EXHIBIT 2.1
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
by and among
QUANTA SERVICES, INC.,
QUANTA I ACQUISITION, INC.,
THE XXXX COMPANY, INC.
XXXX X. XXXX
XXXX X. XXXX 1998 RETAINED ANNUITY TRUST, XXXXXXXX X. XXXX
AND XXX X. XXXXXXXX TRUSTEES
XXXXX X. XXXXXXX
XXXXXXX FAMILY IRREVOCABLE TRUST OF 1998, XXXX X. XXXX
TRUSTEE
AND
XXXXX X. XXXXXXX 1998 RETAINED ANNUITY TRUST, XXXX X. XXXX AND
XXXX X. XXXXXXX, TRUSTEES
Dated as of February 12, 1999
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1. Definitions.......................................................... 1
1.2. Interpretation....................................................... 5
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger........................................................... 5
2.2. Effective Time of the Merger......................................... 5
2.3. Articles of Organization, By-laws and Board of Directors of Surviving
Corporation......................................................... 5
ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Shares................................................. 6
3.2. Conversion of Newco Shares........................................... 6
3.3. Delivery of Merger Consideration..................................... 6
ARTICLE IV
CLOSING
4.1. Closing.............................................................. 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
5.1. Due Organization and Qualification................................... 7
5.2. Authorization; Non-Contravention; Approvals.......................... 7
5.3. Capitalization and Ownership......................................... 8
5.4. Subsidiaries......................................................... 8
5.5. Financial Statements................................................. 9
5.6. Liabilities and Obligations.......................................... 9
5.7. Accounts and Notes Receivable........................................ 10
5.8. Assets............................................................... 10
5.9. Material Customers and Contracts..................................... 11
5.10. Permits.............................................................. 11
5.11. Environmental Matters................................................ 12
5.12. Labor and Employee Relations......................................... 12
5.13. Insurance............................................................ 13
5.14. Compensation; Employment Agreements.................................. 13
5.15. Noncompetition, Confidentiality and Nonsolicitation Agreements....... 13
5.16. Employee Benefit Plans............................................... 13
5.17. Litigation and Compliance with Law................................... 15
5.18. Taxes................................................................ 15
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5.19. Absence of Changes.................................................. 16
5.20. Accounts with Banks and Brokerages; Powers of Attorney.............. 17
5.21. Absence of Certain Business Practices............................... 17
5.22. Competing Lines of Business; Related-Party Transactions............. 17
5.23. Intangible Property................................................. 18
5.24. No Implied Representations.......................................... 18
5.25. Disclosure.......................................................... 18
5.26. Year 2000 Compliance................................................ 18
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
6.1. Organization......................................................... 18
6.2. Authorization; Non-Contravention; Approvals.......................... 18
6.3. Quanta Common Stock.................................................. 19
6.5. No Implied Representations........................................... 19
6.6. Disclosure........................................................... 19
ARTICLE VII
CERTAIN COVENANTS
7.1. Release From Guarantees.............................................. 20
7.2. Future Cooperation; Tax Matters...................................... 20
7.3. Expenses............................................................. 20
7.4. Legal Opinion........................................................ 20
7.5. Employment Agreements................................................ 21
7.6. Repayment of Related Party Indebtedness.............................. 21
7.7. Stock Options........................................................ 21
7.8. Lease Agreement...................................................... 21
7.9. Section 338 (h)(10) Election......................................... 21
ARTICLE VIII
INDEMNIFICATION
8.1. General Indemnification by the Stockholder........................... 21
8.2. Indemnification by Quanta............................................ 22
8.3. Third Person Claims.................................................. 22
8.4. Non-Third Person Claims.............................................. 23
8.5. Indemnification Deductible........................................... 23
8.6. Indemnification Limitation........................................... 23
8.7. Indemnification for Negligence of Indemnified Party.................. 23
8.8. Subrogation.......................................................... 23
8.9. Indemnification Exclusive Remedy..................................... 23
ARTICLE IX
NONCOMPETITION COVENANTS
9.1. Prohibited Activities................................................ 24
9.2. Equitable Relief..................................................... 25
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9.3. Reasonable Restraint................................................. 25
9.4. Severability; Reformation............................................ 25
9.5. Material and Independent Covenant.................................... 25
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. General.............................................................. 25
10.2. Equitable Relief..................................................... 26
ARTICLE XI
11.1. Compliance with Law.................................................. 26
11.2. Economic Risk; Sophistication; Accredited Investors.................. 26
11.3. Rule 144 Reporting................................................... 27
11.4. Lockup Period........................................................ 27
ARTICLE XII
MISCELLANEOUS
12.1. Successors and Assigns............................................... 27
12.2. Entire Agreement..................................................... 28
12.3. Counterparts......................................................... 28
12.4. Brokers and Agents................................................... 28
12.5. Notices.............................................................. 28
12.6. Survival of Representations and Warranties........................... 29
12.7. Exercise of Rights and Remedies...................................... 29
12.8. Reformation and Severability......................................... 29
12.9. Governing Law........................................................ 29
12.10. Dispute Resolution................................................... 30
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ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
THIS ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 12th day of February, 1999, by and among Quanta Services, Inc., a
Delaware corporation ("Quanta"), Quanta I Acquisition, Inc., a Delaware
corporation that is a wholly owned subsidiary of Quanta ("Newco"), The Xxxx
Company, Inc., a Massachusetts corporation (the "Company"), Xxxx X. Xxxx, Xxxx
X. Xxxx 1998 Retained Annuity Trust, Xxxxxxxx X. Xxxx and Xxx X. XxXxxxxx,
Trustees, Xxxxx X. Xxxxxxx, Xxxxxxx Family Irrevocable Trust of 1998, Xxxx X.
