EXHIBIT 10.4
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
QUANTA SERVICES, INC.,
UNDERGROUND ACQUISITION, INC.,
UNDERGROUND CONSTRUCTION CO., INC.,
FIVE POINTS CONSTRUCTION COMPANY,
XXXXX X. XXXXX, TRUSTEE OF THE XXXXX X. XXXXX REVOCABLE TRUST,
DATED AUGUST 11, 1994,
XXXX X. XXXX AND XXXXX X. XXXX, TRUSTEES UNDER THE XXXX X. XXXX AND
XXXXX X. XXXX TRUST DATED OCTOBER 12, 1993,
XXXXXX X. XXXXXXX, XX.,
XXXXX X. XXXXXXXX,
XXXXX X. XXXXX,
XXX-XXXXX AND XXX X. XXXXXX, TRUSTEES UNDER THE XXX-XXXXX XXXXXX AND XXX X.
XXXXXX REVOCABLE LIVING TRUST, DATED NOVEMBER 23, 1994,
XXXXXXXX X. XXXXXXX,
XXXXXX X. XXXXX,
XXXXXXX X. XXXXX,
XXXXXX X. XXXXXXXX,
XXXXX X. XXXXXXX,
AND
XXXXXXX X. XXXXXXXX
DATED AS OF AUGUST 4, 1998
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS.................................................... 2
1.2. INTERPRETATION................................................. 6
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION; THE STOCK PURCHASE
2.1. THE MERGER..................................................... 7
2.2. EFFECTIVE TIME OF THE MERGER................................... 7
2.3. ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF
SURVIVING CORPORATION.......................................... 7
2.4. STOCK PURCHASE. At the Effective Time, the Stockholders shall
sell, and Newco shall purchase, all of the shares of FPC Stock
held by the Stockholders....................................... 7
ARTICLE III
CONVERSION OF SHARES
3.1. CONVERSION OF SHARES........................................... 8
3.2. NEWCO SHARES................................................... 8
3.3. DELIVERY OF CONSIDERATION...................................... 8
3.4. CERTAIN PAYMENTS............................................... 8
ARTICLE IV
CLOSING
4.1. CLOSING........................................................ 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
5.1. DUE ORGANIZATION AND QUALIFICATION............................. 9
5.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.................... 9
5.3. CAPITALIZATION AND OWNERSHIP................................... 10
5.4. SUBSIDIARIES................................................... 10
5.5. FINANCIAL STATEMENTS........................................... 10
5.6. LIABILITIES AND OBLIGATIONS.................................... 11
5.7. ACCOUNTS AND NOTES RECEIVABLE.................................. 11
5.8. ASSETS......................................................... 12
5.9. MATERIAL CUSTOMERS AND CONTRACTS............................... 13
5.10. PERMITS....................................................... 14
5.11. ENVIRONMENTAL MATTERS......................................... 14
5.12. LABOR AND EMPLOYEE RELATIONS.................................. 14
5.13. INSURANCE..................................................... 15
5.14. COMPENSATION; EMPLOYMENT AGREEMENTS........................... 15
5.15. NONCOMPETITION, CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS 15
5.16. EMPLOYEE BENEFIT PLANS........................................ 15
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5.17. LITIGATION AND COMPLIANCE WITH LAW............................ 17
5.18. TAXES......................................................... 18
5.19. ABSENCE OF CHANGES............................................ 18
5.20. ACCOUNTS WITH BANKS AND BROKERAGES; POWERS OF ATTORNEY........ 19
5.21. ABSENCE OF CERTAIN BUSINESS PRACTICES......................... 20
5.22. COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS....... 20
5.23. INTANGIBLE PROPERTY........................................... 20
5.24. TAX REORGANIZATION REPRESENTATION............................. 20
5.25. NO IMPLIED REPRESENTATIONS.................................... 20
5.26. DISCLOSURE.................................................... 20
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
6.1. ORGANIZATION.................................................. 20
6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS................... 21
6.3. QUANTA COMMON STOCK........................................... 21
6.4. TAX REORGANIZATION REPRESENTATIONS............................ 21
6.6. NO IMPLIED REPRESENTATIONS.................................... 22
6.7. DISCLOSURE.................................................... 23
ARTICLE VII
CERTAIN COVENANTS
7.1. RELEASE FROM GUARANTEES....................................... 23
7.2. FUTURE COOPERATION; TAX MATTERS............................... 23
7.3. EXPENSES...................................................... 23
7.4. LEGAL OPINION................................................. 24
7.5. EMPLOYMENT AGREEMENTS......................................... 24
7.6. REPAYMENT OF RELATED PARTY INDEBTEDNESS....................... 24
7.7. STOCK OPTIONS................................................. 24
7.8. STOCK PURCHASE PROGRAM........................................ 24
7.9. CONTINUATION OF UCCO BENEFIT PLANS............................ 24
7.10................................................................. 25
7.11................................................................. 25
ARTICLE VIII
INDEMNIFICATION
8.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDERS................... 25
8.2. INDEMNIFICATION BY QUANTA..................................... 26
8.3. THIRD PERSON CLAIMS........................................... 26
8.4. INDEMNIFICATION DEDUCTIBLE.................................... 27
8.5. INDEMNIFICATION LIMITATION.................................... 27
8.6. INDEMNIFICATION FOR NEGLIGENCE OF INDEMNIFIED PARTY........... 27
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ARTICLE IX
NONCOMPETITION COVENANTS
9.1. PROHIBITED ACTIVITIES.......................................... 27
9.2. EQUITABLE RELIEF............................................... 28
9.3. REASONABLE RESTRAINT........................................... 28
9.4. SEVERABILITY; REFORMATION...................................... 29
9.5. MATERIAL AND INDEPENDENT COVENANT.............................. 29
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. GENERAL....................................................... 29
10.2. EQUITABLE RELIEF.............................................. 29
ARTICLE XI
INTENDED TAX TREATMENT
11.1. TAX-FREE REORGANIZATION....................................... 30
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS ON QUANTA COMMON STOCK
12.1. COMPLIANCE WITH LAW........................................... 30
12.2. ECONOMIC RISK; SOPHISTICATION................................. 30
12.3. RULE 144 REPORTING............................................ 30
ARTICLE XIII
MISCELLANEOUS
13.1. SUCCESSORS AND ASSIGNS........................................ 31
13.2. ENTIRE AGREEMENT.............................................. 31
13.3. COUNTERPARTS.................................................. 32
13.4. BROKERS AND AGENTS............................................ 32
13.5. NOTICES....................................................... 32
13.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.................... 33
13.7. EXERCISE OF RIGHTS AND REMEDIES............................... 33
13.8. REFORMATION AND SEVERABILITY.................................. 33
13.9. GOVERNING LAW................................................. 33
13.10. DISPUTE RESOLUTION........................................... 33
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ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of August 4, 1998, by and among Quanta Services, Inc., a Delaware
corporation ("Quanta"), Underground Acquisition, Inc., a Delaware corporation
that is a subsidiary of Quanta ("Newco"), Underground Construction Co., Inc., a
California corporation ("UCCO"), Five Points Construction Company, a Texas
corporation ("FPC" and, together with Underground Construction, the
"Companies"), Xxxxx X. Xxxxx, Trustee of the Xxxxx X. Xxxxx Revocable Trust,
dated August 11, 1994, Xxxx X. Xxxx and Xxxxx X. Xxxx, Trustees under the Xxxx
X. Xxxx and Xxxxx X. Xxxx Trust dated October 12, 1993, Xxxxxx X. XxXxxxx, Xx.,
Xxxxx X. Xxxxxxxx, Xxxxx X. Xxxxx, Xxx-Xxxxx Xxxxxx and Xxx X. Xxxxxx, Trustees
under the Xxx-Xxxxx Xxxxxx and Xxx X. Xxxxxx Revocable Living Trust dated
November 23, 1994, Xxxxxxxx X. Xxxxxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxx,
Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxx (such individuals
being collectively referred to herein as the "Stockholders"), with the
Stockholders being the Companies' only stockholders.
WHEREAS, the respective Boards of Directors of Newco and UCCO (collectively
referred to as "Constituent Corporations") deem it advisable and in the best
interests of the Constituent Corporations and their respective stockholders that
UCCO merge with and into Newco (the "Merger"); and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, the stockholders of the Constituent Corporations have approved the
Merger in accordance with the GCL and the CCC;
WHEREAS, the Stockholders desire to sell their stock in FPC to Newco and
Newco desires to purchase such stock (the "Stock Purchase");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants contained
herein, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Capitalized terms used in this Agreement shall have the
following meanings:
"Affiliate" of, or "Affiliated" with, a specified person or entity means a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the specified person or entity.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Balance Sheet Date" has the meaning set forth in Section 5.5.
"Broker" has the meaning set forth in Section 13.4.
"CCC" means the California Corporations Code, as amended.
"Closing" has the meaning set forth in Section 4.1.
"Closing Date" has the meaning set forth in Section 4.1.
"Code" has the meaning set forth in the third paragraph of this Agreement.
"Companies" has the meaning set forth in the first paragraph of this
Agreement.
"Company Stock" has the meaning set forth in Section 3.1.
"Company" means either of the Companies.
"Competitive Business" means any business that competes with the Companies,
including, without limitation, any business that provides specialty contracting
services, such as manhole and conduit installation for the power and
telecommunications industries, industrial and process piping, construction and
maintenance of aircraft fueling systems and heavy engineering projects for
passenger rail systems.
"Constituent Corporations" has the meaning set forth in the second
paragraph of this Agreement.
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means all liens, encumbrances, mortgages, pledges, security
interests, conditional sales agreements, charges, options, preemptive rights,
rights of first refusal, reservations, restrictions or other encumbrances or
defects in title.
"Employee benefit plan" has the meaning set forth in Section 5.16.
"Employee pension benefit plan" has the meaning set forth in Section 5.16.
"Employment Agreements" has the meaning set forth in Section 7.5.
"Environmental Laws" means any Law or agreement with any Governmental
Authority relating to (a) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (b)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of any substance, in each case as amended and as in effect on the Closing Date.
The term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal
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Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as
amended and as in effect on the Closing Date, and (ii) any common law or
equitable doctrine (including, without limitation, injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that may
impose liability or obligations for injuries or damages due to, or threatened as
a result of, the presence of, effects of or exposure to any substance.
