EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GROUP MAINTENANCE AMERICA CORP.
CONTINENTAL ACQUISITION CORP.
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
AND
THE HOLDERS OF THE
OUTSTANDING CAPITAL STOCK
OF
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
OCTOBER 15, 1998
TABLE OF CONTENTS
Page
1. THE MERGER................................................................................. 1
1.1 The Merger...................................................................... 1
1.2 Effective Time of the Merger.................................................... 1
1.3 Closing......................................................................... 1
1.4 Effects of the Merger........................................................... 2
1.4.1 At the Effective Time................................................... 2
1.4.2 Effects on the Surviving Corporation.................................... 2
1.5 Written Consents and Other Actions.............................................. 2
1.5.1 Unanimous Written Consent of the Shareholders; Other Matters............ 2
1.5.2 Written Consent of the Sole Shareholder of Merger Sub................... 3
1.5.3 All Other Necessary Actions............................................. 3
1.6 Conversion of Stock............................................................. 3
1.6.1 Merger Sub Capital Stock................................................ 3
1.6.2 Cancellation of the Company Treasury Stock.............................. 3
1.6.3 Merger Consideration.................................................... 3
1.7 Exchange of and Payment for Stock............................................... 3
1.7.1 Delivery of Company Common Stock and Closing Merger Consideration....... 3
1.7.2 Payment In Full Satisfaction of All Rights.............................. 4
1.8 Determination of Closing Merger Consideration................................... 4
1.8.1 Statement............................................................... 4
1.9 Post-Closing Determination of Final Merger Consideration........................ 4
1.9.1 Statement............................................................... 4
1.9.2 Review.................................................................. 5
1.9.3 Disputes................................................................ 5
1.9.4 Resolution by Parties................................................... 5
1.9.5 Final Determination..................................................... 5
1.9.6 Expenses................................................................ 6
2. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS................................................... 6
2.1 Exhibit 2....................................................................... 6
2.2 Stock Ownership................................................................. 6
2.3 Authority....................................................................... 6
2.4 Consents........................................................................ 6
2.5 Brokers and Finders............................................................. 7
2.6 Continuity of Business Enterprise............................................... 7
2.7 Certain Payables and Receivables................................................ 7
2.8 HSR Act......................................................................... 7
3. REPRESENTATIONS AND WARRANTIES OF THE PARENT AND MERGER SUB................................ 7
3.1 Representations and Warranties.................................................. 7
3.1.1 Organization............................................................ 7
3.1.2 Capitalization of the Parent............................................ 7
3.1.3 Authority............................................................... 7
3.1.4 Consents................................................................ 8
3.1.5 Defaults................................................................ 8
3.1.6 Investment Company...................................................... 8
3.1.7 Financial Statements.................................................... 8
Page
3.1.8 Taxes................................................................... 8
3.1.9 Full Authority.......................................................... 8
3.1.10 Disclosure............................................................. 9
3.1.11 Parent Material Adverse Effect......................................... 9
3.1.12 Tax-Free Reorganization................................................ 9
3.1.13 Brokers and Finders....................................................10
3.1.14 Parent Common Stock....................................................10
3.2 Representations and Warranties Concerning the Merger Sub.............................10
3.2.1 Organization and Standing...............................................10
3.2.2 Capital Structure.......................................................10
3.2.3 Authority...............................................................11
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS.......................................11
4.1 Agreements of the Shareholders to be Effective Upon Closing.....................11
4.1.1 Covenant Not to Compete.................................................11
4.1.2 Release.................................................................12
4.2 Elimination of Expense..........................................................12
4.3 Purchase of Certain Receivables.................................................12
4.4 Tax-Free Reorganization.........................................................12
4.5 Discharge of Indebtedness, Releases, Etc........................................13
4.6 Options.........................................................................13
4.7 Employee Options................................................................13
4.8 Prospectus......................................................................13
4.9 Income Taxes....................................................................13
5. CLOSING DELIVERIES..........................................................................14
5.1 Deliveries by the Shareholders at the Closing...................................14
5.1.1 Closing Certificates....................................................14
5.1.2 Stock Transfer Restriction Agreement....................................14
5.1.3 Employment Agreements...................................................14
5.1.4 Lease Agreement.........................................................14
5.1.5 Opinion of Counsel for the Shareholders and the Company.................14
5.1.6 Documents, Stock Certificates...........................................15
5.1.7 Amended and Restated Shareholders Agreement.............................15
5.1.8 Progress Electric Company...............................................15
5.2 Deliveries by the Parent at the Closing.........................................15
5.2.1 Closing Certificates....................................................15
5.2.2 Opinion of Counsel for the Parent and Merger Sub........................15
5.2.3 Closing Merger Consideration............................................15
6. SURVIVAL, INDEMNIFICATIONS.................................................................16
6.1 Survival........................................................................16
6.2 Indemnification.................................................................16
6.2.1 Parent Indemnified Parties..............................................16
6.2.2 Parent Indemnity........................................................17
6.3 Limitations.....................................................................17
6.4 Procedures for Indemnification..................................................18
6.4.1 Notice..................................................................18
6.4.2 Legal Defense...........................................................18
6.4.3 Settlement..............................................................18
6.4.4 Cooperation.............................................................19
Page
7. MISCELLANEOUS................................................................................19
7.1 Notice..........................................................................19
7.2 Further Documents...............................................................20
7.3 Assignability...................................................................20
7.4 Exhibits and Schedules..........................................................20
7.5 Sections and Articles...........................................................20
7.6 Entire Agreement................................................................20
7.7 Headings........................................................................20
7.8 CONTROLLING LAW.................................................................20
7.9 Public Announcements............................................................21
7.10 No Third Party Beneficiaries....................................................21
7.11 Amendments and Waivers..........................................................21
7.12 No Employee Rights..............................................................21
7.13 Non-Recourse....................................................................21
7.14 When Effective..................................................................21
7.15 Takeover Statutes...............................................................21
7.16 Number and Gender of Words......................................................22
7.17 Invalid Provisions..............................................................22
7.18 Multiple Counterparts...........................................................22
7.19 No Rule of Construction.........................................................22
7.20 Expenses........................................................................22
LIST OF EXHIBITS
Exhibit 1 ............................................................................. Determination of Final Merger Consideration
Exhibit 1.5.1 .................................................................. Written Consent of the Shareholders of the Company
Exhibit 1.5.2 ................................................ Written Consent of Sole Shareholder of Continental Acquisition Corp.
Exhibit 1.7 ................................................................................................. Letter of Transmittal
Exhibit 2 ...................................................................................................... Certain Statements
Exhibit 2.2 ..................................................................................... Ownership of Company Common Stock
Exhibit 2.4 .......................................................................... Required Consents - Shareholders and Company
Exhibit 3.1.4 .......................................................................................... Required Consents - Parent
Exhibit 4.5 ................................................................................................ Terminated Obligations
Exhibit 4.7-1 .................................................................................. Employees to Receive Stock Options
Exhibit 4.7-2 ........................................................................................... Company Stock Option Plan
Exhibit 4.7-3 ................................................................................. Nonqualified Stock Option Agreement
Exhibit 5.1.7 ......................................................................................... Agreements To Be Terminated
Exhibit 5.1.2 ................................................................................ Stock Transfer Restriction Agreement
Exhibit 5.1.3 .................................................... List of Employees to Execute and Deliver an Employment Agreement
Exhibit 5.1.3A ................................................................... Form of Employment Agreement for Xxxxxxx X. Xxxx
Exhibit 5.1.3B ........................................................ Form of Employment Agreement for Certain Executive Officers
Exhibit 5.1.4 ..................................................................................................... Lease Agreement
Exhibit 5.1.5 ............................................................... Opinion of Counsel to the Shareholder and the Company
Exhibit 5.2.2 ..................................................................... Opinion of Counsel to the Parent and Merger Sub
INDEX OF DEFINED TERMS
Page
Accountants............................................................. 5
Agreement............................................................... 1
Applicable Corporate Law................................................ 1
Closing................................................................. 1
Closing Date............................................................ 2
Code.................................................................... 1
Company................................................................. 1
Company Common Stock.................................................... 1
Converted Share......................................................... 3
Effective Time.......................................................... 1
Employee Options........................................................13
Holdback................................................................ 4
HSR Act................................................................. 7
Indemnified Party.......................................................18
Indemnifying Party......................................................18
Lease...................................................................14
Losses..................................................................16
Merger.................................................................. 1
Merger Sub.............................................................. 1
Notice of Dispute....................................................... 5
Option Agreements.......................................................13
Parent.................................................................. 1
Parent Common Stock..................................................... 1
Parent Financial Statements............................................. 8
Parent Indemnified Parties..............................................16
Parent Material Adverse Effect.......................................... 9
Parent Related Documents................................................ 7
Prospectus..............................................................13
Securities Act..........................................................10
Settlement Notice.......................................................19
Shareholder Related Document............................................ 6
Shareholders............................................................ 1
Statement of Closing Consideration...................................... 4
Statement of Final Per Share Amounts.................................... 4
Stock Certificate....................................................... 3
Survival Period.........................................................16
Surviving Corporation................................................... 1
Terminated Obligations..................................................13
Threshold...............................................................17
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") made effective as of
October 15, 1998, by and among Group Maintenance America Corp., a Texas
corporation (the "Parent"), Continental Acquisition Corp., a Delaware
corporation ("Merger Sub"), Continental Electrical Construction Co., an Illinois
corporation (the "Company"), and the undersigned holders of all of the
outstanding capital stock of the Company (the "Shareholders").