Xxxx, Trustee and Xxxxx X. Xxxxxxx Retained Annuity Trust, Xxxx X. Xxxx and Xxxx
X. Varsico, Trustees (such individuals and trusts being collectively referred to
herein as the "Stockholders"), with the Stockholders being the Company's only
stockholders.
WHEREAS, the respective Boards of Directors of Newco and the Company
(collectively referred to as "Constituent Corporations") deem it advisable and
in the best interests of the Constituent Corporations and their respective
stockholders that Newco merge with and into the Company; and
WHEREAS, the Boards of Directors of the Constituent Corporations have
approved and adopted this Agreement as a plan of reorganization; and
WHEREAS, the stockholders of the Constituent Corporations have approved the
Merger in accordance with the GCL and the MBCA;
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.
"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 Section 5.16.
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"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Competitive Business" means any business that competes with the Company,
including, without limitation, any business that provides specialty electrical
contracting services to Governmental Authorities.
"Constituent Corporations" has the meaning set forth in the second
paragraph of this Agreement.
"Covered Person" has the meaning set forth in Section 9.1.
"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 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 (b) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of any Hazardous Substance, in each case as
amended and as in effect on the Closing Date. The term "Environmental Law"
includes, without limitation, 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 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.
"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 12.6.
"Financial Statements" has the meaning set forth in Section 5.5.
"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.
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"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 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.
"Knowledge" or "Company's Knowledge" means the actual knowledge, after due
inquiry, of Xxxx X. Xxxx or Xxxxx X. Xxxxxxx.
"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.
"Lockup Period" has the meaning set forth in Section 11.4.
"Loss" or "Losses" means all liabilities, losses, claims, damages
(excluding consequential, special and incidental 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 any insurance proceeds collected by
the Indemnified Party with respect thereto.
"Material Contracts" has the meaning set forth in Section 5.9.
"Material Customers" has the meaning set forth in Section 5.9.
"MBCL" means the Massachusetts Business Corporation Law, as amended.
"Merger Consideration" has the meaning set forth in Section 3.1.
"Merger Filings" has the meaning set forth in Section 2.2.
"Merger" has the meaning set forth in Section 2.1.
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"Newco" has the meaning set forth in the first paragraph of this Agreement.
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Noncompete Term" has the meaning set forth in Section 9.1(a).
"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 Sheet, (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 (c) obligations under operating and
capital leases described in Schedule 5.9, and (d) in the case of real property
owned by the Company, (i) easements, covenants, restrictions and similar
encumbrances that do not materially interfere with the use of such real
property as currently used and improved and (ii) minor encroachments that do not
materially adversely affect the value or use of such real property as currently
used and improved.
"Plan" has the meaning set forth in Section 5.16.
"Qualified Plan" has the meaning set forth in Section 5.16.
"Restricted Shares" has the meaning set forth in Section 11.1.
"Rule 144" means Rule 144 as promulgated under the 1933 Act.
"SEC" means the Securities and Exchange Commission.
"Stockholders" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"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.
1.2. Interpretation. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
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(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.
ARTICLE II
THE MERGER AND THE SURVIVING CORPORATION
2.1. The Merger.
(a) Upon the terms and subject to the conditions of this Agreement, at
the Effective Time in accordance with the MBCA and the GCL, Newco shall be
merged with and into the Company and the separate existence of Newco shall
thereupon cease (the "Merger).
(b) The Company 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 Company
Common Stock approve the Merger, and (b) certificates of merger or articles of
merger, as appropriate, in forms mutually acceptable to Quanta and the Company,
are filed with the Secretaries of State of the States of Delaware and
Massachusetts, respectively (collectively, 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 Organization, By-laws and Board of Directors of Surviving
Corporation. As a result of the Merger and at the Effective Time:
(a) the Articles of Organization of the Company in effect immediately
prior to the Effective Time shall become the Articles of Organization of
the Surviving Corporation. After the Effective Time, the Articles of
Organization of the Surviving Corporation may be amended in accordance with
their terms and as provided in the MBCL;
(b) the Bylaws of the Company 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 or as provided by
the Articles of Organization of the Surviving Corporation and the MBCL; 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.