"ERISA" has the meaning set forth in Section 5.16.
"ERISA Affiliate" has the meaning set forth in Section 5.16.
"Expiration Date" has the meaning set forth in Section 13.6.
"Financial Statements" has the meaning set forth in Section 5.5.
"FPC" has the meaning set forth in the first paragraph of this Agreement.
"FPC Stock" has the meaning set forth in Section 3.1.
"GAAP" means generally accepted accounting principles as currently applied
by the respective party on a basis consistent with preceding years and
throughout the periods involved.
"Governmental Authority" means any federal, state, local or foreign
government, political subdivision or governmental or regulatory authority,
agency, board, bureau, commission, instrumentality or court or quasi-
governmental authority.
"GCL" means General Corporation Law of the State of Delaware, as amended.
"Hazardous Substances" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law. The term "Hazardous
Substances" includes, without limitation, any substance to which exposure is
regulated by any Governmental Authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
"Indemnified Party" has the meaning set forth in Section 8.3.
"Indemnifying Party" has the meaning set forth in Section 8.3.
"Interim Balance Sheets" has the meaning set forth in Section 5.5.
"Interim Financial Statements" has the meaning set forth in Section 5.5.
"JAMS" has the meaning set forth in Section 13.10.
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"Judge List" has the meaning set forth in Section 13.10.
"Law" or "Laws" means any and all federal, state, local or foreign
statutes, laws, ordinances, proclamations, code, regulations, licenses, permits,
authorizations, approvals, consents, legal doctrine, published requirements,
orders, decrees, judgments, injunctions and rules of any Governmental Authority,
including, without limitation, those covering environmental, Tax, energy,
safety, health, transportation, bribery, recordkeeping, zoning, discrimination,
antitrust and wage and hour matters, in each case as amended and in effect from
time to time.
"Loss" or "Losses" means all liabilities, losses, claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, fees, costs and expenses
(including specifically, but without limitation, reasonable attorneys' fees and
costs and expenses of investigation), net of income Tax effects with respect
thereto (including, without limitation, income Tax benefits recognized in
connection therewith and income Taxes upon any indemnification recovery
thereof).
"Material Customers" has the meaning set forth in Section 5.9.
"Merger Filings" has the meaning set forth in Section 2.2.
"Merger" has the meaning set forth in the second paragraph of this
Agreement.
"Minor Shareholders" has the meaning set forth in Section 8.1.
"Newco" has the meaning set forth in the first paragraph of this Agreement.
"Noncompete Term" has the meaning set forth in Section 9.1(a).
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Option Plan" has the meaning set forth in Section 7.7.
"Quanta" has the meaning set forth in the first paragraph of this
Agreement.
"Quanta Common Stock" means Quanta's Common Stock, par value $.00001 per
share.
"Permits" has the meaning set forth in Section 5.10.
"Permitted Encumbrances" means (a) any Encumbrances reserved against in the
Interim Balance Sheets, (b) Encumbrances for property or ad valorem Taxes not
yet due and payable or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the Companies' books in accordance with GAAP, and (c) obligations under
operating and capital leases described in Schedule 59.
"Plan" has the meaning set forth in Section 5.16.
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"Qualified Plans" has the meaning set forth in Section 5.16.
"Restricted Shares" has the meaning set forth in Section 12.1.
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Stock Purchase" has the meaning set forth in the fifth paragraph of this
Agreement.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"TBCA" means the Texas Business Corporations Act, as amended.
"Taxes" has the meaning set forth in Section 5.18.
"Territory" has the meaning set forth in Section 9.1.
"Third Person" has the meaning set forth in Section 8.3.
"UCCO" has the meaning set forth in the first paragraph of this Agreement.
"UCCO Pension Plan" has the meaning set forth in Section 7.9.
"UCCO Stock" has the meaning set forth in Section 3.1.
"UCCO Year-End Financial Statements" has the meaning set forth in Section
5.5.
"Year-End Financial Statements" has the meaning set forth in Section 5.5.
1.2 INTERPRETATION. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) the terms defined in Section 1.1 and elsewhere in this
Agreement include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the
meanings ascribed to them in accordance with GAAP; and
(c) the words "herein," "hereof," and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision.
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ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION; THE STOCK PURCHASE
2.1 THE MERGER. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time in accordance with the CCC and the GCL, UCCO
shall be merged with and into Newco and the separate existence of UCCO shall
thereupon cease. Newco shall be the surviving corporation in the Merger
(hereinafter sometimes referred to as the "Surviving Corporation").
2.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at
such time (the "Effective Time") as (a) holders of a majority of the UCCO Common
Stock approve the Merger, and (b) certificates of merger or articles of merger,
as appropriate, in forms mutually acceptable to Quanta and UCCO, are filed with
the Secretaries of State of the States of Delaware and California, respectively
(the "Merger Filings"). The Merger Filings shall be made simultaneously with or
as soon as practicable after the execution of this Agreement and the Closing.
2.3 ARTICLES OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF SURVIVING
CORPORATION. As a result of the Merger and at the Effective Time:
(a) the Articles of Incorporation of Newco in effect immediately
prior to the Effective Time shall become the Articles of Incorporation of
the Surviving Corporation, except that such Articles of Incorporation
shall be amended as of the Effective Time to change the name of the
Surviving Corporation to "Underground Construction Co., Inc." After the
Effective Time, the Articles of Incorporation of the Surviving
Corporation may be amended in accordance with their terms and as provided
in the GCL;
(b) the Bylaws of Newco in effect immediately prior to the
Effective Time shall become the Bylaws of the Surviving Corporation, and
thereafter may be amended in accordance with their terms and as provided
by the Articles of Incorporation of the Surviving Corporation and the
GCL; and
(c) the Board of Directors of Newco as constituted immediately
prior to the Effective Time shall be the Board of Directors of the
Surviving Corporation.
2.4 STOCK PURCHASE. At the Effective Time, the Stockholders shall sell,
and Newco shall purchase, all of the shares of FPC Stock held by the
Stockholders.
ARTICLE III
CONVERSION OF SHARES
3.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and the Stock Purchase, and without any action on the part of any holder of any
capital stock of the Companies, (a) the issued and outstanding shares of common
stock, no par value, of UCCO as of the Effective Time (the "UCCO Stock") and (b)
the issued and outstanding shares of common stock, $10 par value per share, of
FPC as of the Effective Time (the "FPC Stock and, together with the UCCO Stock,
the "Company Stock") shall be converted into the right to receive, and become
exchangeable for, an aggregate of 944,596 shares of Quanta Common Stock and
$19,500,000, in cash, which shares of Quanta Common Stock and cash shall be
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exchangeable for all the Company Common Stock at the Effective Time and issued
to the Stockholders as set forth in Schedule 31.
3.2 NEWCO SHARES. The outstanding shares of common stock, par value $.01
per share, of Newco shall remain outstanding following the Merger.
3.3 DELIVERY OF CONSIDERATION. At the Closing, (a) each Stockholder shall
furnish to Quanta the certificates representing its Company Common Stock, duly
endorsed in blank by such Stockholder or accompanied by duly executed blank
stock powers, and (b) Quanta shall deliver to each Stockholder cash (by wire
transfer in accordance with the wiring instructions for each Stockholder set
forth on Schedule 3.1) and certificates representing the shares of Quanta Common
Stock to be delivered to such Stockholder pursuant to Section 3.1. Each
Stockholder agrees promptly to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the Company Common Stock or with respect to the stock powers accompanying such
stock.
3.4 CERTAIN PAYMENTS. UCCO shall accrue and effect payment to each
Stockholder an amount equal to such Stockholder's actual state and federal tax
liability for all actual earnings of UCCO from January 1, 1998 to the Closing
Date, as determined from the books and records of UCCO on the accrual basis in
conformity with the normal accounting practices of UCCO, applied on a consistent
basis with prior periods.
ARTICLE IV
CLOSING
4.1 CLOSING. The consummation of the Merger and the Stock Purchase and
delivery of the consideration described in Section 3.3 hereof and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Quanta, 0000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxx, concurrently with the
execution of this Agreement or at such other time and date as Quanta, the
Companies and the Stockholders may mutually agree, which date is herein referred
to as the "Closing Date."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders jointly and severally represent and warrant to Quanta as
follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. UCCO is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California and FPC is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Texas; and each Company is duly
authorized and qualified to do business under all applicable Laws and to carry
on its business in the places and in the manner as now conducted. Each Company
has the requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as such business is currently being
conducted. Schedule 5.1 contains a list of all jurisdictions in which each
Company is authorized or qualified to do business, including each county in
California in which either of the Companies conducts business or has conducted
business within the past three years. True, complete and correct copies of the
Articles of
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Incorporation and By-laws, each as amended, of each Company are attached hereto
as Schedule 51. Correct and complete copies of all stock records and minute
books of each Company have been provided to Quanta, and correct and complete
copies of all other stock records and minute books of each Company have been
made available to Quanta and are correct and complete in all material respects.
5.2 AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) Each Company has the requisite power and authority to enter
into this Agreement and to effect the Merger or Stock Purchase, as
appropriate. Each Stockholder has the full legal right, power and
authority to enter into this Agreement. The execution, delivery and
performance of this Agreement have been approved by the board of
directors of each Company and by the Stockholders. No additional
corporate proceedings on the part of any Company is necessary to
authorize the execution and delivery of this Agreement and the
consummation by each Company of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each
Company and the Stockholders, and, assuming the due authorization,
execution and delivery hereof by Quanta and Newco, constitutes a valid
and binding agreement of each Company and each Stockholder, enforceable
against each of them in accordance with its terms.
(b) The execution and delivery of this Agreement by each Company
and the Stockholders do not, and the consummation by each Company and the
Stockholders of the transactions contemplated hereby will not, violate or
result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any
of the properties or assets of any Company under any of the terms,
conditions or provisions of, (i) the Articles of Incorporation or Bylaws
of each Company, (ii) any Laws applicable to the Stockholders or any
Company or any of its properties or assets, or (iii) except as set forth
in Schedule 5.2, any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, lease or other instrument,
obligation or agreement of any kind to which any Stockholder or any
Company is now a party or by which any Company or any of its properties
or assets may be bound or affected.
