Stock to be delivered to
the Stockholder at the Effective Time, when delivered in accordance with the
terms of this Agreement, will be valid and legally issued shares of CCC capital
stock, fully paid and nonassessable.
C. AUTHORIZATION; VALIDITY OF OBLIGATIONS. The representatives of CCC
and Newco executing this Agreement have all requisite corporate power and
authority to enter into and bind CCC and Newco to the terms of this Agreement.
CCC and Newco have the full legal right, power and corporate authority to enter
into this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by CCC and Newco and the performance by each of CCC
and Newco of the transactions contemplated herein have been duly and validly
authorized by the respective Boards of Directors of CCC and Newco, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of each of CCC
and Newco enforceable in accordance with its terms.
D. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
i. conflict with, or result in a breach or violation of the CCC
Charter Documents;
ii. conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which either
CCC or Newco is a party, or result in the creation or imposition
of any lien, charge or encumbrance on any of CCC's or Newco's
properties pursuant to (i) any law or regulation to which either
CCC or Newco or any of their respective property is subject, or
(ii) any judgment, order
35
or decree to which CCC or Newco is bound or any of their
respective property is subject;
iii. result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of
CCC or Newco; or
iv. violate any law, order, judgment, rule, regulation, decree or
ordinance to which CCC or Newco is subject, or by which CCC or
Newco is bound, (including, without limitation, the HSR Act,
together with all rules and regulations promulgated thereunder).
E. CAPITALIZATION OF CCC AND OWNERSHIP OF CCC STOCK. The authorized
capital stock of CCC consists of 250,000,000 shares of Common Stock, of which
30,150,000 shares were outstanding on January 20, 1998. The authorized capital
stock of Newco consists of 1,000 shares of Common Stock, of which 100 shares are
outstanding. All of the issued and outstanding shares of Newco are owned
beneficially, and of record by CCC. All of the shares of CCC Common Stock to be
issued to the Stockholder in accordance herewith will be offered, issued, sold
and delivered by CCC in compliance with all applicable state and federal laws
concerning the issuance of securities and none of such shares was or will be
issued in violation of the preemptive rights of any stockholder of CCC.
7. COVENANTS
A. TAX MATTERS.
i. The following provisions shall govern the allocation of
responsibility as between the Stockholder, on the one hand, and
the Surviving Corporation, on the other, for certain tax matters
following the Closing Date:
(1) The Stockholder shall prepare or cause to be prepared and
file or cause to be filed, within the time and in the manner
provided by law, all Tax Returns of the Company for all
periods ending on or before the Closing Date that are due
after the Closing Date. The Stockholder shall pay to the
Surviving Corporation on or before the due date of such Tax
Returns the amount of all Taxes shown as due on such Tax
Returns to the extent that such Taxes are not reflected in
the current liability accruals for Taxes (excluding reserves
for deferred Taxes) shown on the Company's books and records
as of the Closing Date. Such Returns shall be prepared and
filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to
review and approval by CCC. To the extent reasonably
requested by the Stockholder or required by law, CCC and the
Surviving Corporation shall participate in the filing of any
Tax Returns filed pursuant to this paragraph.
36
(2) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for
Tax periods which begin before the Closing Date and end
after the Closing Date. The Stockholder shall pay to the
Surviving Corporation within fifteen (15) days after the
date on which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to
the portion of such taxable period ending on the Closing
Date to the extent such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Company's books and records as
of the Closing Date. For purposes of this Section 7.1, in
the case of any Taxes that are imposed on a periodic basis
and are payable for a taxable period that includes (but does
not end on) the Closing Date, the portion of such Tax which
relates to the portion of such taxable period ending on the
Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed
to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the
number of days in the taxable period ending on the Closing
Date and the denominator of which is the number of days in
the entire taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant taxable
period ended on the Closing Date. Any credits relating to a
taxable period that begins before and ends after the Closing
Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall
be made in a manner consistent with prior practice of the
Surviving Corporation.
(3) CCC and the Surviving Corporation on the one hand and the
Stockholder on the other hand shall (A) cooperate fully, as
reasonably requested, in connection with the preparation and
filing of Tax Returns pursuant to this Section 7.1 and any
audit, litigation or other proceeding with respect to Taxes;
(B) make available to the other, as reasonably requested,
all information, records or documents with respect to Tax
matters pertinent to the Company for all periods ending
prior to or including the Closing Date; and (C) preserve
information, records or documents relating to Tax matters
pertinent to the Company that is in their possession or
under their control until the expiration of any applicable
statute of limitations or extensions thereof.
(4) The Stockholder shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees
arising from or relating to the transactions contemplated by
this Agreement, and the Stockholder shall, at his own
expense, file all necessary Tax Returns and other
documentation with respect to all such transfer,
documentary, sales, use, stamp, registration, and other
Taxes and fees. If required by applicable law, CCC and the
Surviving Corporation will join in the execution of any such
Tax Returns and other documentation.
37
ii. The Company shall, prior to the Closing, maintain its status as
an S Corporation for federal and state income tax purposes.
B. ACCOUNTS RECEIVABLE. In the event that all Accounts Receivable are
not collected in full (net of reserves specified in Section 5.12) within ninety
(90) days after the Closing, or in the case of those Accounts Receivable which
are identified on SCHEDULE 5.12, within six (6) months after the Closing, then,
at the request of the Surviving Corporation, the Stockholder shall pay the
Surviving Corporation an amount equal to the Accounts Receivable not so
collected, and upon receipt of such payment the Surviving Corporation shall
assign to the Stockholder all of its rights with respect to the uncollected
Accounts Receivable giving rise to the payment and shall also thereafter
promptly remit any excess collections received by it with respect to such
assigned Accounts Receivable.