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ARTICLE III
CONVERSION OF SHARES
3.1. Conversion of Shares. At the Effective Time, by virtue of the Merger,
and without any action on the part of any holder of any capital stock of the
Company, the issued and outstanding shares of common stock, $no par value, of
the Company as of the Effective Time (the "Company Common Stock") shall be
converted into the right to receive, and become exchangeable for, (a) an
aggregate of 263,665 shares of Quanta Common Stock and (b) $21,400,796 in cash,
which cash and shares of Quanta Common Stock shall be exchangeable for all the
Company Common Stock at the Effective Time and issued to the Stockholders (the
Quanta Common Stock and cash paid in exchange for the Company Common Stock being
herein collectively referred to as the "Merger Consideration").
3.2. Conversion of Newco Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of Quanta, as the sole holder of
capital stock of Newco, each issued and outstanding share of common stock, par
value $.01 per share, of Newco shall be converted into one share of common
stock, no par value, of the Surviving Corporation.
3.3. Delivery of Merger Consideration. At the Closing, (a) the
Stockholders shall furnish to Quanta the certificates representing their Company
Common Stock, duly endorsed in blank by the holder thereof 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 such Stockholder set forth in Schedule 3.1) and a copy of an irrevocable
instruction letter to its transfer agent directing the transfer agent to deliver
to the Stockholders certificates representing the shares of Quanta Common Stock
to be delivered to the Stockholders pursuant to Section 3.1. The Stockholders
agree promptly to cure, or cause to be cured, 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.
ARTICLE IV
CLOSING
4.1. Closing. The consummation of the Merger and delivery of the Merger
Consideration hereof and the other transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Xxxxxxx, Procter & Xxxx, LLP,
Exchange Place, Boston, Massachusetts concurrently with the execution of this
Agreement or at such other time and date as Quanta, the Company and the
Stockholder 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. The Company is a corporation duly
organized, legally existing and in good standing under the Laws of the
Commonwealth of Massachusetts and is duly qualified
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to do business under all applicable Laws and to carry on its business in the
places and in the manner as now conducted as a foreign corporation. The 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 the
Company is qualified to do business as a foreign corporation and in which,
either the ownership or use of the properties owned or used by it, or the nature
of the activities conducted by it, requires such qualification. True, complete
and correct copies of the Articles of Organization and By-laws, each as amended,
of the Company are attached hereto as Schedule 5.1. Correct and complete copies
of all stock records and minute books of the Company have been provided to
Quanta, and correct and complete copies of all other stock records and minute
books of the Company have been made available to Quanta.
5.2. Authorization; Non-Contravention; Approvals.
(a) The Company has the requisite power and authority to enter into
this Agreement and to effect the Merger. Each of the Stockholders 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 the Company and by each of the Stockholders. No
additional corporate proceedings on the part of the Company is necessary to
authorize the execution and delivery of this Agreement and the consummation
by the Company of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and each of the
Stockholders, and, assuming the due authorization, execution and delivery
hereof by Quanta and Newco, constitutes a valid and binding agreement of
the Company and each of the Stockholders, enforceable against each of them
in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company and
each of the Stockholders do not, and the consummation by the Company and
each of 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 the Company under any of the terms,
conditions or provisions of, (i) the Articles of Organization or Bylaws of
the Company, (ii) any Laws applicable to the Company or the Stockholders or
any of the Company's 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 of the Stockholders or the Company is
now a party or by which the 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 Company
and the Stockholders or the consummation by the 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 $25,000, or in the aggregate in excess of $50,000, or other
material agreements, licenses or permits to which the Company is a party
requires notice to, or the consent or approval of, any third
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party for the execution and delivery of this Agreement by the Company and
the Stockholders and the consummation of the transactions contemplated
hereby.
5.3. Capitalization and Ownership. The authorized capital stock of the
Company consists solely of 1,000 shares of Company Common Stock, of which 700
shares are issued and outstanding. All of the issued and outstanding shares of
the Company Common Stock are owned beneficially and of record by the
Stockholders. 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 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 Filing in Massachusetts, the Merger will
become effective in Massachusetts. 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 the Company to
issue any of its capital stock or any of the Stockholders to transfer any of the
capital stock of the Company.
5.4. Subsidiaries. Except as set forth in Schedule 5.4, the Company does
not own, of record or beneficially, or control, directly or indirectly, any
capital stock, securities convertible into or exchangeable for capital stock or
any other equity interest in any corporation, association or other business
entity. Schedule 5.4 reflects the capitalization and equity ownership of the
entities listed therein. Except as set forth in Schedule 5.4, the Company is
not, directly or indirectly, a participant in any joint venture, limited
liability company, partnership or other noncorporate entity.
5.5. Financial Statements.
(a) The Company has delivered to Quanta complete and correct copies of
the following financial statements: the audited balance sheets of the
Company as of December 31, 1998, 1997 and 1996 and the related audited
statement of operations, stockholders' equity and cash flows for the three-
year period ended December 31, 1998 (the "Balance Sheet Date"), together
with the related notes, schedules and audit report of the Company's
independent accountants (the "Financial Statements"). The audited balance
sheet of the Company as of December 31, 1998 is hereinafter referred to as
the "Balance Sheet".