(c) Except for the Merger Filings and as set forth in Schedule
5.2, no declaration, filing or registration with, or notice to, or
authorization, consent or approval of, any Governmental Authority or
third party is necessary for the execution and delivery of this Agreement
by the Companies and the Stockholders or the consummation by each Company
and the Stockholders of the transactions contemplated hereby. Except as
set forth in Schedule 5.2, none of the contracts or agreements with
Material Customers or contracts providing for purchases or services
individually in excess of $100,000, or in the aggregate in excess of
$200,000, or other material agreements, licenses or permits to which any
Company is a party requires notice to, or the consent or approval of, any
third party for the execution and delivery of this Agreement by any
Company and the Stockholders and the consummation of the transactions
contemplated hereby.
5.3 CAPITALIZATION AND OWNERSHIP. The authorized capital stock of UCCO
consists solely of 100,000 shares of UCCO Stock, of which 40,923 shares are
issued and outstanding. The authorized capital stock of FPC consists solely of
100,000 shares of FPC Stock, of which 4,093 shares are issued and
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outstanding. All of the issued and outstanding shares of the Company Common
Stock are owned beneficially and of record by the Stockholders as set forth in
Schedule 5.3. All of the issued and outstanding shares of the Company Common
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, and were offered, issued, sold and delivered by the respective
Company in compliance with all applicable Laws, including, without limitation,
those Laws concerning the issuance of securities. None of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
At the Effective Time, by virtue of the Merger Filings in California and Texas,
the Merger will become effective in California and Texas. Except as set forth in
Schedule 5.3, no subscription, option, warrant, call, convertible or
exchangeable security, other conversion right or commitment of any kind exists
which obligates any Company to issue any of its capital stock or the
Stockholders to transfer any of the capital stock of the Companies.
5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the Companies own,
of record or beneficially, or control, directly or indirectly, no capital stock,
securities convertible into or exchangeable for capital stock or any other
equity interest in any corporation, association or other business entity. Except
as set forth in Schedule 5.4, no Company is, directly or indirectly, a
participant in any joint venture, limited liability company, partnership or
other noncorporate entity.
5.5 FINANCIAL STATEMENTS.
(a) The Companies have delivered to Quanta complete and correct
copies of the following financial statements:
(i) the audited balance sheets of UCCO as of December
31, 1995, 1996 and 1997 and the related audited
statements of operations, stockholders' equity and
cash flows for the three-year period ended December
31, 1997, together with the related notes, schedules
and audit report of each Company's independent
accountants (such balance sheets and the related
income statements and the related notes and
schedules are referred to herein as the "UCCO Year-
End Financial Statements");
(ii) the unaudited balance sheets for FPC as of June 30,
1995, 1996 and 1997 and the related statements of
income and expense for the three-year period ended
December 31, 1997 (such balance sheets and the
related income and expense statements, together with
the UCCO Year-End Financial Statements are referred
to herein as the "Year-End Financial Statements");
and
(iii) the unaudited balance sheets (the "Interim Balance
Sheets") of each Company as of June 30, 1998 (the
"Balance Sheet Date") and the related unaudited
statements of operations for the interim period
ended on the Balance Sheet Date, together with the
related schedules (such balance sheets, the related
statements of operations and the related schedules
are referred to herein as the "Interim Financial
Statements"). The Year-End Financial Statements and
the Interim Financial Statements (collectively, the
"Financial Statements") are attached as Schedule 5.5
to this Agreement.
9
(b) Except as set forth in Schedule 5.5, the Financial Statements
have been prepared from the books and records of each Company in
conformity with GAAP (except for the absence of notes in the Interim
Financial Statements) and present fairly the financial position and
results of operations of each respective Company as of the dates of such
statements and for the periods covered thereby. The books of account of
each Company have been kept accurately in all material respects in the
ordinary course of business, the transactions entered therein represent
bona fide transactions, and the revenues, expenses, assets and
liabilities of each Company have been properly recorded therein in all
material respects.
5.6 LIABILITIES AND OBLIGATIONS. Except as set forth in Schedule 5.6, as
of the Balance Sheet Date the Companies did not have, nor have they incurred
since that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature, except (a) liabilities, obligations or
contingencies (i) that are accrued or reserved against in the Financial
Statements or reflected in the notes thereto or (ii) that were incurred after
the Balance Sheet Date and were incurred in the ordinary course of business,
consistent with past practices, and (b) liabilities and obligations that are of
a nature not required to be reflected in the Financial Statements prepared in
accordance with GAAP and that were incurred in the normal course of business and
are described in Schedule 5.6. Schedule 5.6 contains a reasonable estimate by
the Stockholders of the maximum amount that may be payable with respect to
liabilities which are not fixed. For each such liability for which the amount is
not fixed or is contested, each Company has provided a summary description of
the liability together with copies of all relevant documentation relating
thereto. Schedule 5.6 sets forth each Company's outstanding principal amount of
indebtedness for borrowed money (including overdrafts) as of the date hereof.
5.7 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.7 sets forth an accurate
list of the accounts and notes receivable of each Company as of the Balance
Sheet Date and of those invoiced between the Balance Sheet Date and the second
business day preceding the Closing Date, including any such amounts which are
not reflected in the Interim Balance Sheets. Receivables from and advances to
employees, the Stockholders and any entities or persons related to or Affiliates
of the Stockholders are separately identified in Schedule 5.7. Schedule 5.7 also
sets forth an accurate aging of all accounts and notes receivable as of the
Balance Sheet Date, showing amounts due in 30-day aging categories. The trade
and other accounts receivable of the Companies, including without limitation
those classified as current assets on the Interim Balance Sheets, are bona fide
receivables, were acquired in the ordinary course of business, are stated in
accordance with GAAP and are collectible in the amounts shown on Schedule 5.7,
net of reserves reflected in the Interim Financial Statements with respect to
the accounts receivable as of the Balance Sheet Date, and net of reserves
reflected in the books and records of the Companies (consistent with the methods
used in the Interim Financial Statements) with respect to receivables of the
Companies after the Balance Sheet Date. The preceding sentence shall not be
deemed or construed as a guarantee by the Companies or the Stockholders of the
collection of any such trade or account receivable.
5.8 ASSETS.
(a) Schedule 5.8 sets forth an accurate list of all real and
personal property included in "property and equipment" on the Interim
Balance Sheets and all other tangible assets of the Companies with a book
value in excess of $10,000 (i) owned by any Company 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 significant
equipment and for all real property leased by any Company
10
and descriptions of all real property on which buildings, warehouses,
workshops, garages and other structures used in the operation of the
business of such Company are situated. Schedule 5.8 indicates which
assets used in the operation of the businesses of the Companies are
currently owned by the Stockholders or Affiliates of either of the
Companies or the Stockholders. The tangible assets, vehicles and other
significant machinery and equipment of the Companies that are in good
working order and condition, ordinary wear and tear excepted are all of
the tangible assets, vehicles and other significant machinery and
equipment that are necessary to continue the business of the Companies.
Except as specifically described in Schedule 5.8, all fixed assets used
by any Company in its business are either owned by such Company or leased
under agreements identified in Schedule 5.8. All leases set forth in
Schedule 5.8 are in full force and effect and constitute valid and
binding agreements of the Company that is a party thereto, and to the
knowledge of such Company and the Stockholders, the other parties thereto
in accordance with their respective terms. Schedule 5.8 contains true,
complete and correct copies of all title reports and title insurance
policies received or owned by the Companies. Schedule 5.8 includes a
summary description of all contractual commitments of each Company
involving the opening of new operations, expansion of existing operations
or the acquisition of any real property or existing business, to which
management of such Company has devoted any significant effort or
expenditure in the two-year period prior to the date of the Agreement,
and which (i) are currently being implemented by such Company, or (ii)
involve purchases of capital equipment in connection with existing
operations in amounts in excess of $10,000, individually, or $25,000 in
the aggregate.
(a) Each Company has good and indefeasible title to the tangible
and intangible personal property and the real property owned and used in
its business, including the properties identified in Schedule 5.8 as
owned real property, free and clear of all Encumbrances other than
Permitted Encumbrances and those set forth in Schedule 5.8.
(b) Except as specifically described in Schedule 5.8, the
tangible and intangible assets of any Company include all the assets used
in the operation of the business of such Company as conducted at the
Balance Sheet Date, except for dispositions of such assets since such
date in the ordinary course of business, consistent with past practices.
5.9 MATERIAL CUSTOMERS AND CONTRACTS.
(a) Schedule 5.9 sets forth an accurate list of (i) all customers
representing 5% of each Company's revenues for the fiscal year ended in
1997 or the interim period ended on the Balance Sheet Date (the "Material
Customers"), and (ii) all material executory contracts, warranties,
commitments and similar agreements to which any Company is currently a
party or by which it or any of its properties is bound, including, but
not limited to, (A) all customer contracts in excess of $100,000,
individually, or $250,000 in the aggregate, including, without
limitation, consignment contracts, (B) contracts with any labor
organizations, (C) leases providing for annual rental payments in excess
of $20,000, individually, or $50,000 in the aggregate, (D) loan
agreements, (E) pledge and security agreements, (F) indemnity or guaranty
agreements or obligations , (G) bonds, (H) notes, (I) mortgages, (J)
joint venture or partnership agreements, (K) options to purchase real or
personal property, and (L) agreements relating to the purchase or sale by
any Company of assets (other than oral agreements relating to sales of
inventory or services in the ordinary course of business, consistent with
past practices) or securities for more than $5,000, individually, or
$10,000 in the
11
aggregate. Prior to the date hereof, each Company has made available to
Quanta complete and correct copies of all such agreements. To the extent
applicable, the contracts and agreements set forth in Schedule 5.9 are
separately identified as lump sum, unit price, cost plus or maintenance
agreements.
(b) Except to the extent set forth in Schedule 5.9, since
December 31, 1997, (i) no Material Customer has canceled or substantially
reduced or, to the knowledge of the Companies and the Stockholders, is
threatening to cancel or substantially reduce its purchases of any
Company's products or services, and (ii) each Company is in compliance
with all material commitments and obligations pertaining to it under such
agreements and is not in default under any of the agreements described in
subsection (a), no notice of default has been received by any Company,
and the Stockholders and the Companies are aware of no basis therefor.
