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EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 12, 1998
BY AND AMONG
AMERICAN RESIDENTIAL SERVICES, INC.,
FREESTATE ELECTRICAL ACQUISITION, INC.,
FREESTATE ELECTRICAL SERVICE COMPANY, INC.
AND
THE STOCKHOLDER NAMED HEREIN
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Forward Merger; Section 368(a)(2)(D); Single Stockholder
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of May 12, 1998, by and among American Residential Services, Inc., a
Delaware corporation ("ARS"), Freestate Electrical Acquisition, Inc., a
Maryland corporation and a wholly owned subsidiary of ARS ("ARS Sub"),
Freestate Electrical Service Company, Inc., a Maryland corporation (the
"Company"), and the person listed on the signature page hereof under the
caption "Stockholder" (the "Stockholder").
PRELIMINARY STATEMENT
The parties to this Agreement have determined it is in their best
long-term interests to effect a business combination by means of a Merger
pursuant to which the Company will merge into ARS Sub on the terms and subject
to the conditions set forth herein (that Merger being the "Acquisition").
The respective boards of directors of ARS, ARS Sub and the
Company have approved and adopted this Agreement to effect a reorganization
under Section 368(a)(2)(D) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and undertakings contained herein, the parties
hereto hereby agree as follows:
Paragraph 1. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Paragraph
1. Capitalized terms used in this Agreement and not defined below in this
Paragraph 1 have the meanings assigned to them in the Preliminary Statement,
Article IX of the Standard Provisions or the Special Provisions, as the case
may be.
"Acquired Business" means the Company.
"Acquisition Consideration" has the meaning specified in
Paragraph 2.
"ARS Award Agreement" means the award agreement pursuant to which
ARS, on the Closing Date, will grant to Xxxxx X. Xxxxxxxxx, pursuant to
the American Residential Services, Inc. 1997 Employee Incentive Plan, or
other similar stock option plan, a nonqualified option to purchase
12,500 shares of ARS Common Stock, exercisable as to 33 1/3% of the
shares underlying such option on the date of grant and as to 33 1/3% of
the shares underlying the option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York Stock Exchange on the date of the grant.
"Calculated Value" has the meaning specified in Schedule 2(B).
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"Ceiling Amount" means, in the aggregate with the "Ceiling
Amount" as set forth in the Construction Company Agreement, $10,370,000;
provided, however, that, for purposes of Section 7.06(b), the Ceiling
Amount means, in the aggregate with the "Ceiling Amount" as set forth in
the Construction Company Agreement, (x) $8,415,000 until such time as
the debt evidenced by the Promissory Notes referred to in Schedule 2.16
is discharged and (y) $5,185,000 after the date that all the debt
evidenced by the Promissory Notes referred to in Schedule 2.16 is
discharged. Each of the parties to this Agreement intend that the
Ceiling Amount set forth in this Agreement and the Ceiling Amount set
forth in the Construction Company Agreement will not, in the aggregate,
exceed the amounts set forth in the preceding sentence (e.g., if there
are Stockholder Indemnified Losses under the Construction Company
Agreement in the amount of $100,000, than such $100,000 amount will be
credited against the Ceiling Amounts under this Agreement and the
Construction Company Agreement.)
"Closing" has the meaning specified in Paragraph 3.
"Closing Date" means May 12, 1998 or such later date as to which
ARS and the Company may agree in writing.
"Company" means Freestate Electrical Service Company, Inc., a
Maryland corporation.
"Company Capital Stock" means the Common Stock, no par value, of
the Company.
"Construction Company Agreement" means the Agreement and Plan of
Reorganization, dated as of the date hereof, by and among ARS, Freestate
Acquisition, Inc., Freestate Electrical Construction Company and the
Stockholder.
"Counsel for the Company and the Stockholder" means Xxxx, Xxxx &
Xxxxx.
"Current Balance Sheet" means the balance sheet of the Company as
of December 31, 1997.
"Current Balance Sheet Date" means December 31, 1997.
"Effective Date" means the Closing Date.
"Facilities" means the real property and improvements located at
0000 Xxx-Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx (exclusive of the telephone
antenna), as more fully described in the Facilities Lease.
"Facilities Lease" means the lease in the form thereof attached
hereto as Exhibit 1-B pursuant to which 6623 Mid Cities, LLC, a Maryland
limited liability company, will lease the Facilities to ARS Sub for the
period and on the terms specified therein.