WHEREAS, the respective Boards of Directors of the Parent, Merger Sub and
the Company have each approved the merger of the Company with and into Merger
Sub (the "Merger") pursuant to this Agreement and the applicable statutes of the
State of Illinois and the State of Delaware, and pursuant to the Merger each
issued and outstanding share of Class A Common Stock, $10.00 par value per
share, of the Company and Class B Common Stock, $10.00 par value per share, of
the Company (collectively, the "Company Common Stock") will be converted into
the right to receive certain shares of common stock, $.001 par value per share,
of the Parent ("Parent Common Stock"), and certain cash consideration, all as
provided herein; and
WHEREAS, the Parent and the Company expect that the Merger will further
certain of their respective business objectives (including, without limitation,
expansion of the Parent's existing business, increased market share and volume
efficiencies); and
WHEREAS, the Merger has been approved, as required by applicable law, by
the Parent, acting as sole shareholder of Merger Sub, and by the Shareholders;
and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. Subject to the terms and conditions hereof, and in
accordance with the Illinois Business Corporation Act and the Delaware General
Corporation Law (the "Applicable Corporate Laws") upon the Effective Time (as
defined in Section 1.2), the Company shall be merged with and into Merger Sub.
Merger Sub, as the surviving entity following the Merger, is sometimes referred
to in this Agreement as the "Surviving Corporation."
1.2 Effective Time of the Merger. In accordance with the requirements of
applicable laws, appropriate Articles of Merger under the Applicable Corporate
Laws shall be prepared, executed and submitted for filing with the Secretary of
State of the State of Illinois and the Secretary of State of the State of
Delaware as soon as practicable following the Closing (as defined below). The
date of the later of such filings is referred to in this Agreement as the
"Effective Time."
1.3 Closing. The closing of the Merger ("Closing") is taking place at the
offices of Bracewell & Xxxxxxxxx, L.L.P., in Houston, Texas on the date of this
Agreement (the date of this Agreement is sometimes referred to herein as the
"Closing Date"). At the Closing, the parties will deliver or cause to be
delivered the documents described in Sections 5.3 and 5.4 below.
1.4 Effects of the Merger.
1.4.1 At the Effective Time. At the Effective Time, (i) the Company
shall merge with and into Merger Sub and as a result thereof, the separate
existence of the Company shall cease, (ii) the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, except that the
Certificate of Incorporation of Merger Sub shall be amended to provide that the
name of the Surviving Corporation shall be changed to "Continental Electrical
Construction Co., " (iii) the Bylaws of Merger Sub as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
and (iv) the directors and officers of Merger Sub immediately prior to the
Effective Time shall become the directors and officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed, as the case may be.
1.4.2 Effects on the Surviving Corporation. As of and after the
Effective Time, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises of a public as well as of a private nature
previously belonging to the Company and Merger Sub; and all property (real,
personal and mixed), and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest of or belonging to or due to each of the Company and Merger Sub shall
be transferred to, and vested in, the Surviving Corporation without further act
or deed; and all such property, rights and privileges, powers and franchises and
all and every other interest shall be thereafter the property of the Surviving
Corporation as they were of the Company and Merger Sub; and the title to any
real estate, or interest therein, whether by deed or otherwise, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall be responsible and liable for all the liabilities and obligations of the
Company and Merger Sub, and any claim existing, or action or proceeding pending,
by or against the Company or Merger Sub may be prosecuted against the Surviving
Corporation. Neither the rights of creditors nor any liens upon the property of
the Company or Merger Sub shall be impaired by the Merger, and all debts,
liabilities and duties of each of the Company and Merger Sub shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by it, all in
accordance with the Applicable Corporate Laws and the terms of this Agreement.
1.5 Written Consents and Other Actions.
1.5.1 Unanimous Written Consent of the Shareholders; Other Matters.
On the Closing Date, each of the Shareholders will deliver to the Company an
executed Unanimous Written Consent in substantially the form of Exhibit 1.5.1
attached hereto. Contemporaneously with the date of this Agreement, each of the
Shareholders hereby acknowledges that such Shareholder is aware of such
Shareholder's dissenter's or appraisal rights with respect to the Merger and
such Shareholder's receipt of a copy of the provisions of Sections 5/11.65
through 5/11.70 of the Illinois Business Corporation Act and has elected not to
exercise such rights.
1.5.2 Written Consent of the Sole Shareholder of Merger Sub. On the
Closing Date, the Parent will deliver to Merger Sub an executed written consent
of the sole shareholder of Merger Sub, in the form of Exhibit 1.5.2 attached
hereto, pursuant to the applicable provisions of the Delaware General
Corporation Law, adopting this Agreement.
1.5.3 All Other Necessary Actions. In addition to the actions set
forth in Sections 1.5.1 and 1.5.2, the Parent, Merger Sub and the Company will
take all actions necessary in accordance with the Applicable Corporate Laws and
their respective articles of incorporation and bylaws to cause the Merger to be
consummated on, and subject to, the terms set forth in this Agreement and the
Applicable Corporate Laws.
1.6 Conversion of Stock. As of the Effective Time, by virtue of the
Merger and without further action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Merger Sub:
1.6.1 Merger Sub Capital Stock. Each share of capital stock of Merger
Sub issued and outstanding at the Effective Time shall remain outstanding and
shall be unchanged at and after the Merger and immediately following the
Effective Time shall constitute all of the issued and outstanding capital stock
of the Surviving Corporation.
1.6.2 Cancellation of the Company Treasury Stock. All shares of
Company Common Stock that are owned by the Company as treasury stock or by any
of its subsidiaries shall be canceled and retired and shall cease to exist and
no stock of the Parent or other consideration shall be delivered in exchange
therefor.
1.6.3 Merger Consideration. Each share of Company Common Stock (other
than shares to be canceled in accordance with Section 1.6.2) shall be converted
into the right to receive (i) that number of shares of Parent Common Stock equal
to the Final Per Share Common Stock Amount (as defined in Exhibit 1 attached
hereto), and (ii) cash equal to the Final Per Share Cash Amount (as defined in
Exhibit 1 attached hereto). Each share of Company Common Stock so converted into
the right to receive cash equal to the Final Per Share Cash Amount and shares of
Parent Common Stock equal to the Final Per Share Common Stock Amount (a
"Converted Share") shall, by virtue of the Merger and without any action on the
part of the holder thereof, at the Effective Time no longer be outstanding and
shall at such time be canceled and retired and shall cease at such time to
exist, and each holder of a certificate which prior to the Effective Time
validly evidenced any such Converted Share (a "Stock Certificate") shall
thereafter cease to have any rights with respect to such Converted Share,
except, upon the surrender of the Stock Certificate and a duly executed and
completed letter of transmittal in accordance with Section 1.7, the right to
receive such cash and Parent Common Stock at the times and in the manner set
forth herein.