(c) Except to the extent set forth in Schedule 5.9, no Company is
a party to any governmental contracts subject to price redetermination or
renegotiation. Except to the extent set forth in Schedule 5.9, neither of
the Companies is required to provide any bonding or other financial
security arrangements in any material amount in connection with any
transactions with any of its customers or suppliers.
(d) Schedule 5.9 sets forth a summary of each outstanding bid or
proposal by any Company that, if awarded to such Company, contemplates
payments to such Company in excess of $100,000 and that is subject to
acceptance or award by a third party.
(e) Schedule 5.9 sets forth a summary of each Company's open jobs
and a job cost schedule supporting the Interim Balance Sheets, which
Schedule 5.9 includes the respective Company's good faith estimate of
each such job's profit or loss as of the Balance Sheet Date and the
Closing Date.
5.10 PERMITS. Schedule 5.10 contains an accurate list of all material
licenses, franchises, permits, transportation authorities and other governmental
authorizations and intangible assets held by any Company, including, without
limitation, permits, licenses and operating authorizations, titles (including
motor vehicle titles and current registrations), fuel permits, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by any Company (the "Permits"). The Permits are valid,
and no Company has received any written notice that any Governmental Authority
intends to cancel, terminate or not renew any such license, operating
authorization, franchise, permit or other governmental authorization. The
Permits are all the permits that are required by Law for the operation of the
businesses of the Companies as conducted at the Balance Sheet Date and the
ownership of the assets of the Companies. Each Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in the Permits, as well as the
applicable orders, approvals and variances related thereto, and is not in
violation of any of the foregoing. Except as specifically provided in Schedule
5.10, 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 Companies by, any Permits.
5.11 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 5.11, (a) each
Company has complied with and is in compliance, in all material respects, with
all Environmental Laws, including, without limitation, Environmental Laws
relating to air, water, land and the generation, storage, use,
12
handling, transportation, treatment or disposal of Hazardous Substances; (b)
each Company has obtained and complied, in all material respects, with all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Substances and has reported, to the
extent required by all Environmental Laws, all past and present sites owned or
operated by such Company where Hazardous Substances have been treated, stored,
disposed of or otherwise handled; (c) there have been no "releases" or threats
of "releases" (as defined in any Environmental Laws) at, from, in or on any
property owned or operated by any Company; (d) there is no on-site or off-site
location to which any Company has transported or disposed of Hazardous
Substances or arranged for the transportation or disposal Hazardous Substances
which is the subject of any federal, state, local or foreign enforcement action
or any other investigation which could lead to any claim against the Surviving
Corporation, Quanta or Newco for any clean-up cost, remedial work, damage to
natural resources or personal injury, including, but not limited to, any claim
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, (ii) the Resource Conservation and Recovery Act, (iii)
the Hazardous Materials Transportation Act, or (iv) comparable state and local
statutes and regulations; and (e) no Company has contingent liability in
connection with any release or disposal of any Hazardous Substance into the
environment. None of the past or present sites owned or operated by any Company
is currently or has ever been designated as a treatment, storage and/or disposal
facility, nor has any such facility ever applied for a Permit designating it as
a treatment, storage and/or disposal facility, under any Environmental Law.
5.12 LABOR AND EMPLOYEE RELATIONS. Except as set forth in Schedule 5.12,
no Company is bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 5.12, no employees of the Companies are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Companies' or the Stockholders' knowledge, is any campaign to
establish such representation in progress. There is no pending or, to the
Companies' or the Stockholders' knowledge, threatened labor dispute involving
any Company and any group of its employees nor has any Company experienced any
significant labor interruptions over the past five years. No Company nor any
Stockholder has any knowledge of any significant issues or problems in
connection with the relationship of such Company and its employees.
5.13 INSURANCE. Schedule 5.13 sets forth an accurate list as of the
Balance Sheet Date of all insurance policies carried by each Company and of all
insurance loss runs or workmen's compensation claims received for the past five
policy years. Except as set forth in Schedule 5.13, none of such policies are
"per occurrence" policies. The policies described in such Schedule 5.13 for the
current policy year are currently in full force and effect. As of the Closing
Date any open claims and any losses subject to insurance coverage for which a
claim has not been made are recoverable under such policies, except to the
extent of any applicable deductible or loss retention as set forth on Schedule
5.13.
5.14 COMPENSATION; EMPLOYMENT AGREEMENTS. Schedule 5.14 sets forth an
accurate schedule of all officers, directors and Stockholder employees of each
Company with annual salaries of $50,000 or more as of (a) the Balance Sheet Date
and (b) the date hereof. Attached to Schedule 5.14 are true, complete and
correct copies of each employment or consulting agreement with any employee of a
Company or any Stockholder. No Company is a party with any officer, director,
stockholder, member or employee to any employment agreement or similar
arrangement containing "golden parachute"or other similar provisions.
13
5.15 NONCOMPETITION, CONFIDENTIALITY AND NONSOLICITATION AGREEMENTS.
Schedule 5.15 sets forth all agreements containing covenants not to compete or
solicit employees or to maintain the confidentiality of information to which any
Company is bound or under which any Company has any rights or obligations.
5.16. EMPLOYEE BENEFIT PLANS.
(a) Schedule 5.16 sets forth an accurate schedule of each "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all nonqualified deferred
compensation arrangements, whether formal or informal and whether legally
binding or not, under which any Company or an ERISA Affiliate has any current or
future obligation or liability or under which any present or former employee of
any Company or an ERISA Affiliate, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits (each
such plan and arrangement referred to hereinafter as a "Plan"), together with
true and complete copies of such Plans, arrangements and any trusts related
thereto, and classifications of employees covered thereby as of the Balance
Sheet Date. Except as set forth in Schedule 5.16, no Company nor any ERISA
Affiliate sponsors, maintains or contributes currently, or at any time during
the preceding five years, to any plan, program, fund or arrangement that
constitutes an employee pension benefit plan. Each Plan may be terminated by the
respective Company, or if applicable, by an ERISA Affiliate at any time without
any liability, cost or expense, other than costs and expenses that are customary
in connection with the termination of a Plan. For purposes of this Agreement,
the term "employee pension benefit plan" shall have the meaning given that term
in Section 3(2) of ERISA, and the term "ERISA Affiliate" means any corporation
or trade or business under common control with a Company as determined under
Section 414(b), (c), (m) or (o) of the Code.
(b) Each Plan listed in Schedule 5.16 is in compliance in all material
respects with the applicable provisions of ERISA, the Code, and any other
applicable Law. Except as set forth in Schedule 5.16, with respect to each Plan
of a Company and each ERISA Affiliate (other than a "multiemployer plan," as
defined in Section 4001(a)(3) of ERISA), all reports and other documents
required under ERISA or other applicable Law to be filed with any Governmental
Authority, the failure of which to file could reasonably be expected to result
in a material liability to a Company or any ERISA Affiliate, or required to be
distributed to participants or beneficiaries, have been duly filed or
distributed. True and complete copies of all such reports and other documents
with respect to the past five years for each Plan have been provided to Quanta.
No "accumulated funding deficiency" (as defined in Section 412(a) of the Code)
with respect to any Plan has been incurred (without regard to any waiver granted
under Section 412 of the Code), nor has any funding waiver from the Internal
Revenue Service been received or requested. Except as set forth in Schedule
5.16, each Plan that is intended to be "qualified" within the meaning of Section
401(a) of the Code (a "Qualified Plan") is, and has been during the period from
its adoption to the date hereof, so qualified, both as to form and operation and
all necessary approvals of Governmental Authorities, including a favorable
determination as to the qualification under the Code of each of such Qualified
Plans and each amendment thereto, have been timely obtained. Except as set forth
in Schedule 5.16, all accrued contribution obligations of each Company with
respect to any Plan have either been fulfilled in their entirety or are fully
reflected in the Financial Statements.
14
(c) No Plan has incurred, and no Company nor any ERISA Affiliate has
incurred, any liability for excise tax or penalty due to the Internal Revenue
Service. There have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan during the preceding five
years without notice to and approval by the Internal Revenue Service and payment
of all obligations and liabilities attributable to such Qualified Plan.
(d) Except as set forth in Schedule 5.16, no Company nor any ERISA
Affiliate has made any promises of retirement or other benefits to employees,
except as set forth in the Plans, and no Company nor any ERISA Affiliate
maintains or has established any Plan that is a "welfare benefit plan" within
the meaning of Section 3(1) of ERISA that provides for continuing benefits or
coverage for any participant or any beneficiary of a participant after such
participant's termination of employment, except as may be required by Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code and similar state
Law provisions, and at the expense of the participant or the beneficiary of the
participant, or retiree medical liabilities. No Company nor any ERISA Affiliate
maintains, has established or has ever participated in a multiple employer
welfare benefit arrangement as described in Section 3(40)(A) of ERISA. Except as
set forth in Schedule 5.16, no Company nor any ERISA Affiliate has any current
or future obligation or liability with respect to a Plan pursuant to the
provisions of a collective bargaining agreement.
(e) No Company nor any ERISA Affiliate has incurred any material liability
to the Pension Benefit Guaranty Corporation in connection with any Plan. The
assets of each Plan that are subject to Title IV of ERISA are sufficient to
provide the benefits under such Plan, the payment of which the Pension Benefit
Guaranty Corporation would guarantee if such Plan were terminated, and such
assets are also sufficient to provide all other "benefits liabilities" (as
defined in ERISA Section 4001(a)(16)) due under such Plan upon termination.
(f) No "reportable event" (as defined in Section 4043 of ERISA) has
occurred and is continuing with respect to any Plan. There are no pending, or to
the Companies' and the Stockholders' knowledge, threatened claims, lawsuits or
actions (other than routine claims for benefits in the ordinary course) asserted
or instituted against, and no Company nor any ERISA Affiliate has knowledge of
any threatened litigation or claims against, the assets of any Plan or its
related trust or against any fiduciary of a Plan with respect to the operation
of such Plan. To the Companies' and the Stockholders' knowledge, there are no
investigations or audits of any Plan by any Governmental Authority currently
pending and there have been no such investigations or audits that have been
concluded that resulted in any liability to any Company or any ERISA Affiliate
that has not been fully discharged. No Company nor any ERISA Affiliate has
participated in any voluntary compliance or closing agreement programs
established with respect to the form or operation of a Plan.