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"Xxxxxx Attorney Fees" has the meaning specified in Section 6.06.
"Initial Financial Statements" means the balance sheets of the
Company as of December 31, 1996 and 1997 and the related statements of
operations and retained earnings for each of the Company's fiscal years
in the two-year period ended December 31, 1997.
"MGCL" means the Maryland General Corporation Law.
"Responsible Officer" mean Xxxxxxx X. Xxxxx.
"Special Provisions" has the meaning specified in Paragraph 5.
"Standard Provisions" has the meaning specified in Paragraph 4.
"Surviving Corporation" means ARS Sub, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Threshold Amount" means $140,000; provided that the Threshold
Amount shall be reduced from time to time by an amount equal to any
Xxxxxx Attorney Fees actually paid by ARS or any of its affiliates.
Paragraph 2. (A) Certificate of Merger. Subject to the terms
and conditions hereof, the Company will cause a Certificate of Merger to be
duly executed and delivered on or promptly after the Closing Date and filed
with the State Department of Assessments and Taxation of the State of Maryland.
(B) The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the Effective Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 5:00 p.m., Houston, Texas time, on the Effective Date.
(C) Certain Effects of the Merger. At and as of the Effective
Time, (1) the Company will be merged with and into ARS Sub in accordance with
the provisions of the MGCL, (2) the Company will cease to exist as a separate
legal entity, (3) the articles of incorporation of ARS Sub will be amended to
change the name of the corporation to "Freestate Electrical Service Company,
Inc.," (4) ARS Sub will be the Surviving Corporation and, as such, will, all
with the effect provided by the MGCL, (a) possess all the properties and
rights, and be subject to all the restrictions and duties, of the Company and
ARS Sub and (b) be governed by the laws of the State of Maryland, (5) the
Charter Documents of ARS Sub then in effect (after giving effect to the
amendment to ARS Sub's articles of incorporation described in clause (3)
hereof) will become and thereafter remain (until changed in accordance with (a)
applicable law (in the case of the articles of incorporation) or (b) their
terms (in the case of the bylaws)) the Charter Documents of the Surviving
Corporation, (5) the initial board of directors of the Surviving Corporation
will be the persons named in Schedule 2(C), and those persons will hold the
office of director of the Surviving Corporation, subject to the
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provisions of the applicable laws of the State of Maryland and the Charter
Documents of the Surviving Corporation, and (6) the initial officers of the
Surviving Corporation will be as set forth in Schedule 2(C), and each of those
persons will serve in each office specified for that person in Schedule 2(C),
subject to the provisions of the Charter Documents of the Surviving
Corporation, until that person's successor is duly elected to, and, if
necessary, qualified for, that office.
(D) Effect of the Merger on Capital Stock. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(1) the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time will (a) be converted into the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, on surrender of the certificates evidencing those shares, the
amount of cash as provided in Schedule 2(B) (the "Acquisition
Consideration"), (b) cease to be outstanding and to exist and (c) be
canceled and retired;
(2) each share of Company Capital Stock held in the treasury
of the Company or any Company Subsidiary will (a) cease to be
outstanding and to exist and (b) be canceled and retired; and
(3) each share of the Common Stock, par value $1.00 per share,
of ARS Sub issued and outstanding immediately prior to the Effective
Time will remain unchanged and such shares will constitute all the
issued and outstanding shares of Capital Stock of the Surviving
Corporation.
Each holder of a certificate representing shares of Company Capital Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, subject to the provisions of Paragraph 2(E), without
interest, the Acquisition Consideration and the additional cash, if any, owing
with respect to those shares as provided in Paragraph 2(F).
(E) Delivery, Exchange and Payment. (1) At or after the
Effective Time: (a) the Stockholder, as the holder of certificates
representing all the outstanding shares of Company Capital Stock, will, on
surrender of those certificates to ARS (or any agent that may be appointed by
ARS for purposes of this Paragraph 2(E)), receive, subject to the provisions of
this Paragraph 2(E), the Acquisition Consideration.