C. TITLE INSURANCE AND SURVEYS.
i. With respect to each fee estate included in the Real Property,
the Stockholder will obtain and deliver to CCC (i) as soon as
practicable after the date of this Agreement, a title commitment
disclosing the condition of title to such fee estate and all
easements, rights of way, and restrictions of record with respect
thereto, as of a date not earlier than the date of this
Agreement, accompanied by copies of all instruments evidencing
the scope and extent of all such easements, rights of way, and
restrictions of record (the "Title Commitment"), and (ii) at or
----------------
prior to Closing, an ALTA Owner's Policy of Title Insurance on a
form customarily used in the state in which the Real Property is
located, issued by a title insurer satisfactory to CCC, in an
amount equal to the fair market value of the Real Property (as
reasonably determined by CCC), insuring title to such property to
be in the name of the party designated by CCC on SCHEDULE 7.3,
subject only to Permitted Encumbrances (each a "Title Policy").
------------
ii. Each Title Policy obtained and delivered to CCC pursuant to this
Agreement shall, except to the extent that title insurers in the
state in which the applicable property is located are not
lawfully permitted to issue such policies, (i) insure title to
the property described in the policy and all recorded easements
benefitting such property, (ii) contain an "extended coverage
endorsement" or similar modification insuring over or otherwise
eliminating the general exceptions customarily contained in title
policies, (iii) contain an endorsement insuring that the property
described in the policy is the same real estate shown in the
survey delivered with respect to such property, (iv) contain a
"contiguity" endorsement with respect to any property consisting
of more than one record parcel, (v) provide full coverage against
mechanics' and materialmen's liens arising out of the
construction, repair or alteration of any of the Real Property,
(vi) contain any special endorsements reasonably required by CCC,
including, without limitation, an endorsement insuring that the
improvements included in the Real Property are a permitted use
under the zoning designation applicable to the Real Property, and
(vii) not be subject to any survey exception.
38
iii. With respect to each Real Property interest as to which a Title
Policy is to be procured pursuant to this Agreement, the
Stockholder will obtain and deliver to CCC as soon as practicable
after the date of this Agreement a current survey of the relevant
parcel, prepared and certified to CCC and to the title insurer of
such Real Property interest by a licensed surveyor and conforming
to current ALTA Minimum Detail Requirements for Land Title
Surveys, disclosing the location of all improvements, easements,
party walls, sidewalks, roadways, utility lines, and other
matters customarily shown on such surveys, and showing access
affirmatively to public streets and roads.
iv. The Stockholder shall be responsible for all costs associated
with obtaining the title commitments and surveys described above,
and CCC shall be responsible for the costs of purchasing the
Title Policies described above.
D. RELATED PARTY AGREEMENTS. The Company and/or the Stockholder, as the
case may be, shall terminate any Related Party Agreements, without liability or
further obligation to the Company or the Surviving Corporation, which CCC
requests the Company or Stockholder to terminate. Notwithstanding the
foregoing, in specific reliance on the representation of the Stockholder made in
Section 5.15(c)(xvii), CCC will not request the termination of the Related-Party
Lease relating to the Company's Sterling Virginia location prior to the end of
the current term of such lease.
E. COOPERATION.
i. The Company, the Stockholder, CCC and Newco shall each deliver or
cause to be delivered to the other on the Closing Date, and at
such other times and places as shall be reasonably agreed to,
such instruments as the other may reasonably request for the
purpose of carrying out this Agreement. In connection therewith,
if required, the president or chief financial officer of the
Company shall execute any documentation reasonably required by
CCC's independent public accountants (in connection with such
accountants' audit or review of the Company) or the Nasdaq
National Market.
ii. The Stockholder and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and
employees of the Company cooperate with CCC on and after the
Closing Date in furnishing information, evidence, testimony and
other assistance in connection with any filing obligations,
actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing
Date.
iii. Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the
transactions contemplated hereby
iv. The Company, the Stockholder and CCC shall file all notices and
other information and documents required under the HSR Act (as
defined in Section 5.3) as promptly as practicable after the date
hereof.
39
F. CONDUCT OF BUSINESS PENDING CLOSING. Between the date hereof and the
Effective Time, the Company will (except as requested or agreed by CCC):
i. carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of
management, operation or accounting;
ii. maintain its properties and facilities, including those held
under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
iii. perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
iv. keep in full force and effect present insurance policies or other
comparable insurance coverage;
v. use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and
key employees and maintain its relationships with suppliers,
vendors, customers, creditors and others having business
relations with it;
vi. maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities;
vii. maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
viii. maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent
contractors, except for ordinary and customary bonuses and salary
increases for employees (other than the Stockholder) in
accordance with past practice.