1.7 Exchange of and Payment for Stock.
1.7.1 Delivery of Company Common Stock and Closing Merger
Consideration. On the Closing Date, all of the Company Common Stock held by the
Shareholders will be surrendered by the Shareholders to the Parent together with
properly completed and executed letters of transmittal, in substantially the
form attached hereto as Exhibit 1.7, (with each such signature guaranteed by a
commercial bank or notarized by a notary public or similar official reasonably
satisfactory to the Parent), and the Parent (i) shall cause to be delivered to
the Shareholders at the Closing the Closing Per Share Cash Amount (as defined in
Exhibit 1 attached hereto) less, with respect to the Closing Per Share Cash
Amount payable to the Shareholders, the Holdback (as defined below) in cash or
in immediately available funds, and (ii) shall notify and direct the Parent's
stock transfer agent to prepare and deliver to the Shareholders certificates
based on the Closing Per Share Common Stock Amount (as defined in Exhibit 1
attached hereto) applicable to each of the Converted Shares evidenced by the
Stock Certificates properly surrendered (with properly executed and completed
letters of transmittal) by the Shareholders to the Parent. At the Closing, the
Shareholders agree and hereby authorize Parent to withhold on a pro rata basis
(determined by the number of Shares of Company Common Stock held by each
Shareholder) an aggregate of $2,000,000 of the aggregate Closing Per Share Cash
Amount ("Holdback") payable with respect to the Shareholders, shares of Company
Common Stock to be applied to the Shareholders' obligation with respect to
accounts receivables under Section 4.3 below. Notwithstanding anything in this
Agreement to the contrary, the Holdback may only be used to satisfy the
obligation of the Shareholders with respect to accounts receivables under
Section 4.3 below. Within ten (10) days of the satisfaction of such obligation,
that portion, if any, of the Holdback not needed to satisfy the Shareholders'
obligation with
respect to accounts receivable under Section 4.3 shall be paid to the
Shareholders (pro rata on the same basis as contributed to the Holdback) by
Parent together with interest thereon at the rate of 6% per annum from the
Closing Date.
1.7.2 Payment In Full Satisfaction of All Rights. The delivery of the
Closing Per Share Cash Amount to the Shareholders with respect to the
Shareholders' Converted Shares and the notification of the Parent's stock
transfer agent with respect to the Closing Per Share Common Stock Amount shall
be deemed to be payment in full satisfaction of all rights pertaining to the
outstanding Converted Shares except for the right to receive additional shares
of Parent Common Stock and cash pursuant to Section 1.9.
1.8 Determination of Closing Merger Consideration.
1.8.1 Statement. Prior to the date of this Agreement, the Parent has
delivered to the Shareholders a statement setting forth a calculation of the
Closing Outstanding Common Stock Number (as defined in Exhibit 1 attached
hereto), the Closing Per Share Cash Amount, the Closing Per Share Common Stock
Amount and the Closing Merger Consideration (as defined in Exhibit 1 attached
hereto), payable to the Shareholders at Closing (the "Statement of Closing
Consideration"). The Closing Outstanding Common Stock Number, the Closing Per
Share Cash Amount, the Closing Per Share Common Stock Amount and the Closing
Merger Consideration, as set forth in the Statement of Closing Consideration,
shall be final, conclusive and binding for purposes of this Agreement, subject
only to the provisions of Section 1.9 of this Agreement.
1.9 Post-Closing Determination of Final Merger Consideration.
1.9.1 Statement. No later than 45 days after the Closing, the Parent
shall deliver to the Shareholders a statement showing the Final Outstanding
Common Stock Number (as defined in Exhibit 1), the Final Per Share Cash Amount,
the Final Per Share Common Stock Amount and the Total Consideration (as defined
in Exhibit 1 attached hereto) (the "Statement of Final Per Share Amounts").
1.9.2 Review. After delivery to the Shareholders of the Statement of
Final Per Share Amounts, the Shareholders and the Shareholders' representatives
shall be afforded the opportunity to review and inspect all of the financial
records, work papers, schedules and other supporting papers relating to the
preparation of the Statement of Final Per Share Amounts, and to consult with the
Parent and its representatives regarding the methods used in the preparation of
the Statement of Final Per Share Amounts.
1.9.3 Disputes. The Final Outstanding Common Stock Number, the Final
Per Share Cash Amount, the Final Per Share Common Stock Amount and the Total
Consideration as shown on the Statement of Final Per Share Amounts shall be
final, conclusive and binding for purposes of this Agreement, unless the
Shareholders shall deliver to the Parent a written notice of disagreement
("Notice of Dispute") with any item or items in the Statement of Final Per Share
Amounts within 20 business days following receipt of the Statement of Final Per
Share Amounts, specifying in reasonable detail the nature and extent of such
disagreement. If a Notice of Dispute is not properly given within such time,
the Final Outstanding Common Stock Number, the Final Per Share Cash Amount, the
Final Per Share Common Stock Amount and the Final Merger Consideration as set
forth in the Statement of Final Per Share Amounts shall be final, conclusive and
binding for purposes of this Agreement.
1.9.4 Resolution by Parties. If a Notice of Dispute is properly
given, the Parent and the Shareholders shall negotiate in good faith and use
their best efforts to resolve any disagreement with respect to the Statement of
Final Per Share Amounts. If the Parent and the Shareholders shall not reach
such resolution within 30 days following receipt by the Parent of a properly
given Notice of Dispute, KPMG Peat Marwick LLP (the "Accountants") shall resolve
such dispute within 30 days after its submission to them. The Parent and the
Shareholders (if the dispute is resolved by them or the Statement of Final Per
Share Amounts otherwise becomes final pursuant hereto without referral to the
Accountants) or the Accountants (if a dispute is resolved by them) shall set
forth such resolution in writing, and such writing shall (i) set forth the Final
Outstanding Common Stock Number, the Final Per Share Cash Amount, the Final Per
Share Common Stock Amount and the Total Consideration and (ii) be final,
conclusive and binding for purposes of this Agreement.
1.9.5 Final Determination. Within 10 business days following the
final determination of the Final Outstanding Common Stock Number, the Final Per
Share Cash Amount, the Final Per Share Common Stock Amount and the Total
Consideration as provided in this Section 1.9, (i) the Parent shall deliver to
the Shareholders, in the percentage set forth on Attachment B to Exhibit 1
hereto, (a) the cash amount, if any, by which the aggregate of the Final Per
Share Cash Amounts payable to the Shareholders, as finally determined pursuant
hereto, exceeds the aggregate of the Closing Per Share Cash Amounts paid to the
Shareholders at the Closing; and (b) the number of shares of Parent Common
Stock, if any, by which the aggregate of the Final Per Share Common Stock
Amounts deliverable to the Shareholders, as finally determined pursuant hereto,
exceeds the aggregate of the Closing Per Share Common Stock Amounts delivered to
the Shareholders at the Closing; or (ii) the Shareholders, in the percentage set
forth on Attachment B to Exhibit 1 hereto, shall deliver to the Parent (a) the
cash amount, if any, by which the aggregate of the Closing Per Share Cash
Amounts paid to the Shareholders at the Closing exceeds the aggregate of the
Final Per Share Cash Amounts payable to the Shareholders as finally determined
pursuant hereto; and (b) the number of shares of Parent Common Stock, if any, by
which the aggregate of the Closing Per Share Common Stock Amounts delivered to
the Shareholders at the Closing exceeds the aggregate of the Final Per Share
Common Stock Amounts deliverable to the Shareholders as finally determined
pursuant hereto.
1.9.6 Expenses. The Parent and the Shareholders shall each pay their
own costs incurred in connection with this Section 1.9, including the fees and
expenses of their respective attorneys and accountants, if any.
2. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
The Company and each Shareholder, jointly and severally, hereby represent
and warrant to the Parent and Merger Sub as follows; provided, however, that
notwithstanding the foregoing, Xxxxxxx Xxxxx and Xxxxx Xxxxxxx shall only
represent and warrant the matters contained in Sections 2.2 through 2.5 of this
Agreement and such representations and warranties by Xx. Xxxxx and Xx. Xxxxxxx
shall be on a joint and several basis with the other Shareholders:
2.1 Exhibit 2. The statements in Exhibit 2 attached hereto are true and
correct.
2.2 Stock Ownership. Each Shareholder owns, beneficially and of record,
with full power to vote, the number of shares of Company Common Stock set forth
beside such Shareholder's name on Exhibit 2.2 and such shares are so held by
such Shareholder free and clear of all liens, encumbrances and adverse claims
whatsoever.
2.3 Authority. Each Shareholder has full right, power, legal capacity and
authority to (i) execute, deliver and perform this Agreement, and all other
documents and instruments referred to herein or contemplated hereby to be
executed, delivered and performed by such Shareholder (each a "Shareholder
Related Document") and (ii) consummate the transactions contemplated herein and
thereby.
This Agreement has been duly executed and delivered by each Shareholder and
constitutes, and any Shareholder Related Document, when duly executed and
delivered by the Shareholder named a party therein will constitute, legal, valid
and binding obligations of such Shareholder enforceable against the Shareholder
in accordance with their respective terms and conditions, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (whether applied in a proceeding at law or
in equity).