(2) The Stockholder will deliver to ARS (or any agent that may
be appointed by ARS for purposes of this Paragraph 2(E)) on or before the
Closing Date the certificates representing all the Company Capital Stock owned
by the Stockholder, duly endorsed in blank, or accompanied by stock powers in
blank duly executed, by that Person, and with all necessary transfer tax and
other revenue stamps, acquired at that Person's expense, affixed and canceled.
The Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting,
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or in the stock powers accompanying, the certificates representing Company
Capital Stock delivered by that Person.
Paragraph 3. The Closing. On or before the Closing Date, the
parties hereto will take all actions necessary to (A) effect the Acquisition
(including, as permitted by the MGCL, (i) the execution of a Certificate of
Merger (a) meeting the requirements of the MGCL and (b) providing that the
Merger will become effective on the Effective Date and (ii) the filing of the
Certificate of Merger with the State Department of Assessments and Taxation of
the State of Maryland, (B) verify the existence and ownership of the
certificates evidencing the Company Capital Stock to be exchanged for the
Acquisition Consideration pursuant to Paragraph 2(E) and (C) satisfy the
document delivery requirements on which the obligations of the parties to
effect the Acquisition and the other transactions contemplated hereby are
conditioned by the provisions of Article V (all those actions collectively
being the "Closing"). The Closing will take place at the offices of Xxxxx &
Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx at 10:00 a.m., Houston time, or at
such later time on the Closing Date as ARS shall specify by written notice to
Xxxxxxx X. Xxxxx.
Paragraph 4. Incorporation of Standard Provisions.
(a) The American Residential Services, Inc. Standard Provisions
for Business Combinations, marked "Form 98-1 (BC)" and attached hereto as Annex
1 (the "Standard Provisions"), hereby are incorporated in this Agreement by
this reference and constitute a part of this Agreement with the same force and
effect as if set forth at length herein.
(b) Section 2.14(b) hereby is amended by adding "written"
before "notice" in clause (ii)(A) thereof.
(c) Section 2.15 hereby is amended by (i) deleting "and which
relate to the reporting by the Company and each Company Subsidiary" from clause
(a) and inserting in lieu thereof "which requires reporting by the Company and
each Company Subsidiary to applicable Governmental Authorities," (ii) adding
"at a material cost" after "remediation" in clause (b) and (iii) adding "deed"
before "restrictions" in clause (b).
(d) Section 3.07 hereby is amended by deleting the word
"directly" in the last sentence of Section 3.07 and inserting in lieu thereof
the word "indirectly."
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(e) Article III hereby is amended by adding Sections 3.09,
3.10, 3.11 and 3.12 as follows:
Section 3.09. Financial Statements and Reports. The
audited financial statements in the Form 10-K filed by ARS with the SEC
for fiscal year 1997 have been prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of ARS and its
Subsidiaries as at the date thereof and the results of their operations
and changes in financial position for the period then ended.
Section 3.10. Absence of Undisclosed Liabilities. Except
as set forth in the Form 10-K filed by ARS with the SEC for fiscal year
1997, neither ARS nor any of its Subsidiaries (i) had as of December 31,
1997, any material liability which was then required to be accrued,
reserved against or otherwise disclosed in the consolidated financial
statements of ARS and its Subsidiaries under GAAP or (ii) has incurred
after December 31, 1997, any such material liability except in the
ordinary course of business and consistent with past practice.
Section 3.11. Absence of Certain Changes or Events.
Since December 31, 1997, there has not been any material adverse change
in the consolidated financial condition, consolidated results of
operations of ARS and its Subsidiaries taken as a whole. As of the
Closing Date, the shares of ARS Common Stock to be delivered to the
Stockholder will be shares which have been (i) duly registered by ARS
pursuant to the Registration Statement and (ii) authorized for listing
on the New York Stock Exchange, subject to notice of issuance.
Section 3.12. No Other Litigation. Except as set forth
in the Current Prospectus, there are no actions at law, investigations,
proceedings, suits in equity or claims pending or, to the knowledge of
ARS, threatened, against or affecting ARS and its consolidated
Subsidiaries, taken as a whole, which in the aggregate is likely to
result in a material adverse effect on the business or financial
condition of ARS and its consolidated Subsidiaries taken as a whole.