(b) Except as set forth in Schedule 5.5, the Financial Statements have
been prepared from the books and records of the Company in conformity with
GAAP and present fairly the financial position and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the 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 the 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 Company did not have, nor has it 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
8
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 ordinary course
of business and are described in Schedule 5.6 or in Schedule 5.17. Schedule 5.6
contains a reasonable estimate by the Stockholders of the maximum amount that
may be payable with respect to liabilities (including any contingent obligations
arising out of recoveries of sums under previously closed contracts) which are
not fixed. For each such liability for which the amount is not fixed or is
contested, the Company has provided a summary description of the liability
together with copies of all relevant documentation relating thereto. Schedule
5.6 sets forth the 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 the 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 Balance Sheet. 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 Company, including without limitation those
classified as current assets on the Balance Sheet, 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 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 Company (consistent with the methods used in the Financial
Statements) with respect to receivables of the Company after the Balance Sheet
Date.
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 Balance Sheet and all
other tangible assets of the Company with a book value in excess of $10,000
(i) owned by the Company as of the Balance Sheet Date and (ii) acquired
since the Balance Sheet Date (except for dispositions of such assets since
the Balance Sheet Date in the ordinary course of business consistent with
past practices), including in each case true, complete and correct copies
of leases for significant equipment and for all real property leased by the
Company and descriptions of all real property on which buildings,
warehouses, workshops, garages and other structures used in the operation
of the business of the Company are situated. Schedule 5.8 indicates which
assets used in the operation of the business of the Company are currently
owned by the Stockholders or Affiliates of the Company or the
Stockholders. Except as specifically identified in Schedule 5.8, all of
the tangible assets, vehicles and other significant machinery and equipment
of the Company listed in Schedule 5.8 are in good working order and
condition, ordinary wear and tear excepted. Except as specifically
described in Schedule 5.8, all fixed assets with a book value in excess of
$10,000 used by the Company in its business are either owned by the 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, and to the knowledge of the Company and
the Stockholders, the other parties thereto in accordance with their
respective terms. Schedule 5.8 contains true, complete and correct copies
of
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all title reports and title insurance policies received or owned by the
Company in respect of real property owned by it.
(b) The 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.
(c) Except as specifically described in Schedule 5.8, the tangible and
intangible assets of the Company include all the assets with a book value
in excess of $10,000 used in the operation of the business of the 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% or more of the Company's revenues for the fiscal year ended
in 1998 or the interim period ended on the Balance Sheet Date (the
"Material Customers"), and (ii) all executory contracts, warranties,
commitments and similar agreements to which the Company is currently a
party or by which it or any of its properties is bound which fall within
the following categories (collectively, the "Material Contracts") (A) all
customer contracts in excess of $10,000, individually, or $25,000 in the
aggregate, including, without limitation, consignment contracts, (B)
contracts with any labor organizations, (C) leases providing for annual
rental payments in excess of $5,000, individually, or $10,000 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 the 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 aggregate. Prior to the date
hereof, the 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, (i) no Material
Customer has canceled or substantially reduced or, to the knowledge of the
Company, is threatening to cancel or substantially reduce its purchases of
the Company's products or services, and (ii) the Company is in compliance
with all material commitments and obligations pertaining to it under the
Material Contracts and is not in default under any of the Material
Contracts, no notice of default has been received by the Company, and to
the knowledge of the Company there is no basis therefor.
(c) Except to the extent set forth in Schedule 5.9, the Company is not
a party to any governmental contracts subject to price redetermination or
renegotiation. Except to the extent set forth in Schedule 5.9, the Company
is not 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.
10
(d) Schedule 5.9 sets forth a summary of each outstanding bid or
proposal by the Company that, if awarded to the Company, contemplates
payments to the 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 the Company's open jobs and a
job cost schedule supporting the Balance Sheet, which Schedule 5.9 includes
the 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 the Company, including, without
limitation, permits, licenses and operating authorizations, titles (including
motor vehicle titles and current registrations), fuel permits, franchises,
certificates, but excluding any trademarks, trade names, patents, patent
applications and copyrights or other intangible property required to be
disclosed pursuant to Section 5.23 owned or held by the Company (the "Permits").
The Permits are valid, and the Company has not 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 business of the Company as conducted at the Balance Sheet Date
and the ownership of the assets of the Company. The Company has conducted and is
conducting its businesses 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 Company by, any Permits. The term "Permits" does not
include Material Contracts.