(g) No Company nor any ERISA Affiliate has engaged in any prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, in connection with any Plan for which exemption was not available. Except
as set forth in Schedule 5.16, no Company nor any ERISA Affiliate is, or ever
has been, a participant in or is obligated to make any payment to a
multiemployer plan. No person or entity that was engaged by any Company or an
ERISA Affiliate as an independent contractor within the last five years
reasonably can or will be characterized or deemed to be an employee of such
Company or an ERISA Affiliate under applicable Laws for any
15
purpose whatsoever, including, without limitation, for purposes of federal,
state and local income taxation, workers' compensation and unemployment
insurance and Plan eligibility.
5.17. LITIGATION AND COMPLIANCE WITH LAW. Except as set forth in Schedule
5.17, there are no claims, actions, suits or proceedings, pending or, to the
knowledge of the Companies and the Stockholders, threatened against or affecting
any Company, at law or in equity, or before or by any Governmental Authority
having jurisdiction over such Company. No written notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received by any
Company and, to the Stockholders' and the Companies' knowledge, there is no
basis therefor. Except to the extent set forth in Schedule 5.17, each Company
has conducted and is conducting its business in compliance with all Laws
applicable to such Company, its assets or the operation of its business.
16
5.18. TAXES. For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, unemployment, occupation, use, service, service use, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest, fines, penalties or
additional amounts attributable to or imposed with respect to any such taxes,
charges, fees, levies or other assessments. Each Company has timely filed all
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing, and has duly paid in full or made adequate
provision in the Financial Statements for the payment of all Taxes for all
periods ending at or prior to the Closing Date. Each Company has duly withheld
and paid or remitted all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, shareholder or other person or entity that required withholding under
any applicable Law, including, without limitation, any amounts required to be
withheld or collected with respect to social security, unemployment
compensation, sales or use taxes or workers' compensation. Except as set forth
in Schedule 5.18, there are no examinations in progress or claims against any
Company relating to Taxes for any period or periods prior to and including the
Balance Sheet Date and no written notice of any claim for Taxes, whether pending
or threatened, has been received. No Company has granted or been requested to
grant any extension of the limitation period applicable to any claim for Taxes
or assessments with respect to Taxes. No Company is a party to any Tax
allocation or sharing agreement and is not otherwise liable or obligated to
indemnify any person or entity with respect to any Taxes. The amounts shown as
accruals for Taxes on the Interim Financial Statements as of the Balance Sheet
Date are sufficient for the payment of all Taxes for all fiscal periods ended on
or before that date. True and complete copies of (a) any tax examinations, (b)
extensions of statutory limitations and (c) the federal, state and local Tax
returns of the Companies for the last three fiscal years have been previously
provided to Quanta. There are no requests for ruling in respect of any Tax
pending between any Company and any Taxing authority. UCCO has been taxed under
the provisions of Subchapter S of the Code since July 1, 1988. Each Company
currently utilizes the accrual method of accounting for income tax purposes.
Such method of accounting has not changed in the past five years.
5.19. ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth in Schedule 5.19, each Company has conducted its operations in the
ordinary course and there has not been:
(a) any material adverse change in the business, operations,
properties, condition (financial or other), assets, liabilities
(contingent or otherwise), results of operations or prospects of the
Companies, taken as a whole;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the Companies, taken as a whole;
(c) any change in the authorized capital stock of any Company or in
their outstanding securities or any change in the respective
Stockholders' ownership interests in any Company or any grant of any
options, warrants, calls, conversion rights or commitments;
(d) 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 any Company;
17
(e) any increase in the compensation payable or to become payable by
any Company to the Stockholders or any of their officers, directors,
employees, consultants or agents, except for ordinary and customary
bonuses and salary increases for employees in accordance with past
practice, which bonuses and salary increases are set forth in Schedule
5.19;
(f) any significant work interruptions, labor grievances or claims
filed;
(g) except for the Merger and the Stock Purchase, any sale or
transfer, or any agreement to sell or transfer, any material assets,
properties or rights of any Company to any person, including, without
limitation, the Stockholders and their Affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to any Company;
(i) any increase in the indebtedness of any Company, other than
accounts payable incurred in the ordinary course of business, consistent
with past practices or incurred in connection with the transactions
contemplated by this Agreement;
(j) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of any Company or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(k) 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 any Company's business;
(l) any waiver of any material rights or claims of any Company;
(m) any material breach, amendment or termination of any material
contract, agreement, Permit or other right to which any Company is a
party or any of its property is subject; or
(o) any other material transaction by any Company outside the
ordinary course of business.
5.20. ACCOUNTS WITH BANKS AND BROKERAGES; POWERS OF ATTORNEY. Schedule
5.20 sets forth an accurate schedule, as of the date of this Agreement, of (a)
the name of each financial institution or brokerage firm in which any Company
has accounts or safe deposit boxes; (b) the names in which the accounts or boxes
are held; (c) the type of account and the cash, cash equivalents and securities
held in such account as of the second business day prior to the Closing, none of
which assets have been withdrawn from such accounts since such date except for
bona fide business purposes in the ordinary course of the business of such
Company; and (d) the name of each person authorized to draw thereon or have
access thereto. Schedule 5.20 also sets forth the name of each person,
corporation, firm or other entity holding a general or special power of attorney
from any Company and a description of the terms thereof.
5.21. ABSENCE OF CERTAIN BUSINESS PRACTICES. No Company nor any of its
affiliates has given or offered to give anything of value to any governmental
official, political party or candidate for government
18
office nor has it otherwise taken any action which would constitute a violation
of the Foreign Corrupt Practices Act of 1977, as amended, or any similar Law.
5.22. COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as
set forth in Schedule 5.22, neither the Stockholders nor any other Affiliate of
any Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of any Company. Except as set forth in Schedule 5.22, no
officer or director of any Company nor any Stockholder has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of any Company.
5.23. INTANGIBLE PROPERTY. Schedule 5.23 sets forth an accurate list of
all patents, patent applications, trademarks, service marks, technology,
licenses, trade names, copyrights and other intellectual property or proprietary
property rights owned or used by any Company. Each Company owns or possesses,
and the assets of each Company include, sufficient legal rights to use all of
such items without conflict with or infringement of the rights of others.
5.24. TAX REORGANIZATION REPRESENTATION. The Surviving Corporation will
acquire substantially all of the properties of UCCO within the meaning of
Section 368(a)(2)(D) of the Code.
5.25. NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of the Stockholders
and each Company that Quanta and Newco are not making any representation or
warranty whatsoever, express or implied, other than those representations and
warranties of Quanta and Newco expressly set forth in this Agreement.
5.26. DISCLOSURE. The Stockholders and each Company have fully provided
Quanta or its representatives with all the information that Quanta has requested
in analyzing whether to consummate the Merger and the other transactions
contemplated by this Agreement. None of the information so provided nor any
representation or warranty of the Stockholders to Quanta or Newco in this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
Quanta and Newco jointly and severally represent and warrant to the
Stockholders as follows:
6.1. ORGANIZATION. Each of Quanta and Newco is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and is duly authorized and qualified under all applicable Laws to
carry on its business in the places and in the manner now conducted. Each of
Quanta and Newco has the requisite power and authority to own, lease and operate
its assets and properties and to carry on its business as such business is
currently being conducted.
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6.2. AUTHORIZATION; NON-CONTRAVENTION; APPROVALS.
(a) Each of Quanta and Newco has the full legal right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement has been approved by the boards of directors of Quanta and
Newco and Quanta, as the sole stockholder of Newco. No additional
corporate proceedings on the part of Quanta or Newco are necessary to
authorize the execution and delivery of this Agreement and the
consummation by Quanta and Newco of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Quanta
and Newco, and, assuming the due authorization, execution and delivery by
each Company and the Stockholders, constitutes valid and binding
agreements of Quanta and Newco, enforceable against Quanta and Newco in
accordance with its terms.
(b) The execution and delivery of this Agreement by Quanta and Newco
do not, and the consummation by Quanta and Newco of the transactions
contemplated hereby will not, violate or result in a breach of any
provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result
in a right of termination or acceleration under any of the terms,
conditions or provisions of (i) the Certificate of Incorporation or By-
Laws of Quanta or Newco, (ii) any Law applicable to either Quanta or
Newco or any of its properties or assets or (iii) any material note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement
of any kind to which Quanta or Newco is now a party or by which either
Quanta or Newco or any of its properties or assets may be bound or
affected.
(c) Except for the Merger Filings and such filings as may be
required under federal or state securities Laws, no declaration, filing
or registration with, or notice to, or authorization, consent or approval
of, any Governmental Authority is necessary for the execution and
delivery of this Agreement by Quanta and Newco or the consummation by
Quanta and Newco of the transactions contemplated hereby.
6.3. QUANTA COMMON STOCK. The shares of Quanta Common Stock to be issued to
the Stockholders pursuant to the Merger and the Stock Purchase are duly
authorized and, when issued in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable. The issuance of Quanta Common
Stock pursuant to the Merger will transfer to the Stockholders valid title to
such shares of Quanta Common Stock, free and clear of all Encumbrances, except
for any Encumbrances created by the Stockholders.
6.4. TAX REORGANIZATION REPRESENTATIONS.
(a) Prior to the Merger, Quanta will be in control of Newco within
the meaning of Section 368(c) of the Code.
(b) Quanta has no plan or intention to cause the Surviving
Corporation to issue additional shares of its stock that would result in
Quanta losing control of the Surviving Corporation within the meaning of
Section 368(c) of the Code.
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(c) Quanta has no plan or intention to reacquire any of its stock
issued in the Merger.
(d) Quanta has no plan or intention to liquidate the Surviving
Corporation; to merge the Surviving Corporation with or into another
corporation; to sell or otherwise dispose of the stock of the Surviving
Corporation except for transfers of stock to another corporation
controlled by Quanta; or to cause the Surviving Corporation to sell or
otherwise dispose of any of its assets, except for dispositions made in
the ordinary course of business or transfers of assets to a corporation
controlled by Quanta.