2.4 Consents. Except as provided in Exhibit 2.4, no approval, consent,
order or action of or filing with any court, administrative agency, governmental
authority or other third party is required for the execution, delivery or
performance by the Shareholders of this Agreement or any Shareholder Related
Document. The execution, delivery and performance by the Shareholders of this
Agreement and any Shareholder Related Documents do not violate any mortgage,
indenture, contract, agreement, lease or commitment or other instrument of any
kind to which any Shareholder is a party or by which any Shareholder or such
Shareholder's assets or properties may be bound or affected or any law, rule or
regulation applicable to such Shareholder or any court injunction, order or
decree or any valid and enforceable order of any governmental agency in effect
as of the date hereof having jurisdiction over such Shareholder.
2.5 Brokers and Finders. Neither the Company nor any of the Shareholders
have employed any broker, finder or agent, or incurred any broker's fee or
finder's fee or commission, with respect to the transactions referred to herein
or contemplated hereby, nor has any of them dealt with anyone purporting to act
in the capacity of a finder or broker with respect thereto.
2.6 Continuity of Business Enterprise. The Company operates at least one
significant historic line of business, or owns at least a significant portion of
its historic business assets, in each case, within the meaning of Treasury
Regulation Section 1.368-1(d).
2.7 Certain Payables and Receivables. Prior to the date of this
Agreement, the Shareholders have caused to be paid in full in cash all accounts
receivable, notes receivable and advances payable by the Shareholders to the
Company and the Company has paid in full in cash all accounts payable, notes
payable and advances payable by the Company to the Shareholders.
2.8 HSR Act. The Parent, the Shareholders and the Company have taken all
reasonable actions necessary to make all filings, if any, required under The
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR Act"), in
connection with the transaction contemplated hereby and to obtain the
termination or expiration of the waiting period thereunder.
3. REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
3.1 Representations and Warranties. The Parent hereby represents and
warrants to the Shareholders and the Company as follows:
3.1.1 Organization. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. The
Parent is duly qualified or licensed as a foreign corporation authorized to do
business in all states in which any of its assets or properties may be situated
or where its business is conducted except where the failure to obtain such
qualification or license would not have a Parent Material Adverse Effect (as
defined below).
3.1.2 Capitalization of the Parent. As of the date of the Prospectus
(as hereinafter defined), the total authorized and issued capital stock of
Parent is as set forth in the Prospectus. The outstanding shares of Parent
Common Stock have been duly and validly issued and are fully paid and non-
assessable.
3.1.3 Authority. The Parent has the requisite power and authority to
execute, deliver and perform this Agreement and all documents and instruments
referred to herein or contemplated hereby (the "Parent Related Documents") and
to consummate the transactions contemplated herein and thereby. This Agreement
has been duly executed and delivered by the Parent and constitutes, and all the
Parent Related Documents, when executed and delivered by the Parent will
constitute, legal, valid and binding obligations of the Parent, enforceable in
accordance with their respective terms and conditions except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether applied in a proceeding at law or in
equity).
3.1.4 Consents. Except as provided on Exhibit 3.1.4, no approval,
consent, order or action of or filing with any court, administrative agency,
governmental authority or other third party is required for the execution,
delivery or performance by the Parent of this Agreement or the Parent Related
Documents or the consummation by the Parent of the transactions contemplated
hereby, except for the filing of the Articles of Merger with the Secretary of
State of the State of Illinois and the Secretary of State of the State of
Delaware. The execution, delivery and performance by Parent of this Agreement
and any Parent Related Documents do not violate any mortgage, indenture,
contract, agreement, lease or commitment or other instrument of any kind to
which the Parent is a party or by which the Parent or the Parent's assets or
properties may be bound or affected or any law, rule or regulation applicable to
the Parent or any court injunction, order or decree or any valid and enforceable
order of any governmental agency in effect as of the date hereof having
jurisdiction over the Parent.
3.1.5 Defaults. The Parent is not in default under or in violation
of, and the execution, delivery and performance of this Agreement and the Parent
Related Documents and the consummation by the Parent of the transactions
contemplated hereby and thereby will not result in a default under or in
violation of (i) any mortgage, indenture, charter or bylaw provision, contract,
agreement, lease, commitment or other instrument of any kind to which the Parent
is a party or by which the Parent or any of its properties or assets may be
bound or affected or (ii) any law, rule or regulation applicable to the Parent
or any court injunction, order or decree, or any valid and enforceable order of
any governmental agency in effect as of the date hereof having jurisdiction over
the Parent, which default or violation prevents the Parent from consummating the
transactions contemplated hereby or is reasonably likely to have a Parent
Material Adverse Effect.
3.1.6 Investment Company. The Parent is not an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.1.7 Financial Statements. The Parent has provided certain financial
statements to the Shareholders in the Prospectus ("Parent Financial Statements")
and such Parent Financial Statements have been prepared in accordance with GAAP
and fairly present the consolidated financial position, results of operations
and cash flows of the Parent and its then existing consolidated subsidiaries as
of the dates and for the periods indicated, subject to normal year-end
adjustments and any other adjustments described therein or in the notes or
schedules thereto. The books and records of the Parent have been kept in
reasonable detail and accurately and fairly reflect the transactions of the
Parent.
3.1.8 Taxes. The Parent has either accrued, discharged or caused to
be discharged, as the same have become due, or the Parent Financial Statements
contain adequate accruals and reserves for, all known taxes, interest thereon,
fines and penalties of every kind and character, attributable or relating to the
properties and business of the Parent for the period covered by the Parent
Financial Statements.
3.1.9 Full Authority. The Parent has the corporate power and
authority and has obtained all licenses, permits, qualifications, and other
documentation (including permits required under applicable Environmental Law, as
defined in Exhibit 2) necessary to own and/or operate its businesses, properties
and assets and to carry on its businesses as being conducted on the date of this
Agreement, except such licenses, permits, qualifications or other documentation,
the failure to obtain which is not reasonably likely to result in a Parent
Material Adverse Effect, and such businesses are now being conducted and such
assets and properties are being owned and/or operated in compliance with all
applicable laws (including Environmental Law), ordinances, rules and regulations
of any governmental agency of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, all applicable court or
administrative agency decrees, awards and orders and all such licenses, permits,
qualifications and other documentation, except where the failure to comply will
not have a Parent Material Adverse Effect, and there is no existing condition or
state of facts that would give rise to a violation thereof or a liability or
default thereunder that is reasonably likely to have a Parent Material Adverse
Effect.
3.1.10 Disclosure. No representation or warranty by the Parent in
this Agreement and no statement contained in the Prospectus delivered by the
Parent to the Shareholders pursuant to this Agreement contains any untrue
statement of a material fact or omits any material fact necessary in order to
make the statements herein or therein, in light of the circumstances under which
they are or were made, not misleading.
3.1.11 Parent Material Adverse Effect. The term "Parent Material
Adverse Effect" shall mean an adverse effect on the properties, assets,
financial position, results of operations, long-term debt, other indebtedness,
cash flows or contingent liabilities of the Parent and its consolidated
subsidiaries, taken as a whole, in an amount of $5,000,000 or more.
3.1.12 Tax-Free Reorganization. With respect to the qualification of
the Merger as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code:
(a) The Parent has no plan or intention to sell, exchange or
otherwise dispose of or liquidate the Surviving Corporation, to merge the
Surviving Corporation with or into any other corporation, to sell or
otherwise dispose of its Surviving Corporation Common Stock except for
transfers of Surviving Corporation Common Stock to corporations of which
the Parent has control (within the meaning of Section 368(a) of the Code)
at the time of such transfer, or to cause the Surviving Corporation to sell
or otherwise dispose of any of its assets or of any assets acquired in the
Merger, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation of which the Surviving Corporation has
control (within the meaning of Section 368(a)(1)(A) of the Code) at the
time of such transfer.
(b) The Parent has no plan or intention to cause the Surviving
Corporation, after the Merger, to issue additional shares of its stock that
would result in the Parent losing control of the Surviving Corporation
within the meaning of Section 368(c) of the Code.
(c) Following the Merger, the Surviving Corporation will continue the
Company's historic business or use a significant portion of its historic
business assets in a business.
(d) Except as provided in Section 7.20 below, if the Merger is
effected, the Parent and Merger Sub will each pay their respective
expenses, if any, incurred in connection with the Merger.
(e) The Parent Common Stock that will be issued in connection with
the Merger is voting stock within the meaning of Section 368(c) of the
Code.
(f) At the Effective Time, neither the Parent nor Merger Sub will
have any outstanding warrants, options, convertible securities, or any
other right pursuant to which any person could acquire stock in the Parent
or Merger Sub which, if exercised or converted, would affect the Parent's
acquisition or retention of control of the Surviving Corporation.
(g) Neither the Parent nor Merger Sub is an investment company as
defined in Section 368(a)(2)(F) of the Code.
(h) None of the Parent Common Stock received by the Shareholders as a
part of the Final Merger Consideration will be separate consideration for,
or allocable to, any employment agreement.