5.11. Environmental Matters. Except as set forth in Schedule 5.11, (a) the
Company 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, handling, transportation, treatment or
disposal of Hazardous Substances; (b) the Company has obtained and is in
compliance, 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 the Company
where Hazardous Substances have been treated, stored, disposed of or otherwise
handled; (c) there have been no "releases" (as defined in any Environmental
Laws) at, from, in or on any property owned or operated by the Company in
amounts exceeding those permitted under Environmental Laws (d) there is no on-
site or off-site location to which the Company has transported or disposed of
Hazardous Substances or arranged for the transportation or disposal Hazardous
Substances which to the Company's knowledge 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) the Company has no 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 the Company is currently or has ever been
designated as a treatment, storage and/or disposal facility, nor has any such
facility
11
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,
the Company is not bound by or subject to any arrangement with any labor union.
Except as set forth in Schedule 5.12, no employees of the Company are
represented by any labor union or covered by any collective bargaining agreement
nor, to the Company's knowledge is any campaign to establish such representation
in progress. Except as set forth in Schedule 5.12, there is no pending or, to
the Company's knowledge, threatened labor dispute involving the Company and any
group of its employees nor has the Company experienced any significant labor
interruptions over the past five years. The Company has no knowledge of any
significant issues or problems in connection with the relationship of the
Company with 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 the 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
"claims made" policies. Such policies are currently in full force and effect.
5.14. Compensation; Employment Agreements. Schedule 5.14 sets forth an
accurate schedule of all officers, directors and Stockholder employees of the
Company with annual salaries of $50,000 or more, listing the rate of
compensation (and the portions thereof attributable to salary, bonus, benefits
and other compensation, respectively) of each of such persons 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 the Company or any Stockholder.
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 the
Company is bound or under which the 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 the Company or an ERISA Affiliate has any
current or future obligation or liability or under which any present or
former employee of the 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, neither the 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 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
12
or business under common control with the Companies as determined under
Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended, (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 the 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 the 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 the Company with respect to any Plan have either been fulfilled in their
entirety or are fully reflected in the Financial Statements.
(c) No Plan has incurred, and neither the 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 within the meaning of
Section 411(d)(3) of the Code 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, neither the Company nor any
ERISA Affiliate has made any promises of retirement or other benefits to
employees, except as set forth in the Plans, and neither the 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. Neither the 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, neither of the Companies 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) Neither the 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
13
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 Company's and any of the Stockholders' knowledge, threatened
claims, lawsuits or actions (other than routine claims for benefits in the
ordinary course) asserted or instituted against, and neither the 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
Company's and each of 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 the Company or any
ERISA Affiliate that has not been fully discharged. Neither the 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) Neither the 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, neither the
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 the 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 either the Company or an ERISA
Affiliate under applicable Laws for any 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 Company and each of the Stockholders, threatened against or
affecting the Company, at law or in equity, or before or by any Governmental
Authority having jurisdiction over the Company. Except as set forth in Schedule
5.17, no written notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company and, to the Company's
knowledge, there is no basis therefor. Except to the extent set forth in
Schedule 5.17, the Company has conducted and is conducting its businesses in
compliance with all Laws applicable to the Company, its assets or the operation
of its businesses.
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. The Company has timely filed all
requisite federal, state, local and other tax returns for all fiscal periods
ended
14
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. The 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 by any
Governmental Authority against the 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 from any
Governmental Authority. The Company has not granted or been requested to grant
any extension of the limitation period applicable to any claim for Taxes or
assessments with respect to Taxes. The Company is not 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 Company for the last three fiscal years have been previously
provided or made available to Quanta. There are no requests for ruling in
respect of any Tax pending between the Company and any Taxing authority. The
Company has been taxed under the provisions of Subchapter S of the Code
effective as of January 1, 1992. The 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, the 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) or results of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
Company, individually or in the aggregate;
(c) any change in the authorized capital stock of the Company or in
its outstanding securities or any change in the respective Stockholder's
ownership interests in the 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 the Company;
(e) any increase in the compensation payable or to become payable by
the Company to the Stockholders or any of the Company's 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 labor-
related claims filed;
15
(g) except for dispositions of assets, properties and rights in the
ordinary course of business consistent with past practices any sale or
transfer, or any agreement to sell or transfer, any material assets,
properties or rights of the Company to any person, including, without
limitation, any of the Stockholders and their Affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness for
borrowed money or other obligation owing to the Company;
(i) any increase in the indebtedness for borrowed money of the
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) except for dispositions of assets, properties and rights in the
ordinary course of business consistent with past practices, any plan,
agreement or arrangement granting any preferential rights to purchase or
acquire any interest in any of the assets, property or rights of the
Company or requiring consent of any party to the transfer and assignment of
any such assets, property or rights;
(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 the Company's businesses;
(l) any waiver of any material rights or claims of the Company;
(m) any material breach, amendment or termination of any Material
Contract, Permit or other right to which the Company is a party or any of
its property is subject; or
(n) any other material transaction by the 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 the 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 the
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 the Company and a description of the terms thereof.