(e) Following the Closing, Quanta's intention is that the Surviving
Corporation will continue the historic business of the Companies or use a
significant portion of the historic business assets of UCCO in a
business, all as required to satisfy the "continuity of business
enterprise" requirement under Section 368 of the Code.
(f) Quanta does not own, nor has it owned during the past five
years, any shares of the stock of UCCO.
(g) Each of Quanta and Newco is undertaking the Merger for a bona
fide business purpose and not merely for the avoidance of federal income
tax.
(h) Neither Quanta nor Newco is an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(i) As of the Closing Date, the fair market value of the assets of
Newco will exceed the sum of Newco's liabilities plus the amount of other
liabilities, if any, to which Newco's assets are subject.
6.5. SEC FILINGS; DISCLOSURE. Quanta has filed with the Securities and
Exchange Commission ("SEC") all material forms, statements, reports and
documents required to be filed by it prior to the date hereof under each of the
Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and the respective rules and regulations
thereunder, (a) all of which, as amended, if applicable, complied when filed in
all material respects with all applicable requirements of the appropriate Act
and the rules and regulations thereunder, and (b) none of which, as amended, if
applicable, contains any untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
6.6 NO IMPLIED REPRESENTATIONS. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of Quanta and Newco
that the Stockholders are not making any representation or warranty whatsoever,
express or implied, other than those representations and warranties of the
Stockholders expressly set forth in this Agreement.
6.7. DISCLOSURE. Quanta has fully provided the Stockholders or their
representatives with all the information that the Stockholders have requested in
analyzing whether to consummate the Merger and the Stock Purchase. None of the
information so provided nor any representation or warranty of Quanta contained
in this Agreement contains any untrue statement of a material fact or omits to
state a material fact
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necessary in order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VII
CERTAIN COVENANTS
7.1. RELEASE FROM GUARANTEES. Quanta shall use its commercially reasonable
best efforts to have the Stockholders released from the personal guarantees of
the Companies' indebtedness identified in Schedule 7.1 within 90 days after the
Closing Date. Quanta hereby agrees to indemnify and defend each Stockholder and
hold such Stockholder harmless for any amounts that such Stockholder is required
to pay in connection with the enforcement of any obligations under such personal
guarantees after the Closing, including without limitation any reasonable
attorneys' fees and expenses incurred in connection therewith.
7.2. FUTURE COOPERATION; TAX MATTERS. The Stockholders and Quanta shall
each deliver or cause to be delivered to the other following the Closing such
additional instruments as the other may reasonably request for the purpose of
fully carrying out this Agreement. The Stockholders will cooperate and use their
commercially reasonable best efforts to have the present officers, directors and
employees of the Companies cooperate with Quanta and the Surviving Corporation
at and after the Closing in furnishing information, evidence, testimony and
other assistance in connection with any actions, proceedings, arrangements or
disputes of any nature with respect to matters pertaining to all periods prior
to the Closing. The Stockholders will cooperate with the Surviving Corporation
in the preparation of all tax returns covering the period from the beginning of
each Company's current Tax years through the Closing. In addition, Quanta will
provide the Stockholders with access to such of its books and records as may be
reasonably requested by the Stockholders in connection with federal, state and
local tax matters relating to periods prior to the Closing. The party requesting
cooperation, information or actions under this Section 7.2 shall reimburse the
other party for all reasonable out-of-pocket costs and expenses paid or incurred
in connection therewith, which costs and expenses shall not, however, include
per diem charges for employees or allocations of overhead charges.
7.3. EXPENSES. Quanta will pay the fees, expenses and disbursements of
Quanta and its agents, representatives, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments thereto. The Surviving Corporation following the Closing will pay
the expenses of the audit or audit related procedures in connection with the
transactions contemplated hereby. The Stockholders will pay their fees, expenses
and disburse ments and those of their and the Companies' agents,
representatives, financial advisors, accountants and counsel incurred in
connection with the execution, delivery and performance of this Agreement and
any amendments hereto and the consummation of the transactions contemplated
hereby, including, without limitation, accounting fees and related expenses
attributable to the final Tax returns of the Companies and the Stockholders
through the Closing; provided, however that the Surviving Corporation will pay
up to $20,000 of such Tax returns fees and expenses.
7.4. LEGAL OPINION. At the Closing, the Companies and the Stockholders
shall cause their legal counsel, Xxxxxxxxx, XxXxxxxxxx & Xxxxxx, L.L.P., to
deliver to Quanta a legal opinion in form and substance acceptable to Quanta.
22
7.5. EMPLOYMENT AGREEMENTS. Concurrently with the execution of this
Agreement, the Surviving Corporation shall enter into a mutually acceptable
Employment Agreement with each of the individuals identified on Schedule 7.5
(collectively, the "Employment Agreements").
7.6. REPAYMENT OF RELATED PARTY INDEBTEDNESS. Concurrently with the
execution of this Agreement, (a) the Stockholders shall repay to the Company all
amounts outstanding as advances to or receivables from the Stockholders, each of
which advances or receivables is specifically reflected in Schedule 5.7, and (b)
the Company shall repay all amounts outstanding under loans to the Company from
any Stockholder, each of which loans to the Company is specifically reflected in
Schedule 5.6.
7.7. STOCK OPTIONS. Quanta shall grant nonqualified options to purchase an
aggregate of 140,000 shares of Quanta Common Stock as of the Closing Date under
Quanta's 1997 Stock Option Plan (the "Option Plan") to employees of the UCCO
(other than Stockholders) as mutually agreed upon by Xxxx Xxxx and Quanta, which
options, in each case, shall vest in equal annual increments for four years,
commencing one year after the Closing.
7.8. STOCK PURCHASE PROGRAM. After the Closing, Quanta will endeavor to
establish, subject to stockholder approval, an employee stock purchase program
to facilitate employee purchases of Quanta Common Stock directly from Quanta
without paying third party brokerage commissions. Notwithstanding anything to
the contrary contained herein, neither this Section 7.8, Sections 7.9, 7.10,
7.11, nor anything in this Agreement, or any other agreement of Quanta and its
Affiliates entered into in connection with the consummation of the transactions
contemplated hereby, shall be deemed or construed to make any employee of the
Companies or Quanta or its Affiliates or potential participants in any such
employee stock purchase program a third party beneficiary or create any right in
any such persons to cause Quanta or its Affiliates to establish any such
employee stock purchase program.
7.9. CONTINUATION OF UCCO BENEFIT PLANS. Quanta shall use its reasonable
best efforts to maintain (a) until January 1, 1999, the UCCO Retirement Plan
(the "UCCO Pension Plan"), (b) UCCO's long-term disability program, (c) UCCO's
published bonus program, (d) UCCO's stockholder Exec-u-Care supplemental medical
plan, (e) UCCO's group term insurance plan and (f) UCCO's vacation, sick leave
and subsistence plan; provided, however, that, notwithstanding the foregoing,
the continuation of such plans and programs, including, without limitation, the
UCCO Pension Plan, (i) shall only be required to the extent permitted by
applicable Law and shall not be required to the extent that applicable Law would
require any other employees of Quanta or its subsidiaries to become participants
in any such plan or program in order to maintain such plan or program as a
Qualified Plan, if applicable, and (ii) the Surviving Corporation may replace
any such plan or program with a Quanta or Surviving Corporation plan or program
providing substantially similar benefits. Notwithstanding anything to the
contrary contained herein, neither this Section 7.9 nor anything in this
Agreement, or any other agreement of Quanta and its Affiliates entered into in
connection with the consummation of the transactions contemplated hereby, shall
be deemed or construed to make any employee of the Companies or Quanta or its
Affiliates or participants or potential participants in any such plan or
program, including, without limitation, the UCCO Pension Plan, a third party
beneficiary or create any right in any such persons to cause Quanta or its
Affiliates to continue or maintain any such plan or program, including, without
limitation, the UCCO Pension Plan.
7.10. CONTINUATION OF CAR LEASE PROGRAM. Schedule 7.10 includes a
description of the material terms of the UCCO Stockholder car lease program
including all amounts paid by the Companies pursuant
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to the program in in the fiscal year ended December 31, 1997, and the six months
ended June 30, 1998 and all beneficiaries of the program. Quanta shall use its
reasonable best efforts to maintain the UCCO Stockholder car lease program,
provided, however, that the Surviving Corporation may replace any such plan or
program with a Quanta or Surviving Corporation plan or program providing
substantially similar benefits.
7.11. KEYMAN LIFE INSURANCE POLICIES. Within 90 days of the Closing Date,
the Stockholder's will, at their option, be able to purchase their respective
keyman life insurance policy from their respective Companies for the cash
surrender value of the policy.
7.12. AIRCRAFT PURCHASE. Upon the date that Xxxx Xxxx ceases to be
employed in any capacity by the Surviving Corporation or any Affiliate of the
Surviving Corporation, he will, at his option, be able to purchase that certain
1983 Xxxxxx aircraft from the Surviving Corporation at a price equal to the
wholesale market value of such aircraft at the time of purchase. Nothing in this
Agreement shall require the Surviving Corporation or its Affiliates to maintain
ownership or replace such aircraft if, in the reasonable business judgment of
the Surviving Corporation or such Affiliate, disposal of such aircraft would be
in the best interest of the Surviving Corporation, its Affiliates or their
respective Stockholders.
ARTICLE VIII
INDEMNIFICATION
The Stockholders, Quanta and Newco each make the following covenants:
8.1. GENERAL INDEMNIFICATION BY THE STOCKHOLDERS. Subject to Sections 8.4
and 8.5, the Stockholders, other than Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxxxxx,
Xxxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxxxx (collectively, the "Minor
Shareholders"), covenant and agree that they will jointly and severally (without
any right of indemnification or contribution from the Companies) indemnify,
defend, protect and hold harmless Quanta, Newco and the Surviving Corporation,
and their respective officers, directors, employees, stockholders, agents,
representatives and Affiliates, at all times from and after the date of this
Agreement until the Expiration Date from and against all Losses incurred by any
of such indemnified persons as a result of or arising from (a) any breach of the
representations and warranties of the Stockholders set forth herein or in the
Schedules or certificates delivered in connection herewith, (b) any breach or
nonfulfillment of any covenant or agreement on the part of the Stockholders or
the Companies under this Agreement, (c) all income Taxes payable by any Company
for all periods prior to and including the Closing Date, or (d) all transfer and
other Taxes arising from the transactions contemplated by this Agreement.
8.2. INDEMNIFICATION BY QUANTA. Subject to Section 8.4, Quanta covenants
and agrees that it will indemnify, defend, protect and hold harmless the
Stockholders and their respective agents, representatives, Affiliates,
beneficiaries and heirs and employees at all times from and after the date of
this Agreement until the Expiration Date from and against all Losses incurred by
any of such indemnified persons as a result of or arising from (a) any breach of
the representations and warranties of Quanta or Newco set forth herein or in the
Schedules or certificates attached hereto, or (b) any breach or nonfulfillment
of any covenant or agreement on the part of Quanta or Newco under this
Agreement.
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8.3. THIRD PERSON CLAIMS. Promptly after any party providing
indemnification pursuant to Section 8.1 or 8.2 of this Agreement (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), of the commencement of
any action or proceeding by a Third Person, which the Indemnified Party believes
in good faith is an indemnifiable claim under this Agreement, the Indemnified
Party shall give to the party obligated to provide indemnification pursuant to
Section 8.1, or 8.2 hereof (hereinafter the "Indemnifying Party") written notice
of such claim or the commencement of such action or proceeding. Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. The Indemnifying Party shall have the right to defend and
settle, at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same diligently and in good faith. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in all commercially
reasonable respects in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records and other information reasonably
requested by the Indemnifying Party and in the Indemnified Party's possession or
control. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability; provided, however, that the Indemnified Party shall
be entitled, at its expense, to participate in the defense of such asserted
liability and the negotiations of the settlement thereof. The Indemnifying Party
shall not settle any such Third Person claim without the consent of the
Indemnified Party, unless the settlement thereof imposes no liability or
obligation on, and includes a complete release from liability of, the
Indemnified Party. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person; provided, however,
that notwithstanding the foregoing, the Indemnified Party shall be entitled to
refuse to consent to any such proposed settlement and the Indemnifying Party's
liability hereunder shall not be limited by the amount of the proposed
settlement if such settlement does not provide for the complete release of the
Indemnified Party. If, upon receiving notice, the Indemnifying Party does not
timely undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, in its discretion, and the Indemnifying Party
shall reimburse the Indemnified Party for the amount paid in such settlement and
any other liabilities or expenses incurred by the Indemnified Party in
connection therewith.
8.4. INDEMNIFICATION DEDUCTIBLE. Neither the Stockholders, on the one
hand, nor Quanta, Newco and the Surviving Corporation, on the other hand, shall
be entitled to indemnification from the other under the provisions of Section
8.1(a) or Section 8.2(a), as the case may be, until such time as, and only to
the extent that, the claims subject to indemnification by such other party
exceed, in the aggregate, $325,000. Notwithstanding the foregoing, the
limitations set forth in this Section 8.4 shall not apply to fraudulent
misrepresentations.
8.5. INDEMNIFICATION LIMITATION. Subject to Section 8.4, the aggregate
indemnification obligation of the Indemnifying Stockholders under Section 8.1(a)
shall be limited to $32,500,000. Notwithstanding the foregoing, the limitations
set forth in this Section 8.5 shall not apply to fraudulent misrepresentations.
25
8.6. INDEMNIFICATION FOR NEGLIGENCE OF INDEMNIFIED PARTY. THE RIGHTS TO
INDEMNIFICATION UNDER THIS INCLUDE RIGHTS TO INDEMNIFICATION FOR THE RESULTS OF
AN INDEMNIFIED PARTY'S ACTUAL OR ALLEGED NEGLIGENCE, IF SUCH INDEMNIFIED PARTY
WOULD OTHERWISE BE ENTITLED TO INDEMNIFICATION HEREUNDER.
ARTICLE IX
NONCOMPETITION COVENANTS
9.1. PROHIBITED ACTIVITIES.
(a) For no additional consideration, (i) the Stockholders, other than
the Minor Stockholders, will not for five years following the Closing
Date and, as to Stockholders (other than Minor Stockholders) who are
parties to Employment Agreements, if longer, one year following such
Stockholder's voluntary termination of his or her employment agreement
with the Surviving Corporation or its Affiliates or the termination of
such individual's employment with the Surviving Corporation or its
Affiliates "for cause," in each case as determined in accordance with
such individual's Employment Agreement, and (ii) the Minor Stockholders
will not for two years following the Closing Date, and, as to Minor
Stockholders who are parties to Employment Agreements, if longer, one
year following such Minor Stockholder's voluntary termination of his or
her employment agreement with the Surviving Corporation or its Affiliates
or the termination of such individual's employment with the Surviving
Corporation or its Affiliates "for cause," in each case as determined in
accordance with such individual's Employment Agreement (with the
applicable period being herein referred to as the "Noncompete Term"),
directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial or advisory
capacity, whether as an employee, independent contractor,
consultant or advisor, or as a sales representative, in a
Competitive Business (A) in the counties in California in
which either of the Companies or any subsidiaries conducts
business or has conducted business within the past three
years, all of which counties are set forth on Schedule 5.1,
(B) within 150 miles of where either of the Companies or any
of its subsidiaries conducts business, or has conducted
business within the past three years, outside of California,
including any territory outside of California that is
serviced by either of the Companies or any of such
subsidiaries (the counties and other areas included within
clause (A) and (B) being herein referred to as the
"Territory");
(ii) call upon any person who is an employee or consultant of
Quanta or the Surviving Corporation or any of their
respective subsidiaries for the purpose or with the intent
or effect of enticing such employee or consultant away from
or out of the employ or contract with Quanta or the
Surviving Corporation or any of their respective
subsidiaries; or
26
(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 any Company or the Surviving Corporation or any
of the subsidiaries of such parties within the Territory
for the purpose, or with the effect, of soliciting or
selling services or products in a Competitive Business
within the Territory.
(b) Notwithstanding the above, (i) if the employment of a
Stockholder (other than a Minor Stockholder) identified in Section 9.1(a)
is terminated by the Surviving Corporation other than "for cause," as
determined under such individual's Employment Agreement, if applicable,
then the Noncompete Term shall be five years following the Closing Date,
(ii) Section 9.1(a) shall not be deemed to prohibit any such Stockholder
from acquiring, as a passive investor with no involvement in the
operations of the business, not more than one percent of the capital
stock of a Competitive Business whose stock is publicly traded on a
national securities exchange, The Nasdaq Stock Market or over-the-
counter, and (iii) if the employment of a Stockholder is terminated for
other than "good cause", as determined under such individual's Employment
Agreement, if applicable, then no non-compete provision shall be
enforceable for any period of time during which or for which such
Stockholder is not receiving or has not received severance compensation..
9.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses to Quanta and the Surviving Corporation as a result of a breach of the
foregoing covenant, because a breach of such covenant would diminish the value
of the assets and business of the Companies being sold pursuant to this
Agreement, and because of the immediate and irreparable damage that could be
caused to Quanta and the Surviving Corporation for which it would have no other
adequate remedy, each Stockholder agrees that the foregoing covenant may be
enforced against such individual by injunctions, restraining orders and other
equitable actions.
9.3. REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this ARTICLE IX are necessary in terms of time, activity
and territory to protect Quanta's and the Surviving Corporation's interest in
the assets and business being acquired pursuant to the terms of this Agreement
and impose a reasonable restraint on each Stockholder in light of the activities
and businesses of the Companies on the date of the execution of this Agreement
and the current plans of the Companies.
9.4. SEVERABILITY; REFORMATION. The covenants in this ARTICLE IX are
severable and separate, and the unenforceability of any specific covenant shall
not affect the continuing validity and enforceability of any other covenant. In
the event any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth in this ARTICLE IX are unreasonable
and therefore unenforceable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable
and this Agreement shall thereby be reformed.
9.5. MATERIAL AND INDEPENDENT COVENANT. Each Stockholder acknowledges
that his, her or its agreements and the covenants set forth in this ARTICLE IX
are material conditions to Quanta's and Newco's agreements to execute and
deliver this Agreement and to consummate the transactions contemplated hereby
and that Quanta and Newco would not have entered into this Agreement without
such covenants. All of the covenants in this ARTICLE IX shall be construed as an
agreement independent of any other provision in this Agreement.
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ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. GENERAL. Each Stockholder recognizes and acknowledges that he, she
or it had in the past, currently has, and in the future will have, access to
certain confidential information relating to the businesses of the Companies,
such as lists of customers, operational policies, and pricing and cost policies
that are, and following the Closing will be, valuable, special and unique assets
of the Surviving Corporation. Each Stockholder agrees that he, she or it will
not use or disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose whatsoever, except as
is required in the course of performing his, her or its duties, if any, to the
Surviving Corporation and/or Quanta, unless (a) such information becomes known
to the public generally through no fault of such Stockholder, or (b) disclosure
is required by Law, provided that prior to disclosing any information pursuant
to this clause (b) such Stockholder shall, if possible, give prior written
notice thereof to Quanta and the Surviving Corporation and provide Quanta with
the opportunity to contest such disclosure. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section, Quanta
shall be entitled to an injunction restraining such Stockholder from disclosing,
in whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting Quanta from pursuing any other available remedy for
such breach or threatened breach, including, without limitation, the recovery of
damages.
10.2. EQUITABLE RELIEF. Because of the difficulty of measuring economic
losses as a result of the breach of the foregoing covenants, because a breach of
such covenant would diminish the value of the assets and business of the Company
being sold pursuant to this Agreement, and because of the immediate and
irreparable damage that would be caused for which the Surviving Corporation
and/or Quanta would have no other adequate remedy, each Stockholder agrees that
the foregoing covenants may be enforced against him, her or it by injunctions,
restraining orders and other equitable actions.
ARTICLE XI
INTENDED TAX TREATMENT
11.1. TAX-FREE REORGANIZATION. Quanta and the Stockholders are entering
into this Agreement with the intention that the Merger qualify as a tax-free
reorganizations for federal income tax purposes, except to the extent of any
"boot" received, and neither Quanta nor the Stockholders will take any actions
that disqualify the Merger for such treatment.
ARTICLE XII
FEDERAL SECURITIES ACT; RESTRICTIONS
ON QUANTA COMMON STOCK
12.1. COMPLIANCE WITH LAW. The Stockholders acknowledge the shares of
Quanta Common Stock issued at the Closing in accordance with the terms of this
Agreement (the "Restricted Shares") will not be registered under the 1933 Act
and therefore may not be resold without compliance with the 1933 Act. The
Restricted Shares are being or will be acquired by Stockholders solely for their
own accounts, for investment
28
purposes only, and with no present intention of distributing, selling or
otherwise disposing of them in connection with a distribution. The Stockholders
covenant, warrant and represent that none of the Restricted Shares will be,
directly or indirectly, offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. Certificates representing the Restricted Shares shall bear the following
legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE NOT ISSUED IN A TRANSACTION
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"),
OR ANY APPLICABLE STATE SECURITIES LAWS. THE SHARES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH
SALE OR TRANSFER IS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR, IN THE OPINION
OF COUNSEL TO THE ISSUER, IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH LAWS.
12.2. ECONOMIC RISK; SOPHISTICATION; ACCREDITED INVESTORS. Each Stockholder
is able to bear the economic risk of an investment in the Restricted Shares and
can afford to sustain a total loss of such investment. Each Stockholder has such
knowledge and experience in financial and business matters that it, she or he is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect its, her or his own interests in
connection with the acquisition of the Restricted Shares pursuant hereto. Each
Stockholder or its, her or his representatives have had an adequate opportunity
to ask questions and receive answers from the officers of Quanta concerning,
among other matters, Quanta, its management, its plans for the operation of its
business and potential additional acquisitions.
12.3 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of Quanta
Common Stock to the public without registration, for a period of one year after
the Closing, Quanta agrees to use its commercially reasonable efforts to:
(a) make and keep public information (as such terms are defined in
Rule 144) regarding Quanta available;
(b) file with the SEC in a timely manner all reports and other
documents required of Quanta under the 1933 Act and the 1934 Act; and
(c) furnish to each Stockholder upon written request a written
statement by Quanta as to its compliance with the reporting requirements
of Rule 144, the 1933 Act and the 1934 Act, a copy of the most recent
annual or quarterly report of Quanta, and such other reports and
documents so filed as such Stockholder may reasonably request in availing
itself of any rule or regulation of the SEC allowing such Stockholder to
sell any such shares without registration.
12.4. RESTRICTION ON SALE OR OTHER TRANSFER OF RESTRICTED SHARES. Each
Stockholder covenants, warrants and represents that none of the Restricted
Shares will be offered, sold, assigned, pledged, hypothecated, transferred or
otherwise disposed of, directly or indirectly, during the one-year period
commencing on the Closing Date (the "Lockup Period") and, thereafter, only after
full compliance with all of the applicable provisions of the 1933 Act and the
rules and regulations of the SEC; and, during the Lockup Period, the
Stockholders shall not engage in put, call, short-sale, hedge, straddle or
similar transactions
29
intended to reduce the Stockholders' risk of owning the Restricted Shares.
Certificates representing the Restricted Shares shall bear the following legend
in addition to the legend under Section 12.1:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
RESTRICTION ON TRANSFER THAT EXPIRES ON AUGUST 4, 1999 AND MAY NOT BE
OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE
DISPOSED OF DURING THE PERIOD OF SUCH CONTRACTUAL RESTRICTION WITHOUT THE
PRIOR WRITTEN CONSENT OF QUANTA SERVICES, INC.
ARTICLE XIII
MISCELLANEOUS
13.1 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
Quanta, Newco, the Surviving Corporation and the Companies, and the heirs and
legal representatives of the Stockholders.
13.2. ENTIRE AGREEMENT. This Agreement (including the Schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholders, the
Companies, Newco and Quanta and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including, without limitation,
that certain letter of intent dated June 26, 1998 by and among Quanta and UCCO,
as amended or supplemented. This Agreement may be modified or amended only by a
written instrument executed by the Stockholders, the Companies, Newco and
Quanta, acting through their respective officers, duly authorized by their
respective Boards of Directors.
13.3. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
13.4. BROKERS AND AGENTS.
(a) Except for the Stockholders' engagement of Upton Financial
Group, Inc. ("Broker"), whose fees and expenses are liabilities and
obligations of the Stockholders, each party hereto represents and
warrants that it employed no broker or agent in connection with the
transactions contemplated by this Agreement. Except as specifically
provided in Section 73, each party agrees to indemnify each other party
against all loss, cost, damages or expense arising out of claims for fees
or commissions of brokers employed or alleged to have been employed by
such indemnifying party.
(b) Broker is acting as in intermediary only. Broker has not
provided legal or accounting advice to any party, since Broker is neither
an attorney or an accountant. Quanta and Newco are entering into this
Agreement and shall satisfy themselves as to the viability of the
business of the Companies on the basis of (i) their independent
assessment of each such business and the assets of the Companies, (ii)
the information provided by the Companies, and (iii) their physical
inspection of the assets of the Companies. Quanta and Newco acknowledge
that Broker shall not verify the
30
accuracy of the Stockholders' representations and warranties. Quanta and
Newco specifically understand and acknowledge that marketing flyers,
brochures and packages concerning a business contain opinions,
speculations and projections as to the potential of the Companies and
other matters. Quanta and Newco acknowledge that they are not entering
into this Agreement on the basis of any representations, warranties or
guarantees of Broker. If any representations and warranties of either
Quanta, Newco or the Stockholders are untrue, Quanta, Newco, and/or the
Stockholders shall look solely to each other for relief and shall release
and hold Broker harmless from any claims arising out of any such
misrepresentation. The Merger has been structured as such to meet the
needs of the parties hereto and not as a result of the recommendation of
Broker.
13.5. NOTICES. All notices and communications required or permitted
hereunder shall be in writing and may be given by depositing the same in the
United States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party, as follows:
(a) If to Quanta, Newco or the Surviving Corporation, addressed to
them at:
Quanta Services, Inc.
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: President and General Counsel
(b) If to any Stockholder, respectively addressed as follows:
Xxxx X. Xxxx
00000 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
or such other address as any party hereto shall specify pursuant to this Section
13.5 from time to time.
13.6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties set forth in ARTICLE V and ARTICLE VI shall survive the Closing for a
period of two years from the Closing Date (the "Expiration Date"), except that
the representations and warranties set forth in Section 5.18 hereof shall
survive until such time as the limitations period has run for all tax periods
ended prior to the Closing Date, which shall be deemed to be the Expiration Date
for Section 5.18.
13.7. EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.8. REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and unenforceable,
but so as to most nearly retain the intent of the parties, and if such
modification is not
31
possible, such provision shall be severed from this Agreement, and in either
case, the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
13.9. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of California (except for its principles governing
conflicts of laws).
13.10. DISPUTE RESOLUTION.
(a) Except with respect to injunctive relief as provided in Section
9.2 and Section 10.2 (which relief may be sought from any court or
administrative agency with jurisdiction with respect thereto), any
unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in accordance
with the commercial rules of the American Arbitration Association then in
effect. The arbitration shall be conducted by a retired judge employed by
the San Francisco Regional Office of the Judicial Arbitration and
Mediation Services, Inc. ("JAMS"). The arbitration shall be held in JAMS'
San Francisco office.
(b) The parties shall obtain from JAMS a list of the retired judges
available to conduct the arbitration. The parties shall use their
reasonable efforts to agree upon a judge to conduct the arbitration. If
the parties cannot agree upon a judge to conduct the arbitration within
10 days after receipt of the list of available judges, the parties shall
ask JAMS to provide the parties a list of three available judges (the
"Judge List"). Within five days after receipt of the Judge List, each
party shall strike one of the names of the available judges from the
Judge List and return a copy of such list to JAMS and the other party. If
two different judges are stricken from the Judge List, the remaining
judge shall conduct the arbitration. If only one judge is stricken from
the Judge List, JAMS shall select a judge from the remaining two judges
on the Judge List to conduct the arbitration.
(c) The arbitrator shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrator shall have the authority to order payment
of damages, reimbursement of costs, including those incurred to enforce
this Agreement, and interest thereon in the event the arbitrators
determine that a material breach of this Agreement has occurred. A
decision by the arbitrator shall be final and binding. Judgment may be
entered on the arbitrator's award in any court having jurisdiction.
32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
QUANTA SERVICES, INC.
By:
_____________________________________
Its:
_____________________________________
UNDERGROUND ACQUISITION, INC.
By:
_____________________________________
Its:
_____________________________________
UNDERGROUND CONSTRUCTION CO., INC.
By:
_____________________________________
Its:
_____________________________________
FIVE POINTS CONSTRUCTION COMPANY
By:
_____________________________________
Its:
_____________________________________
XXXXX X. XXXXX, TRUSTEE OF THE XXXXX X. XXXXX
REVOCABLE TRUST, DATED AUGUST 11, 1994
_________________________________________
Xxxxx X. Xxxxx, Trustee
XXXX X. XXXX AND XXXXX X. XXXX, TRUSTEES
UNDER THE XXXX X. XXXX AND XXXXX X. XXXX
TRUST DATED OCTOBER 12, 1993
_________________________________________
Xxxx X. Xxxx, Trustee
_________________________________________
Xxxxxx X. XxXxxxx, Xx., Individually
_________________________________________
Xxxxx X. Xxxxxxxx, Individually
_________________________________________
Xxxxx X. Xxxxx, Individually
XXX-XXXXX AND XXX X. XXXXXX, TRUSTEES UNDER THE
XXX-XXXXX XXXXXX AND XXX X. XXXXXX REVOCABLE
LIVING TRUST DATED NOVEMBER 23, 1994
_________________________________________
Xxx-Xxxxx Xxxxxx, Trustee
_________________________________________
Xxxxxxxx X. Xxxxxxx, Individually
_________________________________________
Xxxxxx X. Xxxxx, Individually
_________________________________________
Xxxxxxx X. Xxxxx, Individually
_________________________________________
Xxxxxx X. Xxxxxxxx, Individually
_________________________________________
Xxxxx X. Xxxxxxx, Individually
_________________________________________
Xxxxxxx X. Xxxxxxxx, Individually