G. ACCESS TO INFORMATION. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of CCC access to (i) all of the sites, properties, books and
records of the Company and (ii) such additional financial and operating data and
other information as to the business and properties of the Company as CCC may
from time to time reasonably request, including without limitation, access upon
reasonable request to the Company's employees, customers, vendors, suppliers and
creditors for due diligence inquiry. No information or knowledge obtained in any
investigation pursuant to this Section 7.7 shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
H. PROHIBITED ACTIVITIES. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of CCC:
40
i. make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
ii. issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls,
conversion rights or commitments relating to its securities of
any kind, or authorize or propose any change in its equity
capitalization, or issue or authorize the issuance of any debt
securities;
iii. declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or
hereafter outstanding, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, or purchase, redeem or otherwise
acquire or retire for value any shares of its stock;
iv. enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business and
consistent with past practice in an amount in excess of $25,000
in the aggregate., including contracts to provide services to
customers;
v. increase the compensation payable or to become payable to any
officer, director, Stockholder, employee, agent, representative
or independent contractor; make any bonus or management fee
payment to any such person; make any loans or advances; adopt or
amend any Company Plan or Company Benefit Arrangement; or grant
any severance or termination pay;
vi. create or assume any mortgage, pledge or other lien or
encumbrance upon any assets or properties whether now owned or
hereafter acquired;
vii. sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of
business consistent with past practice;
viii. acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or
otherwise) any business or the start-up of any new business, or
otherwise acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Company;
ix. merge or consolidate or agree to merge or consolidate with or
into any other corporation;
x. waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past
practice;
41
xi. commit a breach of or amend or terminate any material agreement,
permit, license or other right;
xii. enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company
or any officer, director or Stockholder of the Company or (ii)
outside the ordinary course of business consistent with past
practice or (iii) prohibited hereunder;
xiii. commence a lawsuit other than for routine collection of bills;
xiv. revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business
consistent with past practice;
xv. make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax
election, adopt any tax accounting method other than in the
ordinary course of business and consistent with past practice,
change any tax accounting method, file any Tax Return (other than
any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing
agreement, settle any tax claim or assessment, or consent to any
tax claim or assessment, without the prior written consent of
CCC; or
xvi. take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.8(a) through (o) above, or any
action which would make any of the representations and warranties
of the Company and the Stockholder contained in this Agreement
untrue or result in any of the conditions set forth in Articles 8
and 9 not being satisfied.
I. NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by CCC, and shall provide CCC with proof that any required notice has been sent.
J. SALES OF CCC COMMON STOCK.
i. The Stockholder will not, directly or indirectly, offer, sell,
contract to sell, pledge or otherwise dispose of any shares of
CCC Common Stock to be received by him in the Merger prior to the
first anniversary of the date of receipt of such shares ( each
such date, a Share Receipt Date") by him (i.e., the Closing with
------------------
respect to the 142,857 shares included as a part of the Base
Merger Consideration and a later date with respect to the shares
included as a part of the Contingent Merger Consideration), and
thereafter up to one-third of shares of CCC Common Stock received
as part of the Merger Consideration may be resold at any time
after the first anniversary of the Share Receipt Date relating to
such shares, an additional one-third may be resold by the
Stockholder beginning eighteen months after the Share Receipt
Date relating to such shares and the
42
remaining one-third may be resold beginning on the second
anniversary of the Share Receipt Date relating to such shares.
Trading in shares of CCC Common Stock also is subject to CCC
policies against xxxxxxx xxxxxxx and the misuse of material non-
public information and compliance with applicable securities laws
and rules. Persons who become "affiliates" of CCC may be subject
to additional restrictions on the trading of their CCC Common
Shares.
ii. The Stockholder acknowledges and agrees that CCC will not provide
him with a prospectus for his use in selling the shares of CCC
Common Stock to be received by the Stockholder in the Merger, and
agrees to sell such shares only in accordance with the
requirements, if any, of Rule 145(d) promulgated under the 1933
Act. CCC acknowledges that the provisions of this Section
7.10(b) will be satisfied as to any sale by the Stockholder of
the CCC Common Stock Stockholder may acquire pursuant to the
Merger pursuant to Rule 145(d) under the Securities Act, by a
broker's letter and a letter from the Stockholder with respect to
that sale stating that the applicable requirements of Rule
145(d)(1) have been met or are inapplicable by virtue of Rule
145(d)(2) or Rule 145(d)(3) provided, however, that CCC has no
reasonable basis to believe that such sales were not made in
compliance with such provisions of Rule 145(d) and subject to any
changes in Rule 145 after the date of this Agreement.
iii. Each of the certificates evidencing the shares of CCC Common
Stock to be delivered to the Stockholder in the Merger will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. PRIOR TO [ONE YEAR FROM DATE OF ACQUISITION OF SHARES], THESE
SHARES MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE PROVISIONS OF RULE
145(d)(1). AFTER [ONE YEAR FROM DATE OF ACQUISITION OF SHARES], THESE
SHARES MAY BE TRANSFERRED BY NON-AFFILIATES OF THE ISSUER UNDER RULE
145(d)(2) SO LONG AS THE ISSUER IS CURRENT IN ITS REPORTING OBLIGATIONS
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. AFTER [TWO YEARS
FROM DATE OF ACQUISITION OF SHARES], THESE SHARES MAY BE TRANSFERRED BY
NON-AFFILIATES OF THE ISSUER WITHOUT RULE 145 RESTRICTIONS IN ACCORDANCE
WITH RULE 145(d)(3).
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON [TWO YEARS FROM DATE OF ACQUISITION OF SHARES],
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF
JANUARY 29, 1998, AMONG THE ISSUER AND THE STOCKHOLDER OF SERVICE
MANAGEMENT USA, INC., A VIRGINIA CORPORATION. PRIOR TO THE EXPIRATION OF
SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
TRANSFER OR ASSIGNMENT. UPON THE WRITTEN
43
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN
THE HOLDING PERIOD HAS EXPIRED.
iv. Each of the certificates evidencing the Pledged Shares will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN PLEDGED AS COLLATERAL
PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN OF REOR GANIZATION DATED
JANUARY 29, 1998 BY AND AMONG CONSOLIDATION CAPITAL CORPORATION, CCC1
ACQUISITION CORP., SERVICE MANAGEMENT USA INC. AND XXXX X. XXXXXXXXX.
PRIOR TO THE EXPIRATION OF THE PLEDGE AS SET FORTH IN SUCH AGREEMENT, SUCH
SHARES MAY NOT BE OFFERED, SOLD, EXCHANGED, TRANSFERRED OR OTHERWISE
DISPOSED OF.
K. CCC STOCK OPTIONS. Subject to prior approval by the Compensation
Committee of the Board, as soon as practicable after the Closing, options to
purchase up to 36,000 shares of CCC Common Stock shall be available for issuance
to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's President (or other officer or
director designated by the Surviving Corporation and acceptable to CCC) in
accordance with CCC's policies, and authorized and issued under the terms of
CCC's 1997 Long-Term Incentive Plan. The exercise price of such options shall
be equal to the fair market value of the underlying shares of CCC Common Stock
at date of grant and such options shall have vesting provisions established by
the Compensation Committee of the Board.
L. DISTRIBUTION OF VEHICLES. Immediately prior to the Closing the
Company shall transfer to the Stockholder free and clear of all Liens the
following two automobiles owned by the Company: (i) 1996 Mercedes Benz (VIN # :
XXXXX00X0XX000000) and 1996 Chevrolet Suburban (VIN # : 1GNFK16ROTJ371620).
M. ALLOCATION OF CORPORATE OVERHEAD. CCC may allocate general corporate
overhead to the Surviving Corporation provided the amount of such allocation
does not exceed the benefit derived by the Surviving Corporation therefrom. For
example, in the event CCC employs a corporate manager who oversees CCC's health
insurance plan for employees of the Surviving Corporation, such individual's
salary will be equitably allocated among all CCC subsidiaries and the portion
allocable to the Surviving Corporation may not exceed the "savings" to the
Surviving Corporation of being covered by the CCC health plan. Initially, the
"benefit" to the Surviving Corporation of any CCC program will be determined
relative to the Company's cost of such function or program before the
acquisition. The amount of the corporate overhead allocation from CCC shall be
on a non-discriminatory and no less favorable basis to the Surviving Corporation
than that received by any other subsidiary or operating division of CCC.
Notwithstanding anything contained in this Section 7.13 to the contrary, CCC
agrees during the Initial Earn Out Period to alter the corporate overhead
otherwise allocated to the Surviving Corporation, if necessary, so that the net
savings to the Surviving Corporation of such function or program does not
decreases below the net savings from the comparable
44
period in the prior year. The allocation of corporate overhead from CCC to the
Surviving Corporation shall be done on an "activity-by-activity" basis without
aggregating the net savings, if any, from various or all CCC sponsored functions
or programs. In addition, as a subsidiary of CCC and part of a consolidated
group, certain administrative functions such as preparation of financial
accounting statements will no longer be performed by the Surviving Corporation.
CCC agrees during the Initial Earn Out Period that it will not allocate the
corporate overhead costs relative to performing such functions on a
discriminatory basis or on terms less favorable to the Surviving Corporation
than any other subsidiary or operating division of CCC and in no event shall the
allocated overhead charge exceed the actual cost to the Surviving Corporation of
performing such function, based on the Company Financial Statements.
N. REMOVAL OF LIENS. Within sixty (60) days of the Closing, the
Stockholder will effect the removal of any liens of record held by DSMI, Inc.
with respect to the assets of DMSUSA or of any other Subsidiary.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF CCC AND NEWCO
The obligation of CCC and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
A. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of the Stockholder and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Stockholder on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by the
Stockholder shall have been delivered to CCC.
B. NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, or limiting or restricting CCC's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit claim or proceeding of any nature pending or
threatened against CCC, Newco or the Company, their respective properties or any
of their officers or directors, that could materially and adversely affect the
business, assets, liabilities, financial condition, results of operations or
prospects of the Company.
C. NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company,
45
taken as a whole, since the Balance Sheet Date; and CCC shall have received a
certificate signed by the Stockholder dated the Closing Date to such effect.
D. CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholder of the transactions contemplated
hereby, shall have been obtained and made. Any waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated, and no action by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby shall be pending.
E. OPINION OF COUNSEL. CCC shall have received an opinion from counsel
to the Company and the Stockholder, dated the Closing Date, substantially in the
form attached hereto as SCHEDULE 8.5.
F. CHARTER DOCUMENTS. CCC shall have received (a) a copy of the Articles
of Incorporation of the Company certified by an appropriate authority in the
state of its incorporation and (b) a copy of the Bylaws of the Company certified
by the Secretary of the Company, and such documents shall be in form and
substance reasonably acceptable to CCC.
G. QUARTERLY FINANCIAL STATEMENTS. CCC shall have received from the
Company completed quarterly financial statements in a form reasonably
satisfactory to CCC.
H. DUE DILIGENCE REVIEW. The Company shall have made such deliveries as
are called for by this Agreement. CCC shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
I. DELIVERY OF CLOSING FINANCIAL CERTIFICATE. CCC shall have received a
certificate (the "Closing Financial Certificate"), dated as of the Closing Date,
-----------------------------
signed on behalf of the Company and by the Stockholder, setting forth:
i. the net worth of the Company as of the last day of its most
recent fiscal year (the "Certified Year-End Net Worth");
----------------------------
ii. the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
----------------------------
iii. the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on SCHEDULE 5.9(B)) for the
most recent fiscal year preceding the Closing Date (the
"Certified Year-End EBIT"); and
------------------------
iv. a statement that all of the Company financial conditions set
forth in Section 5.9 of the Agreement are satisfied as of the
Closing Date.
46
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth the Company shall not take account of any increase in
intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after December 31, 1997.
J. FIRPTA COMPLIANCE. The Stockholder shall have delivered to CCC a
properly executed statement in a form reasonably acceptable to CCC for purposes
of satisfying CCC's obligations under Treas. Reg. (S) 1.1445-2(b).
K. EMPLOYMENT AGREEMENT. The Stockholder shall have entered into an
employment agreement with the Company in the form attached hereto as SCHEDULE
8.11.
L. AFFILIATE AGREEMENTS. The Stockholder shall have entered into an
Affiliate Agreement in the form attached hereto as SCHEDULE 8.12.
M. STOCKHOLDER'S RELEASE. The Stockholder shall have delivered to CCC an
instrument in the form attached hereto as SCHEDULE 8.13 and dated the Closing
Date releasing the Company from any and all claims of the Stockholder against
the Company.
N. RELATED PARTY RECEIVABLES. All employees, stockholders, directors,
officers and Affiliates of the Company shall have repaid in full all obligations
to the Company in respect of borrowings or advances.
O. WORKING CAPITAL LINE. Other than disclosed on SCHEDULE 5.11(D), all
amounts outstanding under the Company's working capital line of credit with
Crestar Bank shall have been paid in full.
P. RELEASE OF CORPORATE GUARANTY. The Stockholder shall have obtained
and delivered to CCC a written confirmation, in a form satisfactory to CCC in
its sole discretion, that Crestar Bank has released the Company in respect of
any obligations arising under that certain Guaranty Agreement identified on
SCHEDULE 5.18.
Q. DELIVERY OF ASSURANCE. The Stockholder shall have delivered to CCC a
side letter, in a form satisfactory to CCC in its sole discretion, concerning
the disposition of and certain other covenants with respect to another
investment by the Stockholder.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER
The obligation of the Stockholder and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
A. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All of
the representations and warranties of CCC and Newco contained in this Agreement
shall be true, correct and complete on and as of the Closing Date with the same
effect as though such representations and warranties had been made as of such
date; all of the terms,
47
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by CCC and Newco on or before the Closing Date shall have
been duly complied with, performed or satisfied; and a certificate to the
foregoing effects dated the Closing Date and signed by the President or any Vice
President of CCC shall have been delivered to the Company and the Stockholder.
B. NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
CCC's proposed acquisition of the Company, or limiting or restricting CCC's
conduct or operation of the business of the Company (or its own business)
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against CCC, Newco or the Company, their respective properties or
any of their officers or directors, that could materially and adversely affect
the business, assets, liabilities, financial condition, results of operations or
prospects of the CCC and its subsidiaries taken as a whole.
C. CONSENTS AND APPROVALS. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by CCC and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
D. EMPLOYMENT AGREEMENT. The Company shall have afforded the Stockholder
an opportunity to enter into an employment agreement with the Company in the
form attached hereto as SCHEDULE 8.11.
10. INDEMNIFICATION
A. GENERAL INDEMNIFICATION BY THE STOCKHOLDER. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless CCC, Newco and the
Surviving Corporation and their respective officers, directors, employees,
stockholders, assigns, successors and affiliates (individually, an "Indemnified
-----------
Party" and collectively, "Indemnified Parties") from, against and in respect of:
----- -------------------
i. all liabilities, losses, claims, damages, punitive damages,
causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement payments,
deficiencies, penalties, fines, interest (including interest from
the date of such damages) and costs and expenses (including
without limitation reasonable attorneys' fees and disbursements
of every kind, nature and description) (collectively, "Damages")
-------
suffered, sustained, incurred or paid by
48
the Indemnified Parties in connection with, resulting from or
arising out of, directly or indirectly:
(1) any breach of any representation or warranty of the
Stockholder or the Company set forth in this Agreement or
any Schedule, certificate or other document or instrument,
delivered by or on behalf of the Stockholder or the Company
in connection herewith; or
(2) any nonfulfillment of any covenant or agreement by the
Stockholder or, prior to the Effective Time, the Company,
under this Agreement or certificate or other document or
instrument, delivered by or on behalf of the Stockholder or
the Company in connection herewith; or
(3) the business, operations or assets of the Company and each
of the Subsidiaries prior to the Closing Date or the actions
or omissions of the directors, officers, shareholders,
employees or agents of the Company and each of the
Subsidiaries prior to the Closing Date, other than Damages
arising from matters expressly disclosed in the Company
Financial Statements, this Agreement or the Schedules to
this Agreement; or
(4) the matters disclosed on SCHEDULES 5.23(A) or (C)
(conformity with law; litigation), 5.24 (taxes), and 5.27
(environmental matters);
(5) any dispute between Fresh Start Floor Services, Inc. (or any
of its affiliates) and any of the Company, the Subsidiaries
or the Former IBS Member; and
ii. any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
B. LIMITATION AND EXPIRATION. Notwithstanding the above:
i. there shall be no liability for indemnification under Section
10.1 unless, and solely to the extent that the aggregate amount
of Damages exceeds $120,000 (the "Indemnification Threshold");
-------------------------
provided, however, that the Indemnification Threshold shall not
apply to (i) adjustments to the Merger Consideration as set forth
in Sections 2.2 and 3.1; (ii) Damages arising out of any breaches
of the covenants of the Stockholder set forth in this Agreement
or representations and warranties made in Sections 5.4 (capital
stock of the Company), 5.5 (transactions in capital stock), 5.9
(Company financial conditions), 5.15(c)(xviii) (real property),
5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), or
(iii) Damages described in Section 10.1(a)(iv);
ii. the aggregate amount of the Stockholder's liability under this
Article 10 shall not exceed the Merger Consideration;
49
iii. the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith,
shall terminate at the date that is the later of clause (i) or
(ii) of this Section 10.2(c):
(1)
(a) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 10.2(c), the
second anniversary of the Closing Date, or
(b) with respect to representations and warranties
contained in Sections 5.22 (employee benefit plans),
5.24 (taxes), 5.27 (environmental matters), and the
indemnification set forth in Section 10.1(a)(ii), (iii)
or (iv), on (A) the date that is six (6) months after
the expiration of the longest applicable federal or
state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of
limitation, (x) five (5) years after the Closing Date
if the Claim is related to the cost of investigating,
containing, removing, or remediating a release of
Hazardous Material into the environment, or (y) two (2)
years after the Closing Date for any other Claim
covered by clause (i)(2)(B) of this Section 10.2(c); or
(2) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section
10.2(c) (such claims referred to as "Pending Claims").
--------------
iv. the Stockholder shall have no liability under this Article 10 in
respect of any Damages the full value of which have been recouped
by CCC in the form of a as a result of any reduction to the
Merger consideration pursuant to the provisions of Sections
2.2(b)-(d).
C. INDEMNIFICATION PROCEDURES. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
------
i. In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section
10.1 hereof (the "Indemnifying Party") which does not involve a
-------------------
Claim being asserted against or sought to be collected by a third
party, the Indemnified Party shall with reasonable promptness
notify the Stockholder of such Claim, specifying the nature of
such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). If the Stockholder
------------
does not notify the Indemnified Party within thirty days after
the date of delivery of the Claim Notice that the Indemnifying
Party disputes such Claim, with a detailed statement of the basis
of such position, the amount of such Claim shall be conclusively
deemed a liability of the Indemnifying Party hereunder. In case
an objection is made in writing in accordance with this Section
10.3(a), the Indemnified Party shall respond in a
50
written statement to the objection within thirty days and, for
sixty days thereafter, attempt in good faith to agree upon the
rights of the respective parties with respect to each of such
Claims (and, if the parties should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both
parties).
ii.
(1) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is
asserted against an Indemnified Party by a third party (a
"Third Party Claim"), the Indemnified Party shall deliver a
------------------
Claim Notice to the Stockholder. The Stockholder shall have
thirty days from the date of delivery of the Claim Notice to
notify the Indemnified Party (A) whether the Indemnifying
Party disputes liability to the Indemnified Party hereunder
with respect to the Third Party Claim, and, if so, the basis
for such a dispute, and (B) if such party does not dispute
liability, whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to
defend against the Third Party Claim, provided that the
Indemnified Party is hereby authorized (but not obligated)
to file any motion, answer or other pleading and to take any
other action which the Indemnified Party shall deem
necessary or appropriate to protect the Indemnified Party's
interests.
(2) In the event that the Stockholder timely notifies the
Indemnified Party that the Indemnifying Party does not
dispute the Indemnifying Party's obligation to indemnify
with respect to the Third Party Claim, the Indemnifying
Party shall defend the Indemnified Party against such Third
Party Claim by appropriate proceedings, provided that,
unless the Indemnified Party otherwise agrees in writing,
the Indemnifying Party may not settle any Third Party Claim
(in whole or in part) if such settlement does not include a
complete and unconditional release of the Indemnified Party.
If the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified
Party may do so at its sole cost and expense. If the
Indemnifying Party elects not to defend the Indemnified
Party against a Third Party Claim, whether by failure of
such party to give the Indemnified Party timely notice as
provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or
defend against such Third Party Claim in the Indemnified
Party's sole discretion and the Indemnified Party shall be
entitled to recover from the Indemnifying Party the amount
of any settlement or judgment and, on an ongoing basis, all
indemnifiable costs and expenses of the Indemnified Party
with respect thereto, including interest from the date such
costs and expenses were incurred.
(3) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the
Stockholder, any Third Party
51
Claim seeks material prospective relief which could have an
adverse effect on any Indemnified Party or the Surviving
Corporation or any subsidiary, the Indemnified Party shall
have the right to control or assume (as the case may be) the
defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses
of defense shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If the
Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at
the sole cost and expense of the Indemnifying Party.
iii. Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim
hereunder, for potential or contingent Damages provided the Claim
Notice sets forth the specific basis for any such potential or
contingent claim or demand to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such
Claim may be made.
iv. Subject to the provisions of Section 10.2, the Indemnified
Party's failure to give reasonably prompt notice as required by
this Section 10.3 of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification
hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the
Indemnified Party unless the failure to give such notice
materially and adversely prejudiced the Indemnifying Party.
v. The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the
amount of any indemnification obligation under this Article 10,
provided that no Indemnified Party shall be obligated to continue
pursuing any payment pursuant to the terms of any insurance
policy.
D. SURVIVAL OF REPRESENTATIONS WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Company, the Stockholder,
CCC and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholder will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 10.2. The
representations of CCC and Newco will survive the Closing and will remain in
effect until, and will expire upon the first anniversary of the Closing date.
E. REMEDIES CUMULATIVE. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
52
F. RIGHT TO SET OFF. CCC shall have the right, but not the obligation,
to set off, in whole or in part, against the Pledged Assets, amounts finally
determined under Section 10.3 to be owed to CCC by the Stockholder under Section
10.1 hereof.