5.21. Absence of Certain Business Practices. Neither the 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 office that
was illegal to so give or offer to give 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, none of the Stockholders nor any other Affiliate of
the Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
16
business which is in a Competitive Business or is a competitor, lessor, lessee,
customer or supplier of the Company. Except as set forth in Schedule 5.22, no
officer or director of the Company nor any Stockholder has any interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of the 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 the Company. The Company owns or possesses, and the
assets of the Company include, sufficient legal rights to use all of such items
without conflict with or infringement of the rights of others.
5.24. No Implied Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the express understanding of each of the
Stockholders and the 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.
5.25. Disclosure. No 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 such
representations and warranties, in light of the circumstances under which they
were made, not misleading.
5.26. Year 2000 Compliance. Except as set forth on Schedule 5.26, all
devices, systems, machinery, information technology, computer software and
hardware, and other date sensitive technology (jointly and severally its
"systems") necessary for the business of the Company as presently conducted will
be Year 2000 Compliant within a period of time calculated to result in no
material disruption of any of their business operations. For purposes hereof,
"Year 2000 Compliant" means that such systems are designed to be used prior to,
during and after the Gregorian calendar year 2000 A.D. and will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the product of, date data which represents
or references different centuries or more than one century.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF QUANTA AND NEWCO
Quanta and Newco jointly and severally represent and warrant to each of 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.
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
17
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 the 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 Organization 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 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. SEC Filings; Disclosure. Quanta has filed with the SEC all material
forms, statements, reports and documents required to be filed by it prior to the
date hereof under each of the 1933 Act, 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.
6.5. 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.
6.6. Disclosure. No representation or warranty of Quanta contained 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
18
such representations or warranties, 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 Company indebtedness identified in Schedule 7.1 within 90 days after the
Closing Date. Quanta hereby agrees to indemnify and defend the Stockholders and
hold the Stockholders harmless for any amounts that the Stockholders are
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 Company 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 the Company's current Tax years through the Closing. The
Stockholders shall have the right to review any returns prepared by Quanta with
respect to the Company for periods prior to the Closing Date. Such returns
shall be prepared consistent with past practices. Quanta agrees not to file any
tax returns or settle any disputes with the Internal Revenue Service or any
Governmental Entity related to any of the Company's tax returns for which
indemnity may be sought under Section 8.1 of this Agreement without the consent
of the stockholders, which consent will not be unreasonably withheld. 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 Stockholders will pay their fees, expenses and
disbursements and those of their and the Company's 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. The Company will
pay the fees and expenses of Xxxxxx Xxxxxxxx LLP incurred in connection with its
audit or review procedures related to the Financial Statements.
19
7.4. Legal Opinion. At the Closing, the Company and the Stockholder shall
cause their legal counsel, Xxxxxxx, Procter & Xxxx LLP, to deliver to Quanta a
legal opinion in form and substance acceptable to Quanta.
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 or cause to be
repaid 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 or cause to be repaid
all amounts outstanding under loans to the Company from each of the
Stockholders, each of which loans to the Company is specifically reflected in
Schedule 5.6.
7.7. Stock Options. Quanta shall recommend to the Compensation Committee
of its Board of Directors that nonqualified options to purchase an aggregate of
75,000 shares of Quanta Common Stock be granted as of the Closing Date under
Quanta's 1997 Stock Option Plan to the employees of the Companies set forth on
Schedule 7.7 in the respective amounts set forth on such Schedule, which
options, in each case, shall vest in equal annual increments over the four-year
period commencing on the Closing Date.
7.8. Lease Agreement. Concurrently with the execution of this Agreement,
the Surviving Corporation shall enter into a mutually acceptable Lease Agreement
for the Company's Headquarters at 00 Xxxxxxxxx Xxxx Xxxxx, Xxxxxxxx,
Xxxxxxxxxxxxx with the Stockholders or the Affiliates.
7.9. Section 338(h)(10) Election. At Quanta's option, Quanta, the
Surviving Corporation and the Stockholders will jointly make a Section
338(h)(10) election under the Code. Set forth in Schedule 7.9 is an allocation
of the Merger Consideration among the assets of the Company at the time of
Closing as agreed to by all the parties hereto. Such allocation shall be made
in accordance with the provisions of Section 338(b) of the Code and the
regulations promulgated thereunder. The parties hereto also agree to file the
applicable Form relating to the Section 338(h)(10) election consistently with
the foregoing and in accordance with the applicable provisions of Section 338 of
the Code and the regulations promulgated thereunder.
ARTICLE VIII
INDEMNIFICATION
The Stockholders, Quanta and Newco each make the following covenants:
8.1. General Indemnification by the Stockholders. Subject to Sections 8.5
and 8.6, the Stockholders covenant and agree that they will jointly and
severally 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 from and against all Losses incurred by any of
such indemnified persons as a result of or arising from (a) until the Expiration
Date, any breach of the representations and warranties of the Stockholders set
forth
20
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 Company under this Agreement, (c) all taxes due and payable
by the Company for all periods prior to and including the Closing Date, or (d)
all transfer and other Taxes for periods prior to the Closing arising from the
transactions contemplated by this Agreement.