(i) Neither the Parent nor Merger Sub is under the jurisdiction of a
court in a case under Title 11 of the United States Code, or a
receivership, foreclosure, or similar proceeding in a federal or state
court.
3.1.13 Brokers and Finders. The Parent has not employed any broker,
finder or agent, or incurred any broker's or finder's fee or commission, with
respect to any transactions referred to herein or contemplated hereby and has
not dealt with anyone purporting to act in the capacity of a finder or broker
with respect thereto.
3.1.14 Parent Common Stock. All shares of Parent Common Stock to be
issued by Parent pursuant to the Merger, when issued in accordance with this
Agreement, will be registered under the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"), will be
validly issued, fully paid and nonassessable and, subject to the requirements of
Rules 144 and 145 promulgated pursuant to the Securities Act and the Stock
Transfer Restriction Agreement, will be freely tradeable without restrictions,
and will be listed for trading on the New York Stock Exchange promptly after the
Closing Date.
3.2 Representations and Warranties Concerning the Merger Sub. The Parent
and Merger Sub, jointly and severally, hereby represent and warrant to the
Shareholders and the Company as follows:
3.2.1 Organization and Standing. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware.
3.2.2 Capital Structure. The authorized capital stock of Merger Sub
consists of 5,000 shares of common stock, par value $.01 per share, 1,000 of
which are validly issued and outstanding, fully paid and nonassessable and are
owned by the Parent free and clear of all liens, encumbrances and adverse
claims.
3.2.3 Authority. Merger Sub has the corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by Merger Sub of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by its Board of Directors and the Parent as its sole shareholder, and, except
for the corporate filings required by state law, no other corporate proceedings
on the part of Merger Sub are necessary to authorize this Agreement and the
transaction contemplated hereby. This Agreement has been duly and validly
executed and delivered by Merger Sub and (assuming the due authorization,
execution and delivery hereof by the Company) constitutes a valid and binding
obligation of Merger Sub enforceable against Merger Sub in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity).
4. CERTAIN COVENANTS, AGREEMENTS AND PRE-CLOSING MATTERS
4.1 Agreements of the Shareholders to be Effective Upon Closing.
Effective upon Closing, and without further action on the part of any party or
other person, the Shareholders covenant and agree as follows:
4.1.1 Covenant Not to Compete.
(a) For the considerations specified in this Agreement and in
recognition that the covenants by the Shareholders in this Section are a
material inducement to the Parent to enter into and perform this Agreement,
each Shareholder agrees that for the period from the Closing Date to the
later to occur of (a) the date which is five years after the Closing Date
or (b) the date which is one year following any termination of such
Shareholder's employment with the Surviving Corporation or any of its
affiliates (as defined in Exhibit 2), regardless of the reason for such
termination, such Shareholder will not represent, engage in, carry on, or
have a financial interest in, directly or indirectly, individually, as a
member of a partnership or limited liability company, equity owner,
shareholder (other than as a shareholder of less than one percent of the
issued and outstanding stock of a publicly-held company whose gross assets
exceed $100 million), investor, owner, officer, director, trustee, manager,
employee, agent, associate or consultant engage in any business which
directly competes with any of the services or products produced, sold,
conducted, developed, or in the process of development by the Company on
the Closing Date (or, if clause (b) above is applicable, on the date of
termination of the Shareholder's employment), including any indoor air
quality, heating, electrical, ventilation, process piping, air
conditioning, appliance, mechanical construction, plumbing or sewer
cleaning products or services within a 000-xxxx xxxxxx xx xxx xxxx xx
Xxxxxx, Xxxxxxxx.
(b) Each Shareholder agrees that the limitations set forth herein on
such Shareholder's rights to compete with the Parent and its affiliates as
set forth in clause (i) are reasonable and necessary for the protection of
Parent and its affiliates. In this regard, such Shareholder specifically
agrees that the limitations as to period of time and geographic area, as
well as all other restrictions on his activities specified herein, are
reasonable and necessary for the protection of the Parent and its
affiliates. Each Shareholder agrees that, in the event that the provisions
of this Section should ever be deemed to exceed the scope of business, time
or geographic limitations permitted by applicable law, such provisions
shall be and are hereby reformed to the maximum scope of business, time or
geographic limitations permitted by applicable law.
(c) Each Shareholder agrees that the remedy at law for any breach by
such Shareholder of this Section 4.1.1 will be inadequate and that the
Parent shall be entitled to injunctive relief.
4.1.2 Release. Effective as of the Effective Time, the Shareholders
do hereby (i) release, acquit and forever discharge the Surviving Corporation
from any and all liabilities, obligations, claims, demands, actions or causes of
action arising from or relating to any event, occurrence, act, omission or
condition occurring or existing on or prior to the Effective Time, including,
without limitation, any claim for indemnity or contribution from the Surviving
Corporation in connection with the obligations or liabilities of the
Shareholders hereunder, except for salary and benefits payable to such
Shareholder as an employee in the ordinary course of business and claims of the
Shareholder pursuant to Section 6.2.2 of this Agreement; (ii) waive all
breaches, defaults or violations of any agreement applicable to the Company
Common Stock and agree that any and all such agreements (except for the
Agreement) are terminated as of the Effective Time, and (iii) waive any and all
preemptive or other rights to acquire any shares of capital stock of the Company
and release any and all claims arising in connection with any prior default,
violation or failure to comply with or satisfy any such preemptive or other
rights.
4.2 Elimination of Expense. At the Closing, the Shareholders will produce
evidence to the satisfaction of the Parent and its lenders that the expenses of
the Company as described on Attachment A to Exhibit 1 hereto have been
eliminated as expenses of the Surviving Corporation as of and following the
Closing Date.
4.3 Purchase of Certain Receivables. If any accounts receivable included
in the assets of the Company for purposes of determining the Total Consideration
pursuant to Exhibit 1 remain unpaid in full on the date that occurs 120 days
following the Closing, the Shareholders shall, upon written request by the
Parent made on or before the date that occurs 130 days following the Closing,
purchase the same from the Surviving Corporation, without recourse, for the
uncollected face amount thereof (net of any reserve therefor for bad debts on
the books of the Company on the Closing). Such purchase by the Shareholders
shall be pro rata based on their ownership of the shares of Company Common Stock
on the Closing Date. If the Shareholders are required to purchase any accounts
receivable pursuant to this Section 4.3, then upon the request of the
Shareholders, (i) the Surviving Corporation shall execute and deliver such
assignments and other documents evidencing the transfer of such accounts
receivable to the Shareholders as the Shareholders may reasonably request, and
(ii) after such transfer, the Surviving Corporation and its employees shall,
during the Surviving Corporation's normal business hours, provide reasonable
assistance and cooperation (including testimony) to the Shareholders in helping
the Shareholders with their efforts to collect such purchased accounts
receivable.
4.4 Tax-Free Reorganization. Unless the other parties shall otherwise
agree in writing, none of the Shareholders, the Parent, Merger Sub, the Company
or the Surviving Corporation shall knowingly take or fail to take any action
that would jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code.
4.5 Discharge of Indebtedness, Releases, Etc. Except as otherwise set
forth on Exhibit 4.5, within thirty (30) days after the Effective Time, the
Parent shall cause the indebtedness of the Company referred to in Exhibit 4.5
attached hereto ("Terminated Obligations") to be paid in full or refinanced on
terms acceptable to the Parent.
4.6 Options. Following the Closing, the Parent shall issue under the 1998
Parent Stock Awards Plan to those employees of the Company as shall be agreed to
by the parties hereto at such time, options to purchase the number of shares of
Parent Common Stock equal to 5.3% of the number of shares of Parent Common Stock
(provided that if such calculation shall result in the issuance of a fractional
share, such amount shall be rounded up to the nearest whole number) issued to
the Principal Shareholders pursuant to this Agreement. Prior to the Closing
Date, the Company has delivered to the Parent a list of proposed recipients of
such options, which has been prepared in accordance with the Parent's 1998
Parent
Stock Awards Plan guidelines, and the Company and the Parent have mutually agree
on the actual recipients of such options.
4.7 Employee Options. At the Effective Time, the existing Company options
for 87.9895 shares of the Company Common Stock as listed on Exhibit 4.7-1 will
be exchanged for Parent options to purchase an aggregate of 89,241 shares of
Parent Common Stock with an option price of $ 3.18 (collectively, the "Employee
Options"), pursuant to the terms of Continental Electrical Construction Co.
Stock Option Plan and Nonqualified Stock Option Agreement (collectively, the
"Option Agreements"), attached hereto as Exhibits 4.7-2 and 4.7-3. Upon the
Closing, the Parent shall assume all of the rights, interests and obligations of
the Company under the Option Agreements.