(f) Section 5.02 hereby is amended by deleting clause (b) and
inserting in lieu thereof the following:
(b) all the following conditions:
(1) Representations and Warranties. All the
representations and warranties of ARS in Article III shall be
true and correct as of the Closing Date as though made at that
time;
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(2) Delivery of Documents. ARS and ARS
Sub shall have delivered to the Stockholder and the
Company:
(i) an ARS officer's certificate, in the
form of Exhibit 5.02-1 signed by ARS'
President, respecting the representations
and warranties of ARS in Article III and
compliance with the covenants by ARS and ARS
Sub in Article IV; and
(ii) an opinion dated the Effective Date
and addressed to the Company and the
Stockholder substantially in the form of
Exhibit 5.02-2.
(g) Section 6.01 hereby is amended by adding the following as
the last two sentences:
Notwithstanding the foregoing, the Stockholder will be responsible for
filing the Company's federal income tax return for, and will pay out of
his own funds all federal income taxes attributable to the Company's
operations during, the Company's final year as a subchapter S
corporation under the Code, which will be deemed for purposes of this
Agreement to be the period beginning on January 1, 1998 and ending on
the Closing Date. The Stockholder will be solely responsible for the
expenses he incurs in performing his obligations pursuant to the
preceding sentence.
(h) Section 6.02 hereby is amended by adding the following at
the end thereof:
Notwithstanding the foregoing, ARS will cause the Promissory Notes
executed by Company and Freestate Electrical Construction Company in
favor of First Virginia Bank, which are referred to in Schedule 2.16,
and all indebtedness outstanding thereunder to be discharged on or
before August 1, 1998.
(i) Article VI of the Standard Provisions hereby is amended by
adding thereto the following Sections, which will be and read in their entirety
as follows:
Section 6.04. Use of Names. ARS shall cause the Company, and
its successors and assigns, to continue to use the name "Freestate
Electrical Service Company" for a period of three years after the
Closing Date, or such earlier date as ARS and Xx. Xxxxx may agree.
Section 6.05. Key Employee Stock Options. On the Closing Date,
ARS will grant to Xxxxx X. Xxxxxxxxx a nonqualified option to purchase
12,500 shares of ARS Common Stock, exercisable as to 33 1/3% of the
shares underlying such option on the date of grant and as to 33 1/3% of
the shares underlying the option annually thereafter, at a per share
exercise price equal to the fair market value of a share of ARS Common
Stock on the New York
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Stock Exchange on the date of the grant, such grant to be made pursuant
to the terms and conditions of an ARS Award Agreement which will be
provided to such individual promptly after the Closing Date.
Section 6.06. Certain Additional Indemnities. (a) The Company
and the Stockholder jointly and severally agree, without regard to the
Threshold Amount limitations set forth in Article VII, to indemnify ARS
and ARS Sub against all Damage Claims (excluding any fees and actual
disbursements by attorneys incurred in connection with such Damage
Claims (such fees and disbursements collectively and in the aggregate
referred to herein as "Xxxxxx Attorney Fees")), resulting from, arising
out of or relating to the following:
(i) The complaint filed by Xxxxxx Xxxxxx against
Freestate Electric in the United States District Court for
the District of Columbia, Case Number 1:98CV00907,
disclosed on Schedule 2.12; and
(ii) The charge of discrimination filed on July
1, 1997 with the Equal Employment Opportunity Commission
against Freestate Electric by Xxxxxx Xxxxxx against
Freestate Electric alleging race discrimination, disclosed
on Schedule 2.12.
(b) The Xxxxxx Attorney Fees shall be paid by ARS.
(j) Section 7.04(e) hereby is amended by deleting the number
15 therefrom and inserting the number 30.
(k) Section 8.01 hereby is amended by deleting clause (a) in
its entirety and inserting in lieu thereof the following:
(a) engage as a director, officer or in any similar
managerial capacity or as an owner, co-owner, financier or other
investor of or in any business selling any products or providing
any services in competition with the Acquired Business or ARS or
any Subsidiary of ARS (ARS and its Subsidiaries collectively
being "ARS" for purposes of this Article VIII) within any
Territory in which the Acquired Business was engaged in business
on the date hereof or immediately prior to the Effective Date
(for purposes of this Article VIII, the term "Territory" means
any area within a radius of 100 miles of Beltsville, Maryland);
(l) Section 9.01 hereby is amended by (i) inserting "written
requirement" before "authorization" in the definition of "Governmental
Approval" and (ii) adding "written" before "requirement" in the definition of
"Governmental Requirement."