8.2. Indemnification by Quanta. Subject to Sections 8.5 and 8.6, Quanta
covenants and agrees that it will indemnify, defend, protect and hold harmless
each of 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, and (b) any breach
or nonfulfillment of any covenant or agreement on the part of Quanta or Newco
under this Agreement.
8.3. Third Person Claims. Promptly after any party hereto (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, as the case may be, (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, provided that no such consent by
the Indemnified Party shall be required if the settlement thereof imposes no
liability or obligation on, and includes a complete release from liability of,
the Indemnified Party in respect of such Third Person claims. If the
Indemnifying Party desires to accept a final and complete settlement of any such
Third Person claims and the Indemnified Party refuses to consent to such
settlement (if such consent is required), then the Indemnifying Party's
liability under this Section with respect to such Third Person claims 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 in respect of such Third Person claims. 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
21
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. Non-Third Person Claims. In the event that any Indemnified Party
asserts the existence of a claim giving rise to Losses (but excluding claims
resulting from the assertion of liability by Third Persons), such party shall
give written notice to the Indemnifying Party. Such written notice shall state
that it is being given pursuant to this Section 8.4, specify the nature and
amount of the claim asserted, and indicate the date on which such assertion
shall be deemed accepted and the amount of the claim deemed a valid claim (such
date to be established in accordance with the next sentence). If such
Indemnifying Party, within 60 days after the mailing of notice by such
Indemnified Party, shall not give written notice to such Indemnified Party
announcing such Indemnifying Party's intent to contest such assertion of such
Indemnified Party, such assertion shall be deemed accepted and the amount of
such claim shall be deemed a valid claim. In the event, however, that such
Indemnifying Party contests such assertion of a claim by giving such written
notice to the Indemnified Party within said period, then the parties shall act
in good faith to reach agreement regarding such claim. In the event that
litigation shall arise with respect to any such claim, the prevailing party
shall be entitled to reimbursement of costs and expenses incurred in connection
with such litigation including reasonable attorneys' fees, if the parties
hereto, acting in good faith, cannot reach agreement with respect to such claim
within 60 days after the notice provided by the Indemnified Party.
8.5. 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, $284,000. Notwithstanding the foregoing, the
limitations set forth in this Section 8.5 shall not apply to fraudulent
misrepresentations.
8.6. Indemnification Limitation. Subject to Section 8.5, the aggregate
indemnification obligation of the Stockholders under Section 81(a) or Quanta and
Newco under Section 8.2(a) shall be limited to $28,400,000. Notwithstanding the
foregoing, the limitations set forth in this Section 8.6 shall not apply to
fraudulent misrepresentations.
8.7. 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.
8.8. Subrogation. Upon payment in full of any indemnification claim, the
Indemnifying Parties shall be subrogated to the extent of such payment to the
rights of the Indemnified Parties against any person or entity with respect of
such indemnification claim.
8.9. Indemnification Exclusive Remedy. Except for remedies based upon
fraudulent misrepresentations, the remedies in this Article VIII constitute the
sole and exclusive remedies for recovery against the Indemnified Parties based
upon the inaccuracy, untruth, incompleteness or breach of any
22
representation or warranty of any Indemnifying Party contained herein or in any
certificate, schedule or exhibit furnished by any Indemnifying Party in
connection herewith, or based upon the failure of any Indemnifying Party to
perform any covenant, agreement, or undertaking required by the terms hereof to
be performed by such Indemnifying Party.
ARTICLE IX
NONCOMPETITION COVENANTS
9.1. Prohibited Activities.
(a) For no additional consideration, each of Xxxx Xxxx and Xxxxx
Xxxxxxx (each a "Covered Person"), will not for the longer of (y) five
years following the Closing Date and (z) one year following such Covered
Person's voluntary termination of his or her employment agreement with the
Surviving Corporation or its Affiliates or the termination of his or her
employment engagement with the Surviving Corporation or its Affiliates "for
cause," in each case as determined in accordance with the Covered Person'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 within 150 miles of (A) where the
Company conducts business as of the effective date of this
Agreement or has conducted business within the past three
years prior to the effective date of this Agreement, or (B)
where Quanta or the surviving Corporation or an Affiliate of
Quanta or the surviving Corporation conducts business after
the Closing that is, within six months prior to the date of
termination of such Covered Person's employment, business
under his or her supervision or managerial authority (the
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
(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 the Company, Quanta 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.
23
(b) Notwithstanding the above, (i) if the employment of a Stockholder
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,
and (ii) Section 9.1(a) shall not be deemed to prohibit the Covered Person
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.
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 Company 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 of the Covered Persons agrees that the foregoing covenant may be
enforced against him or her 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 the Stockholders in light of the activities
and businesses of the Company on the date of the execution of this Agreement and
the current plans of the Company.
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 of the Stockholders
acknowledges that his or her 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.