4.8 Prospectus. On or prior to the Closing Date, the Parent shall deliver
to the Company and the Shareholders a completed, filed and effective
registration statement (or and amendment thereto) related to the Parent Common
Stock (the "Prospectus").
4.9 Income Taxes. Prior to the Closing Date, (i) the Company, the
Shareholders and the Parent have agreed that $150,000 is the estimated amount of
federal income taxes that will be payable by the Shareholders on the taxable
income of the Company generated between the Balance Sheet Date and the Closing
Date (the "Estimated Tax Amount"), and (ii) the Company, the Shareholders and
the Parent have added the Estimated Tax Amount to the Total Consideration. On
or prior to March 1, 1999, the Surviving Corporation, the Shareholders and the
Parent shall agree upon the actual amount of federal income taxes payable by the
Shareholders on the taxable income of the Company generated between the Balance
Sheet Date and the Closing Date (the "Actual Tax Amount"). If the Surviving
Corporation, the Shareholders and the Parent cannot agree upon the Actual Tax
Amount within the period set forth above, then upon the written notice
(containing a detailed discussion of all disagreements regarding the Actual Tax
Amount) of the Surviving Corporation, the Shareholders or the Parent, the
Accountants shall resolve such disagreements within 30 days after the submission
of such disagreements to them. The Accountants shall set forth such resolution
or resolutions in writing, and such writing shall be final, conclusive and
binding for purposes of this Agreement. Within ten (10) days following the
final determination of the Actual Tax Amount, (i) the Surviving Corporation
shall deliver to the Shareholders the cash amount, if any, by which Actual Tax
Amount exceeds the Estimated Tax Amount; or (ii) the Shareholders shall deliver
to the Parent the cash amount, if any, by which the Estimated Tax Amount exceeds
the Actual Tax Amount.
5. CLOSING DELIVERIES
5.1 Deliveries by the Shareholders at the Closing. At the Closing,
simultaneously with the deliveries by the Parent specified in Section 5.2 below,
and in addition to any deliveries required to be made by the Shareholders and
the Company pursuant to any other transaction document at the Closing, the
Shareholders shall deliver or cause to be delivered to the Parent the following:
5.1.1 Closing Certificates. The Shareholders and the Company shall
deliver the a certificate to the effect that (i) the Shareholders and the
Company have performed and complied with all covenants of this Agreement to be
performed or complied with by them at or prior to the Closing Date, (ii) no
legal action or proceeding has been instituted against the Company or against
the Parent or Merger Sub arising by reason of the acquisition of the Company
pursuant to this Agreement, which is reasonably likely (a) to restrain, prohibit
or invalidate the consummation of the transactions contemplated by this
Agreement, (b) to have a Company Material Adverse Effect or (c) to have a Parent
Material Adverse Effect after giving effect to the consummation of the
transactions contemplated by this Agreement, (iii)
the Company and the Shareholders have procured all of the consents, approvals
and waivers of third parties or any regulatory body or authority, whether
required contractually or by applicable law or otherwise necessary for the
execution, delivery and performance of this Agreement (including the Company
Related Documents and the Shareholder Related Documents) by the Company and the
Shareholders prior to the Closing Date, (iv) the Company has obtained all such
licenses and permits as are legally required for the continued operation of the
business after the Effective Time, except such licenses and permits, the absence
of which will not have a Company Material Adverse Effect, and (v) all necessary
director and shareholder resolutions, waivers and consents required to
consummate the transactions contemplated hereunder shall have been executed and
delivered.
5.1.2 Stock Transfer Restriction Agreement. Each Shareholder shall
execute and deliver a Stock Transfer Restriction Agreement on the Closing Date,
effective as of the Effective Time, substantially in the form set forth in
Exhibit 5.1.2.
5.1.3 Employment Agreements. The Shareholders specified on Exhibit
5.1.3 shall execute and deliver an Employment Agreement with the Company on the
Closing Date, effective as of the Effective Time, substantially in the form set
forth in either Exhibit 5.1.3.A or Exhibit 5.1.3.B, as indicated on Exhibit
5.1.3.
5.1.4 Lease Agreement. The Shareholders shall cause the owner of the
properties located at 0000 X. Xxxxxx Xx., Xxxxxx, Xxxxxxxx, 0000 Xxxx Xxxxxx
Xx., Xxxxxx, Xxxxxxxx and 000 Xxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxxxx to execute and
deliver lease agreements with the Surviving Corporation substantially in the
form attached as Exhibit 5.1.4. (the "Lease").
5.1.5 Opinion of Counsel for the Shareholders and the Company. The
Shareholders shall deliver the favorable opinion of Schwartz, Cooper,
Xxxxxxxxxxx & Xxxxxx , counsel to the Shareholders and the Company, dated the
Effective Time, substantially in the form and to the effect set forth in
Exhibit 5.1.5 attached hereto.
5.1.6 Documents, Stock Certificates. The Shareholders shall execute
and deliver the documents, certificates, opinions, instruments and agreements
required to be executed and delivered by the Company or its officers or
directors or the Shareholders at the Closing as contemplated hereby or as may be
reasonably requested by the Parent and shall deliver or cause to be delivered
the documents and evidence required under this Agreement. Stock Certificates
representing all of the outstanding Company Common Stock and properly executed
and completed letters of transmittal shall be delivered by the Shareholders to
the Parent.
5.1.7 Amended and Restated Shareholders Agreement. The Company shall
have executed and delivered and shall have caused all of the Shareholders to
execute and deliver an agreement, in form and substance acceptable to the
Parent, terminating in their entirety the agreements listed on Exhibit 5.1.7
attached hereto.
5.1.8 Progress Electric Company. The Shareholders shall cause copies
of the documents evidencing the sale by Xxxxxxx X. Xxxx of all of his interests
in Progress Electric Company to be delivered to the Parent.
The consummation of the Closing shall not be deemed to be a waiver by
the Parent or the Surviving Corporation of any of their rights or remedies
against the Company or any of the Shareholders hereunder for any breach of
warranty, covenant or agreement by the Company or any of the Shareholders herein
irrespective of any knowledge of or investigation made by or on behalf of the
Parent or Merger Sub.
5.2 Deliveries by the Parent at the Closing. At or prior to the Closing,
simultaneously with the deliveries by the Shareholders specified in Section 5.1
above, and in addition to any other deliveries to be made by the Parent and
Merger Sub pursuant to any other transaction document at the Closing, the Parent
shall deliver or cause to be delivered to the Shareholders the following:
5.2.1 Closing Certificates. The Parent and Merger Sub shall deliver a
certificate to the effect that (i) the Parent and the Merger Sub have performed
and complied with all covenants of this Agreement to be performed or complied
with by them at or prior to the Closing Date, and (ii) the Parent has procured
all of the consents, approvals and waivers specified in Exhibit 3.1.4 prior to
the Closing Date.
5.2.2 Opinion of Counsel for the Parent and Merger Sub. The Parent
shall deliver the favorable opinion of its legal counsel dated the Effective
Time, substantially in the form and to the effect set forth in Exhibit 5.2.2.
5.2.3 Closing Merger Consideration. The Parent shall deliver the
Closing Merger Consideration to the Shareholders by delivering the Closing Per
Share Cash Amount for the Converted Shares and providing evidence to the
Shareholders of notification of the Parent's stock transfer agent with respect
to issuance of certificates representing the Closing Per Share Common Stock
Amount applicable to the Converted Shares.
The consummation of the Closing shall not be deemed to be a waiver by
the Shareholders of any of the Shareholders' rights or remedies hereunder for
breach of any warranty, covenant or agreement herein by the Parent or Merger Sub
irrespective of any knowledge of or investigation with respect thereto made by
or on behalf of any Shareholders.