Paragraph 5. Incorporation of Special Provisions. The following
documents attached hereto as Addenda (the "Special Provisions") hereby are
incorporated in this Agreement by this
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reference and constitute a part of this Agreement with the same force and
effect as if set forth at length herein:
(A) Addendum A(D)(2) -- "Special Provisions Relating to
Section 368(a)(2)(D) Reorganizations"; and
Paragraph 6. Counterparts. This Agreement may be executed in
multiple counterparts, each of which will be an original, but all of which
together will constitute one and the same instrument.
Paragraph 7. Notices. For purposes of Section 10.06, notices
shall be addressed to the Stockholder and the Company, as follows:
(A) if to the Stockholder, addressed to him at:
Xxxxxxx X. Xxxxx
00000 Xxxxxx'x Xxxx
Xxxxxx, Xxxxxxxx 00000
; and
(B) if to the Company, addressed to it at:
0000 Xxx-Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Xxxx, Xxxx & Xxxxx
0000 X Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Fax No.: 000-000-0000
Attn: Xxxxxx X. Xxxxx
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AMERICAN RESIDENTIAL SERVICES, INC.
By: /s/ XXXX X. HELD
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Xxxx X. Held
Senior Vice President
FREESTATE ELECTRICAL ACQUISITION, INC.
By: /s/ XXXX X. HELD
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Xxxx X. Held
Vice President
FREESTATE ELECTRICAL SERVICE
COMPANY, INC.
By: /s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
President
Stockholder:
/s/ XXXXXXX X. XXXXX
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Xxxxxxx X. Xxxxx
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Addendum A(2)(D)
AMERICAN RESIDENTIAL SERVICES, INC.
SPECIAL PROVISIONS RELATING TO
SECTION 368(a)(2)(D) REORGANIZATIONS
A. Defined Terms. Words and terms used in this Addendum
which are defined elsewhere in the Agreement in which this Addendum is
incorporated by reference are used herein as defined therein.
B. Representation and Warranty of ARS. ARS represents and
warrants to each Stockholder that all the following representations and
warranties of ARS in this Section B will, as of the Effective Time, be true and
correct:
(1) At the Effective Time, ARS will own all the stock of ARS
Sub. ARS Sub will not issue any of its Capital Stock in the Merger.
(2) At the Effective Time, ARS will have no plan or intention
to lose control, within the meaning of Section 368(c) of the Code, of
ARS Sub after the Merger occurs.
(3) At the Effective Time, ARS will have no plan or intention
(a) to liquidate ARS Sub, (b) to merge ARS Sub with or into another
corporation, (c) to sell or otherwise dispose of the stock of ARS Sub,
(d) to cause ARS Sub to sell or otherwise dispose of any of its assets,
except for dispositions in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or (e) to reacquire any
ARS Common Stock issued in the Merger.
(4) ARS and the members of the Treas. Reg. Section 1.368-
1(d)(4)(ii) "qualified group" of which ARS is a member will, following
the Merger, continue the historic business of Company or use a
significant portion of Company's historic business assets in a business.
(5) At the Effective Time, ARS will not be an investment
company, within the meaning of Section 368(a)(2)(F)(iii) of the Code
(that is, ARS will not be either a regulated investment company, a real
estate investment trust or a corporation 50% or more of the value of
whose total assets are stock and securities and 80% or more of the value
of whose total assets are assets held for investment after applying the
conventions set out in such Section 368(a)(2)(F)). For purposes of
making the 50% and 80% determinations under the preceding sentence,
stock and securities in any subsidiary of ARS shall be disregarded, and
ARS shall be deemed to own its ratable share of that subsidiary's
assets, and a corporation shall be deemed to be a subsidiary of ARS if
ARS owns 50% or more of the combined
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voting power of all classes of stock entitled to vote, or 50% or more of
the total value of shares of all classes of stock outstanding, of that
corporation.
For purposes of Section 7.01, the representations and warranties made in this
Section B shall be deemed to be included in Article III.