ARTICLE X
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1. General. Each of the Stockholders recognizes and acknowledges that he
or she had in the past, currently has, and in the future will have, access to
certain confidential information relating to the businesses of the Company, 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 of the Stockholders agrees that he or she 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
24
the course of performing his or her 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 allowed by law and reasonably 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 the Stockholder of the provisions of this Section,
Quanta shall be entitled to an injunction restraining the Stockholder from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting 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 of the Stockholders
agrees that the foregoing covenants may be enforced against him or her by
injunctions, restraining orders and other equitable actions.
ARTICLE XI
FEDERAL SECURITIES ACT; RESTRICTIONS
ON QUANTA COMMON STOCK
11.1. 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 the Stockholders solely for
their own account, for investment purposes only, and with no present intention
of distributing, selling or otherwise disposing of them in connection with a
distribution. Each Stockholder covenants, warrants and represents 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 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.
11.2. 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 he or she is
capable of evaluating the merits and risks of the proposed investment and
therefore has the capacity to protect his or her own interests in connection
with the acquisition of the Restricted Shares. Each
25
Stockholder represents to Quanta and Newco that he or she is an "accredited
investor," as that term is defined in Regulation D under the 1933 Act. Each
Stockholder or his or her representatives have had an adequate opportunity to
ask questions and receive answers from the officers of Quanta and Newco
concerning, among other matters, Quanta, its management, its plans for the
operation of its business and potential additional acquisitions.
11.3. 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 five years
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 a 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 himself or herself
of any rule or regulation of the SEC allowing such Stockholder to resell
any such shares without registration.
11.4. Lockup Period. The Stockholders covenant, warrant and represent 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 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
11.1:
The shares represented by this certificate are subject to a
contractual restriction on transfer that expires on February 12, 2000
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 XII
MISCELLANEOUS
12.1. 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 Company, and the heirs and
legal representatives of the Stockholders.
26
12.2. Entire Agreement. This Agreement (including the Schedules, exhibits
and annexes attached hereto and that certain letter agreement dated the date
hereof by and among Quanta, the Company and the Stockholders) and the documents
delivered pursuant hereto constitute the entire agreement and understanding
among the Stockholders, the Company, Newco and Quanta and supersede any prior
agreement and understanding relating to the subject matter of this Agreement.
This Agreement may be modified or amended only by a written instrument executed
by the Stockholders, the Company, Newco and Quanta, acting through their
respective officers, duly authorized by their respective Boards of Directors.
12.3. 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.
12.4. Brokers and Agents. Except for the Company's engagement of Xxxx &
Company whose fees and expenses are liabilities and obligations of the
Stockholders, each party represents and warrants that it employed no broker or
agent in connection with the transactions contemplated by this Agreement. Each
party agrees to indemnify each other party against all loss, cost, damages or
expenses arising out of claims for fees or commissions of brokers employed or
alleged to have been employed by such indemnifying party (it being understood
that the Stockholders, and not the Company, shall be responsible for the
indemnification obligation which may arise in connection with any claims for
fees or commissions of brokers made by any person who alleges to have been
employed by the Company).
12.5. 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
27
(b) If to the Stockholders, addressed as follows:
Xxxx X. Xxxx
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
And
Xxxxx X. Xxxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
With a copy (which shall not constitute notice) to:
Xxxxxxx, Procter & Xxxx XXX
Xxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
ATTN: Xxxxxxxxx X. Xxxxx
or such other address as any party hereto shall specify pursuant to this Section
12.5 from time to time.
12.6. Survival of Representations and Warranties. The representations and
warranties set forth in ARTICLE V and ARTICLE VI or in any Schedule, Exhibit,
certificate, financial statement or other instrument delivered under or in
connection with this Agreement shall survive the Closing for a period of one
year from the Closing Date (the "Expiration Date") at which time they shall
expire and be of no further force or effect, 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.
12.7. 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.
12.8. 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
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.
28
12.9. Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Massachusetts applicable to agreements entered
into and fully to be performed in Massachusetts by Massachusetts residents.
[Remainder of page intentionally left blank.]
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an
instrument under seal as of the date first written above.
QUANTA SERVICES, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx, Vice-President & General Counsel
QUANTA I ACQUISITION, INC.
By: /s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx, President
THE XXXX COMPANY, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Name:
Title:
/s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx, Individually
/s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx X. Xxxxxxx, Individually
30
XXXX X. XXXX 1998 RETAINED ANNUITY TRUST
By:/s/ Xxxxxxxx X. Xxxx
--------------------------------
Xxxxxxxx X. Xxxx, Trustee
By:/s/ Xxx X. XxXxxxxx
--------------------------------
Xxx X. XxXxxxxx, Trustee
XXXXXXX FAMILY IRREVOCABLE TRUST OF 1998
By:/s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx, Trustee
XXXXX X. XXXXXXX 1998 RETAINED ANNUITY TRUST
By:/s/ Xxxx X. Xxxx
--------------------------------
Xxxx X. Xxxx, Trustee
By:/s/ Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx, Trustee
31