6. SURVIVAL, INDEMNIFICATIONS
6.1 Survival. The representations and warranties set forth in this
Agreement and the other documents, instruments and agreements contemplated
hereby shall survive after the date hereof to the extent provided herein. The
representations and warranties of the Shareholders and the Company herein and in
the Shareholder Related Documents and the Company Related Documents (as defined
in Exhibit 2) other than those of the Shareholders and the Company in Sections
2.2, 2.3, 2.4 and in Sections 2 and 3 of Exhibit 2 shall survive for a period of
36 months after the Closing Date and the representations and warranties of the
Shareholders and the Company contained in Sections 2.2, 2.3, 2.4 and in Sections
2 and 3 of Exhibit 2 shall survive for the maximum period permitted by
applicable law. The representations and warranties of the Parent herein and in
the Parent Related Documents, other than those in Sections 3.1.3 and 3.1.4,
shall survive for a period of 36 months after the Closing Date and the
representations and warranties of the Parent contained in Sections 3.1.3 and
3.1.4 shall survive for the maximum period permitted by applicable law. The
periods of survival of the representations and warranties as stated above in
this Section 6.1 are referred to herein as the "Survival Period." The
liabilities of the parties under their respective representations and warranties
shall expire as of the expiration of the applicable Survival Period and no claim
for indemnification may be made with respect to any breach of any representation
or warranty, the applicable Survival Period of which shall have expired, except
to the extent that written notice of such breach shall have been given to the
party against which such claim is asserted on or before the date of such
expiration. The covenants and agreements of the parties herein (including but
not limited to Exhibit 4.5) and in other documents and instruments executed and
delivered in connection with the closing of the transactions contemplated hereby
shall survive for the maximum period permitted by law.
6.2 Indemnification.
6.2.1 Parent Indemnified Parties. Subject to the provisions of
Sections 6.1 and 6.3 hereof, the Shareholders shall indemnify, save and hold
harmless the Parent, the Surviving Corporation, Merger Sub and any of their
assignees (including lenders) and all of their respective officers, directors,
employees, representatives, agents, advisors and consultants and all of their
respective heirs, legal representatives, successors and assigns (collectively
the "Parent Indemnified Parties") from and against any and all damages,
liabilities, losses, loss of value (including the value of adverse effects on
cash flow or earnings), claims, deficiencies, penalties, interest, expenses,
fines, assessments, charges and costs, including reasonable attorneys' fees and
court costs (collectively "Losses") arising from, out of or in any manner
connected with or based on:
(a) the breach of any covenant of a Shareholder or the Company or the
failure by any Shareholder or the Company to perform any obligation of such
Shareholder or the Company contained herein or in any Company Related
Document or Shareholder Related Document;
(b) any inaccuracy in or breach of any representation or warranty of
any Shareholder contained herein or in any Shareholder Related Document;
(c) any inaccuracy in or breach of any representation or warranty of
the Company contained herein or in any Company Related Document;
(d) indemnification payments made by the Company or the Surviving
Corporation to the Company's present or former officers, directors,
employees, agents, consultants, advisors or representatives in respect of
actions taken or omitted to be taken prior to the Closing; and
(e) any act, omission, occurrence, event, condition or circumstance
occurring or existing at any time on or before the Effective Time and
involving or related to the assets, properties, business or operations now
or previously owned or operated by the Company and not (a) disclosed with
reasonable specificity in the Disclosure Schedule or (b) disclosed in the
Company Financial Statements (as defined in Exhibit 2).
6.2.2 Parent Indemnity. Subject to the provisions of Sections 6.1 and
6.3, the Parent shall indemnify, save and hold harmless the Shareholders and
each Shareholder's heirs, legal representatives, successors and assigns from and
against all Losses arising from, out of or in any manner connected with or based
on:
(a) any breach of any covenant of the Parent or Merger Sub or the
failure by the Parent or Merger Sub to perform any of its obligations
contained herein or in the Parent Related Documents;
(b) any inaccuracy in or breach of any representation or warranty of
the Parent or Merger Sub contained herein or in the Parent Related
Documents;
(c) any failure by the Surviving Corporation to satisfy the
Terminated Obligations pursuant to Section 4.5 of this Agreement and to
secure the release of any personal guarantees issued by any Shareholder;
and
(d) any act, omission, event, condition or circumstance occurring or
existing at any time after (but not on or before) the Effective Time and
involving or relating to the assets, properties, businesses or operations
of the Company; provided, however, that this clause (iii) shall
not apply to any Losses to the extent that such Losses result from any
Shareholder's acts or omissions after the Effective Time as an officer,
director and/or employee of the Parent, the Surviving Corporation and/or
any other affiliate of the Parent.
The foregoing indemnities shall not limit or otherwise adversely affect the
Parent Indemnified Parties' rights of indemnity for Losses under Section 6.2.1.
6.3 Limitations. No claim under Section 621 may be made until the
aggregate of all Losses for which claims for indemnification under such Section
exceeds $100,000 (the "Threshold"), but all Losses (including, without
limitation, those below the amount of the Threshold) may be recovered under such
Section once the Threshold has been exceeded. The aggregate liability of the
Shareholders under Sections 6.2.1 shall (i) be net of and reduced by any cash
amounts actually received by the Parent or the Surviving Corporation as
insurance proceeds as the result solely of the claims giving rise to such
Shareholder's liability, (ii) with respect to the Shareholders other than Xx.
Xxxxx and Xx. Xxxxxxx, not exceed the cash amount equal to 60% of the Total
Consideration with the Parent Common Stock being valued at the Parent Common
Stock Value for such purpose; provided, however, that the word "Closing" as used
in the definition of "Parent Common Stock Value" in Exhibit 1 shall be then
defined as the date of delivery of any notice under Section 6.4.1., and (iii)
with respect to Xx. Xxxxx and Xx. Xxxxxxx, not exceed the cash amount equal to
60% of the portion of the Total Consideration received by them with the Parent
Common Stock being valued at the Parent Common Stock Value for such purpose;
provided, however, that the word "Closing" as used in the definition of "Parent
Common Stock Value" in Exhibit 1 shall be then defined as the date of delivery
of any notice under Section 6.4.1. The aggregate liability of the Parent under
Section 6.2.2 shall (i) be net of any cash amounts actually received by the
Shareholders as insurance proceeds as the result solely of the claims giving
rise to such Parent's liability, and (ii) shall not exceed the cash amount equal
to 60% of the Total Consideration with the Parent Common Stock being valued at
the Parent Common Stock Value for such purpose; provided, however, that the word
"Closing" as used in the definition of "Parent Common Stock Value" in Exhibit 1
shall be then defined as the date of delivery of any notice under Section 6.4.1.
6.4 Procedures for Indemnification.
6.4.1 Notice. The party (the "Indemnified Party") that may be
entitled to indemnity hereunder shall give prompt notice to any party obligated
to give indemnity hereunder (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought hereunder. Any failure on the part of any Indemnified
Party to give the notice described in this Section 6.4.1 shall relieve the
Indemnifying Party of its obligations under this Article 6 only to the extent
that such Indemnifying Party has been prejudiced by the lack of timely and
adequate notice (except that the Indemnifying Party shall not be liable for any
expenses incurred by the Indemnified Party during the period in which the
Indemnified Party failed to give such notice). Thereafter, the Indemnified Party
shall deliver to the Indemnifying Party, promptly (and in any event within 10
days thereof) after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to such claim, action, suit or proceeding.
6.4.2 Legal Defense. The Parent shall have the obligation to assume
the defense or settlement of any third-party claim, suit, action or proceeding
in respect of which indemnity may be sought hereunder, provided that (i) the
Shareholders shall at all times have the right, at the Shareholders' option, to
participate fully therein, and (ii) if the Parent does not proceed diligently to
defend the third-party claim, suit, action or proceeding within 10 days after
receipt of notice of such third-party claim, suit, action or proceeding, the
Shareholders shall have the right, but not the obligation, to undertake the
defense of any such third-party claim, suit, action or proceeding.
6.4.3 Settlement. The Indemnifying Party shall not be required to
indemnify the Indemnified Party with respect to any amounts paid in settlement
of any third-party suit, action, proceeding or investigation entered into
without the written consent of the Indemnifying Party; provided, however, that
if the Indemnified Party is a Parent Indemnified Party, such third-party suit,
action, proceeding or investigation may be settled without the consent of the
Indemnifying Party on 10 days' prior written notice to the Indemnifying Party if
such third-party suit, action, proceeding or investigation is then unreasonably
interfering with the business or operations of the Company or the Surviving
Corporation and the settlement is commercially reasonable under the
circumstances; and provided further, that if the Indemnifying Party gives 10
days' prior written notice to the Indemnified Party of a settlement offer which
the Indemnifying Party desires to accept and to pay all Losses with respect
thereto ("Settlement Notice") and the Indemnified Party fails or refuses to
consent to such settlement within 10 days after delivery of the Settlement
Notice to the Indemnified Party, and such settlement otherwise complies with the
provisions of this Section 6.4, the Indemnifying Party shall not be liable for
Losses arising from such third-party suit, action, proceeding or investigation
in excess of the amount proposed in such settlement offer. Notwithstanding the
foregoing, no Indemnifying Party will consent to the entry of any judgment or
enter into any settlement without the consent of the Indemnified Party, if such
judgment or settlement imposes any obligation or liability upon the Indemnified
Party other than the execution, delivery or approval thereof and customary
releases of claims with respect to the subject matter thereof.