C. Representation and Warranty of Each Stockholder. Each
Stockholder represents and warrants to ARS and each other Stockholder that all
the following representations and warranties of the Stockholder in this Section
C will, as of the Effective Time, be true and correct:
(1) At the Effective Time, the Stockholder will receive in the
Merger shares of ARS Common Stock the value of which at the Effective
Time is 50% or more of the sum of (A) the value at the Effective Time of
all the Company Capital Stock held immediately prior to the Merger by
the Stockholder and (B) the value at the Effective Time of any other
instruments (such as debt of the Company which is guaranteed by the
Stockholder) which are classified for federal income tax purposes as
stock of the Company (collectively, "Shares") and which are held
immediately prior to the Merger by the Stockholder. For purposes of the
preceding sentence, the Shares that are outstanding immediately prior to
the Merger includes Shares exchanged for cash in lieu of fractional
shares of ARS Common Stock as well as Shares sold, exchanged or
otherwise disposed of prior to the Merger by reason of this Agreement or
otherwise as part of the plan of the Merger provided for herein, and the
value of all Shares outstanding immediately prior to the Merger shall be
determined with regard to any assets distributed by the Company by
reason of this Agreement or otherwise as part of the plan of the Merger
provided for herein.
(2) The Stockholder is not related to ARS and will not after
the Merger, but in connection with the Merger, transfer to ARS or to any
person who is related to ARS any of the ARS Common Stock which such
Stockholder received in the Merger. Each of the phrases "related" and
"in connection with" has the meaning which is assigned thereto in Treas.
Reg. Section 1.368-1(e)(2); provided that a transfer of ARS Common
Stock in respect of an indemnity obligation of the Stockholder pursuant
to this Agreement is not "in connection with" the Merger if such
transfer was not expected at the Effective Time.
(3) In the Merger, ARS Sub will acquire "substantially all of
the properties" of the Company within the meaning of Section
368(a)(2)(D) of the Code and ARS Sub will so acquire at least 90% of the
fair market value of the net assets and at least 70% of the gross assets
held by the Company immediately prior to the Effective Time. For
purposes of the preceding sentence, amounts paid by the Company to
dissenters, amounts paid by the Company to shareholders who receive cash
or other property and the Company assets used to pay its reorganization
expenses and all redemptions and distributions (except for regular,
normal dividends) made by the Company immediately preceding the
Effective Time, pursuant to this Agreement or otherwise as part of the
plan of the Merger provided for herein, will be included as assets of
the Company held immediately prior to the Merger.
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(4) The liabilities of the Company assumed by ARS Sub in the
Merger and the liabilities of the Company to which the assets of the
Company are subject at the Effective Time will have been incurred by the
Company in the ordinary course of its business.
(5) At the Effective Time, the sum of the adjusted basis of
each of the assets of the Company which is transferred to ARS Sub in the
Merger will equal or exceed the sum of (a) the liabilities of the
Company assumed by ARS Sub in the Merger and (b) the liabilities of the
Company to which the assets of the Company are subject at the Effective
Time.
(6) Immediately prior to the Effective Time, neither the
Company nor any member of the affiliated group, within the meaning of
Section 1504(a) of the Code, of which the Company is the common parent
will hold any debt of ARS or any debt of any member of ARS's affiliated
group within that same meaning.
(7) At the Effective Time, the Company will not be under the
jurisdiction of a court in a Title 11 or similar case, within the
meaning of Section 368(a)(3)(A) of the Code.
(8) At the Effective Time, the Company will not be an
investment company, within the meaning of Section 368(a)(2)(F)(iii) of
the Code (that is, the Company will not be either a regulated investment
company, a real estate investment trust or a corporation 50% or more of
the value of whose total assets are stock and securities and 80% or more
of the value of whose total assets are assets held for investment after
applying the conventions set out in such Section 368(a)(2)(F)). In
making the 50% and 80% determinations pursuant to the preceding
sentence, stock and securities in any subsidiary of the Company shall
be disregarded, the Company shall be deemed to own its ratable share of
the subsidiary's assets and a corporation shall be deemed to be a
subsidiary of the Company if the Company owns 50% or more of the
combined voting power of all classes of stock of that corporation
entitled to vote, or 50% or more of the total value of shares of all
classes of stock of that corporation outstanding.
For purposes of Section 7.01, the representations and warranties made in this
Section C shall be deemed to be included in Article II.
D. Covenant of ARS. ARS will assure that ARS Sub has
sufficient assets to repay any Indebtedness referred to in Section 6.02.
End of Addendum
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