11. NONCOMPETITION
A. PROHIBITED ACTIVITIES. The Stockholder agrees that for a period of
two years following the Merger Effective Date, he shall not:
i. engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a
sales representative, in any business selling any products or
services in direct competition with the Surviving Corporation or
CCC within the United States of America (the "Territory");
---------
ii. call upon any person who is, at that time, or who was at any time
within one year prior to that time, an employee of CCC (including
its subsidiaries) in a managerial capacity for the purpose or
with the intent of enticing such employee away from or out of the
employ of CCC (including its subsidiaries);
iii. call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of CCC
or the Company (including their respective subsidiaries) within
the Territory for the purpose of soliciting or selling products
or services within the Territory;
iv. call upon any prospective acquisition candidate, on the
Stockholder's own behalf or on behalf of any competitor, which
candidate either was called upon by the Company or CCC (including
their respective subsidiaries) or was the subject of an
acquisition analysis conducted by the Company or CCC (including
their respective subsidiaries); or
v. disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the Stockholder from (i) acquiring as an investment not more than one
percent of the capital stock of any business enterprise whether or not engaged
in competition with the Company or CCC (including their respective subsidiaries)
to the extent that such securities are actively traded on a national securities
exchange or in the over-the-counter market in the United States or in any
foreign exchange or (ii) engaging in any activity to which CCC shall have
provided its prior written consent.
B. DAMAGES. Because of the difficulty of measuring economic losses to
CCC and the Surviving Corporation as a result of the breach of the foregoing
covenant, and because of the immediate and irreparable damage that would be
caused to CCC and the Surviving Corporation for which they would have no other
adequate remedy, the Stockholder
53
agrees that, in the event of a breach by him of the foregoing covenant, the
covenant may be enforced by CCC or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
C. REASONABLE RESTRAINT. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholder in
light of the activities and business of CCC on the date of the execution of this
Agreement and the current and future plans of CCC and the Surviving Corporation
(as successors to the businesses of the Company).
D. SEVERABILITY; REFORMATION. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
E. INDEPENDENT COVENANT. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against the Company, the Surviving Corporation or CCC, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such covenants. It is specifically agreed that the period of two years
stated above, shall be computed by excluding from such computation any time
during which the Stockholder is in violation of any provision of this Article 11
and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action CCC or the
Surviving Corporation seeks to enforce the agreements and covenants of the
Stockholder or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if the Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
F. MATERIALITY. The Company and the Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
A. STOCKHOLDER. The Stockholder recognizes and acknowledges that he has
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The Stockholder
agrees that he will not disclose any confidential information to any person,
firm, corporation, association or other entity for any purpose
54
or reason whatsoever, except to authorized representatives of CCC, unless the
Stockholder can show that such information has become known to the public
generally through no fault of the Stockholder. In the event of a breach or
threatened breach by the Stockholder of the provisions of this Article 12, CCC
and the Surviving Corporation shall be entitled to an injunction restraining the
Stockholder from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting CCC and the Surviving
Corporation from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
B. CCC. CCC recognizes and acknowledges that it has in the past,
currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. CCC agrees that it will not disclose
any confidential information to any person, firm, corporation, association, or
other entity for any purpose or reason whatsoever, prior to the Closing Date
without prior written consent of the Stockholder. In the event of a breach or
threatened breach by CCC of the provisions of this Article 12, the Stockholder
shall be entitled to an injunction restraining CCC from disclosing, in whole or
in part, such confidential information. Nothing contained herein shall be
construed as prohibiting the Stockholder from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
C. DAMAGES. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, CCC, the Surviving Corporation and the Stockholder agree that,
in the event of a breach by any of them of the foregoing covenant, the covenant
may be enforced against them by injunctions and restraining orders.
13. GENERAL
A. TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date solely:
i. by mutual consent of the boards of directors of CCC and the
Company; or
ii. by the Stockholder and the Company as a group, on the one hand,
or by CCC, on the other hand, if the Closing shall not have
occurred on or before March 15, 1998, provided that the right to
terminate this Agreement under this Section 13.1(b) shall not be
available to either party (with the Stockholder and the Company
deemed to be a single party for this purpose) whose material
misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before
such date; or
iii. by the Stockholder and the Company as a group, on the one hand,
or by CCC, on the other hand, if there is or has been a material
breach, failure to fulfill or
55
default on the part of the other party (with the Stockholder and
the Company deemed to be a single party for this purpose) of any
of the representations and warranties contained herein or in the
due and timely performance and satisfaction of any of the
covenants, agreements or conditions contained herein, and the
curing of such default shall not have been made or shall not
reasonably be expected to occur before the Closing Date; or
iv. by the Stockholder and the Company as a group, on the one hand,
or by CCC, on the other hand, if there shall be a final
nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or there shall be any
action taken, or any statute, rule or regulation or order
enacted, promulgated or issued or deemed applicable to the Merger
by any governmental entity which would make the consummation of
the Merger illegal.
B. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholder and the Company deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby, as well as any damages in
accordance with applicable law.
C. SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
CCC, and the heirs and legal representatives of the Stockholder.
D. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 11.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
E. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
56
F. BROKERS AND AGENTS. CCC and Newco (as a group) and the Company and
the Stockholder (as a group) each represents and warrants to the other that it
has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
G. EXPENSES. CCC has and will pay the fees, expenses and disbursements
of CCC and Newco and their agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement. The
Stockholder (and not the Company) has and will pay the fees, expenses and
disbursements of the Stockholder, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
H. SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
I. NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted
hereunder shall be in writing and shall be deemed given if delivered
personally or sent by telefax (with confirmation of receipt), by
registered or certified mail, postage prepaid, or by recognized
courier service, as follows:
If to CCC, Newco or the Surviving Corporation to:
Consolidation Capital Corporation
0000 Xxxxxxxxxxxx Xxxxxx, X.X
Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: X. Xxxxxxx Xxxx
Executive Vice President and General Counsel
(Telefax: (000)000-0000)
57
with a required copy to:
Xxxxxx, Xxxxx & Bockius LLP
N. Xxxxxxx Xxxxxxx, Esquire
0000 Xxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
(Telefax: (000) 000-0000)
If to the Stockholder to:
Xxxx X. XxxXxxxxx
000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
(Telefax: (000) 000-0000)
with a required copy to:
Xxxxx Xxxxxxxx, Esq.
00000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
(Telefax: (000) 000-0000)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
J. GOVERNING LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of the conflicts of laws provisions thereof that
would require the application of the substantive laws of any other jurisdiction.
K. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 11.4.
L. ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
58
M. FURTHER REPRESENTATIONS. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
N. ACCOUNTING TERMS. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
[Execution Page Following]
59
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
CONSOLIDATION CAPITAL CORPORATION
By:
-----------------------------------------
X. Xxxxxxx Xxxx
Executive Vice President, General Counsel
and Secretary
CCC1 ACQUISITION CORP.
By:
-----------------------------------------
X. Xxxxxxx Xxxx
President, Treasurer and Secretary
SERVICE MANAGEMENT USA INC.
By:
-----------------------------------------
Xxxx X. XxxXxxxxx
President
STOCKHOLDER:
-----------------------------------------
Xxxx X. XxxXxxxxx
60
Index of Defined Terms
----------------------
1933 Act..................................................................... 3
1997 Adjusted EBIT Target.................................................... 3
Accounts Receivable.......................................................... 13
Actual Adjusted EBIT......................................................... 7
Actual Company Net Worth..................................................... 7
Actual EBIT.................................................................. 4
Actual EBIT Earn Out......................................................... 4
add-backs.................................................................... 12
Adjusted EBIT................................................................ 3
Affiliate.................................................................... 28
affiliates................................................................... 36
Agreement.................................................................... 1
ASC.......................................................................... 1
Balance Sheet Date........................................................... 12
Base Merger Consideration.................................................... 3
CCC.......................................................................... 1
CCC Charter Documents........................................................ 29
CCC Common Stock............................................................. 3
CCC Prospectus............................................................... 28
CCC's Accountant............................................................. 4
Certificates................................................................. 6
Certified Closing Net Worth.................................................. 39
Certified Year-End EBIT...................................................... 39
Certified Year-End Net Worth................................................. 39
Charter Documents............................................................ 10
Claim Notice................................................................. 43
Claims....................................................................... 42
Closing...................................................................... 9
Closing Date................................................................. 9
Closing Financial Certificate................................................ 39
Code......................................................................... 21
Company...................................................................... 1
Company Balance Sheet........................................................ 12
Company Common Stock......................................................... 3
Company Financial Statements................................................. 12
Company Hazardous Materials Activities....................................... 27
Company Intellectual Property................................................ 17
Company's knowledge.......................................................... 9
Constituent Corporations..................................................... 1
Contingent Merger Consideration.............................................. 4
Contributed Companies........................................................ 1
controlled group............................................................. 21
Copyright.................................................................... 17
Damages...................................................................... 41
DMUSA........................................................................ 1
61
Earn Out Period Average Price................................................ 5
Effective Time............................................................... 9
Environmental Permits........................................................ 27
Equipment.................................................................... 29
ERISA........................................................................ 21
Extended Earn Out Period..................................................... 5
Financial Adjustment Notice.................................................. 7
Former IBS Member............................................................ 1
GAAP......................................................................... 3
golden parachute............................................................. 21
group health plans........................................................... 22
Hazardous Material........................................................... 27
HSR Act...................................................................... 10
IBS.......................................................................... 1
Identified Acquisition Candidates............................................ 5
Identified Sales Tax Liabilities............................................. 7
Indemnification Threshold.................................................... 42
Indemnified Party............................................................ 41
Indemnifying Party........................................................... 42
Initial Earn Out Period...................................................... 4
Intellectual Property........................................................ 17
Inventory.................................................................... 28
knowledge of the Company..................................................... 9
Laws......................................................................... 15
Leases....................................................................... 16
liabilities.................................................................. 13
Xxxx......................................................................... 17
Market Value................................................................. 9
Material Adverse Effect...................................................... 10
Material Contracts........................................................... 18
Merger....................................................................... 1
Merger Consideration......................................................... 6
Merger Consideration Adjustment.............................................. 7
Merger Documents............................................................. 9
Merger Price................................................................. 3
multi-employer pension plan.................................................. 21
Net Worth Target............................................................. 3
Newco........................................................................ 1
Other Acquisition Candidate.................................................. 5
Other Rights................................................................. 17
Patent....................................................................... 17
PBGC......................................................................... 21
Pending Claims............................................................... 42
Permits...................................................................... 13
Permitted Encumbrances....................................................... 14
Plan of Merger............................................................... 1
Plans........................................................................ 21
62
Pledged Assets............................................................... 8
Pledged Shares............................................................... 8
Post-Closing Audit........................................................... 7
PTO.......................................................................... 17
Qualified Plans.............................................................. 21
Real Property................................................................ 14
Related Party Agreements..................................................... 18
Related-Party Leases......................................................... 14
Release Date................................................................. 9
reportable events............................................................ 22
Restructuring Transaction.................................................... 1
Revenue Earn Out............................................................. 4
Share Receipt Date........................................................... 35
State Corporation Laws....................................................... 1
Stockholder.................................................................. 1
Structures................................................................... 14
Subsequent Earn Out Period................................................... 4
Subsidiaries................................................................. 9
Surviving Corporation........................................................ 1
Tangible Assets.............................................................. 14
Tax.......................................................................... 24
Tax Return................................................................... 25
Territory.................................................................... 44
Third Party Claim............................................................ 43
Third Party Consents......................................................... 19
Third Party Intellectual Property............................................ 18
Title Commitment............................................................. 32
Title Policy................................................................. 32
Virginia U.C.C............................................................... 28
63