6.4.4 Cooperation. The parties shall cooperate in defending any such
third-party suit, action, proceeding or investigation, and the defending party
shall have reasonable access to the books and records, and personnel in the
possession or control of the Indemnified Party that are pertinent to the
defense. The Indemnified Party may join the Indemnifying Party in any suit,
action, claim or proceeding brought by a third party, as to which any right of
indemnity created by this Agreement would or might apply, for the purpose of
enforcing any right of the indemnity granted to such Indemnified Party pursuant
to this Agreement.
7. MISCELLANEOUS
7.1 Notice. Any notice, delivery or communication required or permitted
to be given under this Agreement shall be in writing, and shall be mailed,
postage prepaid, or delivered, to the addresses given below, or sent by telecopy
to the telecopy numbers set forth below, as follows:
To the Company or the Shareholders:
Continental Electrical Construction Co.
0000 X. Xxxxxx Xx.
Xxxxxx, Xxxxxxxx
Telecopy:(000) 000-0000
To the Parent or Merger Sub or the Surviving Corporation:
Group Maintenance America Corp.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President
Telecopy: (000) 000-0000
or other such address as shall be furnished in writing by any such party to the
other parties, and such notice shall be effective and be deemed to have been
given as of the date actually received.
To the extent any notice provision in any other agreement, instrument or
document required to be executed or executed by the parties in connection with
the transactions contemplated herein contains a notice provision which is
different from the notice provision contained in this Section 7.1 with respect
to matters arising under such other agreement, instrument or document, the
notice provision in such other agreement, instrument or document shall control.
7.2 Further Documents. The Shareholders shall, at any time and from time
to time after the date hereof, upon request by the Parent and without further
consideration, execute and deliver such instruments or other documents and take
such further action as may be reasonably required in order to perfect any other
undertaking made by the Shareholders hereunder.
7.3 Assignability. The Shareholders shall not assign this Agreement in
whole or in part without the prior written consent of the Parent, except by the
operation of law. The Parent may assign its rights under this Agreement, the
Company Related Documents and the Shareholder Related Documents without the
consent of any Shareholders or the Company. After the Effective Time, the
Surviving Corporation may assign its rights under this Agreement, the Company
Related Documents and the Shareholder Related Documents without the consent of
the Shareholders.
7.4 Exhibits and Schedules. The Exhibits and Schedules (and any
appendices thereto) referred to in this Agreement are and shall be incorporated
herein and made a part hereof.
7.5 Sections and Articles. Unless the context otherwise requires, all
Sections, Articles and Exhibits referred to herein are, respectively, sections
and articles of, and exhibits to, this Agreement and all Schedules referred to
herein are schedules constituting a part of the Disclosure Schedule.
7.6 Entire Agreement. This Agreement constitutes the full understanding
of the parties, a complete allocation of risks between them and a complete and
exclusive statement of the terms and conditions of their agreement relating to
the subject matter hereof and supersedes any and all prior agreements, whether
written or oral, that may exist between the parties with respect thereto.
Except as otherwise specifically provided in this Agreement, no conditions,
usage of trade, course of dealing or performance, understanding or agreement
purporting to modify, vary, explain or supplement the terms or conditions of
this Agreement shall be binding unless hereafter made in writing and signed by
the party to be bound, and no modification shall be effected by the
acknowledgment or acceptance of documents containing terms or conditions at
variance with or in addition to those set forth in this Agreement. No waiver by
any party with respect to any breach or default or of any right or remedy and no
course of dealing shall be deemed to constitute a continuing waiver of any other
breach or default or of any other right or remedy, unless such waiver be
expressed in writing signed by the party to be bound. Failure of a party to
exercise any right shall not be deemed a waiver of such right or rights in the
future.
7.7 Headings. Headings as to the contents of particular articles and
sections are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular articles or
sections to which they refer.
7.8 CONTROLLING LAW. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS
AGREEMENT AND ANY DISPUTE CONNECTED HEREWITH SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT EITHER OF
THE APPLICABLE CORPORATE LAWS MANDATORILY APPLIES WITH RESPECT THERETO.
7.9 Public Announcements. After the Effective Time, no Shareholder shall
make a press release, public announcement, or public confirmation or disclose
any other information regarding this Agreement or the contents hereof.
7.10 No Third Party Beneficiaries. Except as set forth in Article 6, no
person or entity not a party to this Agreement shall have rights under this
Agreement as a third party beneficiary or otherwise.
7.11 Amendments and Waivers. This Agreement may be amended by the Parent,
Merger Sub and the Company, by action taken by their Boards of Directors to the
extent permitted by applicable law; provided, however, that no such amendment
shall (i) alter or change any provision of this Agreement, the alteration or
change of which must be adopted by the holders of capital stock of the Company
under the certificate or articles of incorporation of the Company or the
Applicable Corporate Laws, or (ii) alter or change this Section 7.11, unless
each such alteration or change is adopted by the holders of shares of capital
stock of the Company as may be required by the certificate or articles of
incorporation of the Company or the Applicable Corporate Laws. All amendments
to this Agreement must be by an instrument in writing signed on behalf of the
Parent and the Shareholders. Any term or provision of this Agreement (other
than the requirements for shareholder approvals) may be waived in writing at any
time by the party which is, or whose shareholders are, entitled to the benefits
thereof.
7.12 No Employee Rights. Except as set forth in any employment agreement
executed in connection with the transactions contemplated by this Agreement,
nothing herein expressed or implied shall confer upon any employee of the
Company, any other employee or legal representatives or beneficiaries of any
thereof any rights or remedies, including any right to employment or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement, or shall cause the employment status of any
employee to be other than terminable at will.
7.13 Non-Recourse. No recourse for the payment of any amounts due
hereunder or for any claim based on this Agreement or the transactions
contemplated hereby or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Parent in this Agreement shall
be had against any incorporator, organizer, promoter, shareholder, officer,
director, employee or representative as such (other than the Shareholders as set
forth herein), past, present or future, of the Parent or of any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement.
7.14 When Effective. This Agreement shall become effective only upon the
execution and delivery of one or more counterparts of this Agreement by each of
the Parent, Merger Sub, the Company and the Shareholders.
7.15 Takeover Statutes. If any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, the Parent and the Company
and their respective members of their Boards of Directors shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated herein and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated herein.
7.16 Number and Gender of Words. Whenever herein the singular number is
used, the same shall include the plural where appropriate and words of any
gender shall include each other gender where appropriate.
7.17 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws, such provisions
shall be fully severable as if such invalid or unenforceable provisions had
never comprised a part of the Agreement; and the remaining provisions of the
Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be automatically as a part of this Agreement, a provision
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
7.18 Multiple Counterparts. This Agreement may be executed in a number of
identical counterparts. If so executed, each of such counterparts is to be
deemed an original for all purposes and all such counterparts shall,
collectively, constitute one agreement, but, in making proof of this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart. For purposes of this Agreement and any Exhibit hereto, facsimile
signatures shall be deemed to be original signatures. In addition, if any of
the parties sign facsimile copies of this Agreement or any of the Exhibits, such
copies shall be deemed originals.
7.19 No Rule of Construction. All of the parties hereto have been
represented by counsel in the negotiations and preparation of this Agreement;
therefore, this Agreement will be deemed to be drafted by each of the parties
hereto, and no rule of construction will be invoked respecting the authorship of
this Agreement.
7.20 Expenses. Each of the parties shall bear all of their own expenses in
connection with the negotiation and closing of this Agreement and the
transactions contemplated hereby, except that Merger Sub shall assume and after
the Closing pay the first $75,000 of such expenses incurred by the Company
(which expenses the parties acknowledge are solely and directly related to the
Merger); provided that the Company may pay the costs of any broker, legal
counsel, accountants (including the fees and costs of the Accountants, other
than the fees and costs of the Accountants generated pursuant to Section 1.9.4
of this Agreement) or other advisors engaged by the Shareholders (to the extent,
and only to the extent, that any such payment will not jeopardize the
qualification of the Merger as a reorganization within the meaning of Section
368(a)(1)(A) of the Code).
(The remainder of this page has intentionally been left blank.)
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered on
the date first hereinabove written.
PARENT:
GROUP MAINTENANCE AMERICA CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name:
Title:
MERGER SUB:
CONTINENTAL ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------------
Name:
Title:
SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxx
/s/ Xxxxxxx Xxxxx
/s/ Xxxxxxx X. Xxxx
/s/ Xxxxxx X. Xxxx
/s/ Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxx
COMPANY:
CONTINENTAL ELECTRICAL CONSTRUCTION CO.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name:
Title:
